**Exhibit 4.8**

 

**AIRCRAFT SECURITY AGREEMENT**

 

THISAGREEMENT, dated as of February 19, 2002, is made by AIRNET SYSTEMS, INC., anOhio corporation (the "Company"), in favor of BANK ONE, NA, anational banking association (the "Bank").

 

**RECITAL**

 

The Companyand the Bank have entered into a Term Loan Agreement dated as of the datehereof (as the same may be amended, modified or revised by prior agreement ofthe Bank and the Company, the "Loan Agreement").  As a condition to the effectiveness of theobligations of the Bank under the Loan Agreement, the Company is required,among other things, to grant to the Bank a security interest in the collateralhereinafter described.

 

**AGREEMENT**

 

Inconsideration of the premises of the mutual agreements herein contained, the partiesagree as follows:

 

**SECTION 1.  Definitions.**

 

1.1           Certain Definitions.  As used herein, the following terms shall have the followingmeanings:

 

"Aircraft"shall mean the Airframes and the Engines.

 

"Airframes"shall mean each of the Airframes described on Schedule A hereto, together withany and all Parts related thereto.

 

"Collateral"shall have the meaning ascribed thereto in Section 2 hereof.

 

"Default"shall mean any Event of Default and any event or condition which might becomesuch an Event of Default with notice or with lapse of time, or both.

 

"Engines"shall mean each of the aircraft engines attached to any Airframe, includingwithout limitation those described on Schedule B hereto.

 

"Eventof Default" shall have the meaning ascribed thereto in Section 4.1hereof.

 

"FAA"shall mean as the context requires, the United States Federal AviationAdministration and/or the Administrator of the United States Federal AviationAdministration, or any person, governmental department, bureau, commission or agencysucceeding to the functions of either of the foregoing.

 

"Itemof Equipment" shall mean any Airframe, any of the Engines or any ofthe Parts.

 

"Leases"shall  mean all leases, subleases,rental agreements, charter agreements, and other agreement or agreements,whether now or hereafter existing, relating to any Item of Equipment.

 

"Lien"shall mean any pledge, assignment, hypothecation, mortgage, depositarrangement, option, title retaining contract, sale and leaseback transaction,the filing of any financing statement, lessor's interest under any lease which,in accordance with generally accepted accounting principles, is or should

 

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be capitalized, subordinationof any claim or right, or any other type of lien, charge, encumbrance, securityinterest, preferential arrangement or other claim or right.  For purposes of this Agreement, the Companyshall be deemed to own subject to a Lien any asset which it has acquired orholds subject to the interest of a vendor or lessor under any conditional saleagreement, lease which, in accordance with generally accepted accountingprinciples, is or should be capitalized or other title retention agreementrelating to such asset.

 

"Notes"shall have the meaning ascribed thereto in Section 2 hereof.

 

"Parts"shall mean any and all appliances, spare parts, engines, propellers,instruments, appurtenances, accessories, furnishings, seats, and otherequipment and parts of whatever nature (including without limitation radio,radar, navigation systems, and other electronic equipment) which areincorporated or installed in or attached to the Aircraft.

 

"Proceeds"shall have the meaning ascribed thereto in Section 2, clause (vi), hereof.

 

"Reserves"shall have the meaning ascribed thereto in Section 3.13 hereof.

 

"SecuredObligations" shall have the meaning ascribed thereto in Section 2hereof.

 

1.2           Other Definitions: Rules of Construction.  Asused herein, the terms the "Bank" and the "Company" shallhave the respective meanings ascribed thereto in the introductory paragraph ofthis Agreement and the term the "Loan Agreement" shall have themeaning ascribed thereto in the recital paragraphs of this Agreement.  Such terms, together with other termsdefined in Section 1.1 hereof, shall include both the singular and plural formsthereof and shall be construed accordingly.

