Exhibit 10.1

 

 

 

 

 

 

 

Loan Agreement

 

Dated as of January 18, 2019

 

BETWEEN

 

AIRCO 1, LLC,

as the Borrower

 

AND

 

MINNESOTA BANK & TRUST AND PARK STATE BANK

as the “Lenders”

 

 

 

 

 

 

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TABLE OF CONTENTS

 

Page

 

1.

Documents; etc.

3

2.

Loan

6

3.

Payments

7

4.

Set-off, Etc.

7

5.

Conditions Precedent to All Credit Extensions

8

6.

Representations and Warranties

8

7.

Affirmative Covenants

11

8.

Negative Covenants

13

9.

Events of Default

16

10.

Accounting Terms and Calculations

17

11.

Definitions

18

12.

Collateral Audit; Appraisals

25

13.

Miscellaneous

25

 

 

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LOAN AGREEMENT

 

 

 

 

 

This LOAN AGREEMENT dated as of January 18, 2019 (this “Agreement”), is entered
into by and between AIRCO 1, LLC, a Delaware limited liability company (the
“Borrower”), PARK STATE BANK, a Minnesota state banking corporation (“PSB”),
MINNESOTA BANK & TRUST, a Minnesota state banking corporation (“MBT”; and
together with PSB and their respective successors and assigns being sometimes
collectively referred herein as the “Lenders” and individually as a “Lender”).

 

RECITALS

 

A.     MBT has previously extended a line of credit to Borrower (the “MBT Line
of Credit”) pursuant to which MBT, has agreed to make term loans (the “MBT
Airframe Acquisition Loan(s)”) for the purpose of acquiring used airframes to be
disassembled and sold as parts by the Borrower pursuant to the terms and
conditions of that certain Second Loan Agreement dated as of February 22, 2018,
by and between the Borrower and MBT (the “MBT Loan Agreement”).

 

B.     Borrower now desires to obtain a term loan in the amount of $2,500,000
(the “Loan”) from Lenders the proceeds of which will be used to finance the
purchase of a decommissioned Boeing 737 airframe to be disassembled and sold as
parts by the Borrower.

 

C.     Lenders are willing, upon the terms and conditions contained in this
Agreement and related loan documents, to severally make the Loan to the
Borrower.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained
in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

1.     Documents; etc.

 

The Borrower has delivered, or will deliver, to the Lenders before the Loan is
made, the following documents (this Agreement together with each of the
following defined documents and each other instrument, document, guaranty,
mortgage, deed of trust, chattel mortgage, pledge, consent, assignment,
contract, security agreement, lease, financing statement, patent, trademark or
copyright registration, subordination agreement, trust account agreement, hedge
agreement, or other agreement executed and delivered by Borrower with respect to
this Agreement or to create or perfect any Lien in any collateral securing the
payment of the Loans (collectively the “Collateral”) (in each case as originally
executed and as amended, modified or supplemented from time to time) being
sometimes hereinafter referred to collectively as the “Loan Documents” and
individually as a “Loan Document”) and other items, all containing or to contain
provisions acceptable to the Lenders and their respective counsel:

 

(a)     (i) a promissory note dated as of even date herewith in the original
principal amount of up to TWO MILLION ONE HUNDRED THOUSAND AND NO/100THS DOLLARS
($2,100,000) (such promissory note together with each renewal, replacement or
substitute note therefor being the “PSB Note”) in the form attached hereto as
Exhibit A-1, duly executed by the Borrower; and (ii) a promissory note dated as
of even date herewith in the original principal amount of up to FOUR HUNDRED
THOUSAND AND NO/100THS DOLLARS ($400,000) (such promissory note together with
each renewal, replacement or substitute note therefor being the “MBT Note”; and
together with the PSB Note being sometimes collectively referred to herein as
the “Notes” and individually as a “Note”) in the form provided by the Lender,
duly executed by the Borrower;

 

 

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(b)     a security agreement (as amended, modified, replaced or restated from
time to time, the “Security Agreement”) in the form provided by the Collateral
Agent and duly executed by the Borrower granting to the Collateral Agent for the
benefit of itself and for the ratable benefit of the Lenders a Lien in the
Collateral described therein to secure repayment of the Loan and all other
Obligations together with Uniform Commercial Code Standard Form UCC Financing
Statements and all such other documents as may be deemed necessary by Collateral
Agent to perfect the Collateral Agent’s Liens in such Collateral, and UCC and
other searches from the filing offices in all states and the International
Registry as may be required by the Collateral Agent which reflect that no other
Person holds a prior Lien in any such Collateral except as permitted by Section
8(a);

 

(c)     a certificate by an officer of the Borrower certifying the names of the
officers of the Borrower authorized to sign the Loan Documents to which the
Borrower is a party on behalf of the Borrower together with: (i) a sample of the
true signatures of such officers; (ii) resolutions of the sole member of the
Borrower authorizing the execution, delivery and performance of the Loan
Documents to which the Borrower is a party; and (iii) copies of the Borrower’s
Certificate of Formation, together with all amendments thereto, certified by the
appropriate governmental official of the jurisdiction of its organization as of
a date acceptable to the Lender, and the limited liability company agreement of
the Borrower together with all amendments thereto;

 

(d)     evidence of Good Standing for the Borrower of recent date issued by the
Secretaries of State of (i) the State of Delaware; and (ii) the State of
Arizona;

 

(e)     evidence of insurance required by any Loan Document;

 

(f)     a non-refundable fee in the amount of $31,500, payable to PSB in
immediately available funds

 

(g)     a non-refundable fee in the amount of $6,000, payable to MBT in
immediately available funds;

 

(h)     evidence of insurance required by any Loan Document;

 

(i)     a closing certificate, in the form provided by Lender, duly executed by
a manager or officer of the Borrower;

 

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(j)     a true, correct and complete copy of the Airframe Sale and Purchase
Agreement, dated on or about January 18, 2019, by and between Borrower and
Contrail, together with true, correct and complete copies of each of the other
documents described on Schedule 1(j) attached hereto and incorporated herein by
reference (the “Airframe Purchase Agreement”), together with the other documents
listed on Schedule 1(j) being sometimes hereinafter referred to as an “Airframe
Transaction Document” and collectively as the “Airframe Transaction Documents”)
pursuant to which the Borrower is acquiring (the “Airframe Acquisition”) from
Contrail a used Boeing 737-700 Airframe bearing MSN 30741 and related parts and
documents (collectively, the “Acquired Assets”);

 

(k)     a Collateral Assignment of Purchase Agreement document pursuant to which
Borrower collaterally assigns its right, title and interest to the Airframe
Purchase Agreement and the other Airframe Transaction Documents to the
Collateral Agent, in the form provided by the Lender, duly executed by Borrower;

 

(l)     a true, correct and complete copy of the Aircraft Disassembly Agreement,
dated on or about January 2, 2019, by and between Borrower and Jet Yard (the
“Disassembly Agreement”), pursuant to which Jet Yard agrees to disassemble the
Airframe into parts and prepare the constituent parts for sale;

 

(m)     a true, correct and complete copy of that certain Consignment Agreement
dated on or about January 18, 2019 by and between Borrower and Airco (the
“Consignment Agreement”), pursuant to which Airco agrees to sell the
disassembled Airframe parts on behalf of Borrower;

 

(n)     separate Bailee Agreement documents, each in the form provided by
Collateral Agent, duly executed by Jet Yard and Airco, regarding Collateral that
may from time to time be located at each such Persons’ facilities;

 

(o)     a statement summarizing the flow of funds required to consummate the
Airframe Acquisition, acceptable to Lenders, in their sole discretion;

 

(p)     evidence satisfactory to the Lenders that: (i) all conditions precedent
to the consummation of the Airframe Acquisition have been satisfied or waived,
including, without limitation, evidence that all necessary regulatory approvals
to the consummation of the Airframe Acquisition have been obtained; (iii) no
litigation exists relating to the Airframe Acquisition; (iv) all of the

 

(q)     confirmation that all of such Acquired Assets have been delivered in
acceptable condition to Jet Yard’s facility in Marana, Arizona; and (v)
contemporaneously with the Borrower’s receipt of the proceeds of the Loan, the
Airframe Acquisition will be consummated in full in accordance with the terms of
the Airframe Transaction Documents;

 

(r)     a final inspection report of the Acquired Assets, in form and substance
acceptable to the Lenders, confirming that all parts included in the descriptive
materials previously provided by the Borrower to the Lenders are actually
present on the Airframe;

 

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(s)     a Collateral Agency Agreement (such Collateral Agency Agreement, as it
may be amended, modified, supplemented, restated or replaced from time to time,
being the “Collateral Agency Agreement”), by and among the Lenders and MBT, in
its capacity as collateral agent (in such capacity, the “Collateral Agent”); and

 

such other approvals, inspection reports, appraisals, certificates, opinions or
documents as the Lenders may reasonably request, including, without limitation,
a Borrowing Base Certificate, together with a detailed inventory report as of a
recent date. In addition, the Lenders or their agent(s) shall have completed
their inspection of the business, operations and assets of the Borrower, and
such survey shall provide the Lenders with results and information which, in the
Lenders’ determination, are satisfactory to the Lenders.

