Unassociated Document


    EXHIBIT
      10.6

     

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT,
      dated
      as of the ____ day of July, 2006 (the “Agreement”),
      is
      entered into by and among Mark Daniels (the “Secured
      Party”),
      and
      Tactical Air Defense Services, Inc., a Nevada corporation (the “Obligor”).
      All
      capitalized terms not otherwise defined herein, shall have the meanings set
      forth in the Asset Purchase Agreement (as hereinafter defined). 

     

    WITNESSETH:

     

    WHEREAS,
      concurrently herewith, the Obligor and its Subsidiaries entered into an Asset
      Purchase Agreement with AeroGroup Incorporated, a Utah corporation (“Sellers”)
      (the “Asset
      Purchase Agreement”),
      pursuant to which, the Obligor agreed to assume all of the obligations of
      Sellers under the Secured Promissory Notes issued to the Secured Party, in
      the
      aggregate principal amount of $1,100,000 (the “Promissory
      Note”);
      and

     

    WHEREAS,
      in
      order to induce Sellers to enter into the Asset Purchase Agreement the Obligor
      and the Subsidiary Purchasers have agreed to execute and deliver to the Secured
      Party this Agreement for the benefit of the Secured Party and to grant him
      a
      security interest in certain property of the Obligor, to secure the prompt
      payment, performance and discharge in full of all of the obligations of the
      Obligor under the Promissory Note.

     

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

     

    1.  Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “general
      intangibles”
and
      “proceeds”)
      shall
      have the respective meanings given such terms in Article 9 of the UCC.


     

    (a)  “Collateral”
means
      the collateral in which the Secured Party is granted a security interest by
      this
      Agreement and which shall include the following, whether presently owned or
      existing or hereafter acquired or coming into existence, and all additions
      and
      accessions thereto and all substitutions and replacements thereof, and all
      proceeds, products and accounts thereof, including, without limitation, all
      proceeds from the sale or transfer of the Collateral and of insurance covering
      the same and of any tort claims in connection therewith:

     

    (i)  all
      Goods
      of the Obligor, including, without limitations, all machinery, equipment,
      computers, motor vehicles, aircraft, aircraft parts, avionics, trucks, tanks,
      boats, ships, appliances, furniture, special and general tools, fixtures, test
      and quality control devices and other equipment of every kind and nature and
      wherever situated, together with all documents of title and documents
      representing the same, all additions and accessions thereto, replacements
      therefor, all parts therefor, and all substitutes for any of the foregoing
      and
      all other items used and useful in connection with the Obligor’s businesses and
      all improvements thereto (collectively, the “Equipment”);
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii)  All
      Inventory of the Obligor; and

     

    (iii)  All
      of
      the Obligor’s contract rights and general intangibles, including, without
      limitation, all partnership interests, stock or other securities, licenses,
      distribution and other agreements, computer software development rights, leases,
      franchises, customer lists, quality control procedures, grants and rights,
      goodwill, trademarks, service marks, trade styles, trade names, patents, patent
      applications, copyrights, deposit accounts, and income tax refunds
      (collectively, the “General
      Intangibles”);
      and

     

    (iv)  All
      Receivables of the Obligor including all insurance proceeds, and rights to
      refunds or indemnification whatsoever owing, together with all instruments,
      all
      documents of title representing any of the foregoing, all rights in any
      merchandising, goods, equipment, motor vehicles and trucks which any of the
      same
      may represent, and all right, title, security and guaranties with respect to
      each Receivable, including any right of stoppage in transit; and

     

    (v)  All
      of
      the Obligor’s documents, instruments and chattel paper, files, records, books of
      account, business papers, computer programs and the products and proceeds of
      all
      of the foregoing Collateral set forth in clauses (i)-(iv) above.