 

**SECTION 2.         Grantof Security Interests**

 

To secure (a)the prompt and complete payment of the principal sum of $3,000,000.00 (ThreeMillion Dollars) together with interest thereon, in accordance with the terms ofa promissory note dated as of the date hereof, issued by the Company to theBank pursuant to the Loan Agreement, and the payment of the principal of, andinterest on, each promissory note or notes issued in exchange or replacementtherefor (all such promissory notes to herein as the "Notes"), (b)all obligations and other liabilities with respect to any transaction(including an agreement with respect thereto) now existing or hereafter enteredinto among the Company and the Bank or any subsidiary or affiliate of the Bank,which is a rate swap, basis swap, forward rate transaction, commodity swap,commodity option, equity or equity index swap, equity or equity index option,bond option, interest rate option, foreign exchange transaction, captransaction, floor transaction, collar transaction, forward transaction,currency swap transaction, cross-currency rate swap transaction, currencyoption or any other similar transaction (including any option with respect toany of these transactions) or any combination thereof, whether linked to one ormore interest rates, foreign currencies, commodity prices, equity prices orother financial measures (any of the foregoing referred to herein as a"Rate Management Transaction"), (c) the performance of the covenantsherein contained and any monies expended by the Bank in connection therewithand (d) the payment of all obligations and performance of all covenants of theCompany under the Loan Agreement, any agreement entered into in connection withany Rate Management Transaction and all other documents, agreements orinstruments between the Company and the Bank, in all cases whether now inexistence or hereafter arising, executed in connection with the Loan Agreementor any agreement with respect to any Rate Management Transaction, whether nowin existence or hereafter arising, absolute or contingent, direct or indirector otherwise, and including without limitation all interests, cost, expensesand attorneys fees accruing to, or incurred in collecting any of the foregoing,or protecting, maintaining or liquidating any collateral with respect to any ofthe foregoing and further including all obligations incurred or 

 

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accrued during the pendency ofany bankruptcy, insolvency, receivership or similar proceeding, regardless ofwhether allowed or allowable in any such proceeding, and all renewals,extensions, modifications, consolidations or substitutions of any of theforegoing (all of such indebtedness, obligations and liabilities of the Companybeing herein called the "Secured Obligations"), for value receivedand pursuant to the Loan Agreement, the Company hereby grants, assigns andtransfers to the Bank a first-priority security interest and lien in and on thefollowing described property whether now owned or existing or hereafteracquired or arising and wherever located (all of which is herein collectivelycalled the "Collateral"):

 

(i)            All the Airframes, Engines andParts;

 

(ii)           All rights, title and interest in, toand under all Leases, and all of the rents, issues, profits, accounts, generalintangibles, chattel paper, and revenues arising from or otherwise relating toany Item of Equipment, including without limitation those arising under theLeases, whether now due and payable or hereafter becoming due and payable;

 

(iii)          All right, title and interest in, toand under all purchase agreements relating to any of the foregoing, and thefull warranty bill of sale for all of the property purchased under suchpurchase agreements;

 

(iv)          All books and records related in anyway to any of the above, including, without limitation, all maintenance logsand flight manuals and logs;

 

(v)           All substitutions and replacementsfor, and all additions and accessions to, any and all of the foregoing; and

 

(vi)          All products and proceeds of any andall of the foregoing, including without limitation, (A) any and all proceeds ofany insurance, indemnity, warranty or guaranty from time to time with respectto any of the Collateral, (B) any and all payments (in any form whatsoever)made or due and payable form time to time in connection with any requisition,confiscation, condemnation, seizure or forfeiture of all or any part of theCollateral by any governmental body, authority, bureau or agency (or any personor entity acting under color of governmental authority) and (C) any and allother amounts from time to time paid or payable under or in connection with anyof the Collateral (all such amounts described in this clause (vi) referredherein as "Proceeds").

 

**SECTION 3.**         **Warranties,Covenants and Agreements**

 

The companywarrants, covenants, and agrees as follows:

 

3.1           Maintenance and Use.

 

(a)           Maintenance and Repair.  The Company, at its cost and expense, shall(i) maintain, service, repair, overhaul, and test the Aircraft so as to keepthe Aircraft in as good operating condition as when this Agreement is executedand delivered by the Company, ordinary wear and tear excepted, (ii) maintainand keep the Aircraft in good order and repair and airworthy condition inaccordance with the requirements of each of the manufacturers' manuals andmandatory service bulletins; (iii) maintain and keep the Aircraft in suchcondition as may be necessary to enable the airworthiness certification of theAircraft to be maintained in good standing at all times under all applicablelaws and regulations; and (iv) without limiting the generality of theforegoing, cause to be performed, on all Items of Equipment, all applicablemandatory Airworthiness Directives, Federal Aviation Regulations, SpecialFederal Aviation Regulations, and manufacturers' service bulletins relating toairworthiness.  The Company shallmaintain 

 

