Exhibit 10.4

 

 

AMENDED AND RESTATED SECURITY AGREEMENT

(Grantor)

 

This AMENDED AND RESTATED SECURITY AGREEMENT is made as of April 3, 2019 (the
“Agreement”), by AIRCO 1, LLC, a Delaware limited liability company, with its
chief executive office at 5930 Balsom Ridge Road, Denver, NC 28037 (“Grantor”),
in favor of MINNESOTA BANK & TRUST, a national banking corporation, with an
office at 9800 Bren Road East, Suite 200, Minnetonka, MN 55343 (“Secured
Party”).

 

RECITALS:

 

A.     Grantor has received extensions of credit from (1) Secured Party pursuant
to the terms of that Second Loan Agreement dated as of February 22, 2018 (such
Second Loan Agreement being, the “February 2018 Loan Agreement”) between Grantor
and Secured Party and (2) Secured Party and its co-Lender, Park State Bank
(“PSB”) pursuant to the terms of that certain Loan Agreement dated as of January
18, 2019 (such Loan Agreement being, the “January 2019 Loan Agreement”).

 

B.     Grantor’s obligations under the February 2018 Loan Agreement are secured
by, among other things, a perfected security interest in Grantor’s assets
granted by Grantor to Secured Party, pursuant to that certain Security Agreement
dated as of October 27, 2017 (the “Original Agreement”).

 

C.     Grantor’s obligations under the January 2019 Loan Agreement are secured
by, among other things, a perfected security interest in Grantor’s assets
granted by Grantor to Secured Party, in its capacity as Collateral Agent for the
benefit of itself and PSB, pursuant to that certain Security Agreement dated as
of January 18, 2019 (such Security Agreement, together with the Original
Agreement being collectively referred to herein as, the “Prior Agreement”)

 

D.     As a condition to the effectiveness of that certain Loan Agreement (as
amended, modified, restated, replaced or restated from time to time, the “Loan
Agreement”) dated as of even date herewith by and between Grantor and Secured
Party, pursuant to which Secured Party has agreed to extend a revolving line of
credit to Grantor, Secured Party has required that the Prior Agreement be
amended and restated in its entirety by this Agreement.

 

E.     Grantor has determined that the execution, delivery and performance of
this Agreement are in its best business and pecuniary interest.

 

NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of
which are hereby acknowledged by each of the parties hereto, Grantor and Secured
Party agree to amend and restate the Prior Agreement in its entirety to read as
follows:

 

 

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ARTICLE I

DEFINITIONS

 

As used herein, the following terms shall have the meanings set forth in this
Section:

 

“Accounts” shall have the meaning provided in the UCC.

 

“Chattel Paper” shall have the meaning provided in the UCC and shall include,
without limitation, all Electronic Chattel Paper and Tangible Chattel Paper.

 

“Collateral” shall mean all property in which a security interest is granted
hereunder.

 

“Commercial Tort Claim” shall have the meaning provided in the UCC.

 

“Controlled Property” shall mean property of every kind and description in which
Grantor has or may acquire any interest, now or hereafter at any time in the
possession or control of Secured Party for any reason and all dividends and
distributions on or other rights in connection with such property.

 

“Data Processing Records and Systems” shall mean all of Grantor’s now existing
or hereafter acquired electronic data processing and computer records, software
(including, without limitation, all “Software” as defined in the UCC), systems,
manuals, procedures, disks, tapes and all other storage media and memory.

 

“Default” shall mean any event which if it continued uncured would, with notice
or lapse of time or both, constitute an Event of Default.

 

“Deposit Accounts” shall have the meaning provided in the UCC and shall include,
without limitation, any demand, time, savings, passbook or similar account
maintained with a bank.

 

“Document” shall have the meaning provided in the UCC.

 

“Electronic Chattel Paper” shall have the meaning provided in the UCC.

 

“Equipment” shall have the meaning provided in the UCC.

 

“Event of Default” shall have the meaning specified in Article VI hereof.

 

“Fixtures” shall have the meaning provided in the UCC.

 

“General Intangibles” shall have the meaning provided in the UCC and shall
include, without limitation, all Payment Intangibles.

 

“Goods” shall have the meaning provided in the UCC and shall include, without
limitation, embedded “Software” to the extent included in “Goods” as defined in
the UCC.

 

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“Grantor” shall have the meaning provided in the preamble hereto.

 

“Instruments” shall have the meaning provided in the UCC.

 

“Insurance Proceeds” shall mean all proceeds of any and all insurance policies
payable to Grantor with respect to any Collateral, or on behalf of any
Collateral, whether or not such policies are issued to or owned by Grantor.

 

“Inventory” shall have the meaning provided in the UCC.

 

“Investment Property” shall have the meaning provided in the UCC.

 

“Letter-of-Credit Rights” shall have the meaning provided in the UCC.

 

“Loan Agreement” shall have the meaning provided in the recitals hereto.

 

“Prior Agreement” shall have the meaning provided in the recitals hereto.

 

“Motor Vehicles” shall mean all vehicles (including, without limitation all
tractors and trailers) for which the title to such vehicle is governed by a
certificate of title or ownership.

 

“Payment Intangibles” shall have the meaning provided in the UCC.

 

“Proceeds” shall have the meaning provided in the UCC.

 

“Products” shall mean any goods now or hereafter manufactured, processed or
assembled with any of the Collateral.

 

“Secured Party” shall have the meaning provided in the preamble hereto.

 

“Supporting Obligations” shall have the meaning provided in the UCC.

