Document:

SECURITY AGREEMENT

         THIS SECURITY AGREEMENT is made this 22nd day of July, 2002 by and
among NYLTIAK INVESTMENTS, LLC (the "Lender"), AVIATION GENERAL, INCORPORATED, a
Delaware corporation with offices at 7200 Northwest 63rd Street, Bethany,
Oklahoma 73008 (the "Borrower") and COMMANDER AIRCRAFT COMPANY and STRATEGIC JET
SERVICES, INC., each a Delaware corporation and a wholly owned subsidiary of
Borrower (together with Borrower, the "Pledgors").

         WHEREAS, Borrower has issued a Secured Convertible Note dated the date
hereof (the "Note") to the Lender, pursuant to which Lender has agreed to loan
to Borrower an aggregate of One Million Dollars ($1,000,000); and

         WHEREAS, Pledgors desire, pursuant to this Agreement, to grant a
security interest to Lender in and to the Collateral (as hereinafter defined) to
secure Borrower's Obligations (as hereinafter defined).

         NOW THEREFORE, to induce and in consideration for the agreement of
Lender to accept the Note and in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound hereby, agree as
follows:

         1.       DEFINITIONS.
                  -----------

         All capitalized terms used but not defined herein which are defined in
the Note shall have the meanings given to them in the Note. For the purposes of
this Agreement, the following terms shall have the following meanings:

                  1.1. The term "Borrower's Obligations" shall include (i) any
and all indebtedness, obligations and liabilities of any type or nature, now
existing or hereafter created, of Borrower, its successors or assigns, to
Lender, its successors or assigns pursuant to the Note, any other agreement or
document incidental to or executed pursuant to the Note or in connection with
the loan by Borrower to Lender, including any refinancings, new financings,
modifications, renewals or extensions thereof, or substitutions therefor; (ii)
all liabilities and obligations of Pledgors hereunder; (iii) all liabilities and
obligations of Borrower under that certain Securities Purchase Agreement, and
Investor Rights Agreement dated as of the date hereof by and between the Lender
and the Borrower; and (iv) all reimbursable costs, expenses and liabilities
which may be incurred in any way in connection with any of the Borrower's
Obligations or any collateral security therefor.

                  1.2. The term "Collateral" shall mean (i) all of the now owned
and hereafter acquired machinery, tooling, equipment, furniture, fixtures,
supplies and other personal property ofPledgors, including any leasehold
interests therein and all replacement parts and annexations thereto
("Equipment"); all of Pledgors' now owned or hereafter acquired and/or created
accounts, instruments, chattel paper, contracts, contract rights, accounts
receivable, tax refunds, notes, notes receivable, drafts, acceptances,
documents, general intangibles, and other choices in action (not including wages
or salary), including proceeds of inventory and proceeds from the sale of goods
and services ("Accounts"); all of Pledgors' now owned and hereafter acquired
inventory, including all raw materials, parts, and containers, but excluding
aircraft work in process, finished aircraft, and aircraft returned, repossessed,
reclaimed or otherwise reacquired, and all products and proceeds thereof
including sales proceeds of any kind ("Inventory"); and all other now owned and
hereafter acquired assets ofPledgors, including all leases, rents, chattels,
leaseholder improvements, aircraft production certificates, parts manufacturing
authority, FAA Aircraft Type Certificates issued to Pledgors, installment
purchase and or sales contracts, bonds, stocks, certificates, advances,
deposits, trademarks, tradenames, licenses, patents and cash values of life
insurance ("together with the Equipment, Accounts, and Inventory, "Assets");
(ii) all proceeds and products of the Assets; (iii) any of Pledgors' assets in
which the Lender has been or is hereafter granted a security interest under any
other security agreements, notes or other obligations or liabilities between
Pledgors and Lender; (iv) any accounts, property, securities or monies of
Pledgors that may at any time be assigned or delivered or come into possession
of Lender, as well as all products and proceeds thereof; (v) and all of the
actual boods and records pertaining to any of the above-described items.

         1.3. The term "Event of Default" shall have the meaning as defined in
the Note.

         2.       CREATION OF SECURITY INTEREST.
                  -----------------------------

                  As security for the full, prompt and complete payment and
performance of each of Borrower's Obligations, Pledgors hereby grant to Lender a
perfected and continuing first priority security interest under the Uniform
Commercial Code of the State of Delaware, as amended, and under any other
applicable law (including, without limitation, the Uniform Commercial Code of
any other state in which the Collateral is located), in and to the Collateral.
The grant contained herein is intended to confer upon Lender all rights which a
secured creditor may obtain and which may be granted in the Collateral under
applicable law as from time to time in effect.