     

    (b)  “Obligations”
means
      all of the Obligor’s obligations under the Promissory Note, in each case,
      whether now or hereafter existing, voluntary or involuntary, direct or indirect,
      absolute or contingent, liquidated or unliquidated, whether or not jointly
      owed
      with others, and whether or not from time to time decreased or extinguished
      and
      later decreased, created or incurred, and all or any portion of such obligations
      or liabilities that are paid, to the extent all or any part of such payment
      is
      avoided or recovered directly or indirectly from the Secured Party as a
      preference, fraudulent transfer or otherwise as such obligations may be amended,
      supplemented, converted, extended or modified from time to time.

     

    (c)  “UCC”
means
      the Uniform Commercial Code, as currently in effect in the State of New York;
      provided,
      however,
      that in
      the event, by reason of mandatory provisions of law, any or all of the
      attachment, perfection or priority of the Secured Party’s security interest in
      any Collateral is governed by the Uniform Commercial Code as in effect in a
      jurisdiction other than the State of New York, the term “UCC” shall mean the
      Uniform Commercial Code as in effect in such other jurisdiction for purposes
      of
      the provisions hereof relating to such attachment, perfection of priority and
      for purposes of definitions related to such provisions. 

     

    2.  Grant
      of Security Interest.
      

     

    (a) As
      an
      inducement for the Secured Party to enter into the Asset Purchase Agreement
      and
      to cause Sellers to enter into the Asset Purchase Agreement, and to secure
      the
      complete and timely payment, performance and discharge in full, as the case
      may
      be, of all of the Obligations, except for Permitted Liens (as hereinafter
      defined), the Obligor hereby, unconditionally and irrevocably, pledge, grant
      and
      hypothecate to the Secured Party, a continuing security interest in, a
      continuing lien upon, an unqualified right to possession and disposition of
      and
      a right of set-off against, in each case to the fullest extent permitted by
      law,
      all of the Obligor’s right, title and interest of whatsoever kind and nature in
      and to the Collateral (the “Security
      Interest”).

     

    
      
        
        

      

      
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    (b) In
      the
      event that the Obligor materially breaches any of the terms and provisions
      of
      this Security Agreement, or should any Event of Default (as that term is defined
      herein) occur, the respective positions of each Secured Party with respect
      to
      the Collateral shall be in accordance with its respective participations
      therein.

     

    3.  Representations,
      Warranties, Covenants and Agreements of the Obligor.
      The
      Obligor represents and warrant to, and covenant and agrees with, the Secured
      Party as follows: 

     

    (a)  The
      Obligor has the requisite corporate power and authority to enter into this
      Agreement and otherwise to carry out its obligations hereunder. The execution,
      delivery and performance by the Obligor of this Agreement and the filings
      contemplated herein have been duly authorized by all necessary action on the
      part of the Obligor and no further action is required by the Obligor. This
      Agreement constitutes a legal, valid and binding obligation of the Obligor
      enforceable in accordance with its terms, except as enforceability may be
      limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
      affecting the enforcement of creditor’s rights generally.

     

    (b)  The
      Obligor represents and warrants that it has no place of business or offices
      where their respective books of account and records are kept (other than
      temporarily at the offices of its attorneys or accountants), except as set
      forth
      on Schedule
      A
      attached
      hereto;

     

    (c)  Except
      as
      to those liens existing as of the date hereof that were disclosed to the Secured
      Party by the Obligor and are set forth on the attached Schedule
      B
      (the
“Permitted
      Liens”),
      the
      Obligor is the sole owner of the Collateral (except for non-exclusive licenses
      granted by the Obligor in the ordinary course of business), free and clear
      of
      any liens, security interests, encumbrances, rights or claims, and are fully
      authorized to grant the Security Interest in and to pledge the Collateral.
      Except as to the Permitted Liens, there is not on file in any governmental
      or
      regulatory authority, agency or recording office an effective financing
      statement, security agreement, license or transfer or any notice of any of
      the
      foregoing (other than those that have been filed in favor of the Secured Party
      pursuant to this Agreement) covering or affecting any of the Collateral. Except
      as to the Permitted Liens, so long as this Agreement shall be in effect, the
      Obligor shall not execute and shall not knowingly permit to be on file in any
      such office or agency any such financing statement or other document or
      instrument (except to the extent filed or recorded in favor of the Secured
      Party
      pursuant to the terms of this Agreement).