 

2.     Loan.

 

(a)     Disbursement. The Lenders shall severally disburse the proceeds of the
Loan to the Borrower, on the Closing Date, following satisfaction of all of the
conditions set forth in Section 5.

 

(b)     Notes. The Loan shall be evidenced by, and be payable in accordance with
the terms of, the Notes. Each Lender shall maintain records of the amount of all
payments on such Lender’s Note. The outstanding amount of the Notes set forth on
the records of the Lenders shall be rebuttable presumptive evidence of the
principal amount owing and unpaid on the Notes.

 

(c)     Interest on the Loan. The Borrower agrees to pay interest on the
outstanding principal amount of the Loan from the date hereof until the Loan is
paid in full at the rates and at the times specified in the Notes.

 

(d)     Prepayment.

 

(i)      Voluntary. The Borrower may prepay the Loan in whole or in part at any
time; provided, that, each such prepayment shall be accompanied by any
prepayment premium set forth in the respective Notes and all such payments shall
be made on a pro rata basis to the Lenders in accordance with their Percentages.

 

(ii)     Mandatory. The Loan shall be subject to mandatory prepayment as
follows, with each such prepayment being paid to the Lenders for application to
their respective Notes in accordance with their respective Percentages:

 

(A)     Contemporaneously with the Borrower’s receipt of any Net Proceeds from
the sale of any Acquired Asset, the Borrower shall prepay the Loan in an
aggregate amount equal to sixty percent (60%) of such Net Proceeds.

 

(B)     Contemporaneously with the Borrower’s receipt of any Net Proceeds from
the sale of (whether in parts or in whole) that certain Boeing 737-700 Airframe
bearing MSN 30742 (“Airframe 30742”), the Borrower shall prepay the Loan in an
aggregate amount equal to eighty percent (80%) of such Net Proceeds; provided,
that, if Airframe 30742 is not sold on or prior to April 15, 2019, the Borrower
shall make a Loan prepayment in the aggregate amount of $600,000 on such date.

 

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(C)     If the outstanding principal balance of the Loan exceeds $1,200,000 on
October 15, 2019, then the Borrower shall make a prepayment in the amount of
such excess on such date.

 

(D)     If the outstanding principal balance of the Loan exceeds $250,000 on
April 12, 2020, then the Borrower shall make a prepayment in the amount of such
excess on such date.

 

(E)     If, at any time, the outstanding principal balance of the Loan exceeds
the Borrowing Base, then the Borrower shall immediately prepay the amount of
such excess.

 

3.     Payments.

 

Any other provision of this Agreement to the contrary notwithstanding, the
Borrower shall make all payments of interest on and principal of the Loans and
all payments to the Lenders with respect to payment of other fees, costs and
expenses payable under any Loan Document in immediately available funds to the
Lenders at their respective addresses for notices hereunder without setoff or
counterclaim. The Borrower authorizes MBT to charge from time to time against
the Borrower’s deposit account number 161010111 maintained with MBT or any other
depository account maintained by Borrower with a Lender any such payments when
due and the Lenders will use the reasonable efforts to notify the Borrower of
such charges. The Borrower hereby authorizes the Lenders to make an additional
Loan advance, at the Lenders’ sole and absolute discretion, to pay, on behalf of
the Borrower, of any amount due to either or both Lenders or the Collateral
Agent under any Loan Document without further action on the part of the Borrower
and regardless of whether the Borrower is able to comply with the terms,
conditions and covenants of this Agreement at the time of such Loan advance.
Each payment received by the Lenders may be applied to the Borrower’ obligations
to the Lenders under this Agreement or any other Loan Document in such order of
application as the Lenders, in their sole and absolute discretion, may elect;
provided, that all payments of principal and interest shall be applied by
Lenders to their respective Notes on a pro rata basis in accordance with their
respective Percentages.

 

4.     Set-off, Etc.

 

Upon the occurrence and during the continuance of an Event of Default, each
Lender and each of their respective affiliates may offset any and all balances,
credits, deposits (general or special, time or demand, provisional or final),
accounts or monies of the Borrower then or thereafter with such Lender or such
affiliate, or any obligations of a Lender or such affiliate to the Borrower,
against the obligations of the Borrower arising under this Agreement or any
other Loan Document. The Borrower hereby grants to the Lenders and each of their
respective affiliates a Lien in all such balances, credits, deposits, accounts
or monies.

 

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5.     Conditions Precedent to All Credit Extensions.

 

The obligation of the Lenders to extend any credit to the Borrower shall be
subject to the satisfaction of each of the following conditions, unless waived
in writing by both Lenders:

 

(a)     The representations and warranties set forth in Section 6 shall be true
and correct on the date of the requested credit extension and after giving
effect thereto except to the extent that such representations and warranties
expressly relate to an earlier date; and

 

(b)     No Event of Default or event which, with notice and/or lapse of time,
would constitute an Event of Default (such event being a “Default”) shall have
occurred and be continuing on the date of the requested credit extension or
after giving effect thereto.

 

6.     Representations and Warranties.

 

To induce the Lenders to extend credit hereunder, the Borrower represents and
warrants to the Lenders that:

 

(a)     the Borrower is a limited liability company duly organized and, validly
existing and in good standing under the laws of the jurisdiction of its
formation, and (b) is duly qualified as a foreign limited liability company and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification except to the extent that the failure to qualify in such
jurisdiction could not reasonably be expected to have a material adverse effect
on Borrower’s financial condition, business, properties or assets;

 

(b)     the Borrower has full power and authority to enter into and to perform
its obligations under the Loan Documents to which it is a party;

 

(c)     the Loan Documents constitute the legal, valid, and binding obligations
of Borrower and are enforceable against Borrower in accordance with their
respective terms subject only to bankruptcy, insolvency, reorganization,
moratorium or similar laws at the time in effect affecting the enforceability of
rights of creditors generally and by general equitable principles which may
limit the right to obtain equitable remedies;

 

(d)     the Borrower’s execution, delivery and performance of the Loan Documents
to which the Borrower is a party have been duly authorized by all necessary
corporate or company action, do not require the consent or approval of any
Person which has not been obtained, and do not conflict with any agreement
binding upon the Borrower or any of the Borrower’s property;

 

(e)     there is no litigation, bankruptcy proceeding, arbitration or
governmental proceeding pending against Borrower or affecting the business,
property or operations of Borrower which, if determined adversely to Borrower,
could reasonably be expected to constitute a Material Adverse Occurrence;

 

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(f)     neither the Borrower nor any member of a group which is under common
control with the Borrower (within the meaning of Section 414 of the IRC or
Section 4001(a)(14) or 4001(b) of ERISA) (the Borrower’s “ERISA Affiliates”)
has maintained, established, sponsored or contributed to any employee benefit
plan which is a defined benefit plan (“Plan”) covered by Title IV of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder (“ERISA”);

 

(g)     the proceeds of the Loan will be used finance a portion of the cost of
acquisition of the Acquired Assets; and (ii); no part of the proceeds of the
Loan will be used for any purpose which violates, or which is inconsistent with,
any regulations promulgated by the Board of Governors of the Federal Reserve
System;

 

(h)     (i) the Borrower is in compliance in all material respects with all
federal, state and local laws, rules and regulations applicable to it including,
without limitation, all pollution control and environmental regulations in each
jurisdiction where the Borrower is doing business; and (ii) no Loan Party has
any material liability for the release or threatened release of any toxic or
hazardous waste, substance or constituent into the environment;