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all records, logs and othermaterials required to be maintained in respect of the Aircraft by allapplicable laws and regulations, the FAA or other governmental authority, andshall promptly furnish to the Bank such information as the Bank may requestwith respect thereto.  The Company willnot permit the Aircraft to be maintained, used or operated in violation of anyinsurance policy provisions or any law, rule, regulation or order of anygovernment or any governmental authority having jurisdiction (domestic orforeign), including without limitation the FAA, or in violation of anyairworthiness certificate, license, registration or operating certificaterelating to the Aircraft and issued by any such authority, nor will the Companysuffer the Aircraft to be so maintained, used or operated.  In the event that any law, rule, regulationor order requires alteration or modification of the Aircraft, the Company willconform thereto or obtain conformance therewith at no expense to the Bank.  The Company will permit the Aircraft to beoperated only by pilots, appropriately qualified and licensed, considering theparticular authorized business or commercial purpose involved, and will permitthe Aircraft to be maintained only by duly licensed and qualified mechanics.

 

(b)           Overhaul and Replacement.

 

(i)            If any Engine or Part shall reachsuch a condition as to require overhaul, repair or replacement in order tocomply with the standards for maintenance and other provisions set forth inthis Agreement, the Company may (A) install on the Aircraft such items ofsubstantially the same type and of equal or greater value in temporaryreplacement of those then installed on the Aircraft, pending overhaul or repairof the unsatisfactory item; provided, however, that such replacement items mustbe in such a condition as to be permissible for use upon the Aircraft inaccordance with the standards for maintenance and other provisions set forth inthis Agreement; provided further, however, that the Company must, at all times,retain unencumbered title to any and all items temporarily removed; or (B)install on the Aircraft such items of substantially the same type and of equalor greater value in permanent replacement of those then installed on theAircraft; provided, however, that such replacement items must be in suchcondition as to be permissible for use upon the Aircraft in accordance with thestandards for maintenance and other provisions set forth in this Agreement;provided further, however, that the Company must first comply with each of therequirements of subsection (ii) below.

 

(ii)           If the Company shall be required orpermitted to install upon any Airframe or any Engine any Parts in permanentreplacement of those then installed on such Airframe or such Engine, theCompany may do so provided that, in addition to any other requirements providedfor in this Agreement:  (A) the Bank isnot divested of its security interest in any item removed from the Aircraft andno such item shall be or become subject to any Lien other than the securityinterest hereunder; (B) the Company's title to every substituted item shallimmediately be and become subject to the security interests of the Bankhereunder, and each of the provisions of this Agreement; and (C) the Companyshall provide prior notice of such permanent replacement if such replacement isan engine which is 750 or more rated takeoff horsepower or the equivalentthereof or is a propeller which is capable of absorbing 750 or more ratedtakeoff shaft horsepower or the equivalent thereof and shall execute alldocuments and agreements required by the Bank to perfect, further perfect orre-document a security interest therein or in any other Collateral pursuant tothis Agreement.

 

(c)           Area of Use.  The Company will not operate or suffer theAircraft to be operated except within the geographical limits set forth inapplicable insurance policies or operating certificates, whichever may be morerestrictive.  Without limiting thegenerality of the foregoing, and as an additional restriction, the Company willnot operate or locate the Aircraft or suffer any Aircraft to be operated orlocated outside North America.

 

3.2           Notices. The Company shall immediately notify the Bank of each Event of Default,each material accident involving the Aircraft, each acquisition of anyairframe, any aircraft engine which is 

 

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750or more rated takeoff horsepower or the equivalent thereof or any aircraftpropeller which is capable of absorbing 750 or more rated takeoff shafthorsepower or the equivalent thereof, each formal or informal investigationinitiated by the FAA, the Department of Transportation, the NationalTransportation Safety Board or any other federal or state agency regulating theCompany, and any other material events affecting the Collateral in any manner.  The Company shall promptly execute allagreements and other documents requested by the Bank to grant to the Bank afirst-priority security interest in any airframe, aircraft engine which is 750or more rated take off horsepower or the equivalent thereof, any aircraftpropeller which is capable of absorbing 750 or more rated takeoff shafthorsepower or the equivalent thereof or any other assets whether now owned bythe Company or hereafter acquired.

 

3.3           Registration and Certificates.  (a) From and after the date hereof, the Company has, and at all timesthereafter will have, good title to the Collateral free and clear of all Liens(other than the Lien created hereunder) and has, and at all times will have,full power and authority to mortgage and grant a lien and security interest in,and assign, the Collateral in the manner aforesaid.

