Exhibit 10.1

EXECUTION VERSION

Loan Agreement

Dated as of April 3, 2019

BETWEEN

AIRCO 1, LLC ,

as the Borrower

AND

MINNESOTA BANK & TRUST ,

as the Lender

Table of Contents

Page

LOAN AGREEMENT

This LOAN AGREEMENT dated as of April 3, 2019 (this “ Agreement ”), is entered into by and between AIRCO 1, LLC, a Delaware limited liability company (the “ Borrower ”), and MINNESOTA BANK & TRUST, a Minnesota state banking corporation (the “ Lender ”).

RECITALS

A.     Lender and Borrower are parties to that certain Second Loan Agreement dated as of February 22, 2018 (the “February 2018 Loan Agreement”), pursuant to which Lender made a loan in the original principal amount of $5,000,000 to the Borrower (the “February 2018 Loan”), and a second loan in the original principal amount of $450,000 (the “December 2018 Loan”).

B.     The February 2018 Loan is evidenced by that certain Airframe Acquisition Note dated February 22, 2018 in the original principal amount of $5,000,000 made by the Borrower payable to the order of the Lender (the “February 2018 Note”) and the December 2018 Loan is evidenced by that certain Airframe Acquisition Note dated December 18, 2018 in the original principal amount of $450,000 made by the Borrower payable to the order of the Lender (the “December 2018 Note”).

C.      Lender and Park State Bank (“PSB”) as co-lenders, and Borrower are parties to that certain Loan Agreement dated as of January 18, 2019 (the “Bi-Lender Loan Agreement”; and together with the February 2018 Loan Agreement being sometimes collectively referred to herein as the “Existing Loan Agreements” and individually as an “Existing Loan Agreement”), pursuant to which the Lender made a term loan to Borrower in the amount of $400,000 (the “January 2019 MBT Loan”; and together with the February 2018 Loan and the December 2018 Loan being sometimes collectively referred to herein as the “Existing MBT Loans”) and PSB made a term loan to Borrower in the amount of $2,100,000 (the “PSB Loan”; and together with the Existing MBT Loans being sometimes collectively referred to herein as the “Existing Loans” and individually as an “Existing Loan”).

D.     The January 2019 MBT Loan is evidenced by that certain Term Note dated January 18, 2019 in the original principal amount of $400,000 made by the Borrower payable to the order of Lender (the “January 2019 MBT Note”) and the PSB Loan is evidenced by that certain Term Note dated January 18, 2019 in the original principal amount of $2,100,000 made by the Borrower payable to the order of PSB (the “PSB Note”; and together with the February 2018 Note, the December 2018 Note and the January 2019 MBT Note being sometimes collectively referred to herein as the “Existing Notes” and individually as an “Existing Note”).

E.      Proceeds of the Existing Loans were used by the Borrower for the purpose of acquiring decommissioned commercial airline airframes to be disassembled and sold as parts by the Borrower pursuant to the terms and conditions of the Existing Loan Agreements.

F.     Borrower now desires to obtain a revolving credit facility from Lender in the original principal amount of up to TEN MILLION AND NO/100THS DOLLARS ($10,000,000.00), the proceeds of which will be used to refinance the Existing Loans and to finance the purchase of additional decommissioned commercial airliner airframes to be disassembled and sold as parts by the Borrower.

G.     Lender agrees to extend to the Borrower a revolving line of credit (the “ Line of Credit ”) pursuant to which the Lender, will make advances (the “ Revolving Loan(s) ”) in the aggregate amount of up to TEN MILLION AND NO/100THS DOLLARS ($10,000,000.00) (the “ Line of Credit Commitment ”) upon the terms and conditions contained in this Agreement and related loan documents.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.        Documents; etc .

