SECURITY AGREEMENT
(Aircraft)
DATE: MAY 31, 1996
PROFLIGHT INC., a Colorado Corporation with its principal place of business at
00000 Xxxx Xxxxxxx Xxxxx Xxxx, Xxxxxxxxx, XX 00000 ("Debtor"), hereby grants to
Textron Financial Corporation, a Delaware corporation and its subsidiaries and
affiliates ("Secured Party") with a principal place of business at 00
Xxxxxxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxxx, Xxxxx Xxxxxx 00000, a security
interest in all of its rights, title and interest, whether now owned or
hereafter acquired, in the aircraft described on Schedule I hereto, and all
parts, engines, equipment, logbooks, manuals, records and accessories thereto;
all instruments, accounts and chattel paper arising therefrom (including leases
and conditional sales contracts); and the proceeds of all the foregoing,
including proceeds in the form of goods, accounts, chattel paper, documents,
instruments and general intangibles (the "Collateral"), to secure payment and
performance of all of Debtor's, and of Debtor's subsidiaries' and affiliates',
liabilities and obligations, actual or contingent, now or hereafter owing,
arising, due or payable from Debtor and any of Debtor's subsidiaries and
affiliates to Secured Party, including but not limited to, that certain
Promissory Note between Debtor and Secured Party dated May 31, 1996
(the "Note"), (hereinafter collectively referred to as the "Obligations"). The
extent to which Secured Party's security interest in the Collateral shall be
entitled to purchase money priority shall be determined by reference to
the unpaid principal, interest or other charges associated with such Collateral.
When payments are received with respect to more than one obligation, they shall
be applied in accordance with the written instructions of Debtor, if any. Absent
instructions, any payment received with respect to one or more obligations
shall be applied as follows: first, to expenses of collection and preservation
of the Collateral, including reasonable attorney's fees; second, to late charges
outstanding with respect to the oldest obligation first until late charges on
all obligations are paid in full; third, to accrued and unpaid interest
outstanding with respect to the oldest obligation first until interest charges
on all obligations are paid in full; and fourth, to principal outstanding under
the oldest obligation first and continuing until the payments so received
are exhausted.
A. Debtor's Representations, Warranties, Covenants and Agreements
1. Authority. The execution, delivery and performance of this Agreement and
any instrument or other agreement or writing relating to this Agreement
have been duly and validly authorized by Debtor and do not and will not
conflict with any provision of Debtor's corporate charter or bylaws or
any agreement, instrument or writing to which Debtor is a party or by
which Debtor is bound, and Debtor has full power and authority to enter
into this Agreement and all other instruments or other writings
contemplated hereby and to consummate the transactions contemplated
hereby.
2. Financial Information. Debtor, its guarantors and affiliates shall
timely provide Secured Party with financial statements at least
quarterly. All financial statements and other written information
heretofore or hereafter delivered or furnished directly or indirectly by
Debtor and any guarantor or affiliate to Secured Party are and will be
true and correct as of the date furnished and as to any such financial
statements, do and will fairly present the financial condition and
results of Debtor's (or its guarantors or affiliates, as appropriate)
operations at the times and for the periods stated in such financial
statements.
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3. Absence of liens. There are no liens, security interests, chattel
mortgages, tax liens or other encumbrances of any kind on the Collateral
other than the security interest created hereby, and Debtor shall not
create or permit any to exist hereafter.
4. Place of Business, Use of Collateral. Debtor's principal place of
business is located at the address set forth at the beginning of this
Agreement and Debtor shall not change such principal place of business
without providing Secured Party at least 45 days' prior written notice.
Debtor hereby represents that the primary use of the Collateral is for
business purposes and agrees that it shall not allow the Collateral to
be removed from or flown outside the continental United States of
America, Mexico, Central America, and South America without the prior
written consent of Secured Party, and then only on the terms and
conditions contained in said consent.
5. Sale or Lease, Registration. Debtor shall not sell, lease, pledge, give
away or otherwise dispose of, alienate or encumber its title to the
Collateral without Secured Party's prior written consent. Debtor shall
at all times maintain registration of the Collateral with the Federal
Aviation Administration ("FAA"), which registration shall appropriately
reflect Secured Party's interest in the Collateral.