 

“Tangible Chattel Paper” shall have the meaning provided in the UCC.

 

“UCC” shall mean the Uniform Commercial Code as enacted in the State of
Minnesota, as amended from time to time; provided, however, that: (a) to the
extent that the UCC is used to define any term herein, and such term is defined
differently in different Articles of the UCC, the definition of such term
contained in Article 9 shall govern; and (b) if, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, the Secured Party’s security interest in any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of Minnesota, the term “UCC” shall mean
the Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection or priority of, or remedies with respect to, the Secured Party’s
security interest and for purposes of definitions related to such provisions.

 

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Other terms defined herein shall have the meanings ascribed to them herein. All
capitalized terms used herein, not specifically defined herein, shall have the
meaning ascribed to them in the Loan Agreement.

 

ARTICLE II

SECURITY INTERESTS

 

As security for the payment of all Obligations, Grantor hereby grants to Secured
Party a security interest in all of Grantor’s right, title and interest in and
to the following, whether now owned or existing or hereafter acquired or
arising:

 

Accounts;

Chattel Paper;

Commercial Tort Claims, if any, described on Exhibit B attached hereto and
incorporated herein by reference;

Controlled Property;

Deposit Accounts;

Documents;

Equipment and Fixtures;

General Intangibles;

Goods;

Instruments;

Inventory;

Investment Property;

Letter-of-Credit Rights;

Proceeds (whether cash or non-cash Proceeds, including Insurance Proceeds and
non-cash Proceeds of all types);

Products of all the foregoing; and

Supporting Obligations.

 

ARTICLE III

REPRESENTATIONS AND COVENANTS OF GRANTOR

 

 Grantor represents, warrants and covenants that:

 

3.1      Authorization. The execution and performance of this Agreement have
been duly authorized by all necessary action and do not and will not: (a)
require any consent or approval of the members or stockholders of any entity, or
the consent of any governmental entity, which in each case has not been
obtained; or (b) violate any provision of any indenture, contract, agreement or
instrument to which it is a party or by which it is bound.

 

3.2      Title to Collateral. Grantor has good and marketable title to all of
the Collateral and none of the Collateral is subject to any security interest
except for the security interest created pursuant to this Agreement or other
security interests permitted by the Loan Agreement (such other security
interests being “Permitted Liens”).

 

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3.3      Disposition or Encumbrance of Collateral. Grantor will not encumber,
sell or otherwise transfer or dispose of the Collateral without the prior
written consent of Secured Party except as provided in this Section or for
Permitted Liens. Until a Default or Event of Default has occurred and is
continuing, Grantor may sell Collateral consisting of: (a) Inventory in the
ordinary course of business provided that Grantor receives as consideration for
such sale an amount not less than the fair market value of the Inventory at the
time of such sale; and (b) Equipment and Fixtures which in the judgment of
Grantor have become obsolete or unusable in the ordinary course of business,
provided that all net Proceeds of such sales of Equipment and Fixtures are (i)
used to acquire replacement Equipment or Fixtures or (ii) delivered directly to
Secured Party for application to the Obligations in such order as the Secured
Party may elect.

 

3.4      Validity of Accounts. Grantor warrants that all Collateral consisting
of Accounts, Chattel Paper and Instruments included in Grantor’s schedules,
financial statements or books and records are bona fide existing obligations
created by the sale and actual delivery of Inventory or the rendition of
services to customers in the ordinary course of business, which Grantor then
owns free and clear of any security interest other than the security interest
created by this Agreement or other Permitted Liens, and which are then
unconditionally owing to Grantor without defenses, offset or counterclaim except
those arising in the ordinary course of business that are immaterial in the
aggregate and that the unpaid principal amount of any such Chattel Paper or
Instrument and any security therefor is and will be as represented to Secured
Party on the date of the delivery thereof to Secured Party.

 

3.5       Maintenance of Tangible Collateral. Grantor will maintain the tangible
Collateral in good condition and repair (reasonable wear and tear excepted). At
the time of attachment and perfection of the security interest granted pursuant
hereto and thereafter, all tangible Collateral will be located and will be
maintained only at the locations set forth on Exhibit A hereto. Except as
otherwise permitted by Section 3.3, Grantor will not remove such Collateral from
such locations unless, prior to any such removal, Grantor has given written
notice to Secured Party of the location or locations to which Grantor desires to
remove the Collateral, Secured Party has given its written consent to such
removal, and Grantor has delivered to Secured Party acknowledgment copies of
financing statements filed where appropriate to continue the perfection of
Secured Party’s security interest as a first priority security interest on such
Collateral. Secured Party’s security interest attaches to all of the Collateral
wherever located and Grantor’s failure to inform Secured Party of the location
of any item or items of Collateral shall not impair Secured Party’s security
interest thereon.

 

3.6       Notation on Chattel Paper. For purposes of the security interest
granted pursuant to this Agreement, Secured Party has been granted a direct
security interest in all Chattel Paper constituting part of the Collateral, and
such Chattel Paper is not claimed merely as Proceeds of Inventory. Upon Secured
Party’s request, Grantor will deliver to Secured Party the original of all
Chattel Paper. Grantor will not execute any copies of such Chattel Paper
constituting part of the Collateral other than those which are clearly marked as
a copy. Secured Party may stamp any such Chattel Paper with a legend reflecting
Secured Party’s security interest therein.