The Borrower has delivered, or will deliver, to the Lender before the initial Revolving Loan is made, the following documents (this Agreement together with each of the following defined documents and each other instrument, document, guaranty, mortgage, deed of trust, chattel mortgage, pledge, consent, assignment, contract, security agreement, lease, financing statement, patent, trademark or copyright registration, subordination agreement, trust account agreement, hedge agreement, or other agreement executed and delivered by Borrower with respect to this Agreement or to create or perfect any Lien in any collateral securing the payment of the Loans (collectively the “ Collateral ”) (in each case as originally executed and as amended, modified or supplemented from time to time) being sometimes hereinafter referred to collectively as the “ Loan Documents ” and individually as a “ Loan Document ”) and other items, all containing or to contain provisions acceptable to the Lender and its counsel:

(a)     this Agreement, duly executed and delivered by an officer of the Borrower;

(b)     the Revolving Credit Note, duly executed and delivered by an officer of the Borrower;

(c)     the Security Agreement, duly executed and delivered by an officer of the Borrower;

(d)    an Amended and Restated Pledge Agreement (the “Pledge Agreement”), in the form provided by the Lender, duly executed by Airco, amending and restating in its entirety that certain Pledge Agreement dated as of February 22, 2018, pursuant to which Airco pledges all of the outstanding membership interest of the Borrower to Lender as collateral for the Obligations;

(e)     a Subordination Agreement in the form provided by Lender, duly executed by Air T;

(f)     a certificate by an officer of the Borrower certifying the names of the officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party on behalf of the Borrower together with: (i) a sample of the true signatures of such officers; (ii) resolutions of the sole member of the Borrower authorizing the execution, delivery and performance of the Loan Documents to which the Borrower is a party; and (iii) copies of the Borrower’s Certificate of Formation, together with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of its organization as of a date acceptable to the Lender, and the limited liability company agreement of the Borrower together with all amendments thereto;

(g)     evidence of Good Standing for the Borrower of recent date issued by the Secretaries of State of (i) the State of Delaware; and (ii) the State of Arizona;

(h)     evidence of insurance required by any Loan Document;

(i)     a certificate by an officer of Air T certifying the names of the officers of Air T authorized to sign the Loan Documents to which Air T is a party on behalf of Air T together with: (i) a sample of the true signatures of such officers; (ii) resolutions of the board of directors of Air T authorizing the execution, delivery and performance of the Loan Documents to which Air T is a party; and (iii) copies of Air T’s Certificate of Incorporation, together with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of its organization as of a date acceptable to the Lender, and the bylaws of Air T together with all amendments thereto;

(j)     a certificate by an officer of Airco certifying the names of the officers of Airco authorized to sign the Loan Documents to which Airco is a party on behalf of Airco together with: (i) a sample of the true signatures of such officers; (ii) resolutions of the board of managers of Airco authorizing the execution, delivery and performance of the Loan Documents to which Airco is a party; and (iii) copies of Airco’s Articles of Organization, together with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of its organization as of a date acceptable to the Lender, and the operating agreement of Airco together with all amendments thereto;

(k)     payment, in immediately available funds of a non-refundable origination fee in the amount of $25,000, together with reimbursement for all expenses for which invoices have been presented (including the fees and expenses of Lender’s legal counsel), on or before the Closing Date; and

such other approvals, inspection reports, appraisals, certificates, opinions or documents as the Lender may reasonably request, including, without limitation, a Borrowing Base Certificate, together with a detailed inventory report as of a recent date, and the approval of Borrower’s initial participant, PSB. In addition, the Lender or its agent shall have completed its inspection of the business, operations and assets of the Borrower, and such survey shall provide the Lender with results and information which, in the Lender’s determination, are satisfactory to the Lender.

2.            Loans .

(a)      Line of Credit .

(i)      Revolving Loan s . The Lender has agreed, on the terms and conditions stated herein, to make Revolving Loans to the Borrower from time to time on any Business Day during the period commencing on the Closing Date and ending on the earlier of November 30, 2019 (the “ Stated Termination Date ”), or the date on which the Lender terminates the Line of Credit pursuant to Section 9 hereof (such earlier date being the “ Termination Date ”); for the purpose of acquiring used Airframes for disassembly and sale as parts; provided , however, that the Lender shall not be required to make any Revolving Loan if, either:

(A)     the requested Revolving Loan is in excess of the sum of 85% of: (a) the cost of the Airframe being purchased with proceeds of such Revolving Loan plus (b) the estimated cost of disassembly of such Airframe; plus (c) the cost of refurbishing the parts from such Airframe for resale; or

(B)     after giving effect to such Revolving Loan, the outstanding principal balance of the Revolving Credit Note would exceed the lesser of: (x) the Line of Credit Commitment, or (y) the Borrowing Base.

