Document:

KCL:  Promissory Note (Bond Paper)  for

Exhibit 4.1

 

 

	

  

  	

  C#: 44097

  L#: 44098

  Ls#: 8800021448

  

 

Promissory

Note

	

   

  

 

	

  $1,248,530.00

  	

  Funding

  Date:

                                            ,

  	

   (Year)

  

 

FOR

VALUE RECEIVED, AIRNET SYSTEMS, INC., an Ohio

corporation ("Maker"), promises to pay to the order of Key

Equipment Finance, a Division of Key Corporate Capital Inc.,

("Holder"), the sum of $1,248,530.00 in lawful money of the United

States of America (the "Principal"), with interest thereon as

hereafter provided ("Interest"), to be paid in the manner set forth

herein. This Note is executed pursuant to that certain security agreement (the

"Security Agreement") dated as of January

       , 2002 between Maker and Holder.

Capitalized terms used herein without definition shall have the meaning given

them in the Security Agreement.

 

1.             Interest Rate; Place of Payment.  Interest on the balance of the Principal

outstanding on this Note shall accrue from the Funding Date of this Note and

shall be due and payable at a fixed rate of five and seventy seven hundredths

percent (5.77%) per annum (the "Interest Rate").  Interest shall be calculated on the basis of

a 360-day year consisting of twelve 30-day months.  Payment of the Principal and Interest hereunder shall be made to

Holder at 66 South Pearl Street, Post Office Box 1865, Albany, NY 12207-1865,

or at such other place as Holder may designate from time to time in writing.

Holder reserves the right to require payment on this Note to be made by wired

federal funds or other immediately available funds.

 

2.             Repayment Terms. The

Principal and Interest shall be due and payable in sixty (60) consecutive

monthly installments payable in arrears, each in an amount equal to $24,004.28

commencing and payable on the same date which is one month after the Funding

Date and on the same day of each month thereafter. In addition, Maker will pay

a late payment charge of five percent (5%) of any payment due hereunder that is

not paid on or before the date due hereunder.

 

3.             Security. Payment of

the Principal and Interest hereunder, and the performance and observance by

Maker of all agreements, covenants and provisions contained herein, is secured

by a first priority security interest in the Collateral.

 

4.             Prepayment. Except as

contemplated by clause (3) of section 10 of the Security Agreement, Maker may

not prepay, in whole or in part, the principal outstanding hereunder; provided,

however, that commencing on the date following the twelve month

anniversary of the Funding Date, Maker may prepay, in whole but not in part,

the principal outstanding hereunder by paying to Holder such outstanding

principal, together with all accrued and unpaid interest thereon, plus a

prepayment premium ("Prepayment Premium") equal to a percentage of

the outstanding principal calculated as follows: 

 

	

  Months

  	

   

  	

  Prepayment

  Premium

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  1-12

  	

   

  	

  No

  prepayment permitted

  	

   

  
	

  13-24

  	

   

  	

  3

  	

  %

  
	

  25-36

  	

   

  	

  2

  	

  %

  
	

  37-48

  	

   

  	

  1

  	

  %

  
	

  49-60

  	

   

  	

  1

  	

  %

  

 

5.             Transfer or Assignment.  Holder may at any time assign or otherwise

transfer or negotiate this Note in whole or in part, without any notice to Maker.  The rights and obligations of Maker may not

be assigned or delegated.

 

 

6.             Application of Payments.  Prior to an Event of Default, each payment

received on this Note shall be applied first to all costs of collection, then

to unpaid late payment charges (if any) and Prepayment Premium (if any)

hereunder, then to Interest as of the payment due date and the balance, if any,

to the outstanding Principal as of the date received.  Upon the occurrence, and during the continuance, of an Event of

Default, any payments in respect of the Secured Obligations and any proceeds of

the Collateral when received by Holder in cash or its equivalent, will be

applied first to costs of collection and, thereafter, in reduction of the

Secured Obligations in such order and manner as Holder may direct in its sole

discretion, and Maker irrevocably waives the right to direct the application of

such payments and proceeds and acknowledges and agrees that Holder shall have

the continuing and exclusive right to apply any and all such payments and

proceeds in the Holder's sole discretion, notwithstanding any entry to the

contrary upon any of its books and records.

 

7.             Events of Default.  (a) 

Maker shall be in default if any of the following happens  (an "Event of Default"): (1) Maker

fails to make any installment of the Principal or Interest, or any other

payment due and owing, under this Note within ten (10) days after the same

becomes due and payable; or (2) Maker fails to perform any other obligation

required to be performed by Maker under this 

Note, the Security Agreement or any of the other Loan Documents for

thirty (30) days after written notice from Holder of such failure; or (3) any

representation, warranty or other statement by or on behalf of Maker in

connection with this  Note is false or

misleading in any material respect; or (4) an Event of Default has occurred and

is continuing under the Security Agreement.

(b)

Notwithstanding anything to the contrary contained herein, upon the occurrence

of an Event of Default, Holder may declare the entire outstanding balance of

the Principal, together with all accrued and unpaid Interest thereon,

immediately due and payable without notice or demand which amounts shall,

together with all other sums due hereunder, accrue interest from such

acceleration until the date of actual payment at the Default Rate (provided,

however, that should there occur an Event of Default, and if a voluntary or

involuntary petition under the United States Bankruptcy Code is filed by or

against Maker while such default remains uncured, the entire outstanding

balance of the Principal automatically shall be accelerated and due and payable

with interest thereon at the Default Rate), and Holder may exercise any and all

of its remedies hereunder, under the other Loan Documents and under Applicable

Law. The remedies of Holder provided herein, in the Security Agreement and

under Applicable Law shall be cumulative and concurrent and may be pursued

singly, successively or concurrently at the sole discretion of Holder and may

be exercised as often as occasion therefor shall occur.  The failure to exercise, or any delay in the

exercise of, any right or remedy shall in no event be construed as a waiver,

release or exhaustion of any such remedies.

 

8.             Collection Costs.  In addition to the Principal, Interest,

Prepayment Premium (if any), and late payment charges (if any), Maker shall pay

Holder on demand, and Holder shall be entitled to collect all costs and

expenses of collection, including, without limitation, reasonable attorneys'

fees, incurred in connection with enforcement of its rights and remedies

hereunder and under the other Loan Documents, the protection or realization of

the Collateral or in connection with Holder's collection efforts, or in

connection with any bankruptcy or other judicial proceeding, whether or not

suit on this Note or any foreclosure proceeding is filed.  All such costs and expenses shall be payable

on demand and, until paid, shall be Secured Obligations secured by the security

interest granted under the Security Agreement and all other collateral, if any,

held by Holder as security for Maker's obligations under this Note.

 

9.             Governing Law; Binding Agreement. The

provisions of this Note shall be binding upon, and shall inure to the benefit

of, the parties hereto and their respective successors and assigns. THIS NOTE IS BEING DELIVERED IN THE STATE OF NEW YORK AND

SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE

OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE

WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR

RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD

CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF

NEW YORK. 