 

(b)           The Company is, andat all times will be, (i) a "Citizen of the United States" as definedin Section 40102(a)(15) of 49 U.S.C., (ii) an air carrier as to which the provisionsof Section 1110 of the United States Bankruptcy Code apply, and (iii) an aircarrier certificated under Sections 41102(a) and 44705 of 49 U.S.C. and holdsair carrier operating certificates.

 

(c)           Each of the Aircraftis duly registered with the FAA in the name of the Company and in accordancewith all applicable laws and regulations, and the Company will take allnecessary action to cause such registration to remain in effect.  An airworthiness certificate has been dulyissued under all applicable laws and regulations for each of the Aircraft andall of such airworthiness certificates are in full force and effect.

 

3.4           Insurance.  (a) The Company, at its cost and expense,shall procure and continuously maintain in full force and effect policies of insuranceissued by such issuers, in all amounts and covering such risks as are in allrespects satisfactory to and approved by the Bank.  Any policies carried in accordance with this Section 3.4 shall:(i) designate the Bank as loss payee or beneficiary under such insurance; (ii)provide that if such insurance is cancelled or materially changed for anyreason whatsoever, or the same is allowed to lapse for non-payment of premium,such cancellation, change or lapse shall not be effective as to the Bank for thirty(30) days after receipt by the Bank of written notice from such insurers ofsuch cancellation or lapse or material change in policy terms and conditions;and (iii) provide that such policies shall insure the Bank regardless of anybreach or violation of any warranties, declarations or conditions contained insuch policies by the Company.

 

(b)           The Company willmake all payments of insurance premiums and will deliver to the Bank promptlyupon request, the originals of all insurance policies required hereundertogether with evidence of payment of all premiums due thereon.

 

(c)           Any amounts advancedor expended by the Bank to pay costs of collection of insurance proceedshereunder, including without limitation, reasonable attorneys' fees, costs anddisbursements, shall be paid by the Company to the Bank on demand, withinterest thereon from the date of advance or expenditure at the rate ofinterest equal to the sum of the per annum rate of interest from time to timepublicly announced by Bank One, NA as its prime rate plus three percent (3%)per annum (the "Default Rate").

 

(d)           The Company shall beentitled to negotiate the settlement of any insurance payment from any insurerin connection with the insurance required hereunder subject to final approvalby the Bank,

 

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provided,however, that if there is any Default under this Agreement the Company will notbe entitled to negotiate the settlement of any such insurance payments.

 

(e)           Any paymentsreceived by the Bank from any insurance with respect to loss or damage to theCollateral shall be held by the Bank and, at the Bank's option, (i) applied onthe Indebtedness or (ii) paid over to the Company for use in the replacement orrestoration of the part of the Collateral which suffered such damage or loss.

 

3.5           Ownership Free of Encumbrances.  The Company represents and warrants to theBank that the Company is, and will remain, the owner of the Collateral free andclear of any Liens except the security interests created hereby in favor of theBank.  None of the Collateral is subjectto any Lease.  The Company representsand warrants to the effective date hereof, the Engines are the only aircraftengines owned by the Company as of the effective date hereof which are 750 ormore rated takeoff horsepower or the equivalent thereof.  The Company will not transfer or offer orattempt to transfer, by Lease, sale or otherwise, any interest in theCollateral or possession thereof.  TheCompany will defend the Collateral against all claims and demands of allpersons at any time claiming the Collateral or any interest therein.

 

3.6           Recording; Filing; FurtherAssurances.  At the request of theBank, from time to time, the Company will execute one or more financingstatements in a form satisfactory to the Bank, and will promptly cure anydefects in the execution and delivery of this Agreement or the creation,perfection or priority of the security interests created hereby, including anyengines or propellers hereafter acquired, and including the execution anddelivery of any documents reasonably requested by the Bank.  The Company shall assist and cooperate withthe Bank in causing to be filed and recorded all documents reasonably requiredby the Bank to be filed or recorded in all public or other offices where filingor recording is deemed by the Bank to be necessary or desirable, including,without limitation, filing of this Agreement with the FAA and the recordingthereof by the FAA.

 

3.7           Location of Items of Equipment.  The Company shall cause the primary locationand base of all Aircraft at all times to be Port Columbus Airport, Columbus,Ohio and shall maintain all Parts and other Collateral not installed on anyAircraft at such location at all times.