         3.       COVENANTS OFPLEDGORS.
                  --------------------

                  Pledgors shall:

                  3.1. Timely and fully perform each and every covenant,
agreement and obligation set forth in the Note, this Agreement, the Securities
Purchase Agreement, the Investor Rights Agreement and the Voting Agreement dated
as of the date hereof by and between the Lender and thePledgors.

                  3.2. Sign and execute any financing statement or renewal,
substitution or correction thereof, or other document, or procure any document,
and pay all incidental costs necessary to protect the security interests granted
under this Agreement against the rights or interests of third parties.

                  3.3. Pay all filing fees in connection with any financing,
continuation or termination statement or other instrument with respect to the
security interests created hereby.

                  3.4. Deliver and pledge to Lender endorsed or accompanied by
instruments of assignment or transfer satisfactory to Lender, any instruments,
documents and chattel papers which Lender may reasonably specify from time to
time, including, without limitation, delivery of any notes receivable and
collateral assignments of contracts.

                  3.5. Keep, and stamp or otherwise mark, any of its documents,
instruments and chattel paper and its individual books and records relating to
any Collateral in such manner as Lender may reasonably require.

         3.6. Not sell, transfer, mortgage or otherwise encumber any of the
Collateral.

                  3.7. Not remove any Collateral to a new location, open any new
places of business or commence any business under a new or fictitious name or
designation, except in compliance with the Note and with thirty (30) days prior
written notice of Lender.

         4.       REPRESENTATIONS AND WARRANTIES OFPLEDGORS.
                  -----------------------------------------

                  Borrower hereby makes the following representations and
warranties:

                  4.1. The offices where the books and records of Pledgors are
kept concerning the Collateral of Pledgors are 7200 Northwest 63rd Street,
Bethany, Oklahoma 73008. Prior to moving the books and records to any other
location, Pledgors shall give thirty (30) days prior written notice of such move
to Lender.

         4.2. Pledgors conduct their business only under the name set forth on
the signature page hereof.

                  4.3. Pledgors have good title to all of the Collateral free
and clear of any and all liens and encumbrances excepting only the security
interests created pursuant to this Agreement.

                  4.4. The execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment of the
terms hereof will not result in the breach of any of the terms, conditions,
provisions of, or constitute a default under, or conflict with, or cause any
acceleration of any obligation under, any material agreement or other material
instrument to which any Pledgor is a party or by which any Pledgor is bound.

                  4.5. No approvals of any nature are required by any
governmental or regulatory authority or other third parties in connection with
the security interests herein granted, except such as have already been
obtained.

                  4.6. Pledgors have the full power and legal authority to enter
into this Agreement and to consummate the transactions contemplated hereby, and
this Agreement constitutes the authorized, valid and binding obligation of
Pledgors enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally.

         5.       SECURED PARTY'S RIGHTS AND REMEDIES.
                  -----------------------------------

                  5.1. Upon the occurrence and during the continuance of any
Event of Default, Lender may proceed to exercise (i) any one or more of the
rights or remedies afforded by the Uniform Commercial Code of any applicable
jurisdiction, including the right to sell any or all of the Collateral at one or
more public or private sales upon at least twenty (20) days written notice to
Borrower of the time and place of any public sale and of the date on which the
Collateral will first be offered for sale in the case of any private sale, and
to bid thereat or purchase any part or all thereof in its own or a nominee's
name, free and clear of any equity of redemption; and to apply the net proceeds
of the sale, after deduction for any costs and expenses of sale (including any
liabilities incurred in connection therewith), including reasonable attorneys'
fees, to the payment of Borrower's Obligations in any manner or order which
Lender, in its sole discretion, may elect, to the payment of any other amount
required by law and to the payment of any remaining net proceeds to whomsoever
may lawfully be entitled to receive the same or as a court of competent
jurisdiction may direct, without further notice and without regard to any
equitable principles of marshaling or other like equitable doctrines, (ii) any
rights or remedies upon any judgment entered upon the Notes, (iii) any other
remedies or rights provided in the Note, this Agreement, the Securities Purchase
Agreement, the Investor Rights Agreement dated as of the date hereof between
Borrower and Lender, simultaneously or consecutively, against or in respect
ofPledgors , all of which rights and remedies shall, to the full extent
permitted by law, be cumulative. The choice of one or more rights or remedies
shall not be construed as a waiver or election barring other rights and
remedies. Borrower hereby acknowledges and agrees that Lender is not required to
exercise all remedies and rights available to it equally with respect to all the
Collateral and that Lender may select less than all of the Collateral with
respect to which the remedies as determined by Lender may be exercised.