 

(i)     the Borrower’s internally prepared financial statements for the fiscal
quarter that ended on September 30, 2018, copies of which have been furnished to
the Lender, have been prepared in accordance with GAAP (except for the absence
of footnotes and subject to customary year-end adjustments) and present fairly
the financial condition of the Borrower as of such date and the result of its
operation for the periods then ended;

 

(j)     since the date on which the financial statements described in Section
6(i) were prepared, there has not been any material adverse change in the
business, operations, prospects, assets, results of operations or condition
(financial or other) of the Borrower that has not been otherwise reported via
applicable regulatory filings, copies of which have been provided to the Lender;

 

(k)     the Borrower has filed all Federal and State income tax and other tax
returns which are required to be filed, and has paid all taxes as shown on said
returns and all assessments received by the Borrower to the extent that such
taxes have become due, except to the extent that the Borrower is disputing such
taxes in good faith and has established adequate reserves on its books;

 

(l)     the Borrower possesses adequate licenses, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, to conduct its
business substantially as now conducted and as presently proposed to be
conducted;

 

(m)     no Loan Party is in default of a material provision under any material
agreement, instrument, decree or order to which it is a party or by which it or
its property is bound or affected and assuming that this Agreement had been
previously executed and delivered no Default or Event of Default has occurred
and is continuing hereunder;

 

(n)     the Borrower has good title to all of its properties and assets,
including, without limitation, the Collateral, free and clear of all mortgages,
security interests, Liens and encumbrances, except as permitted by Section 8(a);

 

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(o)     Airco owns all of the outstanding membership of the Borrower, free and
clear of all Liens other than a Lien in favor of MBT;

 

(p)     the Borrower is Solvent after giving effect to the making of the Loan
hereunder and the granting of Liens pursuant to the Loan Documents;

 

(q)     (i) the Borrower is not a party to any labor dispute; and (ii) there are
no strikes or walkouts relating to any labor contracts to which the Borrower is
subject;

 

(r)     the Borrower is not an “investment company” and is not “controlled” by
an “investment company” within the meaning of the Investment Company Act of
1940, as amended;

 

(s)     the Borrower is not a partner (limited or general) or joint venturer in
any partnerships or joint ventures;

 

(t)     the Borrower is not a “holding company” or a “subsidiary company” of a
holding company or an “affiliate” of a holding company or of a subsidiary
company of a holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended;

 

(u)     the Borrower is not subject to or in violation of any law or regulation,
or listed on any list of any government agency including, without limitation,
the U.S. Office of Foreign Asset Control list, Executive Order 13224 or the USA
PATRIOT Act (Title III of Pub. L. 107-56, signed into law October 26, 2001, as
amended) (the “Patriot Act”) that prohibits or limits the conduct of business
with or receiving of funds, goods or services to or for the benefit of certain
Persons specified therein or that prohibits or limits Lenders from making the
Loan or any other extension of credit to Borrower or from otherwise conducting
business with Borrower;

 

(v)     (i) neither the execution of this Agreement nor the use of the proceeds
of the Loan violates the Trading with the Enemy Act of 1917, as amended, nor any
of the foreign assets control regulations promulgated thereunder or under the
International Emergency Economic Powers Act or the U.N. Participation Act of
1945; and (ii) neither the Borrower nor any Person who owns a controlling
interest in or otherwise controls the Borrower is listed on the Specially
Designated Nationals and Blocked Person List or other similar lists maintained
by the Office of Foreign Assets Control, the Department of the Treasury or
included in Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001;

 

(w)     the Borrower does not have any Subsidiaries; and

 

(x)     Schedule attached hereto is a true and correct listing of all of the
Acquired Assets.

 

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All representations and warranties contained in this Section 6 shall survive the
delivery of the Loan Documents, and the making of the Loan, and no investigation
at any time made by or on behalf of Lender shall diminish its rights to rely
thereon.

 

7.     Affirmative Covenants.

 

The Borrower covenants and agrees with the Lenders that, for so long as any Loan
remains unpaid, the Borrower shall:

 

(a)     furnish to the Lenders:

 

(i)     as soon as available and in any event within fifteen (15) days after the
end of each of fiscal quarter of the Borrower’s fiscal year, a copy of the
Borrower’s internally prepared financial statements consisting of a balance
sheet as of the close of such fiscal quarter and related income statement and
cash flow statement for such fiscal quarter and from the beginning of such
fiscal year to the end of such fiscal quarter;

 

(ii)     as soon as available and in any event within fifteen (15) days after
the end of each fiscal month of the Borrower’s fiscal year, a borrowing base
certificate, in the form of Exhibit B attached hereto (the “Borrowing Base
Certificate”), showing the relevant information for the Borrower as of the end
of business on the last business day of the then most recently-ended month of
the Borrower’s fiscal year; each Borrowing Base Certificate shall be accompanied
by a detailed inventory report by part serial number, an accounts receivable
aging, a purchase order report, and other supporting reports such as may be
required by the Lenders or the Collateral Agent and the Borrowing Base
Certificate and such supporting reports shall be in a form acceptable to the
Lenders and the Collateral Agent and certified as accurate by the Borrower’s
chief financial officer, treasurer or controller;

 

(iii)     as soon as available and in any event within fifteen (15) days after
the end of each fiscal month of the Borrower’s fiscal year, a report, in form
and detail acceptable to the Lenders in its sole discretion, showing sales made
during such month and a timeline of anticipated sales of the remaining Acquired
Assets;

 

(iv)     by not later than five (5) business days after becoming aware of any
Default or Event of Default, a notice describing the nature thereof and what
action the Borrower proposes to take with respect thereto;

 

(v)     copies of the federal income tax returns (with all supporting schedules)
of Borrower due during the term of the Loan, within thirty (30) days after the
deadline for filing the same;

 

(vi)     by not later than five (5) business days after becoming aware of the
institution of any litigation, arbitration or governmental proceeding against
Borrower which, if determined adversely to Borrower, could reasonably be
expected to be a Material Adverse Occurrence, or the rendering of a judgment or
decision in such litigation or proceeding which could reasonably be expected to
constitute a Material Adverse Occurrence, and the steps being taken by the
Borrower with respect thereto; and

 

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(vii)     such other financial or other information or certification as the
Lenders may reasonably request;

 

(b)     maintain and preserve its existence as a limited liability company
organized and in good standing under the laws of the State of its organization
and in each other jurisdiction in which the character of the properties owned,
leased or operated by it or the business conducted by it makes such
qualification necessary and where the failure to qualify could constitute a
Material Adverse Occurrence;

 

(c)     maintain insurance of such types and in such amounts as are maintained
by companies of similar size engaged in the same or similar businesses and as
may be required by any Loan Document; provided, that, each policy insuring any
Collateral securing the Loans shall name the Collateral Agent as lender loss
payee and each policy of the liability insurance shall name the Lenders as
additional insureds;

 

(d)     file all federal and state income tax and other tax returns (including,
without limitation, withholding tax returns) which are required and make
payments as required of such taxes; provided, however, that: (i) the Borrower
shall not be required to pay any such tax so long as the validity thereof is
being contested in good faith by appropriate proceedings, the Borrower’s title
to its property is not materially adversely affected, its use of such property
in the ordinary course of its business is not materially interfered with and
adequate reserves with respect thereto have been set aside on the Borrower’s
books in accordance with GAAP; and (ii) in all events, the Borrower shall pay,
or cause to be paid, all such taxes forthwith upon the commencement of
foreclosure of any Lien which may have attached as security therefor;

 

(e)     reimburse the Lenders and the Collateral Agent for reasonable expenses,
fees and disbursements (including, without limitation, reasonable attorneys’
fees and legal expenses), incurred in connection with the preparation or
administration of this Agreement or any other Loan Document or the Lenders’ and
the Collateral Agent’s enforcement of the obligations of the Borrower under any
Loan Document, whether or not suit is commenced, which attorneys’ fees and legal
expenses shall include, but not be limited to, any attorneys’ fees and legal
expenses incurred in connection with any appeal of a lower court’s judgment or
order;

 