     

    (d)  No
      part
      of the Collateral has been judged invalid or unenforceable. No written claim
      has
      been received that any Collateral or the Obligor’s use of any Collateral
      violates the rights of any third party. There has been no adverse decision
      to
      the Obligor’s claim of ownership rights in or exclusive rights to use the
      Collateral in any jurisdiction or to the Obligor’s right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of the Obligor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority. 

     

    (e)  The
      Obligor shall at all times maintain their books of account and records relating
      to the Collateral at its principal place of business and may not relocate such
      books of account and records unless it delivers to the Secured Party at least
      thirty (30) days prior to such relocation (i) written notice of such relocation
      and the new location thereof (which must be within the United States) and
      (ii) evidence that appropriate financing statements and other necessary
      documents have been filed and recorded and other steps have been taken to
      perfect the Security Interest to create in favor of the Secured Party valid,
      perfected and continuing liens in the Collateral. 

     

    
      
        
        

      

      
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    (f)  This
      Agreement creates in favor of the Secured Party a valid security interest in
      the
      Collateral securing the payment and performance of the Obligations and, upon
      making the filings described in the immediately following sentence, a perfected
      security interest in such Collateral. Except for the filing of financing
      statements on Form-1 under the UCC with the jurisdictions indicated on
Schedule
      C,
      attached hereto, no authorization or approval of or filing with or notice to
      any
      governmental authority or regulatory body is required either (i) for the grant
      by the Obligor of, or the effectiveness of, the Security Interest granted hereby
      or for the execution, delivery and performance of this Agreement by the Obligor,
      or (ii) for the perfection of or exercise by the Secured Party of their rights
      and remedies hereunder.

     

    (g)  The
      Obligor hereby irrevocably authorize the Secured Party at any time and from
      time
      to time to file in any Uniform Commercial Code jurisdiction any initial
      financing statements and amendments thereto that (i) indicate the Collateral
      regardless of whether any particular asset comprised in the Collateral falls
      within the scope of Article 9 of the Uniform Commercial Code of the State of
      New
      York as amended from time to time (“NYUCC”),
      or
      any other Uniform Commercial Code jurisdiction; and (ii) contain any other
      information required by part 5 of Article 9 of the NYUCC for the sufficiency
      or
      filing office acceptance of any financing statement or amendment, including
      whether the Obligor is an organization, the type of organization and any
      organization identification number issued to the Obligor. The Obligor agrees
      to
      furnish any such information to the Secured Parties promptly upon request.
      The
      Obligor also ratifies its authorization for the Secured Party to have filed
      in
      any Uniform Commercial Code jurisdiction any like initial financing statements
      or amendments thereto if filed prior to the date hereof with respect to the
      Collateral.

     

    (h)  The
      execution, delivery and performance of this Agreement does not conflict with
      or
      cause a breach or default, or an event that with or without the passage of
      time
      or notice, shall constitute a breach or default, under any agreement to which
      Obligor is a party or by which Obligor is bound. No consent (including, without
      limitation, from stockholders or creditors of the Obligor) is required for
      the
      Obligor to enter into and perform its obligations hereunder.

     

    (i)  The
      Obligor shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected liens and security interests in the Collateral
      in favor of the Secured Party until this Agreement and the Security Interest
      hereunder shall be terminated pursuant to Section 11. The Obligor hereby agrees
      to defend the same against any and all persons. The Obligor shall safeguard
      and
      protect all Collateral for the account of the Secured Party. At the request
      of
      the Secured Party, the Obligor will pay the cost of filing one or more financing
      statements pursuant to the UCC (or any other applicable statute) in form
      reasonably satisfactory to the Secured Party in all public offices wherever
      filing is, or is deemed by the Secured Party to be, necessary or desirable
      to
      effect the rights and obligations provided for herein. Without limiting the
      generality of the foregoing, the Obligor shall pay all fees, taxes and other
      amounts necessary to maintain the Collateral and the Security Interest
      hereunder, and the Obligor shall obtain and furnish to the Secured Party from
      time to time, upon demand, such releases and/or subordinations of claims and
      liens which may be required to maintain the priority of the Security Interest
      hereunder. 