 

3.8           Payment of Taxes, Etc.  The Company will pay promptly, and withinthe time that they can be paid without interest or penalty, any taxes,assessments and similar imposts and charges which are now, or hereafter maybecome, a Lien, other than the security interest created hereby, upon any ofthe Collateral.  If the Company fails topay any such taxes, assessments or other imposts or charges in accordance withthis Section 3.8, the Bank shall have the option to do so, and the Companyagrees to repay forthwith all amounts so expended by the Bank together withinterest thereon at the Default Rate.

 

3.9           Reimbursement of Expenses.  The Company will reimburse the Bank for allexpenses, including reasonable attorney fees and legal expenses, incurred bythe Bank in seeking to collect the Indebtedness or any part thereof, indefending the Bank's security interests and the priority thereof, or inpursuing any of the Bank's rights or remedies hereunder or under any Note orany other agreement relating to the Indebtedness.

 

3.10         Records.  TheCompany shall keep accurate and complete logs, manuals, books and recordsrelating to the Collateral, and provide the Bank with copies of reports andinformation relating to the Collateral as the Bank may reasonably require fromtime to time, and allow the Bank access to all such logs, manuals, books, andrecords at any time for purposes of inspection and copying.

 

3.11         Further Representations andWarranties.  The Company representsand warrants that (a) the execution, delivery and performance of this Agreementby the Company are within its corporate powers,

 

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havebeen duly authorized and are not in contravention of law or any terms of theCompany's certificate of incorporation or by-laws or of any law, order, judgment,decree, contract or undertaking to which the Company is a party or by which itor any of its properties is bound or affected, (b) this Agreement constitutes alegal, valid and binding obligation of the Company, enforceable against theCompany in accordance with its terms, and (c) this Agreement grants to the Banka first-priority, enforceable and perfected security interest which is not voidor voidable in all of the Collateral.

 

**SECTION 4.         Defaults, Enforcement andApplication of Proceeds**

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4.2           Events of Default.  The occurence of any one of the followingevents or conditions shall be deemed an "Event of Default" hereunder:(a) nonpayment of the Secured Obligations when due, (b) the failure of theCompany to perform or observe any term or covenant contained in this SecurityAgreement, (c) any representation or warranty made by the Company in thisSecurity Agreement shall prove to have been false or misleading in any materialrespect when made, (d) any proceeding in bankruptcy, insolvency or reorganizationshall instituted by or against the Company or (e) the occurence of any Event ofDefault (as defined in the Loan Agreement) under the Loan Agreement.

** **

4.2           Remedies.  Upon the occurrence of any Event of Defaultthe Bank shall have and may exercise any or all of the following rights andremedies, without notice to the Company:

 

(a)           Proceed toselectively and successively enforce and exercise any and all rights andremedies which the Bank may have under this Agreement, any other applicableagreement or applicable law including without limitation: (i) commencing one ormore actions against the Company and reducing the claims of the Bank againstthe Company to judgment, (ii) foreclosure or other enforcement of the Bank'ssecurity interest in the Collateral, or any portion thereof, or otherenforcement of the Bank's rights and remedies in respect of and to recover uponthe Collateral, through judicial action or otherwise, including withoutlimitation all available remedies under the applicable provisions of theUniform Commercial Code as enacted in Ohio, and (iii) payment or discharge ofany Lien, prior or subordinate, in respect of or affecting the Collateral.

 

(b)           Require the Companyto assemble the Collateral and make it available to the Bank at such airportrequested by the Bank.

 

(c)           Take possession ofand remove the Collateral wherever the same may be located, without demand ornotice, without any court order or other process of law and without incurringany liability to the Company for any damages occasioned by such taking ofpossession.