(f)     permit the Lenders, the Collateral Agent and their respective
representatives at reasonable times and intervals and upon reasonable notice to
visit the Borrower’s offices and the offices and locations of each other Person
storing any Collateral and inspect their respective books and records including,
without limitation, permitting the Lenders and the Collateral Agent to examine
any Collateral securing the Loans and reimburse the Lenders and the Collateral
Agent for all examination fees and expenses incurred in connection with such
examinations at its then current rate for such services and for its
out-of-pocket expenses incurred in connection therewith;

 

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(g)     maintain in full force and effect all of the Borrower’s material rights,
licenses, certifications, franchises and comply with all applicable laws and
regulations necessary to enable it to conduct its business;

 

(h)     promptly, upon request by the Lenders or the Collateral Agent: (i)
correct any defect or error that may be discovered in any Loan Document or in
the execution, acknowledgment or recordation thereof; (ii) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all deeds, conveyances, mortgages, deeds of trust, trust
deeds, assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as the Lenders or the Collateral Agent may
reasonably require from time to time in order: (A) to carry out more effectively
the purposes of the Loan Documents; (B) to perfect and maintain the validity,
effectiveness and priority of any Liens intended to be created by the Loan
Documents; and (C) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm unto the Collateral Agent the rights granted now or
hereafter intended to be granted to the Collateral Agent under any Loan Document
or under any other instrument executed in connection with any Loan Document or
that the Borrower may be or become bound to convey, mortgage or assign to the
Collateral Agent in order to carry out the intention or facilitate the
performance of the provisions of any Loan Document; and (iii) cause each other
Loan Party to do all of the foregoing;

 

(i)     Borrower shall pay in a timely manner all applicable duties, freight,
charges and like fees and charges of shippers, freight forwarders, carriers and
warehousemen;

 

(j)     Deliver a copy of the FAA decommissioning certificate for each Airframe
to the Lenders by not later than two months after the date such Airframe is
acquired by the Borrower; and

 

(k)     maintain the Borrower’s primary depository accounts with MBT.

 

8.     Negative Covenants.

 

The Borrower hereby agrees with the Lenders that, for so long as any Loan
remains unpaid, the Borrower shall not:

 

(a)     create, incur or suffer to exist any Liens encumbering any of its
assets, including without limitation any real or personal property owned by the
Borrower, except: (i) Liens in favor of the Collateral Agent; or (ii) Permitted
Liens;

 

(b)     create, incur, assume or suffer to exist any Indebtedness except:
(i) the Indebtedness under this Agreement or any other Loan Document; (ii)
current liabilities (other than borrowed money) incurred in the ordinary course
of business; (iii) Indebtedness in respect of hedge agreements, including Hedge
Agreements, entered into in the ordinary course of business to hedge or mitigate
risks to which Borrower is exposed in the conduct of its business or the
management of its liabilities and not for speculative purposes; (iv)
Indebtedness in respect of taxes, assessments or government charges to the
extent that payment thereof shall not at the time be required to be made under
this Agreement; (v) Indebtedness owing to MBT; or (vi) Subordinated Debt;

 

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(c)     lease, sell or otherwise convey all or any substantial portion of its
property and business to any other entity or entities, whether in one
transaction or a series of related transactions, except for sales of Inventory
in the ordinary course of Borrower’s business;

 

(d)     consolidate with or merge into or with any other entity or entities or
liquidate, wind up or dissolve itself or suffer any liquidation or dissolution;

 

(e)     declare or pay any cash dividends, purchase, redeem, retire or otherwise
acquire for value any of the Borrower’s membership interest (or any warrant or
option to purchase any such membership interest) now or hereafter outstanding,
or return any capital to its members;

 

(f)     acquire, make or hold any Investment in any other Person except:

 

(i)     loans or advances to officers and employees of the Borrower to finance
travel, entertainment and relocation expenses and other ordinary business
purposes in the ordinary course of business as presently conducted; provided,
however, that the aggregate outstanding principal amount of all loans and
advances permitted pursuant to this clause shall not exceed $50,000 at any one
time;

 

(ii)     Extensions of credit in the nature of accounts or notes receivable
arising from the sale of goods and services in the ordinary course of business;

 

(iii)     Shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business; and

 

(iv)     investments in Hedge Agreements and other hedging agreements permitted
by Section 8(b)(iii);

 

(g)     (i) assume, guarantee, endorse or otherwise become liable upon the
obligation of any Person, firm or corporation except pursuant to the Loan
Documents or by endorsement of negotiable instruments for deposit or collection
in the ordinary course of business, nor (ii) sell any notes or accounts
receivable with or without recourse;

 

(h)     engage in any business other than the business engaged in by the
Borrower on the date of this Agreement, or make any material change in the
nature of the business of the Borrower as carried on the date of this Agreement;

 

(i)     maintain, establish, sponsor or contribute to any Plan which is a
defined benefit plan and shall not permit any of its ERISA Affiliates to do so;

 

(j)     either: (i) form or acquire any corporation or company which would
thereby become a Subsidiary; or (ii) form or enter into any partnership as a
limited or general partner or form or enter into any joint venture;

 

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(k)     materially change its selling terms of payment on accounts receivable as
in effect on the Closing Date;

 

(l)     either: (i) permit the direct or indirect transfer, distribution or
payment of any of its funds, assets or property to any Affiliate, except that
the Borrower may pay: (A) bona fide employee compensation (including benefits)
to Affiliates for services actually rendered to the Borrower; (B) expenses
incurred by an employee in the ordinary course of business; (C) expenses or
rents for services or property or the use thereof allocated to the Borrower;
provided, however, that all such payments pursuant to subsections (i)(A), (B)
and (C) shall not exceed the amount which would be payable in a comparable arm’s
length transaction with a third party who is not an Affiliate; (ii) except as
otherwise permitted by Sections 8(f)(i) of this Agreement, lend or advance
money, credit or property to any Affiliate; (iii) invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or Indebtedness,
or any assets or properties, of any Affiliate; or (iv) guarantee, assume,
endorse or otherwise become responsible for, or enter into any agreement or
instrument for the purpose of discharging or assuming (directly or indirectly,
through the purchase of goods, supplies or services or otherwise) the
Indebtedness, performance, capability, obligations, dividends or agreement for
the furnishing of funds of any Affiliate or any officer, director or employee;

 

(m)     make any loan to, or otherwise extend any credit to, Borrower’s
officers, directors, shareholders, partners, members, managers or Affiliates or
to any member of any such Person’s immediate family, except for loans expressly
permitted by Section 8(f)(i);

 

(n)     materially change its selling terms of payment on Accounts as in effect
on the date of this Agreement or provide dating terms except on a basis
consistent with past business practices of the Borrower;

 

(o)     except as permitted by the Subordination Agreement pertaining to an item
of Subordinated Debt: (i) make any payment of, or purchase, redeem, or acquire,
any Subordinated Debt; (ii) give security for all or any part of any
Subordinated Debt; (iii) take or omit to take any action whereby the
subordination of any Subordinated Debt or any part thereof to the Obligations
might be terminated, impaired or adversely affected; (iv) settle, compromise,
discharge or otherwise reduce the outstanding principal amount of any
Subordinated Debt or exercise any right to convert the Subordinated Debt to
equity; or (v) omit to give the Lenders prompt written notice of any default or
event which, with the giving of notice or lapse of time, would constitute a
default under any other agreement or instrument relating to any Subordinated
Creditor;

 

(p)     use any proceeds of the Loan for any purpose other than to finance a
portion of the purchase of the Acquired Assets or the refurbishment of Acquired
Assets in preparation for the sale thereof; or

 

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(q)     change the Borrower’s fiscal year end to a date other than March 31.