     

    
      
        
        

      

      
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    (j)  So
      long
      as the Obligor shall have any obligations under the Promissory Note, the Obligor
      shall not, without the Secured Party’s written consent, transfer, pledge,
      hypothecate, encumber, license (except for non-exclusive licenses granted by
      the
      Obligor in the ordinary course of business), sell (except for sales of inventory
      in the ordinary course of business) or otherwise dispose of any of the
      Collateral. 

     

    (k)  The
      Obligor shall keep and preserve their Equipment, Inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

     

    (l)  The
      Obligor shall, within ten (10) days of obtaining knowledge thereof, advise
      the
      Secured Party promptly, in sufficient detail, of any substantial change in
      the
      Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Party’s security
      interest therein.

     

    (m)  The
      Obligor shall promptly execute and deliver to the Secured Party such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Party may from time to time request and may in its sole
      discretion deem necessary to perfect, protect or enforce its security interest
      in the Collateral.

     

    (n)  The
      Obligor shall permit the Secured Party and their representatives and agents
      to
      inspect the Collateral at any time, and to make copies of records pertaining
      to
      the Collateral as may be requested by the Secured Party from time to
      time.

     

    (o)  The
      Obligor will take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

     

    (p)  The
      Obligor shall promptly notify the Secured Party in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by the
      Obligor that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Party hereunder.

     

    (q)  All
      information heretofore, herein or hereafter supplied to the Secured Party by
      or
      on behalf of the Obligor with respect to the Collateral is accurate and complete
      in all material respects as of the date furnished.

     

    4.  Defaults.
      The
      following events shall be “Events
      of Default”:

     

    
      
        
        

      

      
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    (a)  A
      breach
      by Obligor or any of the Purchasers of their material obligations under any
      of
      the Promissory Note, the Asset Purchase Agreement, the Guaranty and failure
      to
      cure such breach for ten (10) days after receipt by such Obligor of notice
      of
      such breach from the Secured Party;

     

    (b)  Any
      representation or warranty of the Obligor or in this Agreement and/or or any
      Purchaser in (i) the Asset Purchase Agreement, or (ii) any other agreement,
      guaranty or other document relating to the Asset Purchase Agreement to which
      such Purchaser is a party, shall prove to have been incorrect in any material
      respect when made; and

     

    (c)  The
      material failure by an Obligor to observe or perform any of its material
      obligations hereunder for ten (10) days after receipt by such Obligor of notice
      of such failure from the Secured Party.

     

    5.  Duty
      To Hold In Trust.
      Upon
      the occurrence of any Event of Default and at any time thereafter, the Obligor
      shall, upon receipt by it of any revenue, income or other sums subject to the
      Security Interest, whether payable pursuant to the Promissory Note, or
      otherwise, or of any check, draft, debenture, trade acceptance or other
      instrument evidencing an obligation to pay any such sum, hold the same in trust
      for the Secured Party and shall forthwith endorse and transfer any such sums
      or
      instruments, or both, to the Secured Party for application to the satisfaction
      of the Obligation.

     

    6.  Rights
      and Remedies Upon Default.
      Upon
      occurrence of any Event of Default and at any time thereafter, the Secured
      Party
      shall have the right to exercise all of the remedies conferred hereunder and
      under the Promissory Notes, and the Secured Party shall have all the rights
      and
      remedies of a secured party under the UCC and/or any other applicable law
      (including the Uniform Commercial Code of any jurisdiction in which any
      Collateral is then located). Without limitation, the Secured Party shall have
      the following rights and powers:

     

    (a)  The
      Secured Party shall have the right to take possession of the Collateral and,
      for
      that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and the Obligor shall assemble the Collateral and make it available to
      the
      Secured Party at places which the Secured Party shall reasonably select, whether
      at the Obligor’s premises or elsewhere, and make available to the Secured Party,
      without rent, all of the Obligor’s respective premises and facilities for the
      purpose of the Secured Party taking possession of, removing or putting the
      Collateral in saleable or disposable form.