 

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3.7     Instruments as Proceeds; Deposit Accounts. Notwithstanding any other
provision in this Agreement concerning Instruments, Grantor covenants that
Instruments constituting cash Proceeds (for example, money and checks) shall be
deposited in Deposit Accounts with the Secured Party. Grantor has granted to the
Secured Party a direct security interest in all Deposit Accounts constituting
part of the Collateral and such Deposit Accounts are not claimed merely as
Proceeds of other Collateral.

 

3.8     Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling and shipping of the Collateral, all costs of
keeping the Collateral free of any liens, encumbrances and security interests
prohibited by this Agreement and of removing the same if they should arise, and
any and all excise, property, sales and use taxes imposed by any state, federal
or local authority on any of the Collateral or in respect of the sale thereof,
shall be borne and paid by Grantor and if Grantor fails to promptly pay any
thereof when due, Secured Party may, at its option, but shall not be required to
pay the same whereupon the same shall constitute Obligations and shall bear
interest at the Default Rate specified in the Note and shall be secured by the
security interest granted hereunder.

 

3.9     Insurance. Grantor will procure and maintain, or cause to be procured
and maintained, insurance issued by responsible insurance companies insuring the
Collateral against damage and loss by theft, fire, collision (in the case of
Motor Vehicles), and such other risks as are usually carried by owners of
similar properties or as may be requested by Secured Party in an amount equal to
the replacement value thereof, and, in any event, in an amount sufficient to
avoid the application of any co-insurance provisions and payable, in the case of
any loss in excess of $50,000.00, to Grantor and Secured Party jointly. All such
insurance shall contain an agreement by the insurer to endeavor to provide
Secured Party with 30 days’ prior notice of cancellation and an agreement that
the interest of Secured Party shall not be impaired or invalidated by any act or
neglect of Grantor nor by the occupation of the premises wherein such Collateral
is located for purposes more hazardous than are permitted by said policy.
Grantor will maintain, with financially sound and reputable insurers, insurance
with respect to its properties and business against such casualties and
contingencies of such types (which may include, without limitation, public and
product liability, larceny, embezzlement, business interruption or other
criminal misappropriation insurance) and in such amounts as may from time to
time be required by Secured Party. Grantor will deliver evidence of such
insurance and the policies of insurance or copies thereof to Secured Party upon
request.

 

3.10    Compliance with Law. Grantor will not use the Collateral, or knowingly
permit the Collateral to be used, for any unlawful purpose or in violation of
any federal, state or municipal law.

 

3.11    Books and Records; Access.

 

(a)      Grantor will permit Secured Party and its representatives to examine
Grantor’s books and records (including Data Processing Records and Systems) with
respect to the Collateral and make extracts therefrom and copies thereof at any
time and from time to time, and Grantor will furnish such information and
reports to Secured Party and its representatives regarding the Collateral as
Secured Party and its representatives may from time to time request. Grantor
will also permit Secured Party and its representatives to inspect the Collateral
at any time and from time to time as Secured Party and its representatives may
request.

 

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(b)     Secured Party shall have authority, at any time, to place, or require
Grantor to place, upon Grantor’s books and records relating to Accounts, Chattel
Paper and other rights to payment covered by the security interest granted
hereby a notation or legend stating that such Accounts, Chattel Paper and other
rights to payment are subject to Secured Party’s security interest.

 

3.12    Notice of Default. Immediately upon any officer of Grantor becoming
aware of the existence of any Default or Event of Default, Grantor will give
notice to Secured Party that such Default or Event of Default exists, stating
the nature thereof, the period of existence thereof, and what action Grantor
proposes to take with respect thereto.

 

3.13    Additional Documentation. Grantor will execute, from time to time, and
authorizes Secured Party to execute from time to time as Grantor’s
attorney-in-fact and/or file, such financing statements, assignments, and other
documents covering the Collateral, including Proceeds, as Secured Party may
request in order to create, evidence, perfect, maintain or continue its security
interest in the Collateral (including additional Collateral acquired by Grantor
after the date hereof), and Grantor will pay the cost of filing the same in all
public offices in which Secured Party may deem filing to be appropriate and will
notify Secured Party promptly upon acquiring any additional Collateral that may
require an additional filing. Upon request, Grantor will deliver to Secured
Party all Grantor’s Documents, Chattel Paper and Instruments constituting part
of the Collateral.

 

3.14    Chief Executive Office; State of Organization. The location of the chief
executive office of Grantor is located in the State set forth in the preamble
hereto and will not be changed from such state without 30 days’ prior written
notice to Secured Party. Grantor warrants that its books and records concerning
Accounts and Chattel Paper constituting part of the Collateral are located at
its chief executive office. Grantor’s State of organization is the State set
forth in the preamble hereto, and such State has been its State of organization
since the date of Grantor’s organization. Grantor will not change its State of
organization from such State without 30 days’ prior written notice to Secured
Party, and without Secured Party’s written consent to such change, and without
delivering to Secured Party acknowledgment copies of financing statements filed
where appropriate to continue the perfection of Secured Party’s security
interest as a first priority security interest therein.

 

3.15    Name of Grantor. Grantor’s exact legal name and type of legal entity is
as set forth in the preamble hereto. Grantor will not further change its legal
name without 30 days’ prior written notice to the Secured Party, and without
Secured Party’s written consent to such change, and without delivering to the
Secured Party acknowledgment copies of financing statements filed where
appropriate to continue the perfection of the Secured Party’s security interest
as a first priority security interest in the Collateral. Grantor has not used
any other name within the past five years except those described on Exhibit A
attached hereto. Neither Grantor nor, to Grantor’s knowledge, any predecessor in
title to any of the Collateral has executed any financing statements or security
agreements presently effective as to the Collateral except those described on
Exhibit A attached hereto.