 

(d)           Sell, lease orotherwise dispose of the Collateral at private or public sale, in bulk or inparcels, and, where permitted by law, without having the Collateral present atthe place of sale.  The parties agreethat public sale of the Collateral by auction conducted in any county in whichthe Bank or the Company does business, after advertisement of the time andplace thereof shall, among other manners of public and private sale, be deemedto a commercially reasonable disposition of the Collateral.  Unless it appears that the value of theCollateral will decline speedily or the Collateral is a type customarily soldon a recognized market, or unless the Company has signed a statement (afterdelivery of a notice of acceleration of the Indebtedness) renouncing ormodifying the Company's right to notice, the Bank will give the Companyreasonable notice of the time and place of any public sale or other dispositionthereof or the time after which any private sale or other disposition thereofis to be made.  The requirements ofreasonable notice shall be met if such notice is given to the Company at leastfive (5) days before the time of any such sale or disposition.  In addition, the Bank may execute and filewith the FAA for recordation such affidavits, certificates or other documentsas may be necessary or desirable to permit the Bank, their

 

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assignees or nominees to becomethe registered owner of the Aircraft or to transfer of record good title to theAircraft.  The Bank shall apply the netproceeds of any such sale, lease or other disposition, after deducting allreasonable costs and expenses of every kind incurred therein or incidental tothe care or safekeeping of any of the Collateral or in any way relating to theCollateral or the rights of the Bank hereunder, including, without limitation,reasonable attorneys' fees and disbursements, in accordance Section 4.5 hereof,and only after such application and after the payment by any provision of law,need the Bank account for the surplus, if any, to the Company.  To the extent permitted by applicable law,the Company waives all claims, damages and demands against the Bank of any ofits rights hereunder.  The Company shallremain liable for any deficiency remaining after disposition of the Collateral.

 

4.3           Application of Proceeds.  If a Default shall have occurred or be continuing, (a) allProceeds received by the Company shall be held by the Company in trust for theBank, segregated from other funds of the Company and shall, forthwith uponreceipt by the Company, be turned over to the Bank in the exact from receivedby the Company (duly endorsed by the Company to the Bank, if required, oraccompanied by such documents of transfer to the Bank as the Bank may request),and (b) any and all such Proceeds received by the Bank (whether from theCompany or otherwise) shall be applied by the Bank in accordance with Section4.5 hereof.

 

4.4           Power of Attorney. For purposes of assisting the Bank in exercising its rights and remediesprovided to it under this Agreement, the Company, upon the occurrence andduring the continuance of an Event of Default, hereby irrevocably constitutesand appoints the Bank its true and lawful attorney, for it and in its name,place and stead, and irrevocably authorizes the Bank to do any and all actswhich the Company is obligated to do under this Agreement or under any Noterelative to the Collateral.

 

4.5           Application of Liquidation Proceeds.  All monies received by the Bank from itsexercise of remedies under this Agreement, the Note, any related loan document,under applicable law or otherwise, shall, unless otherwise required by law, beapplied as follows:

 

(a)           First to the payment of all expensesincurred by the Bank in connection with the exercise of such rights andremedies, including all costs and expenses of collection, reasonable attorneys'fees, court costs and expenses of foreclosing on the Collateral;

 

(b)           Next, to the payment of interest thenaccrued on the Notes;

 

(c)           Next, to the payment of the principalbalance then owing on the Notes;

 

(d)           Next, to the payment of any otherSecured Obligations; and

 

(e)           Next, to the Company or such otherperson and shall be legally entitled thereto.

 

**SECTION 5.         Miscellaneous**

 

5.1           Governing Law. This Agreement shall in all respects be governed by and construed inaccordance with the laws of the State of Ohio.

 

5.2           Successor and Assigns.  This Agreement shall be binding on the Company, the Bank andtheir successors and assigns, and all rights and remedies hereunder shall inureto the benefit of the Bank and its successors and assigns.

 

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5.3           Waivers and Amendments.  None of the terms and provisions of this Agreement may be waived,altered, modified or amended in any way except by an instrument in writingexecuted by duly authorized officers of the Bank and the Company.

 

5.4           Notices. Any notice or other communication which by any provision of thisAgreement is required or provided to be given or served upon the Company shallbe deemed to have been duly given or served for all purposes if sent in writing(including telecommunications) to the Company to the address or telex ortelecopy number set forth after the name of the Company below, or at such otheraddress or telex or telecopy number as the Company may hereafter specify to theBank in writing.  All mailed notices orother communications shall be by registered or certified mail, postage prepaid,with return receipt requested.  Allnotices or other communications sent by means of telecopy, telex or other wiretransmission shall be made with request for assurance of receipt in a mannertypical with respect to communications of that type.  Written notices or other communications shall be deemed deliveredupon receipt if delivered by hand, three business days after mailing if mailed,or one business day after deposit with an overnight courier service ifdelivered by overnight courier.  Noticesor other communications provided by any of the other means referred to aboveshall be deemed delivered upon receipt.