     

    (b)  The
      Secured Party shall have the right to operate the business of the Obligor using
      the Collateral and shall have the right to assign, sell, lease or otherwise
      dispose of and deliver all or any part of the Collateral, at public or private
      sale or otherwise, either with or without special conditions or stipulations,
      for cash or on credit or for future delivery, in such parcel or parcels and
      at
      such time or times and at such place or places, and upon such terms and
      conditions as the Secured Party may deem commercially reasonable, all without
      (except as shall be required by applicable statute and cannot be waived)
      advertisement or demand upon or notice to the Obligor or right of redemption
      of
      the Obligor, which are hereby expressly waived. Upon each such sale, lease,
      assignment or other transfer of Collateral, the Secured Party may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral being sold, free from and discharged of all trusts, claims,
      right
      of redemption and equities of the Obligor, which are hereby waived and
      released.

     

    
      
        
        

      

      
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    7.  Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys' fees and expenses incurred by
      the
      Secured Party in enforcing their rights hereunder and in connection with
      collecting, storing and disposing of the Collateral, and then to satisfaction
      of
      the Obligations, and to the payment of any other amounts required by applicable
      law, after which the Secured Party shall pay to the Obligor any surplus
      proceeds. If, upon the sale, license or other disposition of the Collateral,
      the
      proceeds thereof are insufficient to pay all amounts to which the Secured Party
      are legally entitled, the Obligor will be liable for the deficiency, together
      with interest thereon, at the rate of 18% per annum (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Party to collect
      such deficiency. To the extent permitted by applicable law, the Obligor waives
      all claims, damages and demands against the Secured Party arising out of the
      repossession, removal, retention or sale of the Collateral, unless due to the
      gross negligence or willful misconduct of the Secured Party.

     

    All
      ordinary costs and expenses incurred by any Secured Party in collection of
      the
      Obligations shall be borne exclusively by the Obligor including, without
      limitation, any costs, expenses, fees or disbursements incurred by outside
      agencies or attorneys retained by the Secured Party to effect collections of
      the
      Obligations or any Collateral securing the Obligations. The provisions of this
      paragraph shall not apply to any suits, actions, proceedings or claims of the
      nature referred to herein or otherwise which are based upon or related to the
      repayment of, or the taking of security for, any loans and/or advances made
      by
      Secured Party to the Obligor that do not arise under the Promissory Note, and
      the party making such loans and/or advances shall be exclusively responsible
      for
      such suits, actions, proceedings or claims and the payment of all such expenses
      in connection therewith.

     

    8.  Costs
      and Expenses.
      The
      Obligor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including without
      limitation, any financing statements, continuation statements, partial releases
      and/or termination statements related thereto or any expenses of any searches
      reasonably required by the Secured Party. The Obligor shall also pay all other
      claims and charges which in the reasonable opinion of the Secured Party might
      prejudice, imperil or otherwise affect the Collateral or the Security Interest
      therein. The Obligor will also, upon demand, pay to the Secured Party the amount
      of any and all reasonable expenses, including the reasonable fees and expenses
      of its counsel and of any experts and agents, which the Secured Party may incur
      in connection with (i) the enforcement of this Agreement, (ii) the custody
      or
      preservation of, or the sale of, collection from, or other realization upon,
      any
      of the Collateral, or (iii) the exercise or enforcement of any of the rights
      of
      the Secured Party under the Promissory Note. Until so paid, any fees payable
      hereunder shall be added to the principal amount of the Promissory Note, and
      shall bear interest at the Default Rate.