6. Books and Records. Debtor will at all times keep accurate and complete
records and books of account with respect to all of Debtor's business
activities, in accordance with sound accounting practices and generally
accepted accounting principles, such records and accounts to be
maintained at Debtor's address set forth at the beginning of this
Agreement, and Debtor agrees that Secured Party may from time to time,
during normal business hours, inspect and make copies thereof, and
Secured Party shall have the right to make such verification concerning
the Collateral as Secured Party may consider reasonable under the
circumstances, all at Debtor's expense.
7. Continuing Information. Debtor will furnish and cause Guarantor to
furnish to Secured Party such information relevant to the Collateral,
(Debtor's and Guarantor's, as appropriate) financial condition, and
business as Secured Party may from time to time reasonably request. In
addition, Debtor hereby authorizes Secured Party to update its credit
information from time to time including, but not limited to, the
obtaining of updated references from credit reporting agencies, Debtor's
banks and other companies with whom Debtor does business.
8. Maintenance of Collateral. The Debtor shall, at its own expense,
maintain and keep the Collateral in an air-worthy and good flying
condition and all components thereof and equipment installed thereon in
good order and repair particularly in accordance with the maintenance
requirements of (i) the Federal Aviation Agency (the "FAA"), (ii) the
manufacturer of the Collateral and (iii) the manufacturer of any
component or equipment installed on said Collateral, and shall allow
Secured Party reasonable access to the Collateral during normal business
hours in order to verify compliance with the foregoing. The Debtor
shall, within a reasonable time, at its own cost and expense, replace in
or on the Collateral and its components and equipment any and all such
parts, equipment, appliances, instruments and accessories which may
be worn, used, lost, destroyed, confiscated, damaged or otherwise
rendered unfit for use so that each of such items shall always
be in good operating condition and shall have at least the original
value and utility of the property replaced. All inspections,
repairs, modifications, installments and overhaul work to be performed
on the Collateral shall be performed at the Debtor's expense by
personnel duly licensed to perform such work and shall be in accordance
with the standards required by the FAA. Debtor shall
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promptly notify Secured Party of any scheduled or unscheduled overhaul
or servicing of engines or other major components of the Collateral,
which notice shall specify the nature of the work to be done, the name
and address of the shop providing such services, and a reasonable
estimate of the completion date of such work. The Debtor shall also
comply with all FAA air-worthiness directives and the manufacturer's
maintenance and repair manuals and alert service bulletins.
9. Engine Reserves. During the term of this Security Agreement, Debtor
shall pay to Secured Party the sum of $65.00 for each hour of operation
(take off to landing) of each serial numbered engine (hereinafter
individually and collectively an "Engine") constituting a part of each
Aircraft (the "Reserves"). The Reserves will be submitted to, and held
by, the Secured Party. Any interest earned will be applied to costs
associated with account maintenance and associated expenses incurred by
Secured Party in administering the account and any interest earned and
not so expended shall accrue in the account and used for disbursements
described herein. At the Secured Party's option, the amount of the
Reserves payable for each hour of operation shall be adjusted annually
during the term of this Security Agreement to an amount equal to the
Engine manufacturer's then published price for a major engine overhaul
plus hot section divided by the number of flight hours permitted between
major engine overhauls as provided for in the FAA approved maintenance
program of the Debtor. The Reserves may be insufficient to cover all
costs eligible for disbursement in whole. The Reserves are payable in
arrears commencing on the fifteenth day of the month immediately
subsequent to the note date with respect to the related Aircraft, and
thereafter on the same day of each succeeding month during the term of
this Security Agreement, and shall be accompanied with copies of log
books and other records substantiating Debtor's certification of the
actual number of hours of operation for the previous month. Secured
Party shall reflect all Reserves so paid by Debtor on Secured Party's
books and shall render an account thereof, annually, to Debtor upon