         5.2. In addition to or in conjunction with the rights and remedies
referred to in Section 5.1. hereof, after the occurrence of an Event of Default:

         5.2.1. Written notice mailed to Pledgors at the address designated
herein twenty (20) days or more prior to the date of public or private sale of
any of the Collateral shall constitute reasonable notice.

         5.2.2. Lender may require Pledgors to assemble any of the Collateral
and to make it available to Lender at any place Lender designates.

         5.2.3. Lender may require Pledgors to use their best efforts to obtain
any approvals that are required by any governmental or regulatory body or other
Person in order to permit the sale of the Collateral pursuant to this Agreement.

         6.       ENTIRE AGREEMENT.
                  ----------------

         This Agreement and the agreements referenced herein sets forth all of
the promises, covenants, agreements, conditions and understandings among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, with respect thereto, except as
contained or referred to herein. This Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed by the party
against whom enforcement of such amendment, waiver, discharge or termination is
sought.

         7.       INVALIDITY.
                  ----------

         If any provisions of this Agreement shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereunder, but this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.

         8.       NON-WAIVER AND NON-EXCLUSIVE REMEDIES.
                  -------------------------------------

                  8.1. No remedy or right herein conferred upon, or reserved to
Lender is intended to be to the exclusion of any other remedy or right, but each
and every such remedy or right shall be cumulative and shall be in addition to
every other remedy or right given hereunder, and now or hereafter existing at
law or in equity.

                  8.2. No delay or omission by Lender to exercise any remedy or
right accruing upon an Event of Default shall impair any such remedy or right,
or shall be construed to be a waiver of any such Event of Default, or an
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or of a different nature.

         9.       TERMINATION OF SECURITY INTEREST.
                  --------------------------------

         At such time as (a) all of Borrower's Obligations have been paid and/or
performed in full, and (b) such satisfaction of Borrower's Obligations is not
then subject to any filed claim, contest, voidance or offset of any type
whatsoever the security interest provided herein shall terminate and Lender
shall return to Pledgors all Collateral then held by Lender, if any, and upon
request of Borrower shall execute, in form for filing, termination statements of
the security interests herein granted, and, thereafter, no party hereby shall
have any further right or obligation hereunder.

         10.      SUCCESSORS AND ASSIGNS.
                  ----------------------

         This Agreement shall be binding upon the successors or permitted
assigns of Pledgors and shall inure to the benefit of and be enforceable by the
successors or permitted assigns of Lender.

         11.      POWER OF ATTORNEY.
                  -----------------

         Lender is hereby appointed by Pledgors as Pledgors' attorney-in-fact,
irrevocably, to do any and all acts and things which Lender may deem necessary
to continue the perfected security interest hereby created including, without
limitation, to execute on behalf of Pledgors of any continuation statement with
respect to the security interest created hereby, and, upon an Event of Default
and during the continuance thereof, to do any and all acts and things to protect
and preserve the Collateral including, without limitation, the endorsement of
any draft or order which may be payable to Borrower and the protection and
prosecution of all rights included in the Collateral.

         12.      GOVERNING LAW.
                  -------------

         THIS AGREEMENT SHALL BE GOVERNED AS TO ITS VALIDITY, INTERPRETATION AND
EFFECT IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS REQUIRED
BY MANDATORY PROVISIONS OF LAW AND EXCEPT IF THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN NEW YORK.
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL TERMS USED HEREIN WHICH ARE DEFINED
IN THE UNIFORM COMMERCIAL CODE AS ENACTED IN NEW YORK SHALL HAVE THE MEANINGS
THEREIN STATED.

         13.      WAIVER OF JURY TRIAL.
                  --------------------

         Pledgors and Lender hereby waive trial by jury in any judicial
proceeding to which they are parties involving, directly or indirectly, any
matter (whether in tort, contract or otherwise) in any way arising out of,
related to, or connected with this Agreement, the relationships established
hereunder or the transactions financed in connection with this Agreement.

         14.      NOTICES.
                  -------

         Any notice, request or consent required hereunder or in connection
herewith shall be deemed satisfactorily given if in writing (including facsimile
transmissions) and delivered by hand, U.S. mail (registered or certified mail)
or recognized overnight courier to the parties at their respective addresses or
telecopier number set forth in the Note or such other addresses or telecopier
numbers as may be given by any party to the others in writing.

         15.      COUNTERPARTS.
                  ------------

         This Agreement may be executed in one or more counterparts, each of
which shall constitute an original agreement, but all of which together shall
constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers on the date first above
written.