 

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3.16    Disputes, Etc. Grantor shall advise Secured Party promptly of Inventory
in excess of $50,000.00 for any one customer in any fiscal year or in excess of
$100,000.00 in the aggregate for all customers in any fiscal year which are
returned by a customer(s) or otherwise recovered from such customer(s) and
unless instructed to deliver such Inventory to Secured Party, Grantor shall
resell such Inventory for Secured Party and assign or deliver to Secured Party
the resulting Accounts or other Proceeds. Grantor shall also advise Secured
Party promptly of all disputes and claims in excess of $50,000.00 for any one
obligor on the Collateral in any fiscal year or in excess of $100,000.00 in the
aggregate for all obligors in any fiscal year and settle or adjust them at no
expense to Secured Party. After the occurrence and during the continuance of an
Event of Default, Secured Party may at all times settle or adjust such disputes
and claims directly with the customers for amounts and upon terms which Secured
Party considers commercially reasonable. No discount, credit, allowance,
adjustment or return shall be granted by Grantor to any customer without Secured
Party’s written consent other than discounts, credits, allowances, adjustments
and returns made or granted by Grantor in the ordinary course of business prior
to the occurrence and during the continuance of an Event of Default.

 

3.17    Power of Attorney. Grantor appoints Secured Party or any other person
whom Secured Party may from time to time designate, as Grantor’s attorney in
fact, with power to: (a) endorse Grantor’s name on any checks, notes,
acceptances, drafts or other forms of payment or security evidencing or relating
to any Collateral that may come into Secured Party’s possession; (b) sign
Grantor’s name on any invoice or bill of lading relating to any Collateral, on
drafts against customers, on schedules and confirmatory assignments of Accounts,
Chattel Paper, Documents or other Collateral, on notices of assignment,
financing statements under the UCC and other public records, on verifications of
accounts and on notices to customers; (c) notify the post office authorities to
change the address for delivery of Grantor’s mail to an address designated by
Secured Party; (d) receive and open all mail addressed to Grantor; (e) send
requests for verification of Accounts, Chattel Paper, Instruments or other
Collateral to customers; and (f) do all things necessary to carry out this
Agreement; provided, however, that so long as no Event of Default has occurred
and is continuing, Lender: (x) shall not exercise the powers granted pursuant to
Section 3.17(c) or (d); (y) shall exercise the power granted by Section 3.17(e)
through Secured Party’s trade accounting firm name and not in any name
identifying the verifying party as a bank, lender or other financial
institution; and (z) shall exercise the powers granted by Section 3.17(f) only
upon Grantor’s failure to take action requested by Secured Party within five (5)
Business Days after the Lender has requested that Borrower take the requested
action. Grantor ratifies and approves all acts of the attorney taken within the
scope of the authority granted. Neither Secured Party nor the attorney will be
liable for any acts of commission or omission, or for any error in judgment or
mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as any Obligation remains unpaid. Grantor waives presentment
and protest of all instruments and notice thereof, notice of default and
dishonor and all other notices to which Grantor may otherwise be entitled.

 

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3.18    Patents and Trademarks, Etc. Grantor agrees with Secured Party that,
until the security interest granted by this Agreement has been terminated in
accordance with the terms hereof:

 

(a)      Grantor will perform all acts and execute all documents including,
without limitation, grants of security interest, in form suitable for filing
with the United States Patent and Trademark Office, reasonably requested by
Secured Party at any time to evidence, perfect, maintain, record and enforce
Secured Party’s interest in the Collateral comprised of patents (collectively
the “Patents”), patent applications (collectively the “Patent Applications”),
trademarks or service marks (collectively the “Trademarks”) or of any
applications therefor (collectively the “Trademark Applications”) or otherwise
in furtherance of the provisions of this Agreement;

 

(b)      Except to the extent that Secured Party shall consent in writing,
Grantor (either itself or through licensees) will, unless Grantor shall
reasonably determine that a Trademark (or the use of a Trademark in connection
with a particular class of goods or products) is not of material economic value
to Grantor: (i) continue to use each Trademark on each and every trademark class
of goods in order to maintain each Trademark in full force free from any claim
of abandonment for non-use; (ii) maintain as in the past the quality of products
and services offered under each Trademark; (iii) employ each Trademark with the
appropriate notice of application or registration to the extent required by
applicable law to maintain such Trademark; (iv) not use any Trademark except for
the uses for which registration or application for registration of such
Trademark has been made, unless such use is otherwise lawful; and (v) not (and
not permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any Trademark may become invalidated;

 

(c)      Except to the extent that Secured Party shall consent in writing,
Grantor will not, unless Grantor shall reasonably determine that a Patent is not
of material economic value to Grantor, do any act, or not to do any act, whereby
any Patent may become abandoned or dedicated;

 

(d)      Unless Grantor shall reasonably determine that a Patent, Patent
Application, Trademark or Trademark Application is not of material economic
value to Grantor, Grantor shall notify Secured Party immediately if it knows, or
has reason to know, of any reason that any Patent, Patent Application, Trademark
or Trademark Application may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court) regarding Grantor’s ownership of any
Patent or Trademark, its rights to register the same, or to keep and maintain
the same;

 