written request. Provided Debtor is not in default, Debtor shall have
the right to have available Reserves applied to reasonable expenses for
labor and materials (as Debtor certifies, in writing, in the
disbursement request forms supplied and required by Secured Party which
requires the inclusion of copies of all applicable invoices and return
to service documentation), to the Secured Party as are necessary solely
in order to accomplish hot sections and scheduled overhauls. Such
expenses may be disbursed up to the maximum amount held on account for
an Engine at date of repair. Upon receipt and approval of such
disbursement request, Secured Party shall, within 10 days, remit the
available amounts directly to the laborers and/or vendors. If evidence
satisfactory to Secured Party has been submitted by Debtor to Secured
Party supporting Debtor's contention that Debtor has paid the expenses
in full, Secured Party may remit payment directly to Debtor. In the
event that collected Reserves are insufficient, Debtor shall be
responsible for any shortfall. Shortfall payments made by Debtor shall
not be credited towards or offset future Reserves due. Reserves
collected on an Engine may not be applied to an expense claim on a
different Engine. In the event an Engine is substituted in accordance
with this Security Agreement, any accumulated Reserves on the Engine
being substituted for shall be retained as Reserves with respect to the
new engine which shall thereafter be considered an Engine hereunder. So
long as any event of default exists, irrespective of whether the
Aircraft has been returned to Secured Party, Secured Party shall not be
required to disburse any amounts and will retain the entire balance of
the Reserves until the default is cured to Secured Party's satisfaction.
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10. Base Location. The home airport and base location at which the
Collateral will be located is Centennial Airport, Englewood, CO, which
home airport location will not be changed without the prior written
consent of the Secured Party and in particular the Collateral shall not
be used in or over the territorial limits of any country other than the
United States of America, Mexico, Central America, and South America
without the prior written consent of the Secured Party.
11. Legal Purpose. Debtor shall not use or permit the Collateral to be used
(i) contrary to any laws or regulations, including but not limited to
those relating to intoxicating liquors, narcotics, drugs or similar
products, or (ii) in any manner which invalidate or restrict the
insurance coverage required to be carried or maintained by this
Agreement.
12. Insurance. Debtor shall have and maintain at all times with respect to
the Collateral Aircraft Liability Insurance and All Risk Ground and
Flight Insurance covering all forms of loss or damage to the Collateral
in such amounts, containing such terms and in such form as is
satisfactory in the sole discretion of Secured Party. All such policies
of insurance shall provide that any proceeds thereof shall be payable to
Secured Party and Debtor as their interests may appear. All such
policies of insurance shall provide for not less than thirty days' prior
notice of cancellation or change in form to Secured Party, such policies
to include a Breach of Warranty clause in favor of Secured Party without
obligation to pay the premium therefore in the event of Debtor's failure
to pay. In the event of Debtor's failure to secure and maintain
insurance as herein provided, Secured Party may, at its option, secure
such insurance on behalf of Debtor and Debtor hereby promises to pay to
Secured Party on demand any amounts expended by Secured Party in
securing such insurance as part of the obligations payment of which is
secured by the Collateral pursuant to this Agreement. Debtor hereby
agrees that Secured Party may act as Debtor's attorney-in-fact in
making, adjusting and settling claims under any such insurance policies
covering the Collateral.
13. Liens and Encumbrances. In its discretion, Secured Party may at any time
discharge taxes and other encumbrances levied or placed on the
Collateral, make repairs thereto and pay any necessary filing fees with
respect to the Collateral or its interest therein. Debtor agrees to
reimburse Secured Party on demand for any and all expenditures so made,
and until paid the amount thereof shall be deemed to be part of the
Obligations payment of which is secured by the Collateral pursuant to
this Agreement. Secured Party shall have no obligation to Debtor to make
any such expenditures nor shall the making thereof cure any default by
Debtor hereunder or under any agreement or instrument performance of the
terms of which is secured hereby.