 

5.5           Severability. If any one or more provisions of this Agreement should be invalid,illegal or unenforceable in any respect, the validity, legality andenforceability of the remaining provisions contained herein shall not in anyway be affected, impaired, prejudiced or disturbed thereby.

 

5.6           Indemnification; Expenses.  (a) The Company hereby agrees to assumeliability and pay for, and does hereby agree to indemnify and hold harmless theBank and its successors, assigns, agents and employees, from and against, anyand all liabilities, damages, penalties, suits, costs, and expenses of any kindand nature (including reasonable attorneys' fees and disbursements), imposed on,incurred by or asserted against any of them, or any of their successors,assigns, agents, or employees, in any way relating to or arising out of thisAgreement (including the administration and enforcement hereof), or thepurchase, acceptance, rejection, ownership, delivery, lease, possession, use,operation, condition, sale, return or other disposition of any Collateral(including, without limitation, latent and other defects, whether or notdiscoverable by the Bank or the Company, any tort claim (whether in strictliability or otherwise), and any claim for patent, trademark or copyrightinfringement).

 

(b)           The Company will, upon demand, pay tothe Bank an amount of any and all reasonable expenses, including the reasonablefees and disbursements of its counsel and of any experts and agents, which theBank may incur in connection with (i) the administration of this SecurityAgreement, (ii) the custody, preservation, use or operation of, or the sale of,collection from or other realization upon, any of the Collateral, (iii) theexercise or enforcement of any of the rights of the Bank hereunder, or (iv) thefailure of the Company to perform or observe any of the provisions hereof.  The Company will reimburse the Bank for allexpenses, including attorney's fees and disbursements incurred by the Bank inseeking to collect the Secured Obligations or any part thereof, in enforcingperformance of the Company's obligations under the Loan Agreement, the Notes,this Security Agreement or any other agreements executed in connection with anyof the foregoing between the Bank and the Company in defending the Bank'ssecurity interests and the priority thereof, or in pursuing any of the Bank'srights or remedies hereunder or under the Loan Agreement, the Notes, this SecurityAgreement or any other agreements between the Bank and the Company.

 

5.7           Consent to Jurisdiction.  Any suit, action or proceeding against the Company arising out ofor relating to this Agreement may be instituted in any court of competentjurisdiction in the State of Ohio, and the Company hereby irrevocably waivesany objection which it may have or hereafter have to the laying of such venueof any such suit, action or proceeding and any claim that any such suit, actionor proceeding has been brought in an inconvenient forum, and the Company herebyirrevocably submits its

 

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person and property to thejurisdiction of any such court in any such suit, action or proceedings.  The Company hereby consents to the serviceof process in any suit, action or proceeding of the nature referred to in thisparagraph by the mailing of a copy thereof registered or certified mail,postage prepaid, or personally delivering a copy thereof, to the Company,addressed to the address set forth after the name of the Company below, or atsuch other address as the Company may hereafter specify to the Bank inwriting.  Nothing in this paragraphshall affect the right of the Bank or any Bank to serve process in any othermanner permitted by law or limit the right of the Bank or any Bank to bringproceedings against the Company or any of its property in the courts of anyother jurisdiction in which it is subject to service of process.

 

5.8           Survival of Representations and Warranties.  All representations and warranties of theCompany contained herein or made in writing by the Company in connectionherewith shall continue and shall survive the execution and delivery of thisAgreement.

 

5.9           No Waiver: Cumulative Remedies.  The Bank shall not by any act (except by awritten instrument pursuant to Section 5.4 hereof), delay, indulgence, omissionor otherwise be deemed to have waived any right or remedy hereunder or to haveacquiesced in any Default or Event of Default or in any breach of any of theterms and conditions hereof.  No failureto exercise, nor any delay in exercising, on the part of the Bank, any right,power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right,power or privilege hereunder shall preclude any other or further exercisethereof or the exercise any other right, power or privilege.  A waiver by the Bank of any right or remedyhereunder on any one occasion shall not be construed as a bar to any right orremedy which the Bank would otherwise have on any future occasion.  The rights and remedies herein provided arecumulative, may be exercised singly or concurrently and are not exclusive ofany rights or remedies provided by law, by the Loan Agreement, by the Notes orby any other agreement between the Bank and the Company, or between the Bankand any guarantor of the Secured Obligations or any other party.