(e)      If Grantor, either itself or through any agent, employee, licensee or
designee, shall file a Patent Application or Trademark Application for the
registration of any Trademark with the United States Patent and Trademark
Office, or any similar office or agency in any other country or any political
subdivision thereof, Grantor shall promptly inform Secured Party, and, upon
request of Secured Party, shall promptly execute and deliver any and all
agreements, instruments, documents and papers as Secured Party may reasonably
request to evidence Secured Party’s security interest in such Patent or
Trademark and the goodwill and general intangibles of Grantor relating thereto
or represented thereby;

 

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(f)      Unless Grantor shall reasonably determine that a Patent Application or
Trademark Application is not of material economic value to Grantor, Grantor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each Patent Application and Trademark Application (and to obtain the
relevant registration) and to maintain each registration of the Patents and
Trademarks, including, without limitation, filing of applications for renewal
and affidavits of use;

 

(g)     Unless Grantor shall reasonably determine that a Patent or Trademark is
not of material economic value to Grantor, Grantor shall promptly notify Secured
Party if any Patent or Trademark is infringed, misappropriated or diluted by a
third party and either shall promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as Grantor shall
reasonably deem appropriate under the circumstances to protect such Patent or
Trademark; and

 

(h)      Grantor agrees that it will not enter into any agreement (for example,
a license agreement) which is inconsistent with Grantor’s obligations under this
Agreement.

 

3.19    Copyrights. Grantor agrees with Secured Party that, until the security
interest granted by this Agreement has been terminated in accordance with the
terms hereof:

 

(a)      Grantor will perform all acts and execute all documents including,
without limitation, grants of security interest, in form suitable for filing
with the United States Copyright Office, reasonably requested by Secured Party
at any time to evidence, perfect, maintain, record and enforce Secured Party’s
interest in the Collateral comprised of copyrights or copyright applications
(collectively the “Copyrights”) or otherwise in furtherance of the provisions of
this Agreement;

 

(b)      Except to the extent that the Secured Party shall consent in writing,
Grantor (either itself or through licensees) will, unless Grantor shall
reasonably determine that a Copyright is not of material economic value to
Grantor, publish the materials for which a Copyright has been obtained (the
“Works”) with any notice of copyright registration required by applicable law to
preserve the Copyright;

 

(c)      Unless Grantor shall reasonably determine that a Copyright is not of
material economic value to Grantor, Grantor shall notify the Secured Party
immediately if it knows, or has reason to know, of any reason that any
application or registration relating to any Copyright may become abandoned or
dedicated or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Copyright Office or any court) regarding
Grantor’s ownership of any Copyright, its right to register the same, or to keep
and maintain the same;

 

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(d)      If Grantor, either itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Copyright with
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, Grantor shall promptly inform
Secured Party, and, upon request of Secured Party, execute and deliver any and
all agreements, instruments, documents and papers as Secured Party may request
to evidence Secured Party’s security interest in such Copyright and the Works
relating thereto or represented thereby;

 

(e)      Unless Grantor shall reasonably determine that a Copyright is not of
material economic value to Grantor, Grantor will take all commercially
reasonable steps, including, without limitation, in any proceeding before the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the Copyrights;

 

(f)      In the event that any Copyright is infringed by a third party, Grantor
shall promptly notify Secured Party and shall, unless Grantor shall reasonably
determine that such Copyright is not of material economic value to Grantor,
promptly sue to recover any and all damages or take such other actions as
Grantor shall reasonably deem appropriate under the circumstances to protect
such Copyright; and

 

(g)      Grantor agrees that it will not enter into any agreement (for example,
a license agreement) which is inconsistent with Grantor’s obligations under this
Agreement.

 

3.20    Control. Grantor will cooperate with Secured Party in obtaining control
with respect to Collateral consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights, and Electronic Chattel Paper. Without limiting the
foregoing, if Grantor becomes a beneficiary of a letter of credit, then Grantor
shall promptly notify the Secured Party thereof and, if then requested by
Secured Party, enter into a tri-party agreement with the Secured Party and the
issuer and/or confirmation bank with respect to such letter of credit assigning
the Letter-of-Credit Rights to the Secured Party and directing all payments
thereunder to the Secured Party, all in form and substance reasonably
satisfactory to the Secured Party.

 

3.21    Further Acts. Where Collateral is in the possession of a third party,
Grantor will join with Secured Party in notifying such third party of Secured
Party’s security interest and in obtaining an acknowledgment from such third
party that it is holding such Collateral for the benefit of the Secured Party.

 

3.22    Commercial Tort Claims. Grantor shall promptly notify the Secured Party
of any Commercial Tort Claim acquired by it and, unless otherwise consented to
by the Secured Party, Grantor shall promptly enter into a supplement to this
Agreement granting to the Secured Party a security interest in such Commercial
Tort Claim.

 

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3.23    Motor Vehicles.

 

(a)      Grantor shall maintain all vehicle titles at its chief executive
office.

 

(b)     Grantor shall promptly, but in any event no later than 10 days after the
Secured Party’s written request (the date on which the Grantor receives such
request being the “Titles Request Date”), deliver to the Secured Party originals
of the certificates of title or ownership for the Motor Vehicles owned by it
together with appropriate grant forms executed in favor of the Secured Party.

 

(c)      Upon the acquisition after the Titles Request Date by Grantor of any
Motor Vehicle, Grantor shall deliver to the Secured Party originals of the
certificates of title or ownership for such Motor Vehicle, together with the
manufacturer’s statement of origin, with the Secured Party listed as lienholder.