14. Execution and Filing. Debtor shall perform, make, execute and deliver
all such additional and further acts, things, deeds, assurances and
instruments as Secured Party may request to more completely vest in and
assure to Secured Party its rights hereunder or in the Collateral,
including, without limitation, execution and delivery of any documents
or instruments which Secured Party deems appropriate to perfect and
continue the security interest hereby granted, in the United States of
America or any other country in which Secured Party determines such
action to be advisable; and Debtor hereby irrevocably authorizes Secured
Party, or its designee, at Debtor's expense, to file such documents or
instruments with respect thereto, with or without the Debtor's
signature, as Secured Party may deem appropriate, and appoints Secured
Party as Debtor's attorney-in-fact to execute such documents and
instruments and to do each and every other act or thing which Secured
Party is authorized to do or perform on behalf of Debtor by this
Agreement.
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15. Collateral Value. Debtor shall have a continuing obligation to notify
Secured Party of any factors or circumstances which affect the value of
the Collateral, including but not limited to, current market conditions.
16. Authority and Citizenship. Debtor hereby affirms to Secured Party that
it has full power and authority to enter into, and perform the
obligations under, this Agreement. Debtor, if an individual, hereby
affirms that Debtor is a citizen of the United States as defined in the
Federal Aviation Act of 1958, as amended (the "Act"), or a lawfully
admitted permanent resident of the United States or is otherwise
qualified to register aircraft for operation and navigation within the
United States. Debtor, if a partnership, hereby affirms that all
partners are of the United States as defined in the Act. All corporate
Debtors hereby affirm that: (i) they are organized under the laws of the
United States; (ii) the president of the corporation is a United States
citizen; (iii) 2/3 of the managing officers/directors are United States
citizens; and (iv) at least 75% of the voting interest of the
corporation's stock is owned or controlled by citizens of the United
States.
B. Default
The occurrence of any of the following shall constitute an Event of Default
hereunder:
1. Debtor's, or any of Debtor's subsidiaries' and affiliates', failure to
perform, breach of, or default with respect to any Obligation or any of
Debtor's covenants and agreements contained herein or in any other
agreement, instrument or obligation between Debtor or its subsidiaries
and affiliates, and Secured Party.
2. Any statement, representation or warranty of Debtor contained in this
Agreement or made by Debtor or any other party in any other writing
furnished to Secured Party by or on behalf of Debtor proves to have been
untrue, incomplete, or misleading in any material respect when made.
3. There occurs a loss, theft, substantial damage, destruction, sale or
encumbrance of or upon the Collateral, or the Collateral is levied upon
or seized or attached by legal process.
4. The dissolution, liquidation, termination of existence, insolvency,
appointment of a receiver for any part of the property of, assignment
for the benefit of creditors by, or the voluntary or involuntary
commencement of any proceeding under any bankruptcy, insolvency or
similar laws by or against Debtor or by or against any guarantor or
other party liable for the Debtor's Obligations under the Note.
5. Any guaranty or other document or instrument securing payment of the
Obligations given in favor of Secured Party shall not be in full force
and effect in accordance with its terms or shall cease to be a lawful,
valid and binding obligation or if the obligor thereof shall so assert;
or
6. There shall occur such change in the management, ownership or financial
or other condition or affairs of Debtor or any other party liable for
payment of the Obligations as, in the reasonable opinion of Secured
Party, significantly impairs Secured Party's security hereunder or
substantially increases Secured Party's risk of nonpayment of the
Obligations.
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C. Rights Upon Default
If an Event of Default shall occur:
1. Upon the occurrence of any such Event of Default, and so long as such
Default continues, Secured Party may without notice, demand or legal
process of any kind declare any part of or all the Obligations to be
immediately due and payable, and Secured Party shall then have, in any
jurisdiction where enforcement of this Agreement is sought, in addition
to any and all other rights and remedies it may have at law, in equity,
by statute or otherwise, all the rights and remedies of a Secured
Creditor under the Uniform Commercial Code, including, without
limitation, the right to take immediate possession of the Collateral
wherever it may be found, and for that purpose Secured Party may, so far
as Debtor can give authority therefor and without breach of the peace,
enter upon any premises on which the Collateral or any part thereof may
be situated or Secured Party believes it to be situated and take
possession of, remove, keep, and store any of the Collateral until the
same shall be sold or disposed of.
2. Debtor will upon demand from Secured Party and at Debtor's expense,
assemble the Collateral at a place and time designated by Secured Party
which is reasonably convenient to both parties and where, at Secured
Party's option, the Collateral may remain, at Debtor's expense, pending
a sale or other disposition thereof.