     

    9.  Responsibility
      for Collateral.
      The
      Obligor assume all liabilities and responsibility in connection with all
      Collateral, and the obligations of the Obligor hereunder or under the Promissory
      Note shall in no way be affected or diminished by reason of the loss,
      destruction, damage or theft of any of the Collateral or its unavailability
      for
      any reason. 

     

    
      
        
        

      

      
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    10.  Security
      Interest Absolute.
      All
      rights of the Secured Party and all Obligations of the Obligor hereunder, shall
      be absolute and unconditional, irrespective of: (a) any lack of validity or
      enforceability of this Agreement, the Promissory Note, or any agreement entered
      into in connection with the foregoing, or any portion hereof or thereof; (b)
      any
      change in the time, manner or place of payment or performance of, or in any
      other term of, all or any of the Obligations, or any other amendment or waiver
      of or any consent to any departure from the Promissory Notes, or any other
      agreement entered into in connection with the foregoing; (c) any exchange,
      release or nonperfection of any of the Collateral, or any release or amendment
      or waiver of or consent to departure from any other collateral for, or any
      guaranty, or any other security, for all or any of the Obligations; (d) any
      action by the Secured Party to obtain, adjust, settle and cancel in its sole
      discretion any insurance claims or matters made or arising in connection with
      the Collateral; or (e) any other circumstance which might otherwise constitute
      any legal or equitable defense available to the Obligor, or a discharge of
      all
      or any part of the Security Interest granted hereby. Until the Obligations
      shall
      have been paid and performed in full, the rights of the Secured Parties shall
      continue even if the Obligations are barred for any reason, including, without
      limitation, the running of the statute of limitations or bankruptcy. The Obligor
      expressly waives presentment, protest, notice of protest, demand, notice of
      nonpayment and demand for performance. In the event that at any time any
      transfer of any Collateral or any payment received by the Secured Party
      hereunder shall be deemed by final order of a court of competent jurisdiction
      to
      have been a voidable preference or fraudulent conveyance under the bankruptcy
      or
      insolvency laws of the United States, or shall be deemed to be otherwise due
      to
      any party other than the Secured Party, then, in any such event, the Obligor’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and binding obligation enforceable
      in accordance with the terms and provisions hereof. The Obligor waives all
      right
      to require the Secured Party to proceed against any other person or to apply
      any
      Collateral which the Secured Party may hold at any time, or to marshal assets,
      or to pursue any other remedy. The Obligor waives any defense arising by reason
      of the application of the statute of limitations to any obligation secured
      hereby.

     

    11.  Term
      of Agreement.
      This
      Agreement and the Security Interest shall terminate on the earlier of: (i)
      the
      repayment of all amounts due the Secured Party under the Promissory Note. Upon
      such termination, the Secured Party, at the request and at the expense of the
      Obligor, will join in executing any termination statement with respect to any
      financing statement executed and filed pursuant to this Agreement. 

     

    12.  Power
      of Attorney; Further Assurances.
      

     