 

9.     Events of Default.

 

The occurrence of any one or more of the following shall constitute an Event of
Default (“Event of Default”) hereunder:

 

(a)     the Borrower shall default (i) in the due and punctual payment of any
installment of interest or principal on the Loan on the date when due, or (ii)
in the due and punctual payment of any other amount which is due and payable to
either or both Lenders or the Collateral Agent under any Loan Document within
five days of the date when due;

 

(b)     the Borrower shall default in the due performance or observance of any
covenant set forth in Sections 2(d)(ii), 7(b), 7(c), 7(i), 7(h) or in Section 8;

 

(c)     Borrower shall default (other than those defaults covered by other
subsections of this Section 9) in the due performance or observance of any term,
covenant, agreement or warranty contained in any Loan Document on its part to be
performed, and such default shall continue for a period of thirty (30) days
after the earliest of: (i) the date the Borrower gives notice of such default to
the Lenders; (ii) the date the Borrower should have given notice of such default
to the Lenders pursuant to Section 7(a)(ii); or (iii) the date the Lenders gives
notice of such default to the Borrower;

 

(d)     Borrower shall default and fail to cure such default in the time
provided therein, under the terms of any other agreement, indenture, deed of
trust, mortgage, promissory note or security agreement governing the borrowing
of sums money in excess of $10,000; and either (i) the maturity of any amount
owed under such document or instrument is accelerated; or (ii) such default
shall continue unremedied or unwaived for a period of time to permit such
acceleration;

 

(e)     Borrower shall become insolvent or generally fail to pay, or admit in
writing Borrower’s inability to pay its debts as they become due; or Borrower
shall apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver or other custodian for Borrower or for Borrower’s property, or make a
general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian
shall be appointed for Borrower or for a substantial part of Borrower’s property
and not be discharged within sixty (60) days; or any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding shall be commenced by or
against Borrower and if commenced against Borrower, be consented to or
acquiesced in by Borrower or remain for sixty (60) days undismissed; or Borrower
shall take any action to authorize any of the foregoing;

 

(f)     any judgments, writs, warrants of attachment, executions or similar
process (not covered by insurance) shall be issued against Borrower or any of
Borrower’s assets where the aggregate amount of such judgments, writs, warrants
of attachment, executions or similar process exceed $50,000.00 and are not
released, vacated, suspended, stayed, abated or fully bonded prior to any sale
and in any event within thirty (30) days after its issue or levy;

 

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(g)     Airco shall cease to own, directly or indirectly, all of the Borrower’s
issued and outstanding membership interest or shall cease to have the power to
elect a majority of the Borrower’s directors or shall cease to direct the
Borrower’s management policies;

 

(h)     the occurrence of any default by Borrower under any Consignment
Agreement or Disassembly Agreement or the termination of any such agreement;

 

(i)     the Lender, in its sole discretion, shall determine in good faith that
there has been a Material Adverse Occurrence;

 

(j)     any representation or warranty set forth in this Agreement or any other
Loan Document shall be untrue in any material respect on the date as of which
the facts set forth are stated or certified;

 

(k)     there is instituted against Borrower or any executive officer of
Borrower any criminal proceeding for which forfeiture of any material asset is a
potential penalty, or the Borrower is enjoined, restrained or in any way
prevented by order of any governmental authority from conducting any material
part of its business affairs and such order is not completely stayed, to the
satisfaction of the Lender, or dissolved within two business days from the
effective date of such order;

 

(l)     the occurrence of any “Event of Default” under the MBT Loan Agreement
(as such term in quotation marks is therein defined);

 

(m)    the occurrence of any “Event of Default” under the Air T Loan Agreement
(as such term in quotation marks is therein defined); or

 

(n)     the Borrower shall seek to revoke, repudiate or disavow the
enforceability of any Loan Document.

 

Upon: (1) the occurrence of any Event of Default described in Section 9(e), the
full unpaid principal amount of the Notes and all other obligations of the
Borrower to the Lenders shall automatically be due and payable without any
declaration, notice, presentment, protest or demand of any kind (all of which
are hereby waived); or (2) the occurrence of any other Event of Default, the
Lenders, upon written notice, may declare the outstanding principal amount of
the Notes and all other obligations of the Borrower to the Lenders to be due and
payable without other notice, presentment, protest or demand of any kind,
whereupon the full unpaid amount of the Notes and any and all other obligations,
which shall be so declared due and payable, shall be and become immediately due
and payable. In addition, the Lenders may exercise any right or remedy available
to it pursuant to any Loan Document, at law or in equity.

 

10.     Accounting Terms and Calculations.

 

Except as may be expressly provided to the contrary herein, all accounting terms
used herein shall be interpreted and all accounting determinations hereunder
shall be made in accordance with GAAP consistently applied for the Borrower as
used in the preparation of the Borrower’s financial statements described in
Section 7(a)(i).

 

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11.     Definitions.

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

“Acquired Assets”: As defined in Section 1 of this Agreement.

 

“Acquisition”: Any transaction or series of transactions by which the Borrower
acquires, either directly or through a Subsidiary or otherwise, (a) any or all
of the stock or other securities of any class of any Person if, after giving
effect to such transaction, such Person would be an Affiliate of the Borrower;
or (b) a substantial portion of the assets or a division, or line of business of
any Person.

 

“Affiliate”: Shall mean, with respect to the Borrower, any Person which directly
or indirectly controls, is controlled by, or is under common control with, the
Borrower. One Person shall be deemed to control another Person if the
controlling Person owns directly or indirectly 10% or more of any class of
voting stock of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.

 

“Airco”: Airco, LLC, a North Carolina corporation.

 

“Air T Loan Agreement”: Shall mean that certain Credit Agreement dated as of
December 21, 2017, by and between MBT and Air T, as it may be amended, modified,
supplemented, restated or replaced from time to time.

 

“Airframe”: The mechanical structure of an aircraft, including, without
limitation, its fuselage, wings and undercarriage, but excluding its jet
engines.

 

“Airframe Acquisition”: Shall have the meaning given such term in Section 1(j)
of this Agreement.

 

Airframe Purchase Agreement”: Shall have the meaning given such term in Section
1(j) of this Agreement.

 

“Airframe Transaction Documents”: Shall have the meaning given such term in
Section 1(j) of this Agreement.

 

“Air T”: Air T, Inc., a Delaware corporation.

 

“Audit”: As defined in Section 12 of this Agreement.

 

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“Bailee Agreement(s)”: The Jet Yard Bailee Agreement, the Airco Bailee Agreement
and each other bailee agreement executed by the owner of a facility where
Collateral is located from time to time.

 

“Banking Services”: Each and any of the following bank services provided to
Borrower by a Lender or any of its affiliates: (a) commercial credit cards, (b)
stored value cards, and (c) treasury management services (including, without
limitation, controlled disbursement, automated clearinghouse transactions,
return items, overdrafts and interstate depository network services).

 

“Banking Services Liabilities”: Any and all obligations of the Borrower, whether
absolute or contingent and howsoever and whenever created, arising, evidenced or
acquired (including all renewals, extensions and modifications thereof and
substitutions therefor) in connection with Banking Services.

 

“Borrowing Base. At any date of determination, the sum of: (a) 60% of Eligible
Inventory; plus (b) 80% of Eligible Accounts Receivable; provided, however, that
the Lenders reserve the right, in their discretion, to and to establish reserves
as they deems appropriate and to adjust such borrowing base percentages based on
their periodic evaluation of the Collateral. The amount of the Borrowing Base
shall be determined periodically by the Lenders.

 

“Borrowing Base Certificate”: As defined in Section 7(a)(ii) of this Agreement.

 

“Cape Town Convention”: The English language text of the Convention on
International Interests in Mobile Equipment, adopted on November 16, 2001 at a
diplomatic conference held in Cape Town, South Africa, as implemented and
modified by the Protocol to the Convention on Matters Specific to Aircraft
Equipment as adopted by the United States of America, and as the same may be
further amended or modified from time to time.

 

“Capitalized Lease”: Any lease which, in accordance with GAAP, is capitalized on
the books of the lessee.

 

“Closing Date”: The date on which the Loan is made after the Lenders have
received all of the Loan Documents in accordance with Section 1 and all
conditions precedent specified in Section 5 have been satisfied.

 

“Code”: As defined in Section 8(e) of this Agreement.

 

“Collateral”: As defined in Section 1 of this Agreement.

 

“Collateral Agent”: As defined in Section 1(s) of this Agreement.

 

“Collateral Agency Agreement”: As defined in Section 1(s) of this Agreement.

 

“Consigned Inventory Eligibility Requirements”: As set forth on Exhibit C to
this Agreement.

 

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“Consignment Agreement”: As defined in Section 1 of this Agreement.

 

“Contrail”: Contrail Aviation Support, LLC, a Wisconsin limited liability
company.

 

“Contingent Obligation”: With respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the “primary obligor”) in any manner, whether
directly or otherwise, or entered into for the purpose of assuring in any manner
the owner of such Indebtedness of the payment of such Indebtedness or to protect
the owner against loss in respect thereof.

 

“Default”: As defined in Section 5(b) of this Agreement.