 

2

 

10.          More than One Signer.  If more than one person or entity signs this

Note as a Maker, the obligations contained herein shall be deemed joint and

several and all references to "Maker" shall apply both jointly and

severally.

 

11.          General. 

Maker represents and warrants that this Note evidences a loan for

business or commercial purposes.  Prior

to signing this Note, Maker read and understood the provisions hereof, and

agrees to all terms and conditions contained herein.

 

12.          Waiver. 

MAKER

AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY JOINTLY AND SEVERALLY

WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF NON-PAYMENT OR DISHONOR,

NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE OF PROTEST AND PROTEST

OF THIS NOTE. HOLDER AND MAKER HEREBY EACH

WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION

BASED UPON OR ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS

OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING

TO WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT

CLAIMS, TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION,

COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE

THE VALIDITY OR ENFORCEABILITY, OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR ANY

PROVISION HEREOF OR THEREOF.  THIS

WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY HOLDER AND THE MAKER WHO

EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO

INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS

EFFECT.  THIS WAIVER SHALL APPLY TO ANY

SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE AND

THE OTHER LOAN DOCUMENTS. 

 

13.          Usury; Partial Invalidity.  (a) 

At no time shall the Interest Rate (or the Default Rate or other amounts

paid or collected hereunder) exceed the highest rate allowed by applicable law

for this type of loan.  Should Holder

ever collect interest at a rate that exceeds such applicable legal limit, such

excess will be credited to the Principal. 

(b)

Whenever possible, each provision of this Note shall be interpreted in such

manner as to be effective and valid under applicable law, but if any provision

of this Note shall be prohibited by or invalid under the laws of any applicable

jurisdiction, such provision, as to such jurisdiction, shall be ineffective to

the extent of such prohibition or invalidity, without invalidating the

remainder of such provision or the remaining provisions of this Note in any

other jurisdiction.

 

14.          Notices. 

All notices and other communications under this Note shall be in writing

and shall be addressed: (a) if to Maker, 3939 INTERNATIONAL GATEWAY, COLUMBUS,

OH 43219; and (b) if to Holder, Key Equipment Finance, a Division of Key

Corporate Capital Inc., 66 South Pearl Street, Post Office Box 1865, Albany, NY

12207-1865, Attention: Account Manager, or such other address as either party

hereto shall communicate to the other party at its address specified

above.  All such notices and other

communications shall be deemed to have been duly given if delivered by hand,

overnight courier or if sent by certified mail, return receipt requested, to

the party to whom such notice is intended to be given, and shall be effective

upon receipt.

 

15.          Funding Date.  The Funding Date for this Note shall be the

date on which Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT

BLANK ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS

HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE

TIME OF DISBURSEMENT.

 

3

 

IN

WITNESS WHEREOF, Maker, intending to be legally bound,

has caused this Note to be duly executed on the day and year first above

written. 

 

MAKER:

 

	

  AIRNET

  SYSTEMS, INC.

  
	

   

  
	

  X 

  	

   

  	

   

  
	

  Name:

  
	

  Title:

  

 

 

	

  STATE

  OF

  	

  )

  
	

   

  	

  )

  ss.:

  
	

  COUNTY

  OF

  	

  )

  

 

                On this          (Day)

day

of                                                    (Month),                  (Year),

before me the subscriber personally appeared

                                                                                                 ,

who being by me duly sworn, did depose and say; that (s)he resides

at                               County,

State

of                                      :

that (s)he is

a                                                                         of

                                ,

the corporation described in and which executed the foregoing instrument; and

that (s)he signed his/her name thereto by order of the Board of Directors of

said corporation.

 

	

   

  	

   

  
	

  NOTARY

  PUBLIC

  	

   

  

 

My

Commission Expires:

 

4KCL:  Security Agreement  for

 

Exhibit 4.2

 

 

	

  

  	

  C#: 44097

  L#: 44098

  Ls#: 8800021448

  

 

Security

Agreement

	

   

  

 

 

THIS

SECURITY AGREEMENT (this "Agreement" or

"Security Agreement") dated as of January

       , 2002 is made by and between AIRNET

SYSTEMS, INC., an Ohio corporation having its chief executive office at 3939

INTERNATIONAL GATEWAY, COLUMBUS, OH 43219 (the "Borrower"), and Key

Equipment Finance, a Division of Key Corporate Capital Inc. and

assigns, having an office at 66 South Pearl Street, Post Office Box 1865,

Albany, NY 12207-1865 ("KEF").

 

W I T N E S S E T H:

 

1.             Grant of Security Interest in the Equipment.  In consideration of one or more loans,

advances or other financial accommodations at any time before, at or after the

date hereof, made or extended by KEF to or for the account of the Borrower,

directly or indirectly, as principal, guarantor or otherwise and to secure the

prompt payment and performance in full when due, whether by lapse of time,

acceleration or otherwise, of the Secured Obligations, the Borrower hereby pledges,

assigns, transfers hypothecates to KEF and grants to KEF a security interest

in, and acknowledges and agrees that this Agreement shall create a continuing

security interest in, all of Borrower’s right, title and interest in and to the

Collateral.

 

The

Secured Obligations of the Borrower are absolute, irrevocable and unconditional

under any and all circumstances whatsoever and shall not be subject to any

right of set-off, counterclaim, deduction, defense or other right which the

Borrower may have for any reason against any vendor, supplier, manufacturer,

KEF or any other party.  All obligations

of Borrower hereunder shall survive the expiration, cancellation or other

termination of this Agreement.

 

2.             Definitions.  Unless the context otherwise

requires, as used in this Agreement, the following terms shall have the

respective meanings indicated below and shall be equally applicable to both the

singular and the plural forms thereof:

“Alteration” shall have the meaning specified in

Section 6 hereof.

“Applicable Law" shall mean all applicable

Federal, state, local and foreign laws, ordinances, judgments, decrees,

injunctions, writs, rules, regulations, orders, licenses and permits of any

Governmental Authority.

"Authorized Signer" shall mean any

officer of Borrower, set forth on an incumbency certificate (in form and

substance satisfactory to KEF) delivered by Borrower to KEF, who is authorized

and empowered to execute the Loan Documents.

"Certificate of Acceptance" shall mean

a certificate of acceptance, in form and substance satisfactory to KEF,

executed and delivered by Borrower in accordance with Section 3 hereof.

“Collateral” shall mean the Equipment and any and

all substitutions, replacements or exchanges therefor, and any and all proceeds

(both cash and non-cash) receivable or received from the sale, lease, license,

collection, use, exchange or other disposition of the Collateral, including

insurance proceeds, thereof (including, without limitation, claims of the

Borrower against third parties for Loss or Damage to any such collateral).