Within the limits set forth above, the Borrower may obtain Revolving Loans from the Lender and prepay Revolving Loans pursuant to this Section; provided, that, the aggregate amount of Revolving Loans used for the purpose of acquiring, disassembling and refurbishing the parts of, any single Airframe, shall not exceed $2,500,000. 

(ii)      Initial Revolving Loans ; Termination of Existing Loan Agreements . On the Closing Date:

(A)     the consolidated outstanding principal balances of the Existing MBT Loans will be deemed to be the initial Revolving Loan outstanding under the Line of Credit and the Lender shall make a separate Revolving Loan to refinance the Existing PSB Loan; and

(B)     any commitments on the part of MBT and PSB to extend credit to the Borrower under the Existing Loan Agreements shall terminate.

(iii)    Revolving Credit Note . The Revolving Loans shall be evidenced by, and be payable in accordance with the terms of, the Revolving Credit Note. The Lender shall maintain records of the amount of each Revolving Loan and of the amount of all payments on the Revolving Credit Note. The aggregate outstanding principal amount of all Revolving Loans set forth on the records of the Lender shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Revolving Credit Note.

(iv)     Interest on the Revolving Loan s . The Borrower agrees to pay interest on the outstanding principal amount of each Revolving Loan from the date of such Revolving Loan until such Revolving Loan is paid at the rates and at the times specified in the Revolving Credit Note.

(v)      Borrowing Procedure ; Conditions Precedent to each Revolving Loan .

(A)     Revolving Loan s . The Borrower shall give written notice on the form attached hereto as Exhibit A (a “ Revolving Loan Request ”) to the Lender of each requested Revolving Loan by not later than 11:00 a.m. (Minneapolis time) on the Business Day that is two days prior to the date on which such Revolving Loan is to be made. Each such Revolving Loan Request shall specify the amount of the requested Revolving Loan and be accompanied by each of the following items with regards to the Airframe (or Airframes) being financed with such Revolving Loan (each such purchase being, an “ Airframe Acquisition ”):

(I)         a true correct and complete copy of each fully-executed purchase agreement (each an “ Airframe Purchase Agreement ”) by and between Borrower and the respective seller with regards to the Airframe(s) that are being acquired by the Borrower with proceeds of such Revolving Loan, together with fully-executed copies of the related bill of sale, acknowledgment of delivery, certificate of technical acceptance and other documents related thereto (collectively, “ Airframe Purchase Documents ”;

(II)         a detailed listing of the Acquired Assets included in each such Airframe Acquisition;

(III)       a true, correct and complete copy of each fully-executed Aircraft Disassembly Agreement, by and between Jet Yard, LLC (“Jet Yard”), or any other mutually agreed upon third-party service provider, and Borrower (“ Disassembly Agreement ”), pursuant to which Jet Yard (or such alternative service provider) agrees to disassemble each such Airframe into parts and prepare the constituent parts for sale;

(IV)      a true, correct and complete copy of each fully-executed Consignment Agreement, by and between Borrower and Airco (the “ Consignment Agreement ”; and together with the related Disassembly Agreement and Airframe Purchase Agreements being collectively, the “ Airframe Transaction Agreements ”), pursuant to which Airco agrees to sell the disassembled Airframe parts on behalf of Borrower;

(V)        a statement summarizing the flow of funds required to consummate the Airframe Acquisition, acceptable to Lender, in its sole discretion;

(VI)      a fully-executed Collateral Assignment of Purchase Agreement document pursuant to which Borrower collaterally assigns its right, title and interest to each Airframe Purchase Agreement being financed with proceeds of such Revolving Loan and the other Airframe Transaction Documents to the Lender, in the form provided by the Lender, duly executed by Borrower;

(VII)     evidence satisfactory to the Lender that: (i) all conditions precedent to the consummation of the Airframe Acquisition other than the making of such Revolving Loan have been satisfied or waived, including, without limitation, evidence that all necessary regulatory approvals to the consummation of the Airframe Acquisition have been obtained;