 

“Disassembly Agreement”: As defined in Section 1(l) of this Agreement.

 

“Eligible Accounts”: At any date of determination, the United States dollar
value (net of deposits, finance charges and/or service charges) of only such
accounts of the Borrower arising from the rendering of sale of goods in the
ordinary course of Borrower’s business in which the Collateral Agent holds a
perfected first priority Lien for the benefit of itself and for the ratable
benefit of the Lenders and as to which the Lenders, in their reasonable business
judgment, shall from time to time determine to be collectible in a timely manner
in the ordinary course of business without dispute or set-off. Without limiting
the Lenders’ right, in their reasonable business judgment, to consider any
account not to be an Eligible Account, and by way of example only of types of
accounts that the Lenders will consider not to be Eligible Accounts, the
Lenders, notwithstanding any earlier classification of eligibility, may consider
any account not to be an Eligible Account if: (a) any warranty is breached as to
the account or the account debtor disputes liability or makes any claim with
respect to the account; (b) (i) the account is not paid by the account debtor
within 90 days after its invoice date; or (ii) the account is owed by any
account debtor who has not paid 10% or more of such account debtor’s accounts
within the time period specified in subsection (b)(i) above; (c) a petition in
bankruptcy or other application for relief under any insolvency law is filed
with respect to the account debtor owing the account, or the account debtor
owing the account assigns for the benefit of creditors, becomes insolvent,
fails, suspends, or goes out of business, or the Lenders, in their reasonable
business judgment, shall become dissatisfied with the creditworthiness of an
account debtor owing an account; (d) the account arises from a sale to an
account debtor outside the United States, unless the sale is on letter of
credit, acceptance or other terms acceptable to the Lenders; (e) the account
debtor is an employee, or Affiliate of the Borrower, or an entity which has
common officers, managers or directors with the Borrower; (f) the account debtor
is the United States of America or any agency or department thereof and the
account is subject to the Assignment of Claims Act; (g) the account is a bonded
account; (h) the account balance includes the amount of any counterclaims or
offsets which have been or may be asserted against the Borrower by the account
debtor (including offsets for any "contra accounts" owed by the Borrower to the
account debtor for goods purchased by the Borrower or for services performed for
the Borrower); (i) the account debtor is a state, county, city, town or
municipality; or (k) any account for a customer deposit.

 

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“Eligible Inventory”: Shall mean the aggregate United States dollar Fair Market
Value of the Borrower’s aircraft parts Inventory, in which only the Collateral
Agent holds a perfected first priority Lien for the benefit of itself and for
the ratable benefit of the Lenders and as to which the Lenders, in their
reasonable business judgment, shall elect from time to time to constitute
Eligible Inventory. Without limiting the Lenders’ right, in their reasonable
business judgment, to consider any inventory not to be Eligible Inventory, and
by way of example only of types of inventory that the Lenders will consider not
to be Eligible Inventory, the Lenders, notwithstanding any earlier
classification of eligibility, may consider any inventory not to be Eligible
Inventory if: (a) such inventory is not located at (or in transit to or from) a
facility owned and operated by either Jet Yard or Airco that is located in the
domestic United States; and (b) in the case of Inventory that is consigned by
Borrower to a consignee, the Borrower has not complied with any of the Consigned
Inventory Eligibility Requirements. The value of Eligible Inventory shall be the
lower of the cost or market value of the Eligible Inventory computed on a
first-in, first-out basis

 

“Event of Default”: As defined in the introductory paragraph of Section 9 of
this Agreement.

 

“Fair Market Value”: The price a willing non-affiliated buyer would pay a
willing seller for an item of Inventory (neither being under any compulsion to
buy or sell), whether or not such item of Inventory has been physically removed
from the Airframe. The Fair Market Value of an item of Inventory included in
Eligible Inventory shall be determined based on the most recent invoice price of
a similar item of Inventory actually sold by the Borrower or by an Affiliate of
Borrower to a non-affiliated buyer, or other supporting documentation provided
by Borrower to Lender that is acceptable to Lender in its sole discretion;
provided, however, that the Lenders reserve the right to assign a lower Fair
Market Value for any such item based on an Appraisal of the Inventory
commissioned by Lenders or by the Collateral Agent. At Lenders’ or Collateral
Agent’s request, Borrower shall promptly provide Lenders with copies of invoices
and other relevant materials to support its determination of Fair Market Value
of any item(s) Inventory.

 

“Hedge Agreement”: Any agreement between Borrower and a Lender or any affiliate
of a Lender (a “Hedge Provider”) now existing or hereafter entered into, which
provides for and interest rate swap, cap, floor, collar, or any similar
transaction or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Borrower’s exposure to fluctuations in
interest rates.

 

“Hedge Obligations”: The liabilities, Indebtedness, and obligations of the
Borrower, if any, to the Hedge Provider under any Hedge Agreement.

 

“Indebtedness”: Without duplication, all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon the obligor’s balance
sheet as liabilities, but in any event including the following (whether or not
they should be classified as liabilities upon such balance sheet):
(a) obligations secured by any mortgage, pledge, security interest, or other
Lien, charge or other encumbrance existing on property owned or acquired subject
thereto, whether or not the obligation secured thereby shall have been assumed
and whether or not the obligation secured is the obligation of the owner or
another party, in an amount equal to the lesser of (i) such liabilities and (ii)
the greater of the purchase price or the fair market value of such property in
such obligations have not been assumed; (b) any obligation on account of
deposits or advances; (c) any obligation for the deferred purchase price of any
property or services, except Trade Accounts Payable; (d) any obligation as
lessee under any Capitalized Lease; (e) all guaranties, endorsements and other
contingent obligations in respect to Indebtedness of others; (f) undertakings or
agreements to reimburse or indemnify issuers of letters of credit or in
connection with bankers’ acceptances; and (g) all Hedge Obligations. For all
purposes of this Agreement, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture as to which such Person is or
may become personally liable.

 

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“Inventory”: Shall have the meaning given such term in the Security Agreement.

 

“International Registry”: Shall mean the International Registry of Mobile Assets
located in Dublin, Ireland and established pursuant to the Cape Town Convention,
along with any successor registry.

 

“Investment”: The acquisition, purchase, making or holding of any stock or other
security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of, or any interest in, another Person or any integral
part of any business or the assets comprising such business or part thereof.

 

“Jet Yard”: Jet Yard, LLC, an Arizona limited liability company.

 

“Lender(s)”: As defined in the Preamble to this Agreement.

 

“Liabilities”: At any date of determination, the aggregate amount of liabilities
appearing on the Borrower’s consolidated balance sheet at such date prepared in
accordance with GAAP.

 

“Lien(s)”: Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement), including
without limitation, any registrations on the International Registry without
regard to whether such registrations are valid.

 

“Loan(s)”: The Loan, together with each other loan or extension of credit now or
hereafter provided by Lenders to Borrower pursuant to this Agreement.

 

“Loan Document(s)”: As defined in Section 1 of this Agreement.

 

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“Loan Party(ies)”: Individually, or collectively, the Borrower and each Person
who executes a guaranty of the Obligations in favor of the Lender. On the
Effective Date, the Borrower is the sole Loan Party.

 

“Material Adverse Occurrence”: Any occurrence of whatsoever nature (including,
without limitation, any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding) which could reasonably be expected to
materially and adversely affect: (a) the financial condition or operations of
Borrower; (b) the ability of Borrower to perform its obligations under the Loan
Documents; (c) the validity or enforceability of the material obligations of
Borrower under the Loan Documents; (d) the rights and remedies of the Lenders
against Borrower; or (e) the timely payment of the principal of and interest on
the Loan or other amounts payable by the Borrower hereunder or under any other
Loan Document.

 

“MBT”: As defined in the Preamble to this Agreement.

 

“MBT Loan Agreement”: As defined in Recital A to this Agreement.

 

“Net Proceeds”: With respect to any sale of Inventory, the cash proceeds
received by the Borrower from such transaction after deducting the ten percent
(10%) commission payable to Airco pursuant to the Consignment Agreement.

 

“Note(s): As defined in Section 1(a) of this Agreement.