“Collateral Schedule” shall mean each collateral

schedule now or hereafter attached hereto and made a part hereof, in

substantially the form of Schedule 1 hereto.

"Default" shall mean any event or

condition which, with the passage of time or the giving of notice, or both,

would constitute an Event of Default.

"Default Rate" shall mean an annual

interest rate equal to the lesser of 18% or the maximum interest rate permitted

by Applicable Law.

"Equipment" shall mean an item or items

of personal property which are described on the Collateral Schedule, together

with all replacement parts, additions and accessories incorporated therein or

affixed thereto including,

 

 

without limitation, any software that is a component or

integral part of, or is included or used in connection with, any Item of

Equipment, but with respect to such software, only to the extent of Borrower’s

interest therein, if any. 

"Equipment Location" shall mean the

location of the Equipment, as set forth on Schedule 1, or such other location

(approved in writing by KEF) as Borrower shall from time to time specify in

writing.

"Event of Default" shall have the

meaning specified in Section 16 hereof.

“GAAP” shall have the meaning specified in

Section 22(g) hereof.

"Governmental Action" shall mean all

authorizations, consents, approvals, waivers, filings and declarations of any

Governmental Authority, including, without limitation, those environmental and

operating permits required for the ownership, lease, use and operation of the

Equipment.

"Governmental Authority” shall mean any

foreign, Federal, state, county, municipal or other governmental authority,

agency, board or court.

"Guarantor" shall mean any guarantor of

the Secured Obligations.

"Installment(s)" shall mean the

periodic payments due to repay the Note, and, where the context hereof

requires, all such additional amounts as may from time to time be payable under

any provision of the Loan Documents.

"Item of Equipment" shall mean each

item of the Equipment.

"Liability" shall have the meaning set

forth in Section 18 hereof.

"Loan Documents" shall mean,

collectively, this Agreement, the Note, and all other documents prepared by KEF

and now or hereafter executed in connection therewith.

"Lien" shall mean all mortgages,

pledges, security interests, liens, encumbrances, claims or other charges of

any kind whatsoever, except the security interest of KEF created by this

Agreement.

“Loss or Damage” shall mean any loss, theft,

destruction, disappearance or any condemnation, expropriation or requisition of

or damage to any Item of Equipment.

"Note" shall mean that certain

Promissory Note in the original principal amount of $1,248,530.00 executed in

connection herewith, together with any extensions, modifications, renewals, refinancings

or other restructurings thereof.

“Secured Obligations” means all of the following

obligations of Borrower, whether direct or indirect, absolute or contingent,

matured or unmatured, originally contracted with KEF or another party, and now

or hereafter owing to or acquired in any manner partially or totally by KEF or

in which KEF may have acquired a participation, contracted by Borrower alone or

jointly or severally: (a) any and all indebtedness, obligations, liabilities,

contracts, indentures, agreements, warranties, covenants, guaranties,

representations, provisions, terms, and conditions of whatever kind, now

existing or hereafter arising, and however evidenced, that are now or hereafter

owed, incurred or executed by Borrower to, in favor of, or with KEF (including,

without limitation, those as are set forth or contained in, referred to,

evidenced by, or executed with reference to the Loan Documents, any letter of

credit agreements, advance agreements, indemnity agreements, guaranties, lines

of credit, mortgage deeds, security agreements, assignments, pledge agreements,

hypothecation agreements, instruments, and acceptance financing agreements),

and including any partial or total extension, restatement, renewal, amendment,

and substitution thereof or therefor; (b) any and all claims of whatever kind

of KEF against Borrower, now existing or hereafter arising, including, without

limitation, any arising out of or in any way connected with warranties made by

Borrower to KEF in connection with any instrument purchased by KEF; and (c) any

and all of KEF’s fees, costs and expenses related to the foregoing.

"Supplier" shall mean the manufacturer

or the vendor of the Equipment, as set forth on each Collateral Schedule.

“Term” shall mean the term of the Note.

“UCC” shall have the meaning set forth in Section

16(b)(2) hereof.  Where applicable and

except as otherwise defined herein, terms used in this Agreement shall have the

meaning assigned to them in the UCC.

“Upgrade” shall have the meaning specified in Section

8 hereof.

 

3.             Delivery and Acceptance.  Concurrently with execution

of the Collateral Schedule hereunder, Borrower shall execute and deliver to KEF

a Certificate of Acceptance for the Equipment described on such Collateral

Schedule.  KEF SHALL HAVE NO OBLIGATION TO ADVANCE

ANY FUNDS TO BORROWER UNLESS AND UNTIL KEF SHALL HAVE RECEIVED A CERTIFICATE OF

ACCEPTANCE RELATING TO THE EQUIPMENT EXECUTED BY BORROWER.  Such Certificate of Acceptance shall

constitute Borrower's acknowledgment that such Equipment (a) was received by

Borrower, (b) is satisfactory to Borrower in all respects,

 

2

 

(c) is suitable for Borrower's purposes, (d) is in good

order, repair and condition, (e) has been installed and operates properly, and

(f) is subject to all of the terms and conditions of the Loan Documents.

Borrower's execution and delivery of a Certificate of Acceptance shall be

conclusive evidence as between KEF and Borrower that the Items of Equipment

described therein are in all of the foregoing respects satisfactory to

Borrower, and Borrower shall not assert any claim of any nature whatsoever

against KEF based on any of the foregoing matters; provided, however,

that nothing contained herein shall in any way bar, reduce or defeat any claim

that Borrower may have against the Supplier or any other person (other than

KEF). 

 

4.             Payments.  Borrower shall pay the Note

on the terms set forth therein.  All

Installments shall be payable when due whether or not Borrower has received any

additional notice that such Installments are due.  All Installments shall be paid to KEF at 66 South Pearl Street,

Post Office Box 1865, Albany, NY 12207-1865, or as otherwise directed by KEF in

writing. 

 

5.             Location; Inspection; Labels.  The Equipment shall be

delivered to the Equipment Location and shall not be removed therefrom without

KEF's prior written consent.  Borrower

shall maintain possession and control of the Equipment at all times. Borrower

will promptly give written notice to KEF of any change in the identity or

location of any Item of Equipment which might require new filings or other

action to assure continued perfection of the security interest of KEF granted

hereby.  The Borrower owns, and will

continue to own, all Equipment Locations except as otherwise indicated on

Schedule 1. KEF shall have the right to

enter upon the Equipment Location and inspect the Equipment at any reasonable

time.  At KEF's request, Borrower shall

affix permanent labels evidencing KEF's interest in the Equipment in a

prominent place on the Equipment and shall keep such labels in good repair and

condition.

 

6.             Use; Alterations.  Borrower shall use the

Equipment only in the course of its business for commercial purposes (and shall

not permanently discontinue use of the Equipment), and in compliance with

Applicable Law and the requirements of any applicable insurance policies, and

only in the manner for which it was designed and intended and so as to subject

it only to ordinary wear and tear. 