AVIATION GENERAL, INCORPORATED              COMMANDER AIRCRAFT COMPANY

By:                                   By:

Name:                                 Name:

Title:                                Title:

NYLTIAK INVESTMENTS, LLC                    STRATEGIC JET SERVICES, INC.

By:                                        By:

Name:                                      Name:

Title:                                     Title:GUARANTEE

         THIS GUARANTEE, dated as of July 22, 2002, is made by COMMANDER
AIRCRAFT COMPANY AND STRATEGIC JET SERVICES, INC., (collectively, the
"Guarantors") each a Delaware Corporation and a wholly owned subsidiary of
AVIATION GENERAL, INCORPORATED, a Delaware corporation ("Borrower"), in favor of
NYLTIAK INVESTMENTS, LLC, a Maryland Limited Liability company ("Lender").

         WHEREAS, Borrower and Lender have entered into that certain Securities
Purchase Agreement, Investor Rights Agreement, and Security Agreement dated as
of the date hereof pursuant to which Borrower has issued that certain Secured
Convertible Note in the original principal amount of one million dollars
($1,000,000) (collectively, the "Loan Agreements");

         WHEREAS, each Guarantor has determined that as a wholly owned
subsidiary of Borrower it is in the best interests of such Guarantor for
Borrower to enter into the Loan Agreements and accordingly each has agreed to
execute and deliver to Lender an unconditional and irrevocable guarantee of the
obligations of Borrower under the Loan Agreements;

         THEREFORE, in order to induce Lender to enter into the Loan Agreements
and in consideration of the foregoing premises and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, each of the Guarantors agrees as follows:

         1. Guarantee. (a) Each Guarantor hereby jointly and severally
guarantees to Lender the due and punctual performance, whether at stated
maturity or otherwise, of any and all obligations of Borrower under the Loan
Agreements, whether direct or contingent, including all Borrower's Obligations
(as defined in the Security Agreement). The obligations guaranteed hereunder are
hereafter referred to as the "Guaranteed Obligations."

                  (b) Each Guarantor covenants, in case of default in the
payment by Borrower of any part of the Guaranteed Obligations, to pay any such
unpaid amounts as the same shall become due, on demand of Lender.

         2. Obligations Unconditional. (a) This Guarantee is an unconditional
and absolute guarantee of payment and not of collectibility. The liability of
Guarantors on this Guarantee shall be direct and immediate. Each Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Lender or Borrower with respect thereto. If the Guaranteed Obligations
or any part thereof shall not be paid promptly when due and payable, each
Guarantor shall forthwith pay such amounts to Lender, regardless of any defense,
set-off, or counterclaim, and regardless of whether Lender or anyone on its
behalf shall have instituted any suit, action, or proceeding, or exhausted its
remedies, or taken any steps to enforce any rights against Borrower or any other
person to collect all or part of any such amounts, either pursuant to the
provisions of this Guarantee or the Loan Agreements, or at law or in equity, and
regardless of any other condition or contingency. Each Guarantor hereby waives
any requirement that Lender, in the event of default by Borrower, first make
demand on, or seek to enforce remedies against, Borrower before demanding
payment under or seeking to enforce this Guarantee. The obligations of
Guarantors under this Guarantee are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against
Guarantors to enforce this Guarantee, irrespective of whether any action is
brought against any collateral, Borrower or any other person and irrespective of
whether Borrower or any other person is joined in any such action or actions.
Each Guarantor agrees that this Guarantee shall remain in full force and effect
without regard to, and shall not be affected or impaired by, any invalidity,
irregularity, or unenforceability in whole or in part of this Guarantee or the
Loan Agreements or any limitation on the liability of Borrower thereunder, or
any limitation on the method or terms of payment thereunder, which may now or
hereafter be caused or imposed in any manner whatsoever. Each Guarantor hereby
unconditionally waives diligence, presentment, and protest, and any notice of
default in the payment of any of the Guaranteed Obligations, and notice of the
breach of any obligation of Borrower contained in the Loan Agreements.

                  (b) Each Guarantor agrees that in the event it shall make any
payment in respect of the Loan Agreements, any right of payment to Guarantors
from Borrower, whether by way of reimbursement, indemnity, subrogation, or
otherwise, shall constitute indebtedness of Borrower subordinated in right and
time of payment, and in every other way, to the unpaid amount, if any, of
indebtedness represented by the Loan Agreements. No payment shall be made on the
subordinated indebtedness until prior payment in full has been made of the
indebtedness represented by the Loan Agreements.