 

5.10         Descriptive Headings.  The descriptive headings of the several paragraphs of thisAgreement are inserted for convenience of reference only and shall in no waymodify any of the terms or provisions hereof.

 

5.11         Rights Not Construed as Duties.  The Bank neither assumes nor shall it haveany duty of performance or other responsibility under any contracts in whichthe Bank has or obtains a security interest hereunder.  If the Company fails to perform anyagreement contained herein, the Bank may but is in no way obligated to itselfperform, or cause performance of, such agreement, and the expenses of the Bankincurred in connection therewith shall be payable by the Company under Section5.6 The powers conferred on the Bank hereunder are solely to protect itsinterests in the Collateral and shall not impose any duty upon it to exerciseany such powers.  Except for the safecustody of any Collateral in its possession and accounting for monies actuallyreceived by it hereunder, the Bank shall have no duty as to any Collateral oras to the taking of any necessary steps to preserve rights against priorparties or any other rights pertaining to any Collateral.

 

5.12         Waiver of Jury Trial. The Bank and the Company, afterconsulting or having had the opportunity to consult with counsel, knowingly,voluntarily and intentionally waive any right either of them may have to atrial by jury in any litigation based upon or arising out of this SecurityAgreement or any related instrument or agreement or any of the transactionscontemplated by this Security Agreement or any course of conduct, dealing,statements (whether oral or written) or actions of either of them.  Neither the Bank nor the Company shall seekto consolidate, by counterclaim or otherwise, any such action in which a jurytrial has been waived with any other action in which a jury trial cannot be orhas not been waived.  These provisionsshall not be deemed to have modified in any respect or relinquished by eitherthe Bank or the Company except by a written instrument executed by both ofthem.

 

10

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IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be duly executed asof the day and year first above written, which shall be the effective datehereof.

 
|                                  | AIRNET  SYSTEMS, INC. |
|---------------------------------------|-----------------------|
|                                  |                  |   |
|                                  | By:                   |   | /s/ William  R Sumser |   |
|                                  |                  |   |
|                                  |                  | Its: | CFO |   |
|                                  |                  |   |   |
|                                  | Address for  Notices: |   | William R  Sumser Chief Financial Officer |   |
|                                  |                  | AirNet  Systems, Inc 3939 International Gateway Col  DH 4321: |   |
|                                  |                  | Telephone: | (614)  236-3850 |   |
|                                  |                  | Telecopy: | (614)  237-7876 |   |
|                                  |                  |
| ACCEPTED AND  AGREED TO BY:           |                  |
| BANK ONE, NA                          |                  |
|                                  |                  |
| By:                                   | /s/ [ILLEGIBLE]       |   |   |
|                                  |                  |   |   |
|                                  | Its:                  | F.V.P. |   |   |
|                                  |                  |   |   |   |
| Bank One, NA  Attn.  David Clark |                  |   |
| 100 E Broad  St                       |                  |   |
| Columbus, OH  43215                   |                  |   |
| Telephone:                            | (614)  248-9785       |   |   |
| Telecopy:                             | [ILLEGIBLE]           |   |   |
|                                       |                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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SCHEDULE A

 

SCHEDULE OF AIRFRAMES

 
|             |   |            |   | **Manufacturer  Serial Number** |   | **FAA Registration  Number** |
|------------------|--------|-----------------|--------|---------------------------------|--------|------------------------------|
| **Manufacturer** |   | **Model**       |   |                            |
|             |   |            |   |                            |   |                         |
| Cessna           |   | 2001 Caravan    |   | 208B0918                        |   | N104AN                       |
|             |   | Super           |   |                            |   |                         |
|             |   | Cargomaster     |   |                            |   |                         |
|             |   |            |   |                            |   |                         |
| Learjet          |   | 1978 Model  35A |   | 35A-178                         |   | N900JC                       |

 

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SCHEDULE B

 

AIRCRAFT ENGINES

 

The followingengines, each of which engine is 750 or more rated takeoff horsepower or theequivalent thereof:

 
|             |   |         |   | **Manufacturer**   |   |
|------------------|--------|--------------|--------|--------------------|--------|
| **Manufacturer** |   | **Model**    |   | **Serial  Number** |   |
|             |   |         |   |               |   |
| Garret           |   | TFE-731-2-2B |   | P74906             |   |
| Garret           |   | TFE-731-2-2B |   | P74550             |   |

 

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