Borrower shall comply with all Applicable Law with respect to the

Equipment.  Borrower shall immediately

notify KEF in writing of any existing or threatened investigation, claim or

action by any Governmental Authority in connection with any Applicable Law or

Governmental Action which could adversely affect the value of the Equipment or

the perfection or priority of the security interest of KEF in the Collateral.

Borrower shall not make any material alterations, additions, modifications or

improvements (each, an “Alteration”) to the Equipment without KEF's prior

written consent; provided that Borrower, at its own expense, shall make

Alterations as may be required from time to time to meet the requirements of

Applicable Law or Governmental Action. 

All such Alterations immediately, and without further act, shall be

deemed to constitute Items of Equipment and fully be subject to the security

interest granted to KEF hereunder.

 

7.             Repairs and Maintenance.  Borrower, at Borrower's own

cost and expense, shall (a) keep the Equipment in good repair, operating

condition and working order and in compliance with the manufacturer's

specifications and Borrower’s standard practices (but with respect to the

latter, in no event less than industry practices) and (b)  maintain, service and repair the Equipment

as otherwise required herein.  Borrower,

at its own cost and expense and within a reasonable period of time, shall

replace any part of any Item of Equipment that is unfit or unavailable for use

from any cause with a replacement part of the same manufacture, value,

remaining useful life and utility as the replaced part immediately preceding

the replacement (assuming that such replaced part was in the condition required

by this Agreement).  Such replacement

part shall be free and clear of all Liens and upon installation, attachment or

incorporation in, on or into such Item of Equipment, such replacement part

immediately, and without further act, shall be deemed to constitute an Item of

Equipment and fully be subject to the security interest granted to KEF

hereunder. If KEF repossesses the Equipment pursuant to its rights under this

Agreement and at that time, in the opinion of KEF, any Item of Equipment fails

to meet the standards set forth above, Borrower agrees to pay on demand all

costs and expenses incurred in connection with repairing or restoring such Item

of Equipment so as to meet such standards and/or assembling and delivering such

Item of Equipment.

 

3

 

8.             Equipment Upgrades/Attachments.  In addition to the

requirements of Section 6 hereof, Borrower, at its own expense, may from

time to time add or install upgrades or attachments (each, an “Upgrade”) to the

Equipment; provided, that such Upgrades are readily removable without

causing material damage to the Equipment, and do not materially adversely

affect the fair market value of the Equipment. 

Any such Upgrades shall be owned by Borrower, shall become subject to

the security interest created by this Agreement and shall be kept free and clear

of all Liens so long as attached to the Equipment.

 

9.             Lease and Assignment.  (a) 

WITHOUT KEF’S PRIOR WRITTEN CONSENT, BORROWER SHALL NOT (1) ASSIGN,

TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE EQUIPMENT OR ANY

INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR OBLIGATIONS UNDER THE

LOAN DOCUMENTS, OR (2) LEASE OR LEND THE EQUIPMENT TO, OR PERMIT THE EQUIPMENT

TO BE USED BY, ANYONE OTHER THAN BORROWER.

 

(b)  KEF, at any

time with or without notice to Borrower, may sell, transfer, grant

participations in, assign and/or grant a security interest in any or all of

KEF’s right, title and interest in and to the Loan Documents, or in KEF’s

security interest in any Item of Equipment. 

In any such event, any such purchaser, transferee, assignee or secured

party shall have and may exercise all of KEF's rights hereunder or thereunder,

and BORROWER

SHALL NOT ASSERT AGAINST ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED

PARTY ANY DEFENSE, COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST KEF.  Borrower agrees that upon written notice to

Borrower of any such sale, transfer, assignment and/or security interest,

Borrower shall acknowledge receipt thereof in writing and shall comply with the

reasonable directions and demands of such purchaser, transferee, assignee or

secured party.

 

(c)  Subject to

the foregoing, all covenants and agreements contained herein shall be binding

upon, and inure to the benefit of, KEF and its successors and permitted assigns

and Borrower and its successors and permitted assigns.  

 

10.          Loss of or Damage to Equipment.  (a) In the event of Loss or

Damage to any Item of Equipment, Borrower shall immediately notify KEF of same

and, at the option of Borrower, Borrower shall within thirty (30) days, unless

otherwise agreed by KEF in writing, following such Loss or Damage: (1) place

such Item of Equipment in good condition and repair, in accordance with the

terms hereof; (2) replace such Item of Equipment with replacement equipment

(acceptable to KEF) in as good condition and repair, and with the same or

better fair market value as such replaced Item of Equipment immediately

preceding the Loss or Damage (assuming that such replaced Item of Equipment was

in the condition required by this Agreement), which replacement equipment shall

immediately, and without further act, be deemed to constitute Items of

Equipment and be fully subject to this Agreement and the security interest

granted to KEF as if originally pledged as Collateral hereunder and shall be

free and clear of all Liens; or (3) 

pay to KEF any unpaid Installments

and other charges due prior to the payment date specified in such notice plus

an amount, with respect to an Item of Equipment, equal to the pro rata portion

of the Installments attributable to such Item of Equipment under the Loan

Documents after discounting such Installments to present worth as of the

payment date specified in such notice on the basis of a per annum rate of

discount equal to five percent (5%) from the respective dates upon which such

Installments would have been paid but for the operation of this clause.  

 

(b)

Upon KEF's receipt of the payment required

under clause (3) above, KEF shall release its security interest in such Item of

Equipment. If Borrower fails to either restore or replace the Item of Equipment

pursuant to clauses (1) or (2) above, respectively, Borrower shall make the

payment under clause (3) above.

 

11.          Insurance.  (a)  Borrower, at Borrower's own cost and expense, shall maintain (1)

insurance against all risks of physical loss or damage to the Equipment (which

shall include theft and collision for Equipment consisting of motor vehicles,

and shall not exclude loss resulting from flood or earthquake) in an amount not

less than the full replacement value thereof and (2) comprehensive public

liability insurance including blanket contractual liability for personal and

bodily injury and property damage in an amount satisfactory to KEF.