 

(d)     Grantor hereby appoints the Secured Party as its attorney-in-fact,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (i) executing on behalf of Grantor title or
ownership applications for filing with appropriate state agencies to enable
Motor Vehicles now owned or hereafter acquired by Grantor to be retitled and the
Secured Party listed as lienholder thereof, (ii) filing such applications with
such state agencies, and (iii) executing such other documents and instruments on
behalf of, and taking such other action in the name of, Grantor as the Secured
Party may deem necessary or advisable to accomplish the purposes hereof
(including, without limitation, for the purpose of creating in favor of the
Secured Party a perfected Lien on the Motor Vehicles and exercising the rights
and remedies of the Secured Party hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the
Obligations are paid in full after the termination of the Loan Agreement and the
other Loan Documents.

 

(e)      Any certificates of title or ownership delivered pursuant to the terms
hereof shall be accompanied by odometer statements for each Motor Vehicle
covered thereby.

 

(f)      So long as no Event of Default shall have occurred and be continuing,
upon the request of Grantor, the Secured Party shall execute and deliver to
Grantor such instruments as Grantor shall reasonably request to remove the
notation of the Secured Party as lienholder on any certificate of title for any
Motor Vehicle; provided that any such instruments shall be delivered, and the
release effective, only upon receipt by the Secured Party of a certificate from
Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is
to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss),
the amount that Grantor will receive as sale Proceeds or insurance Proceeds, and
any Proceeds of such sale or casualty loss shall be paid to the Secured Party
hereunder to be applied to the Obligations then outstanding.

 

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ARTICLE IV

COLLECTIONS

 

Except as otherwise provided in this Article IV, Grantor shall continue to
collect, at its own expense, all amounts due or to become due to Grantor under
the Accounts constituting part of the Collateral and all other Collateral. In
connection with such collections, Grantor may take (and, at Secured Party’s
direction given after the occurrence and during the continuance of an Event of
Default, shall take) such action as Grantor or Secured Party may deem necessary
or advisable to enforce collection of the Accounts and such other Collateral;
provided, however, that Secured Party shall have the right at any time, without
giving written notice to Grantor of Secured Party’s intention to do so, to
notify the account debtors under any Accounts or obligors with respect to such
other Collateral of the assignment of such Accounts and such other Collateral to
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to Grantor thereunder directly to Secured Party
and, upon such notification and at the expense of Grantor, to enforce collection
of any such Accounts or other Collateral, and to adjust, settle or compromise
the amount or payment thereof in the same manner and to the same extent as
Grantor might have done, but unless and until Secured Party does so or gives
Grantor other instructions, Grantor shall make all collections for Secured
Party. In addition to its rights under the preceding sentence to this Section,
Secured Party, at any time after the occurrence of an Event of Default may
require that Grantor instruct all current and future account debtors and
obligors on other Collateral to make all payments directly to a lockbox (the
“Lockbox”) controlled by Secured Party. All payments received in the Lockbox
shall be transferred to a special bank account (the “Collateral Account”)
maintained for the benefit of Secured Party subject to withdrawal by Secured
Party only. After the earliest to occur of an Event of Default, Secured Party’s
exercise of its right to direct account debtors or other obligors on any
Collateral to make payments directly to Secured Party or to require Grantor to
establish a Lockbox, Grantor shall immediately deliver all full and partial
payments on any Collateral received by Grantor to Secured Party in their
original form, except for endorsements where necessary. Secured Party, at its
sole discretion, may hold any collections on the Collateral delivered to it or
deposited in the Collateral Account as cash collateral or may apply such
collections to the payment of the Obligations in such order as Secured Party may
elect; provided, however, that after an Event of Default has occurred and is
continuing, Secured Party shall apply all collections in accordance with Section
7.7. Until such payments are so delivered to Secured Party, such payments shall
be held in trust by Grantor for and as Secured Party’s property, and shall not
be commingled with any funds of Grantor. Any application of any collection to
the payment of any Obligation is conditioned upon final payment of any check or
other instrument.

 

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ARTICLE V

ASSIGNMENT OF INSURANCE

 

Grantor hereby assigns to Secured Party, as additional security for payment of
the Obligations, any and all monies due or to become due under, and any and all
other rights of Grantor with respect to, any and all policies of insurance
covering the Collateral. So long as no Default or Event of Default has occurred
and is continuing, Grantor may itself adjust and collect for any losses of up to
an aggregate amount of $50,000.00 for all occurrences during any of Grantor’s
fiscal years and Grantor may use the resulting Insurance Proceeds for the
replacement, restoration or repair of the Collateral. After the occurrence and
during the continuance of a Default or an Event of Default, or after the
aggregate amount of losses arising out of all occurrences during any of
Grantor’s fiscal years exceeds $50,000.00, Secured Party may (but need not) in
its own name or in Grantor’s name execute and deliver proofs of claim, receive
such monies, and settle or litigate any claim against the issuer of any such
policy and Grantor directs the issuer to pay any such monies directly to Secured
Party and Secured Party, at its sole discretion and regardless of whether
Secured Party exercises its right to collect Insurance Proceeds under this
Section, may apply any Insurance Proceeds to the payment of the Obligations,
whether due or not, in such order and manner as Secured Party may elect or may
permit Grantor to use such Insurance Proceeds for the replacement, restoration
or repair of the Collateral.

 

ARTICLE VI

EVENTS OF DEFAULT

 

The occurrence of any Event of Default as defined in the Loan Agreement shall
constitute an Event of Default hereunder (“Event of Default”).