    (a)  The
      Obligor authorizes the Secured Party, and does hereby make, constitute and
      appoint him and his respective agents, heirs or assigns with full power of
      substitution, as the Obligor’s true and lawful attorney-in-fact, with power, in
      its own name or in the name of the Obligor, to, after the occurrence and during
      the continuance of an Event of Default, (i) endorse any debentures, checks,
      drafts, money orders, or other instruments of payment (including payments
      payable under or in respect of any policy of insurance) in respect of the
      Collateral that may come into possession of the Secured Party; (ii) to sign
      and
      endorse any UCC financing statement or any invoice, freight or express bill,
      bill of lading, storage or warehouse receipts, drafts against debtors,
      assignments, verifications and notices in connection with accounts, and other
      documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
      security interests or other encumbrances at any time levied or placed on or
      threatened against the Collateral; (iv) to demand, collect, receipt for,
      compromise, settle and sue for monies due in respect of the Collateral; and
      (v)
      generally, to do, at the option of the Secured Party, and at the Obligor’s
      expense, at any time, or from time to time, all acts and things which the
      Secured Party deems necessary to protect, preserve and realize upon the
      Collateral and the Security Interest granted therein in order to effect the
      intent of this Agreement and the Promissory Note, all as fully and effectually
      as the Obligor might or could do; and the Obligor hereby ratifies all that
      said
      attorney shall lawfully do or cause to be done by virtue hereof. This power
      of
      attorney is coupled with an interest and shall be irrevocable for the term
      of
      this Agreement and thereafter as long as any of the Obligations shall be
      outstanding.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (b)  On
      a
      continuing basis, the Obligor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, in the proper filing and recording places in any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C,
      attached hereto, and with the Federal Aviation Administration, all such
      instruments, and take all such action as may reasonably be deemed necessary
      or
      advisable, or as reasonably requested by the Secured Party, to perfect the
      Security Interest granted hereunder and otherwise to carry out the intent and
      purposes of this Agreement, or for assuring and confirming to the Secured Party
      the grant or perfection of a security interest in all the
      Collateral.

     

    (c)  The
      Obligor hereby irrevocably appoints the Secured Party as the Obligor’s
      attorney-in-fact, with full authority in the place and stead of the Obligor
      and
      in the name of the Obligor, from time to time at the discretion of the Secured
      Party, to take any action and to execute any instrument which the Secured Party
      may deem necessary or advisable to accomplish the purposes of this Agreement,
      including the filing, in its sole discretion, of one or more financing or
      continuation statements and amendments thereto, relative to any of the
      Collateral without the signature of the Obligor where permitted by
      law.

     

    13.  Notices.
      All
      notices, requests, demands and other communications hereunder shall be in
      writing, with copies to all the other parties hereto, and shall be deemed to
      have been duly given when (i) if delivered by hand, upon receipt, (ii) if sent
      by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
      nationally recognized overnight delivery service (receipt requested), the next
      business day or (iv) if mailed by first-class registered or certified mail,
      return receipt requested, postage prepaid, four days after posting in the U.S.
      mails, in each case if delivered to the following addresses:

     

    If
      to the
      Obligor, to: 


    c/o
      Tactical Air Defense Services, Inc.

    5001
      Airport Drive 

    Denison,
      Texas 75025

    Attention:
      Mark T. Daniels

    Telephone:
      (903) 786-5300 

    Facsimile:
      (903) 786-5302

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    with
      a
      copy to:  


    Hodgson
      Russ LLP

    60
      E.
      42nd Street, 37th
      Floor

    New
      York,
      NY 10165

    Attention:
      Jeffrey A. Rinde, Esq. 

    Telephone:
      (212) 661-3535

    Facsimile:
      (212) 972-1677

     

    If
      to
      Secured Party, to:  


    Mark
      T.
      Daniels

    4521
      PGA
      Blvd.

    Palm
      Beach Gardens, FL 33418    

    Telephone:
      (561) 745-9422

    Facsimile:
      (561) 745-5594

     

    with
      a
      copy to:   


    Hodgson
      Russ LLP

    60
      E.
      42nd Street, 37th
      Floor

    New
      York,
      NY 10165

    Attention:
      Jeffrey A. Rinde, Esq. 

    Telephone:
      (212) 661-3535

    Facsimile:
      (212) 972-1677

     

    14.  Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Parties shall have the
      right, in their sole discretion, to pursue, relinquish, subordinate, modify
      or
      take any other action with respect thereto, without in any way modifying or
      affecting any of the Secured Party’s rights and remedies hereunder.

     

    15.  Miscellaneous.
      

     

    (a)  No
      course
      of dealing between the Obligor and the Secured Party, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Promissory Note shall operate
      as a waiver thereof; nor shall any single or partial exercise of any right,
      power or privilege hereunder or thereunder preclude any other or further
      exercise thereof or the exercise of any other right, power or
      privilege.