 

4

 

(b)  All

insurance policies required hereunder shall (1) require 30 days' prior written

notice to KEF of cancellation or material change in coverage (any such

cancellation or change, as applicable, not being effective until the thirtieth

(30th) day after the giving of such notice); (2) name “KeyCorp and its

subsidiaries and affiliated companies, including Key Equipment Finance, a

Division of Key Corporate Capital Inc., their successors and assigns” as sole

loss payee under the property insurance policies; (3) not require contributions

from other policies held by KEF; (4) waive any right of subrogation against

KEF; (5) in respect of any liability of KEF, except for the insurers' salvage

rights in the event of a Loss or Damage, waive the right of such insurers to

set-off, to counterclaim or to any other deduction, whether by attachment or

otherwise, to the extent of any monies due KEF under such policies; (6) not

require that KEF pay or be liable for any premiums with respect to such

insurance covered thereby; (7) be in full force and effect  throughout any geographical areas at any

time traversed by any Item of Equipment; and (8) contain breach of warranty

provisions providing that, in respect of the interests of KEF in such policies,

the insurance shall not be invalidated by any action or inaction of Borrower or

any other person (other than KEF) and shall insure KEF regardless of any breach

or violation of any warranty, declaration or condition contained in such

policies by Borrower or by any other person (other than KEF).  Prior to funding the Note, and thereafter

not less than 15 days prior to the expiration dates of the expiring policies

theretofore delivered pursuant to this Section, Borrower shall deliver to KEF a

duplicate original of all policies (or in the case of blanket policies,

certificates thereof issued by the insurers thereunder) for the insurance

maintained pursuant to this Section. 

 

(c)  Proceeds of

insurance with respect to physical loss or damage to the Equipment shall be

applied, at the option of KEF, to repair or replace the Equipment or to reduce

or satisfy (as applicable) the Secured Obligations.

 

12.          Taxes.  Borrower shall pay when due

any and all taxes, fees, levies, imposts, duties, assessments and public and

private charges levied or assessed on or with respect to the Equipment, on the use

thereof, or on this Agreement or any of the other Loan Documents.

 

13.          KEF's Right to Perform for Borrower.  If Borrower fails to perform

any of its obligations contained in the Loan Documents, KEF may (but shall not

be obligated to) itself perform such obligations, and the amount of the

reasonable costs and expenses of KEF incurred in connection with such

performance, together with interest on such amount from the date paid by KEF

until the date repaid by Borrower to KEF, at the Default Rate, shall be payable

by Borrower to KEF upon demand.  No such

performance by KEF shall be deemed a waiver of any rights or remedies of KEF,

or be deemed to cure the default of Borrower hereunder.  All such sums and amounts so expended by

KEF shall be repayable by the Borrower immediately without notice or demand,

shall constitute additional Secured Obligations and shall bear interest from

the date said amounts are expended at the Default Rate.

 

14.          Delinquent Payments; Interest.  If Borrower fails to pay any

of the Installments on the date when the same becomes due, Borrower shall pay

to KEF a late charge equal to five percent (5%) of such delinquent amount.  Such late charge shall be payable by

Borrower upon demand by KEF and shall be deemed part of the Secured Obligations.  In no event shall such late charge exceed

the maximum amounts permitted under Applicable Law.

 

15.          Personal Property; Liens; Warranty

of Title.  The Borrower is, and will continue to be,

the sole owner of the Equipment, free from any Lien.  KEF and Borrower hereby agree that the Equipment is, and shall at

all times remain, personal property notwithstanding the fact that any Item of

Equipment may now be, or hereafter become, in any manner affixed or attached to

real property or any improvements thereon. 

Borrower shall at all times keep the Equipment free and clear from all

Liens, and the Borrower shall obtain and deliver to KEF (to be recorded at the

Borrower’s expense) from each person having a Lien on any Equipment Location

waivers of any Lien which such person might have or hereafter obtain or claim

with respect to the Equipment.  Borrower

shall (a) give KEF immediate written notice of any Lien on the Collateral, (b)

promptly, at Borrower's sole cost and expense, take such action as may be

necessary to discharge any such Lien, and (c) indemnify and hold KEF, on an

after-tax

 

5

 

basis, harmless from and against any loss or damage

caused by any such Lien. Borrower warrants that it has good, valid

and marketable title to the Equipment, and that (1) the security interest in

the Collateral granted to KEF hereunder, when properly perfected by filing,

shall constitute a valid and perfected first priority security interest in the

Collateral and, (2) the Collateral is not subject to, and Borrower will not

grant or permit to exist, any Liens or claims on or against the Collateral,

whether senior, superior, junior, subordinate or equal to the security interest

granted to KEF hereby, or otherwise.

 

16.          Events of Default; Remedies.  (a)  As used herein, the term "Event of Default" shall mean

any of the following events:  (1) Borrower

fails to pay any Installment within ten (10) days after the same shall have

become due and payable; (2) Borrower or any

Guarantor becomes insolvent or makes an assignment for the benefit of its

creditors; (3) a receiver, trustee, conservator or liquidator of Borrower or

any Guarantor or of all or a substantial part of Borrower's or such Guarantor's

assets is appointed with or without the application or consent of Borrower or

such Guarantor, respectively; (4) a petition is filed by or against Borrower or

any Guarantor under any bankruptcy, insolvency or similar legislation; (5)

Borrower or any Guarantor violates or fails to perform any provision of either

the Loan Documents or any other loan, lease or credit agreement or any

acquisition or purchase agreement with KEF or any other party; (6) Borrower

violates or fails to perform any covenant or representation made by Borrower in

the Loan Documents; (7) any representation or warranty made herein or in any of

the Loan Documents, certificates, financial statements or other statements

furnished to KEF (or KEF’s parent, subsidiaries or affiliates) shall prove to

be false or misleading in any material respect as of the date on which the same

was made; (8) Borrower makes a bulk transfer of furniture, fixtures or other

equipment or inventory; (9) there is a material adverse change in Borrower's or

any Guarantor's financial condition; (10) Borrower merges or consolidates with

any other corporation or entity, or sells, leases or disposes of all or

substantially all of its assets without the prior written consent of KEF; (11)

without the written consent of KEF, which consent shall not be unreasonably

withheld,  a change in control occurs in

Borrower or any Guarantor; (12) the death or dissolution of Borrower or any

Guarantor; (13) any of the liens created or granted hereby, or intended to be

granted or created hereby, to KEF shall fail to be valid, first priority

perfected liens subject to no prior or equal lien; or (14) an additional Lien

attaches to the Equipment or the Equipment becomes subject to risk of seizure

or forfeiture.

 

(b)           (1)

Upon the occurrence of an Event of Default, KEF, at its

option, may declare any or all of the Secured Obligations, including, without

limitation, the Note, to be immediately due and payable, without demand or

notice to Borrower or any Guarantor. 

The obligations and liabilities accelerated thereby shall bear interest

(both before and after any judgment) until paid in full at the Default

Rate.  Should there occur a Default and

if a voluntary or involuntary petition under the United States Bankruptcy Code

is filed by or against Borrower while such Default remains uncured, the Secured

Obligations automatically shall be accelerated and due and payable and interest

thereon at the Default Rate automatically shall apply as of the date of the

first occurrence of the Default, without any notice, demand or action of any

type on the part of KEF (including any action evidencing the acceleration or

imposition of the Default Rate).  The

fact that KEF has, prior to the filing of the voluntary or involuntary petition

under the United States Bankruptcy Code, acted in a manner which is inconsistent

with the acceleration and imposition of the Default Rate shall not constitute a

waiver of this provision or estop KEF from asserting or enforcing KEF’s rights

hereunder.