 

“Obligations”: All Loans, advances, debts, liabilities, obligations, Banking
Services Liabilities, covenants and duties, owing by Borrower to the Lenders of
any kind or nature, present or future, which arise under this Agreement, any
other Loan Document or any permitted Hedge Agreement or by operation of law,
whether or not evidenced by any note, guaranty or other instrument, whether or
not for the payment of money, whether arising by reason of an extension of
credit, opening, guarantying or confirming of a letter of credit, guaranty,
indemnification or in any other manner, whether joint, several, or joint and
several, direct or indirect (including those acquired by assignment or
purchases), absolute or contingent, due or to become due, and however acquired.
The term includes, without limitation, all principal, interest, fees, charges,
expenses, attorneys’ fees, and any other sum chargeable to Borrower under this
Agreement or any other Loan Document or any permitted Hedge Agreement.

 

“Patriot Act”: As defined in Section 6(t) of this Agreement.

 

“Percentage”. The term “Percentage” means, with respect to either Lender, and
with respect to any amount to be funded or paid to the Lenders, such Lender’s
pro rata share of such amount, determined by the ratio that the amount of the
Obligations consisting of principal and interest owing such Lender bears to the
aggregate amount of all of the Obligations consisting of principal and interest
on the applicable date of determination.

 

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“Permitted Liens”:

 

(a)     Liens in favor of MBT securing other obligations of Borrower to MBT;

 

(b)     Deposits or pledges to secure payment of workers’ compensation,
unemployment insurance, old age pensions or other social security obligations,
in the ordinary course of business of the Borrower; and

 

(c)     Liens for taxes, fees, assessments and governmental charges not
delinquent or to the extent that payments therefor shall not at the time be
required to be made in accordance with the provisions of Section 7(d);

 

“Person”: Any natural person, corporation, partnership, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision, or any other entity, whether acting in an
individual, fiduciary or other capacity.

 

“PSB”: As defined in the Preamble to this Agreement.

 

“Regulatory Change”: As to either or both Lenders, any change (including any
scheduled change) applicable to a class of banks which includes either or both
Lenders in any:

 

(a)     federal or state law or foreign law; or

 

(b)     regulation, interpretation, directive or request (whether or not having
the force of law) of any court or governmental authority charged with the
interpretation or administration of any law referred to in clause (a) of this
definition or of any fiscal, monetary or other authority having jurisdiction
over such class of banks;

 

or the adoption after the date hereof of any new or final law, regulation,
interpretation, directive or request applicable to a class of banks which
includes either or both Lenders.

 

“Security Agreement”: As defined in Section 1(b).

 

“Solvent”: Shall mean, with respect to any Person on any date of determination,
that on such date:

 

(a) the fair value of such Person’s tangible and intangible assets as a going
concern is in excess of the total amount of such Person’s liabilities including,
without limitation, Contingent Obligations;

 

 (b) such Person is then able to pay its debts as they mature; and

 

 (c) such Person has capital sufficient to carry on its business.

 

“Subordination Agreement(s)”: Each subordination agreement now or hereafter
executed by a creditor of the Borrower in favor of the Lender.

 

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“Subordinated Creditor”: Each holder of Subordinated Debt.

 

“Subordinated Debt”: At any date of determination, the outstanding principal
amount of any Indebtedness of the Borrower which has been subordinated to the
payment of the Obligations pursuant to a Subordination Agreement acceptable to
the Lenders in their sole discretion.

 

“Subsidiary”: Any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.

 

“Taxes” All present or future taxes, levies, imposts, duties, fees, assessments
or other charges of whatever nature now or hereafter imposed by any jurisdiction
or by any political subdivision or taxing authority thereof or therein with
respect to such payments.

 

“Trade Accounts Payable”: The trade accounts payable of any Person with a
maturity of not greater than 90 days incurred in the ordinary course of such
Person’s business.

 

12.     Collateral Audit; Appraisals.

 

Borrower acknowledges and agrees that, while the Loan or any portion thereof
remains outstanding, Lenders have the right at any time to obtain an audit
(“Audit”) of the Collateral (or any portion thereof) performed by employees of
the Collateral Agent or by an appraiser, consultant or auditor engaged by the
Collateral Agent. If any of the Collateral or related books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Collateral Agent or its agents to have access to perform inspections
or audits and to respond to the Collateral Agent’s (or Collateral Agent’s
agent’s) requests for information concerning such Collateral and records. The
Borrower further agrees to promptly reimburse the Collateral Agent for all
expenses, charges, costs and fees of any such Audit and Collateral Agent’s
internal review of such Audit that is commissioned by Lender (a) following the
occurrence of an Event of Default, or (b) if, at any time after October 15,
2019, the outstanding principal balance of the Loan is greater than $1,000,000.

 

13.     Miscellaneous.

 

(a)     Notices. Any notices or demands required or contemplated hereunder shall
be written and shall be effective two days after the placing thereof in the
United States mails postage prepaid or with a nationally-recognized courier
service such as Federal Express, addressed to the relevant party at its address
set forth on the signature page below or upon transmission by telecopy to the
relevant party at the telecopy number set forth on the signature page below and
a confirmation is received or at any other address or telecopy number as may be
designated by the party in a notice to the other parties provided, however, that
any notice to a Lender shall not be deemed given until actually received by such
Lender.

 

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(b)     Counterparts. This Agreement may be executed in counterparts and by
separate parties in separate counterparts, each of which shall be an original
and all of which taken together shall constitute one and the same document.
Receipt by telecopy, pdf file or other electronic means of any executed
signature page to this Agreement shall constitute effective delivery of such
signature page.

 

(c)     Governing Law. This Agreement, the Notes and each other Loan Document
shall be governed by, interpreted and construed in accordance with the internal
laws, but not the law of conflicts, of the State of Minnesota.

 

(d)     General Indemnity. In addition to the payment of expenses pursuant to
Section 7(f), whether or not the transactions contemplated hereby shall be
consummated, the Borrower hereby indemnifies, and agrees to pay and hold the
Lenders, the Collateral Agent, their respective affiliates and any holder of any
Note, and their respective officers, directors, employees, agents, successors
and assigns (collectively called the “Indemnitees”) harmless from and against,
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto),
that may be imposed on, incurred by, or asserted against the Indemnitees (or any
of them), in any manner relating to or arising out of the Loan Documents, the
statements contained in any proposal letters or other similar correspondence
delivered by either or both Lenders or the Collateral Agent (whether in person,
by mail, courier or any electronic means), the Lenders’ agreement to make the
Loan to the Borrower, or the use or intended use of the proceeds of the Loan
(the “Indemnified Liabilities”); provided, however, that the Borrower shall have
no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of an Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, the Borrower shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them. The
obligations of the Borrower under this Section 13(d) and under Section 7(f)
shall survive any termination of this Agreement.

 

(e)     All payments made by the Borrower hereunder or under any Note will be
made free and clear of, and without deduction or withholding for, any Taxes. If
the Borrower shall be required to deduct any Taxes from such payments, then (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 13(e) such Lender or other recipient receives an amount equal
to the sum it would have received had no such deduction been made; (ii) the
Borrower shall make such deduction; and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable Law.

 

26

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(f)     Regulatory Change. If, as a result of any Regulatory Change:

 

(i)     any tax, duty or other charge with respect to any Loan, the Notes, or
any commitment to lend is imposed, modified or deemed applicable, or the basis
of taxation of payments to the Lenders of interest or principal of the Loans is
changed;

 

(ii)     any reserve, special deposit, special assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
the Lenders is imposed, modified or deemed applicable;

 

(iii)     any increase in the amount of capital required or expected to be
maintained by either or both Lenders or any Person controlling either or both
Lenders is imposed, modified or deemed applicable;

 

(iv)     any other condition affecting this Agreement or any commitment to lend
is imposed on either or both Lenders or the relevant funding markets;

 

(v)     and either or both Lenders determines that, by reason thereof, the cost
to either or both Lenders of making or maintaining the Loan or any commitment to
lend is increased, or the amount of any sum receivable by the Lenders hereunder
or under the Notes is reduced, then, the Borrower shall pay to such Lender or
Lenders upon demand such additional amount or amounts as will compensate such
Lender or Lenders (or the controlling Person in the instance of (c) above) on an
after-tax basis for such additional costs or reduction. Determinations by the
Lenders for purposes of this Section 13(f) of the additional amounts required to
compensate the Lenders shall be conclusive in the absence of manifest error. The
Lenders’ demand for payment of any amount pursuant to this Section 13(f) shall
show the calculation of the amount demanded in reasonable detail. In determining
such amounts, the Lenders may use any reasonable averaging, attribution and
allocation methods.