     

    (b)  All
      of
      the rights and remedies of the Secured Party with respect to the Collateral,
      whether established hereby or by the Promissory Note, or by any other
      agreements, instruments or documents or by law shall be cumulative and may
      be
      exercised singly or concurrently.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)  This
      Agreement constitutes the entire agreement of the parties with respect to the
      subject matter hereof and is intended to supersede all prior negotiations,
      understandings and agreements with respect thereto. Except as specifically
      set
      forth in this Agreement, no provision of this Agreement may be modified or
      amended except by a written agreement specifically referring to this Agreement
      and signed by the parties hereto.

     

    (d)  In
      the
      event that any provision of this Agreement is held to be invalid, prohibited
      or
      unenforceable in any jurisdiction for any reason, unless such provision is
      narrowed by judicial construction, this Agreement shall, as to such
      jurisdiction, be construed as if such invalid, prohibited or unenforceable
      provision had been more narrowly drawn so as not to be invalid, prohibited
      or
      unenforceable. If, notwithstanding the foregoing, any provision of this
      Agreement is held to be invalid, prohibited or unenforceable in any
      jurisdiction, such provision, as to such jurisdiction, shall be ineffective
      to
      the extent of such invalidity, prohibition or unenforceability without
      invalidating the remaining portion of such provision or the other provisions
      of
      this Agreement and without affecting the validity or enforceability of such
      provision or the other provisions of this Agreement in any other
      jurisdiction.

     

    (e)  No
      waiver
      of any breach or default or any right under this Agreement shall be considered
      valid unless in writing and signed by the party giving such waiver, and no
      such
      waiver shall be deemed a waiver of any subsequent breach or default or right,
      whether of the same or similar nature or otherwise.

     

    (f)  This
      Agreement shall be binding upon and inure to the benefit of each party hereto
      and its successors and assigns.

     

    (g)  Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

     

    (h)  This
      Agreement shall be construed in accordance with the laws of the State of New
      York, except to the extent the validity, perfection or enforcement of a security
      interest hereunder in respect of any particular Collateral which are governed
      by
      a jurisdiction other than the State of New York in which case such law shall
      govern. Each of the parties hereto irrevocably submit to the exclusive
      jurisdiction of any New York State or United States federal court sitting in
      New
      York county over any action or proceeding arising out of or relating to this
      Agreement, and the parties hereto hereby irrevocably agree that all claims
      in
      respect of such action or proceeding may be heard and determined in such New
      York State or Federal court. The parties hereto agree that a final judgment
      in
      any such action or proceeding shall be conclusive and may be enforced in other
      jurisdictions by suit on the judgment or in any other manner provided by law.
      The parties hereto further waive any objection to venue in the State of New
      York
      and any objection to an action or proceeding in the State of New York on the
      basis of forum non conveniens.

     

    (i)  EACH
      PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRAIL OF
      ANY
      CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE
      OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY
      BE
      FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
      INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
      AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
      THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
      BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
      ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
      WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
      REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
      SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS RIGHTS TO A JURY TRIAL
      FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
      NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
      ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
      RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
      A
      LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
      THE
      COURT. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (j)  This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    


     

    [THE
      REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      



    COUNTERPART
      SIGNATURE PAGE TO SECURITY AGREEMENT, DATED AS OF JULY __,
      2006.

    


    IN
      WITNESS WHEREOF,
      the
      parties hereto, intending to be bound hereby, have caused this Security
      Agreement to be executed the day and year first above written.

     

    
      	 	 	 
	 	OBLIGOR:
	 	 
	 	TACTICAL
              AIR DEFENSE SERVICES, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	
              Title: 

            


    

    
      	 	 	 
	 	 	 
	 	SECURED
              PARTY: 
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Mark
                T. Daniels

            
	 	Title 


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    


    SCHEDULE
      A

    


    Principal
      Offices


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      B

    


    Permitted
      Liens

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      C

    


    Jurisdictions

    


    Utah

    Texas

    Ukraine

     

    British
      Columbia