 

(2)

Furthermore, upon the occurrence of an Event of Default, KEF shall have, in addition

to the rights and remedies provided herein, in the other Loan Documents or by

law, the rights and remedies of a secured party under the Uniform Commercial

Code under the laws of the State of New York (the "UCC") (regardless

of whether the UCC is the law of the jurisdiction where the rights and remedies

are asserted and regardless of whether the UCC applies to the affected

Collateral), and further KEF may do any one or more of the following as KEF in

its sole discretion may elect, with or without judicial process or the aid and

assistance of others:  (a) enter and

remain on any premises on which any of the Equipment may be located and,

without resistance or interference by the Borrower, without liability to KEF by

reason of such entry or taking possession, take possession of the Equipment,

(b)  prepare for sale and sell or

otherwise dispose of any Equipment on any such premises, (c) require the

Borrower to assemble and make available to KEF at Borrower’s expense any

 

6

 

Equipment

at any place and time designated by KEF, (d) remove any Equipment from any such

premises for the purpose of effecting sale or other disposition thereof, (e)

without demand and without advertisement, notice, hearing or process of law,

all of which the Borrower hereby waives, at any place and time or times, sell

and deliver any or all Equipment held by or for it at public or private sale,

by one or more contracts, in one or more parcels, for cash, upon credit or

otherwise, at such prices and upon such terms as KEF deems advisable, in its

sole discretion, or (f) lease all or any portion of the Equipment on such terms

and conditions as KEF in its sole discretion may determine. 

In addition to all other sums due KEF hereunder, the Borrower shall pay

KEF all reasonable costs and expenses incurred by KEF, including reasonable

attorneys' fees and court costs, in obtaining or liquidating the Collateral, in

enforcing payment of Secured Obligations, or in the prosecution or defense of

any action or proceeding by or against KEF or the Borrower concerning any

matter arising out of or connected with the Loan Documents, the Collateral or

the Secured Obligations, including without limitation any of the foregoing

arising in, arising under or related to a case under the United States

Bankruptcy Code.  

 

(3) Borrower’s

waivers regarding disposition of the equipment. IF AN EVENT OF DEFAULT OCCURS, BORROWER HEREBY

WAIVES ANY DEFENSES, RIGHTS, OFFSETS OR CLAIMS AGAINST KEF ARISING OUT OF THE

REPOSSESSION, RETENTION, SALE, MANNER OR METHOD OF SALE OR DISPOSITION OF ANY ITEMS OF

EQUIPMENT. THE BORROWER AGREES THAT ANY REQUIREMENT OF REASONABLE NOTICE

SHALL BE MET IF SUCH NOTICE IS PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID,

TO THE BORROWER IN ACCORDANCE WITH THE NOTICE PROVISIONS HEREOF AT LEAST 10

DAYS BEFORE THE TIME OF SALE OR OTHER EVENT GIVING RISE TO THE REQUIREMENT OF

SUCH NOTICE. KEF SHALL NOT BE OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION

OF THE EQUIPMENT REGARDLESS OF NOTICE HAVING BEEN GIVEN. KEF MAY BE THE

PURCHASER AT ANY SUCH SALE. THE BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF

REDEMPTION FROM ANY SUCH SALE. KEF MAY POSTPONE OR CAUSE THE POSTPONEMENT OF

THE SALE OF ALL OR ANY PORTION OF THE EQUIPMENT BY ANNOUNCEMENT AT THE TIME AND

PLACE OF SUCH SALE, AND SUCH SALE MAY, WITHOUT FURTHER NOTICE, BE MADE AT THE

TIME AND PLACE TO WHICH THE SALE WAS SCHEDULED. NONE OF KEF'S RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE

EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY OTHER RIGHT

OR REMEDY REFERRED TO HEREUNDER OR OTHERWISE AVAILABLE TO KEF OR ITS ASSIGNS AT

LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR CONCURRENTLY AT

THE SOLE DISCRETION OF LENDER AND MAY BE EXERCISED AS OFTEN AS OCCASION

THEREFOR SHALL OCCUR.  THE FAILURE TO

EXERCISE, OR ANY DELAY IN THE EXERCISE OF, ANY RIGHT OR REMEDY SHALL IN NO

EVENT BE CONSTRUED AS A WAIVER, RELEASE OR EXHAUSTION OF ANY SUCH

REMEDIES.  NO EXPRESS OR IMPLIED WAIVER

BY KEF OF ANY EVENT OF DEFAULT SHALL CONSTITUTE A WAIVER OF ANY OTHER EVENT OF

DEFAULT OR A WAIVER OF ANY OF KEF'S RIGHTS UPON THE REOCCURRENCE OF ANY SUCH

EVENT OF DEFAULT.

 

(c)           The Borrower hereby authorizes KEF,

upon the occurrence and during the continuation of any Event of Default

hereunder, at KEF's option to adjust, compromise and settle any losses under

any insurance afforded, and the Borrower does hereby irrevocably constitute KEF

and each of its designees, as its attorneys-in-fact, with full power and

authority, upon the occurrence and during the continuation of any Event of

Default hereunder, to effect such adjustment, compromise and/or settlement and

to endorse any drafts drawn by an insurer of the Equipment or any part thereof

and to do everything necessary to carry out such purposes and to receive and receipt

for any unearned premiums due under policies of such insurance; but unless or

until KEF elects to adjust, compromise or settle losses as aforesaid, such

insurance proceeds shall be subject to the lien and security interest of KEF

hereunder.

 

(d)           Upon the occurrence, and during the

continuance, of an Event of Default hereunder, any payments in respect of the

Secured Obligations and any proceeds of the Collateral, when received by KEF in

cash or its equivalent, will be applied first to costs of collection and,

thereafter, in reduction of the Secured Obligations in such order and manner as

KEF may direct in its sole discretion, and the Borrower irrevocably waives the

right to direct the application of such payments and proceeds and acknowledges

and agrees that KEF shall have the

 

7

 

continuing

and exclusive right to apply any and all such payments and proceeds in KEF’s

sole discretion, notwithstanding any entry to the contrary upon any of its

books and records.  The Borrower shall

remain liable to KEF for any deficiency. 

Any surplus remaining after the full payment and satisfaction of the

Secured Obligations shall be returned to the Borrower or to whomsoever a court

of competent jurisdiction shall determine to be entitled thereto.

 

(e)           To the extent that any of the Secured

Obligations are now or hereafter secured by property other than the Collateral,

or by a guarantee, endorsement or property of any other person, then KEF also

shall have the right to proceed against such other property, guarantee or

endorsement upon the occurrence of a default hereunder, and KEF shall have the

right, in its sole discretion, to determine which rights, liens, security

interests or remedies KEF shall at any time pursue, relinquish, subordinate or

modify, without in any way affecting the Secured Obligations or any of KEF's

rights under this Agreement.