 

ARTICLE VII      

RIGHTS AND REMEDIES ON DEFAULT

 

Upon the occurrence of an Event of Default, and at any time thereafter until
such Event of Default is cured to the satisfaction of Secured Party, and in
addition to the rights granted to Secured Party under Articles IV and V hereof,
Secured Party may exercise any one or more of the following rights and remedies:

 

7.1      Acceleration of Obligations. Declare any and all Obligations to be
immediately due and payable, and the same shall thereupon become immediately due
and payable without further notice or demand.

 

7.2      Right of Offset. Offset any deposits, including unmatured time
deposits, then maintained by Grantor with Secured Party, whether or not then
due, against any indebtedness then owed by Grantor to Secured Party whether or
not then due.

 

7.3     Deal with Collateral. In the name of Grantor or otherwise, demand,
collect, receive and give receipt for, compound, compromise, settle and give
acquittance for and prosecute and discontinue any suits or proceedings in
respect of any or all of the Collateral.

 

7.4     Realize on Collateral. Take any action which Secured Party may deem
reasonably necessary or desirable in order to realize on the Collateral,
including, without limitation, the power to perform any contract, to endorse in
the name of Grantor any checks, drafts, notes, or other instruments or documents
received in payment of or on account of the Collateral. Secured Party may comply
with any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered adversely to
affect the commercial reasonableness of any sale of the Collateral. Secured
Party may sell the Collateral without giving any warranties as to the
Collateral. Secured Party may specifically disclaim any warranties of title or
the like. This procedure will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral.

 

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7.5      Access to Property. Enter upon and into and take possession of all or
such part or parts of the properties of Grantor, including lands, plants,
buildings, machinery, equipment, Data Processing Records and Systems and other
property as may be necessary or appropriate in the reasonable judgment of
Secured Party, to permit or enable Secured Party to store, lease, sell or
otherwise dispose of or collect all or any part of the Collateral, and use and
operate said properties for such purposes and for such length of time as Secured
Party may deem necessary or appropriate for said purposes without the payment of
any compensation to Grantor therefor. Grantor shall provide Secured Party with
all information and assistance requested by Secured Party to facilitate the
storage, leasing, sale or other disposition or collection of the Collateral
after an Event of Default has occurred and is continuing.

 

7.6     Other Rights. Exercise any and all other rights and remedies available
to it by law or by agreement, including rights and remedies under the UCC as
adopted in the relevant jurisdiction or any other applicable law, or under the
Loan Agreement and, in connection therewith, Secured Party may require Grantor
to assemble the Collateral and make it available to Secured Party at a place to
be designated by Secured Party, and any notice of intended disposition of any of
the Collateral required by law shall be deemed reasonable if such notice is
mailed or delivered to Grantor at its address as shown on Secured Party’s
records at least 10 days before the date of such disposition.

 

7.7      Application of Proceeds. All Proceeds of Collateral shall be applied in
accordance with the UCC, and such Proceeds applied toward the Obligations shall
be applied in such order as Secured Party may elect.

 

7.8      Patents and Trademarks. Upon the occurrence and during the continuance
of an Event of Default:

 

(a)     Secured Party may, at any time and from time to time, upon thirty (30)
days’ prior notice to Grantor, license or, to the extent permitted by an
applicable license, sublicense, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any Patent or Trademark,
throughout the world for such term or terms, on such conditions, and in such
manner, as Secured Party shall in its sole discretion determine;

 

(b)     Secured Party may (without assuming any obligations or liability
thereunder), at any time enforce (and shall have the exclusive right to enforce)
against any licensor, licensee or sublicensee all rights and remedies of Grantor
in, to and under any one or more license or other agreements with respect to any
Patent or Trademark and take or refrain from taking any action under any such
license or other agreement, and Grantor hereby releases Secured Party from, and
agrees to hold Secured Party free and harmless from and against, any claims
arising out of, any action taken or omitted to be taken with respect to any such
license or agreement;

 

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(c)      Any and all payments received by Secured Party under or in respect of
any Patent or Trademark (whether from Grantor or otherwise), or received by
Secured Party by virtue of the exercise of the license granted to Secured Party
by subsection (g) below, shall be applied to the Obligations in accordance with
Section 7.7 hereof;

 

(d)      Secured Party may exercise in respect of the Patents and Trademarks, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the UCC;

 

(e)      In order to implement the sale, lease, assignment, license, sublicense
or other disposition of any of the Patents and Trademarks pursuant to this
Section 7.8, Secured Party may, at any time, execute and deliver on behalf of
Grantor one or more instruments of assignment of the Patents and Trademarks (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country. Grantor agrees to pay when due all reasonable
costs incurred in any such transfer of the Patents and Trademarks, including any
taxes, fees and reasonable attorneys’ fees;

 

(f)      In the event of any sale, lease, assignment, license, sublicense or
other disposition of any of the Patents or Trademarks pursuant to this Section,
Grantor shall supply to Secured Party or its designee its know-how and expertise
relating to the manufacture and sale of the products relating to any Patent or
Trademark subject to such disposition, and its customer lists and other records
relating to such Patents or Trademarks and to the distribution of said products;
and

 

(g)      For the purpose of enabling Secured Party to exercise rights and
remedies under this Agreement at such time as Secured Party shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, Grantor
hereby grants to Secured Party, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Grantor) to
use, license or sublicense at such time any Patent or Trademark, now owned or
hereafter acquired by Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof.