 

(g)     Participation. Either or both Lenders may in their sole and exclusive
discretion at any time issue participations in the Loan and in any or all or a
portion of its obligations to make the Loan to one or more participants in the
Loan. Each Lender may divulge all information received by it from Borrower or
any other source, including but not limited to information relating to the Loan
and to the Borrower, to any such participant(s) or other lenders, and Borrower
shall cooperate with Lenders in satisfying the reasonable requirements of any
such participant(s) or other lenders for consummating such a purchase,
participation or assignment.

 

(h)     Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or transfer its rights
hereunder without the prior written consent of both Lenders.

 

(i)     Waivers, Amendments; etc. The provisions of this Agreement, or any other
Loan Document, may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to by the Borrower
and both Lenders.

 

27

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(j)     Inconsistencies, etc. In the event of any conflict or inconsistency
between or among the provisions of this Agreement and any other Loan Document,
it is intended that the provisions of this Agreement and such other Loan
Document be enforceable except to the extent that the enforcement of such
provisions is irreconcilable and, in that event, the provisions of the Loan
Document most favorable to the Lenders shall be controlling.

 

(k)     WAIVER OF TRIAL BY JURY. THE BORROWER AND EACH LENDER SEVERALLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS (i) UNDER THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH OR (ii) ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

(l)     Limitation of Liability. Neither of the Lenders, the Collateral Agent or
any affiliate of the Lenders or the Collateral Agent shall have any liability
with respect to, and the Borrower hereby waives, releases and agrees not to sue
upon, any claim for any special, indirect or consequential damages suffered by
the Borrower in connection with, arising out of, or in any way related to, this
Agreement, the Notes or any other Loan Document, or the transactions
contemplated and the relationship established hereby or thereby, or any act,
omission or event occurring in connection herewith or therewith.

 

(m)     Customer Identification - USA PATRIOT Act Notice. The Lenders hereby
notify the Borrower that pursuant to the requirements of the Patriot Act, and
the Lenders’ policies and practices, the Lenders are required to obtain, verify
and record certain information and documentation that identifies the Borrower,
which information includes the name and address of the Borrower and such other
information that will allow the Lenders to identify the Borrower in accordance
with the Patriot Act.

 

(n)     Venue. AT THE OPTION OF THE LENDERS, THIS AGREEMENT AND EACH OTHER LOAN
DOCUMENT TO WHICH THE BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT
OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE LENDERS AT THEIR OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

 

28

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(o)     Entire Agreement; Document Construction. This Agreement, the Notes and
the other Loan Documents embody the entire agreement and understanding between
the Borrower and the Lenders with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement, the Notes and each other
Loan Document has been reviewed by all parties hereto and incorporate the
requirements of such parties. Each party waives the rule of construction that
any ambiguities are to be resolved against the party drafting the same and
agrees such rules will not be employed in the interpretation of this Agreement,
the Notes or any other Loan Document. The words “hereof,” “herein,” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, Schedules and like references are
to this Agreement unless otherwise expressly provided. The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.” Unless the context in which used herein otherwise clearly requires,
“or” has the inclusive meaning represented by the phrase “and/or.”

 

(p)     Document Imaging, Electronic Transactions and the UETA. Without notice
to or consent of Borrower, Lenders may create electronic images of this
Agreement and the other Loan Documents and destroy paper originals of any such
imaged documents. Provided that such images are maintained by or on behalf of
Lenders as part of Lenders’ normal business processes, Borrower agrees that such
images have the same legal force and effect as the paper originals and are
enforceable against Borrower. Furthermore, Borrower agrees that Lenders may
convert any Loan Document into a “transferrable record” as such term is defined
under, and to the extent permitted by, the UETA, with the image of such
instrument in Lenders’ possession constituting an “authoritative copy” under the
UETA.

 

(q)     Single Purpose Entity. Borrower’s sole business purpose shall be to own
and sell decommissioned Airframes. Borrower (i) shall conduct business only in
its own name, (ii) shall not engage in any business or have any assets unrelated
to decommissioned Airframes, (iii) shall not have any indebtedness other than as
permitted by this Agreement and other than trade payables incurred in the
ordinary course of Borrower’s business, (iv) shall have its own separate books,
records, and accounts (with no commingling of assets), (v) shall hold itself out
as being an entity separate and apart from any other person or entity, (vi)
shall not change its name or identity unless Borrower shall have obtained the
prior written consent of Lenders to such change, and shall have taken all
actions necessary or requested by Lenders or the Collateral Agent to file or
amend any financing statement or continuation statement to assure perfection and
continuation of perfection of security interests under the Loan Documents, and
(vii) shall not amend its limited liability company agreement in any way that
would have a material adverse effect on its ability to own or sell the Acquired
Assets or to perform its obligations under the Loan Documents unless Borrower
shall have obtained the prior written consent of both Lenders to such change.

 

29

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(r)     Divisibility and Replacement of Notes. Any instrument representing the
Loan may be divided into multiple notes or certificates in such denominations as
the Lenders may request upon surrender of such instrument at the principal
office of the Borrower. In case any instrument evidencing the Loan issued to the
Lenders hereunder shall be mutilated, lost, stolen, or destroyed, the Borrower
shall issue and deliver in exchange and substitution for, and upon cancellation
of the mutilated instrument or in lieu of and substitution for the instrument
lost, stolen or destroyed, a new note or other document of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Borrower of such loss, theft or destruction; the affidavit
of the holder, without bond but with promise of indemnity, shall be
satisfactory.

 

(s)     Headings; Document Construction. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement. This Agreement, the Note and
each other Loan Document has been reviewed by all parties hereto and incorporate
the requirements of such parties. Each party waives the rule of construction
that any ambiguities are to be resolved against the party drafting the same and
agrees such rules will not be employed in the interpretation of this Agreement,
the Notes or any other Loan Document.

 

[signature page follows]

 

30

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first set forth above.

 

LENDERS:

 

 

PARK STATE BANK, a Minnesota state banking

corporation

 

 

 

 

 

 

By:

 

 

 

Name: 

David Saber

 

 

Its:

President

 

        Address for Notices:        

1108 Nicollet Mall #210

Minneapolis, MN 55403

Attention: Mr. David Saber, President

Telephone No.: 612-238-0430

 

 

 

 

MINNESOTA BANK & TRUST, a Minnesota state

banking corporation

 

 

 

 

 

 

By:

 

 

 

Name:

Eric P. Gundersen

 

 

Its:

Senior Vice President

 

        Address for Notices:        

9800 Bren Road East, Suite 200

Minnetonka, MN 554343

Attention: Mr. Eric P. Gundersen, SVP

Telephone No.: (952) 841-9331

          With a copy to (which shall not constitute notice or service of
process):            

Fabyanske, Westra, Hart & Thomson, P.A

333 South Seventh Street, Suite 2600

Minneapolis, MN 55402

Attention: Frederick H. Ladner, Esq.

 

 

 

[signature page to Loan Agreement]

 

 

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AirCo 1, LLC, a Delaware limited liability company

 

 

 

 

 

 

By:

 

 

 

Name:

Chuck Kingsley

 

 

Its:

Vice President

 

        Address for Notices:        

AirCo 1, LLC

5930 Balsom Ridge Road

Denver, North Carolina 28037

Attention: Candice Otey

Telephone No.: (828) 466-6680

          With a copy to (which shall not constitute notice or service of
process):            

Winthrop & Weinstine, P.A.

225 S. 6th Street

Minneapolis, MN 55402

Attention: David E. Moran, Esq.

 

     

 

[Signature page to Loan Agreement]

 

 

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EXHIBITS AND SCHEDULES TO LOAN AGREEMENT

 

 

EXHIBITS

 

EXHIBIT A-1

FORM OF PARK STATE BANK TERM NOTE

EXHIBIT A-2

FORM OF MINNESOTA BANK & TRUST TERM NOTE

EXHIBIT B

FORM OF BORROWING BASE CERTIFICATE

EXHIBIT C

CONSIGNED INVENTORY ELIGIBILITY REQUIREMENTS

 

 

SCHEDULES

 

 

SCHEDULE 1(J)  AIRFRAME TRANSACTION DOCUMENTS    

SCHEDULE

ACQUIRED ASSETS