 

17.          Notices.  All notices and other communications hereunder shall be in writing and

shall be transmitted by hand, overnight courier or certified mail (return

receipt requested), postage prepaid. 

Such notices and other communications shall be addressed to the

respective party at the address set forth above or at such other address as any

party may from time to time designate by notice duly given in accordance with

this Section.  Such notices and other

communications shall be effective upon the earlier of receipt or three (3) days

after mailing if mailed in accordance with the terms of this section.

 

18.          General Indemnification.  Borrower shall pay, and shall

indemnify and hold KEF and its directors, officers, employees, counsel, agents

and advisors harmless on an after-tax basis from and against, any and all

liabilities, causes of action, claims, suits, penalties, damages, losses, costs

or expenses (including attorneys' fees), obligations, liabilities, demands and

judgments, and Liens, of any nature whatsoever (collectively, a

"Liability") arising out of or in any way related to: (a) the Loan

Documents, (b) a failure to comply fully with Applicable Law and (c) Borrower's

failure to perform any covenant, or breach of any representation or warranty

under the Loan Documents; provided, that the foregoing indemnity shall

not extend to the Liabilities to the extent resulting solely from the gross

negligence or willful misconduct of KEF. 

Borrower shall promptly deliver to KEF copies of any documents received

from the United States Environmental Protection Agency or to any state, county

or municipal environmental or health agency concerning the Equipment or its

operation and copies of any documents submitted by Borrower or any of its

subsidiaries to the United States Environmental Protection Agency or any state,

county or municipal environmental or health agency concerning the Equipment or

its operation.  Borrower further agrees

to indemnify KEF against and hold it harmless from all present and future

stamp, transfer, documentary and other such taxes, levies, fees, assessments or

other charges made by any jurisdiction by reason of the execution, delivery,

performance and enforcement of the Loan Documents.

 

19.          Severability; Captions.  Whenever possible, each

provision of this Agreement shall be interpreted in such manner as to be

effective and valid under Applicable Law. 

If, however, any provision of this Agreement or any of the Loan

Documents shall be prohibited or unenforceable in any jurisdiction, it shall,

as to such jurisdiction, be deemed modified to conform to the minimum

requirements of such law, or if for any reason it is not deemed so modified, it

shall be ineffective only to the extent of such prohibition or unenforceability

without affecting the remaining provisions hereof, and any such prohibition or

unenforceability shall not invalidate or render unenforceable such provision in

any other jurisdiction.  Captions are

intended for convenience or reference only, and shall not be construed to

define, limit or describe the scope or intent of any provisions hereof. 

 

20.          Financial and Other Data.  During the Term hereof,

Borrower shall furnish KEF (a) as soon as available, and in any event within

120 days after the last day of each fiscal year, financial statements of

Borrower and each Guarantor and (b) from time to time as KEF may reasonably

request, other financial reports, information or data (including federal and

state income tax returns) and quarterly or interim financial statements of

Borrower and each Guarantor. All such information shall be audited (or if

audited information is not available, compiled or reviewed) by an independent certified

public accountant.

 

8

 

21.          [RESERVED]

 

22.          Representations and Warranties of

Borrower.  Borrower represents and warrants that: (a)  Borrower is a corporation duly organized and

validly existing in good standing under the laws of the state of its

incorporation; (b)  the execution,

delivery and performance of this Agreement and all related instruments and

documents:  (1) have been duly

authorized by all necessary corporate action on the part of Borrower, (2) do

not require the approval of any stockholder, partner, trustee, or holder of any

obligations of Borrower except such as have been duly obtained, and (3) do not

and will not contravene any law, governmental rule, regulation or order now

binding on Borrower, or the charter or by-laws of Borrower, or contravene the

provisions of, or constitute a default under, or result in the creation of any

lien or encumbrance upon the property of Borrower under, any indenture,

mortgage, contract or other agreement to which Borrower is a party or by which

it or its property is bound; (c) the Loan

Documents, when entered into, will constitute legal, valid and binding

obligations of Borrower enforceable against Borrower in accordance with the

terms thereof; (d) there are no pending actions or proceedings to which

Borrower is a party, and there are no other pending or threatened actions or

proceedings of which Borrower has knowledge, before any court, arbitrator or

administrative agency, which, either individually or in the aggregate, would

adversely affect the financial condition of Borrower, or the ability of

Borrower to perform its obligations under the Loan Documents; (e) Borrower is

not in default under any obligation for the payment of borrowed money, for the

deferred purchase price of property or for the payment of any installments

under any lease agreement which, either individually or in the aggregate, would

have the same such effect; (f) under the laws of the state(s) in which the

Equipment is to be located, the Equipment consists solely of personal property

and not fixtures; (g) the financial statements of Borrower (copies of which

have been furnished to KEF) have been prepared in accordance with generally

accepted accounting principles consistently applied ("GAAP"), and

fairly present Borrower's financial condition and the results of its operations

as of the date of and for the period covered by such statements, and since the

date of such statements there has been no material adverse change in such

conditions or operations; (h) the address stated above is the chief place of

business and chief executive office, or in the case of individuals, the primary

residence, of Borrower; (i) except as set forth on Collateral Schedule 1

attached hereto, Borrower does not conduct business under a trade, assumed or

fictitious name, except as set forth in Schedule 1; (j) this Agreement

creates a valid first priority security interest in the Collateral securing

payment and performance of the Secured Obligations and all filings and other

action necessary to perfect such security interest have been taken or shall be

promptly taken; (k)  Borrower has filed

or has caused to have been filed all Federal, state and local tax returns

which, to the knowledge of Borrower, are required to be filed, and has paid or

caused to have been paid all taxes as shown on such returns or on any

assessment received by it, to the extent that such taxes have become due,

unless and to the extent only that such taxes, assessments and governmental

charges are currently contested in good faith and by appropriate proceedings by

Borrower and adequate reserves therefor have been established as required under

GAAP and, to the extent Borrower believes it advisable to do so, Borrower has

set up reserves which are believed by Borrower to be adequate for the payment

of additional taxes for years which have not been audited by the respective tax

authorities; (l) except as previously

disclosed in writing to KEF, neither Borrower nor any of its officers or

directors (if a corporation), partners (if a partnership) or members or

managers (if a limited liability corporation) has, directly or indirectly, any

financial interest in the Supplier; and (m) Borrower is not in violation

of any Applicable Law, the violation of which would have a material adverse

effect on the conduct of its business, and Borrower has obtained any and all

licenses, permits, franchises or other governmental authorizations necessary

for the ownership of its properties and the conduct of its business; and (n) none

of the proceeds of the loan made by KEF will be used, directly or indirectly,

by Borrower for the purpose of purchasing or carrying, or for the purpose of

reducing or retiring any indebtedness which was originally incurred to purchase

or carry any  “margin stock” within the

meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the

Federal Reserve System (herein called “margin stock”) or for any other purpose

which might make the transactions contemplated herein a “purpose credit” within

the meaning of Regulation U, or cause this Agreement to violate any other

regulation of the Board of Governors of the Federal Reserve System or the

Securities Exchange Act of 1934 or the Small Business Investment Act of 1958,

as amended, or any rules or regulations promulgated under any of such statutes.