 

7.9      Copyrights. Upon the occurrence and during the continuance of an Event
of Default:

 

(a)      Secured Party may, at any time and from time to time, upon thirty (30)
days’ prior notice to Grantor, license or, to the extent permitted by an
applicable license, sublicense, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any Copyright, for such term or
terms, on such conditions, and in such manner, as Secured Party shall in its
sole discretion determine;

 

(b)      Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensor, licensee or sublicensee all rights and remedies
of Grantor in, to and under any one or more license or other agreements with
respect to any Copyright and take or refrain from taking any action under any
such license or other agreement and Grantor hereby releases Secured Party from,
and agrees to hold Secured Party free and harmless from and against, any claims
arising out of, any action taken or omitted to be taken with respect to any such
license or agreement;

 

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(c)      Any and all payments received by Secured Party under or in respect of
any Copyright (whether from Grantor or otherwise), or received by Secured Party
by virtue of the exercise of the license granted to Secured Party by subsection
(f) below, shall be applied to the Obligations in accordance with Section 7.7;

 

(d)      Secured Party may exercise in respect of the Copyrights, in addition to
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC;

 

(e)      In order to implement the sale, lease, assignment, license, sublicense
or other disposition of any of the Copyrights pursuant to this Section 7.9,
Secured Party may, at any time, execute and deliver on behalf of Grantor one or
more instruments of assignment of the Copyrights (or any application or
registration thereof), in form suitable for filing, recording or registration in
the Copyright Office or any country where the relevant Copyright is of material
economic value to Grantor. Grantor agrees to pay when due all reasonable costs
incurred in any such transfer of the Copyrights, including any taxes, fees and
reasonable attorneys’ fees; and

 

(f)      For the purpose of enabling Secured Party to exercise rights and
remedies under this Agreement at such time as Secured Party shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, Grantor
hereby grants to Secured Party an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Grantor) to
use, license or sublicense any Copyright, now owned or hereafter acquired by
Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1     No Liability on Collateral. It is understood that Secured Party does not
in any way assume any of Grantor’s obligations under any of the Collateral.
Grantor hereby agrees to indemnify Secured Party against all liability arising
in connection with or on account of any of the Collateral, except for any such
liabilities arising on account of Secured Party’s negligence or willful
misconduct.

 

8.2      No Waiver. Secured Party shall not be deemed to have waived any of its
rights hereunder or under any other agreement, instrument or paper signed by
Grantor unless such waiver is in writing and signed by Secured Party. No delay
or omission on the part of Secured Party in exercising any right shall operate
as a waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.

 

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8.3      Remedies Cumulative. All rights and remedies of Secured Party shall be
cumulative and may be exercised singularly or concurrently, at their option, and
the exercise or enforcement of any one such right or remedy shall not bar or be
a condition to the exercise or enforcement of any other.

 

8.4     Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Minnesota, except to the extent that the perfection of the security
interest hereunder, or the enforcement of any remedies hereunder, with respect
to any particular Collateral shall be governed by the laws of a jurisdiction
other than the State of Minnesota.

 

8.5     Expenses. Grantor agrees to pay the reasonable attorneys’ fees and legal
expenses incurred by Secured Party in the exercise of any right or remedy
available to it under this Agreement, whether or not suit is commenced,
including, without limitation, attorneys’ fees and legal expenses incurred in
connection with any appeal of a lower court’s order or judgment.

 

8.6      Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of Grantor and Secured Party.

 

8.7      Recitals. The above Recitals are true and correct as of the date hereof
and constitute a part of this Agreement.

 

8.8      Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

 

8.9     Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Obligations, whether as a “voidable preference”,
“fraudulent conveyance”, or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.

 

8.10    No Obligation to Pursue Others. Secured Party has no obligation to
attempt to satisfy the Obligations by collecting them from any other person
liable for them and Secured Party may release, modify or waive any Collateral
provided by any other person to secure any of the Obligations, all without
affecting Secured Party’s rights against Grantor. Grantor waives any right it
may have to require Secured Party to pursue any third person for any of the
Obligations.

 

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8.11   Waiver of Jury Trial. GRANTOR HEREBY EXPRESSLY WAIVE(S) ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a)
UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b)
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND
AGREE(S) THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.

 

8.12    Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or .pdf file shall be effective as delivery of a manually
executed counterpart of this Agreement, but the party delivering a facsimile,
pdf or other digital copy shall deliver an original copy of this Agreement as
soon as possible after delivering the facsimile or other digital copy.

 

8.13    Effect on Prior Agreement. The Prior Agreement is amended and restated
in its entirety by this Agreement, but such amendment and restatement does not
alter the original date and continuing effectiveness of, the Prior Agreement.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be
effective as of the date and year first above written.

 

 

  AIRCO 1, LLC, a Delaware limited liability company       By:                 
                                                                               
    Name: Chuck Kingsley   Its:       President    

 

                        

 

MINNESOTA BANK & TRUST, a Minnesota state

banking corporation

      By:                                                                       
                              Name: Eric P. Gundersen   Its:       Senior Vice
President    

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Security Agreement]

 

 

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EXHIBIT A

 

 

I.

Financing Statements on File Listing Grantor or Any Predecessor in Title as
Debtor

 

 

None.

 

II.

Location of Equipment and Inventory

 

 

1.

25233 E. Pinal Airpark Road, Suite 101, Marana, AZ 85653

 

2.

1853 S. Eisenhower Court, Wichita, KS 67209

 

 

 

III.

Prior Names within the last five years.

 

 

None.

 

 

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EXHIBIT B

 

COMMERCIAL TORT CLAIMS

 

 

None.