3. From the proceeds of any public or private sale of the Collateral,
Secured Party shall be entitled to retain the following amounts, and any
excess shall be due and payable to Debtor:
(i) all sums secured hereby;
(ii) secured Party's reasonable expenses of retaking, holding,
preparing for sale and selling the Collateral; and
(iii) Secured Party's reasonable attorneys' fees and other reasonable
fees and expenses incurred in connection with enforcing its rights
hereunder.
Debtor shall be and remain liable for any deficiency, plus interest,
costs and attorneys fees provided under the Note, remaining from the net
proceeds of any sale of the Collateral.
4. In the event Secured Party seeks to take possession of any or all of the
Collateral by court process, Debtor hereby waives any bonds and any
security and surety relating thereto required by any statute, court rule
or otherwise as an incident to such possession, and waives any demand
for possession prior to the commencement of any suit or action to
recover with respect thereto and waives the right to demand a jury in
any action in which Secured Party is a party.
5. Demand, presentment, protest, notice of nonpayment, notice of intent to
accelerate and notice that the debt has been accelerated are hereby
waived by Debtor. Debtor also waives the benefit of all evaluation,
appraisement and exemption laws.
D. Miscellaneous
1. No waiver by Secured Party of any Event of Default shall be effective
unless in writing and signed by an authorized officer or employee of
Secured Party, nor operate as a waiver of any other Event of Default or
of the same Event of Default on a future occasion or past occasion. No
single or partial exercise by Secured Party of any right
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or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy, all rights and remedies of
Secured Party hereunder being cumulative. All rights of Secured Party
shall inure to the benefit of the successors and assigns of Secured
Party and all Obligations of Debtor shall be binding upon the heirs,
executors, administrators, successors and assigns of Debtor.
2. Whenever possible each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable law, but
if any provision of this Agreement shall be prohibited by or invalid
under any applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity but the remainder of such
provision or the remaining provisions of this Agreement shall remain in
full force and effect.
3. THIS AGREEMENT IS DELIVERED IN AND SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF RHODE ISLAND.
IN WITNESSS WHEREOF, the parties hereunto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
Secured Party:
TEXTRON FINANCIAL CORPORATION
By: [signature]
----------------------------------
Title: GVP
------------------------------
Debtor:
PROFLIGHT INC.
By: /s/ Xxxxx Xxxxx
----------------------------------
Title: Trea.
------------------------------
XXXXX XX Xxxxxxxx
XXXXXX XX Xxxxxxxx
Xx this 24th day of May, 1996 before me personally appeared Xxxxx Xxxxx
to me known and known by me to be the person executing the foregoing instrument,
and he/she acknowledged said instrument by him/her executed to be his/her free
act and deed.
[signature]
-------------------------------------
NOTARY PUBLIC
My Commission Expires 3-3-98
0000 X. Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
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Schedule 1 to the
Security Agreement (Aircraft)
DESCRIPTION OF AIRCRAFT
-----------------------
AIRCRAFT:
MANUFACTURER: Xxxx
MODEL: 35A
SERIAL NUMBER: 105
FAA NUMBER: N18FN
ENGINES:
Engine #1 Engine #2
MANUFACTURER: XXXXXXX XXXXXXX
MODEL: TFE 731-2-2B TFE 731-2-2B
SERIAL NUMBER: P74592 P74184
RATED TAKE-OFF*: 0000 XXX. OF THRUST 35OO LBS. OF THRUST
* 750 HP OR MORE (1875 LBS THRUST IS EQUIVALENT TO 750 HORSEPOWER)
EQUIPPED AS FOLLOWS:
XXXXXXX XX-1086 JET VG-206D
JET DN-101D XXXXXXX VHF-20
XXXXXXX VIR-30 XXXXXXX TDR 90
XXXXXXX 51Y-719 XXXXXXX DME-40
BENDIX 1200 XXXXXXX ALT 50A
KING KHF-950 GLOBAL GNS-500A
CARGO DOOR AIR CONDITION
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