                   (c) The obligations, covenants, agreements, and duties of
Guarantors under this Guarantee shall not be affected or impaired by any
assignment or transfer in whole or in part of the Loan Agreements without notice
to either Guarantor; or any waiver by Lender of the performance or observance by
Borrower or any other party of any of the agreements, covenants, terms or
conditions contained in the Loan Agreements; or any indulgence in or the
extension of the time for payment by Borrower of any amounts payable under or in
connection with the Loan Agreements or of the time for performance by Borrower
or any other party of any other obligation under or arising out of the Loan
Agreements, or the extension or renewal thereof; or any change, amendment,
modification, waiver, or termination (whether material or otherwise, and whether
or not made without notice to or further assent by either Guarantor) of any
duty, agreement, or obligation of Borrower or any other party set forth in the
Loan Agreements; or the voluntary or involuntary liquidation, sale, or other
disposition of all or substantially all of the assets of Borrower; or any
receivership, insolvency, bankruptcy, reorganization, or similar proceedings
affecting Borrower or its assets; or the release or discharge by operation of
law of Borrower from the performance or observance of any agreement, covenant,
term or condition contained in the Loan Agreements, where such release or
discharge occurs without the consent of Lender; or any release or exchange in
whole or in part of any security granted for the Guaranteed Obligations; or any
failure to perfect any lien or security interest granted to or in favor of
Lender as security for the Guaranteed Obligations; or any other cause, whether
similar or dissimilar to the foregoing.

         3. Continuing Guarantee; Release; Reinstatement. (a) This Guarantee is
a continuing guarantee and shall remain in full force and effect until all of
the Guaranteed Obligations have been paid in full, unless earlier released
pursuant to the terms of the Loan Agreements.

                  (b) Notwithstanding the foregoing, the obligations of
Guarantors under this Guarantee shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of Borrower in respect of
the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and Each Guarantor
agrees that it will indemnify Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by Lender in
connection with any such rescission of termination and restoration of this
Guarantee.

         4. Representations and Warranties. Each of the Guarantors represents
and warrants as follows:

         (i) Guarantors are corporations duly organized and in good standing
under the laws of Delaware, and have full right, power and authority to enter
into and perform this Guarantee, and Guarantors shall do or shall cause to be
done all things necessary and appropriate to preserve and keep in full force and
effect their corporate existence, rights and franchises.

         (ii) This Guarantee has been duly authorized and approved by all
necessary corporate action.

         (iii) Guarantors have duly and validly executed and delivered this
Guarantee, which constitutes a valid and binding obligation of Guarantors
enforceable against Guarantors in accordance with its terms, except as limited
by bankruptcy, insolvency or other similar laws (regardless of whether
enforcement is sought in a court of law or equity), and except that the remedy
of specific performance may be limited by the equitable discretion of the court
before which any proceeding hereunder may be brought.

         (iv) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by Guarantors of this Guarantee.

         5. Notices. All notices or other communications in connection with this
Guarantee shall be deemed satisfactorily given if in writing and delivered
personally or by registered or certified mail, postage pre-paid, by overnight
courier, or by telecopier to the parties at their respective

<PAGE>

addresses set forth below or at such other address as may be given by any party
to the other in writing in accordance with this section:

         If to the Guarantors:

         Commander Aircraft Company
         Strategic Jet Services, Inc.
         7200 Northwest 63rd Street
         Bethany, Oklahoma  73008
         Facsimile:  (405) 495-8383

         With copy to:

         Dyer Ellis & Joseph
         600 New Hampshire Avenue, N.W.
         Suite 1100
         Washington, D.C.  20037
         Attn:  John Kearney
         Facsimile:  (202) 944-3068

         If to the Lender:

         Nyltiak Investments, LLC
         511 Avenleigh Court
         Ashton, MD  20861

         Miles & Stockbridge, P.C.
         1751 Pinnacle Drive, Suite 500
         McLean, VA  22102-3833
         Attn:  Morris DeFeo
         Facsimile:  703-610-8686

         6. Governing Law. (a) This Guarantee shall be governed by, and
construed in accordance with, the laws of the State of New York.

<PAGE>

         IN WITNESS WHEREOF, Guarantors have caused this Guarantee to be signed,
sealed and delivered by their duly authorized representatives as of the date
first above written.

         COMMANDER AIRCRAFT COMPANY

         By:
                  --------------------------------------------

         Name:
                  --------------------------------------------

         Title:
                  --------------------------------------------

         STRATEGIC JET SERVICES, INC.

         By:
                  --------------------------------------------

         Name:
                  --------------------------------------------

         Title:
                  --------------------------------------------

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