 

9

 

23.          Further Covenants of Borrower. The Borrower further covenants and agrees that it will not

change its legal name, be a party to a merger, consolidation or other change in

structure or use a trade name in its business without at least 30 days' prior

written notice to KEF; and shall execute and deliver to KEF (to be filed at

Borrower’s expense) all UCC statements as may be required by KEF in connection

with such event.

 

24.          Miscellaneous.  Time is of the essence with

respect to this Agreement.  ANY FAILURE

OF KEF TO REQUIRE STRICT PERFORMANCE BY BORROWER OR ANY WAIVER BY KEF OF ANY

PROVISION HEREIN SHALL NOT BE CONSTRUED AS A CONSENT OR WAIVER OF ANY PROVISION

OF THIS AGREEMENT.  None of

the Loan Documents may be amended except by a writing signed by KEF and

Borrower. This Agreement will be binding upon KEF only if executed by a duly

authorized officer or representative of KEF at KEF's principal place of

business as set forth above. This Agreement and all other Loan Documents shall

be executed on Borrower's behalf by Authorized Signers of Borrower.  The Borrower hereby waives presentment,

notice of dishonor and protest of all instruments included in or evidencing any

Secured Obligations, and all other notices and demands whatsoever (except as

expressly provided herein).  THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK

AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE

OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE

WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR

RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD

CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF

NEW YORK. 

 

25.          Jury Trial Waiver.  KEF AND BORROWER HEREBY EACH WAIVE THEIR

RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON

OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE

TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO

WHICH KEF OR BORROWER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,

TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION,

COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE

THE VALIDITY OR ENFORCEABILITY, OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS

OR ANY PROVISION HEREOF OR THEREOF. 

THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY KEF AND THE

BORROWER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY

INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR

NULLIFY ITS EFFECT.  THIS WAIVER SHALL

APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 

 

26.          More than One Borrower.  If more than one person or

entity executes this Agreement, each of the other Loan Documents, and all

addenda or other documents executed in connection herewith or therewith, as

"Borrower," the obligations of "Borrower" contained herein

and therein shall be deemed joint and several and all references to

"Borrower" shall apply both individually and jointly.

 

27.          Entire Agreement. 

This Agreement, together with the other Loan Documents, collectively

constitute the entire understanding or agreement between KEF and Borrower with

respect to the financing of the Equipment, and there is no understanding or

agreement, oral or written, which is not set forth herein or therein.  This Agreement shall not be modified except

by the written agreement of KEF and Borrower.

 

28.          Execution in Counterparts.  This Agreement may be

executed in any number of counterparts and by different parties hereto in

separate counterparts, each of which when so executed shall be deemed to be an

original and all of which taken together shall constitute but one and the same

instrument.

 

10

 

29.          Power of Attorney; UCC Filings.  BORROWER SHALL EXECUTE AND DELIVER TO

KEF CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM

TIME TO TIME THEREAFTER, ALL FINANCING STATEMENTS, AMENDMENTS TO FINANCING

STATEMENTS, CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM

SATISFACTORY TO KEF, AND TAKE ALL OTHER ACTION AS KEF MAY REASONABLY REQUIRE,

TO PERFECT AND CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE

OF KEF’S SECURITY IN THE COLLATERAL. 

BORROWER HEREBY APPOINTS KEF, OR ITS ASSIGNEE, AND ANY OF KEF’S OR ASSIGNEE’S

OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN FACT, IRREVOCABLY AND

COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF BORROWER ALL UCC

FINANCING STATEMENTS WHICH IN KEF'S SOLE DISCRETION ARE NECESSARY OR PROPER TO

SECURE KEF'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE JURISDICTIONS.  Borrower hereby ratifies, to the extent

permitted by law, all that KEF shall lawfully and in good faith do or cause to

be done by reason of and in compliance with this paragraph

 

	

  Lender:

  	

  Borrower:

  
	

   

  	

   

  
	

  Key Equipment Finance,

  a Division of Key Corporate Capital Inc

  	

  AIRNET SYSTEMS, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  X

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  Name:

  
	

  Name:

  	

  Title:

  
	

  Title:

  	

   

  
						

 

COUNTERPART NO. 3 OF 3 SERIALLY

NUMBERED MANUALLY EXECUTED COUNTERPARTS. 

TO THE EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE

UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH THE

TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.

 

11

 

COLLATERAL SCHEDULE

 

Schedule 1

 

	

  BORROWER

  TRADE NAMES

  
	

   

  	

   

  	

   

  
	

  AIRNET

  EXPRESS

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  DESCRIPTION

  OF EQUIPMENT

  
	

   

  	

   

  	

   

  
	

  Airframe

  Make and Model:

  	

   

  	

  Cessna

  Cargomaster Caravan Model 208B

  
	

  United States Registration Number:

  	

   

  	

  N102AN

  
	

  Airframe Manufacturer’s Serial Number:

  	

   

  	

  208B0906

  
	

  Engine Make and Model:

  	

   

  	

  Pratt & Whitney PT6A-114A {Under 750 Horsepower}

  
	

  Engine Manufacturer’s Serial Number:

  	

   

  	

  PCE-PC0892

  
	

   

  	

   

  	

   

  
	

  AVIONICS

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Seats

  – Dakota Leather Slate Blue

  	

   

  	

  KMA-24H70

  Audio Console

  
	

  Floor

  Covering – Trophy Beige

  	

   

  	

  KX-165

  Nav/Com

  
	

  Sidewalls

  – Slate Blue Vinyl

  	

   

  	

  KX-165

  Nav/Com with KI-206 Indiactor

  
	

  Recorder,

  Flight Hour

  	

   

  	

  KR-87

  ADF W KI-227-01 Indicator

  
	

  Abrasion

  Boot Instl. Radar Pod

  	

   

  	

  KN-63

  DME with KDI-572 Indicator

  
	

  Valve,

  Oil Quick Drain w/ Elect. Standby

  	

   

  	

  KT-70

  Mode S Transponder

  
	

  Ventilation

  System, Fan Driven

  	

   

  	

  KFC-225

  Autopilot/Flight Director

  
	

  Step,

  Cabin Entrance, Retractable (RH Crew Door)

  	

   

  	

  RDR-2000

  Color Radar

  
	

  Net.

  Partition (cargo area)

  	

   

  	

   

  
	

  Cargo

  Tie-Down Fittings Instl. (100 lb. Rating)

  	

   

  	

   

  
	

  Aft

  Air Stair Door

  	

   

  	

   

  

 

12

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