(VIII)    confirmation that all of such Acquired Assets have been delivered in acceptable condition to Jet Yard’s facility in Marana, Arizona or any other mutually agreeable location where the owner of such facility has executed a Bailee Agreement in favor of the Lender;

(IX)       a final inspection report of such Acquired Assets, in form and substance acceptable to the Lender, confirming that all parts included in the descriptive materials previously provided by the Borrower to the Lender are actually present on such Airframe(s); and

(X)       evidence, acceptable to the Lender, that Airco has made, or is irrevocably committed to make, additional cash investments (which may be in the form of Subordinated Debt) in an amount equal to at least 15% of the sum of (a) the cost of the Airframe being purchased with proceeds of such Revolving Loan plus (b) the estimated cost of disassembly of such Airframe; plus (c) estimated repair costs;

(XI)       evidence acceptable to the Lender that contemporaneously with the Borrower’s receipt of the proceeds of the Revolving Loan, the Airframe Acquisition will be consummated in full in accordance with the terms of the Airframe Transaction Documents.

So long as all of the conditions precedent to such extension of credit set forth in this Section and Section 5 are satisfied as of the date of such request, the Lender shall make such Revolving Loan by transferring the amount thereof in immediately available funds for credit to an account (other than a payroll account) maintained by the Borrower with the Lender or by transmitting such amount directly to the seller of such Acquired Assets. Each request for a Revolving Loan shall be deemed a representation and warranty that all conditions precedent to such credit extension under Section 5 are satisfied as of the date of such request and as of the date of such extension.

(vi)     Prepayment .

(A)     Voluntary . The Borrower shall have the right, by giving written notice to the Lender by not later than 3:00 p.m. (Minneapolis time) on the Business Day of such payment, to voluntarily prepay the Revolving Loans in whole or in part at any time; provided , that, each such prepayment shall be accompanied by any prepayment premium set forth in the applicable Revolving Credit Note.

(B)      Mandatory . The Loan shall be subject to mandatory prepayment as follows:

(I)          Contemporaneously with the Borrower’s receipt of any Net Proceeds from the sale of any Acquired Asset, the Borrower shall make a principal repayment on the Revolving Credit Note in an amount equal to eighty percent (80%) of such Net Proceeds.

(II)         If, at any time, the outstanding principal balance of the Revolving Credit Note exceeds the lesser of (A) the Line of Credit Commitment, or (B) the Borrowing Base, then the Borrower shall immediately prepay the amount of such excess together with interest on the amount prepaid.

3.        Payments .

Any other provision of this Agreement to the contrary notwithstanding, the Borrower shall make all payments of interest on and principal of the Loans and all payments to the Lender with respect to payment of other fees, costs and expenses payable under any Loan Document in immediately available funds to the Lender at its address for notices hereunder without setoff or counterclaim. The Borrower authorizes the Lender to charge from time to time against the Borrower’s deposit account number                        * or any other depository account maintained by Borrower with the Lender any such payments when due and the Lender will use its reasonable efforts to notify the

* This bank account information has been omitted pursuant to the Securities Exchange Commission rules and federal securities laws because it is personally identifiable information.

Borrower of such charges. Each payment received by the Lender may be applied to the Borrower’s obligations to the Lender under this Agreement or any other Loan Document in such order of application as the Lender, in its sole and absolute discretion, may elect.

4.        Set-off, Etc.

Upon the occurrence and during the continuance of an Event of Default, the Lender and each of its affiliates may offset any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies of the Borrower then or thereafter with the Lender or such affiliate, or any obligations of the Lender or such affiliate to the Borrower, against the obligations of the Borrower arising under this Agreement or any other Loan Document. The Borrower hereby grants to the Lender and each of its affiliates a Lien in all such balances, credits, deposits, accounts or monies.

5.        Conditions Precedent to All Credit Extensions .

The obligation of the Lender to extend any credit to the Borrower shall be subject to the satisfaction of each of the following conditions, unless waived in writing by the Lender:

(a)     The representations and warranties set forth in Section 6 shall be true and correct on the date of the requested credit extension and after giving effect thereto except to the extent that such representations and warranties expressly relate to an earlier date; and

(b)     No Event of Default or event which, with notice and/or lapse of time, would constitute an Event of Default (such event being a “ Default ”) shall have occurred and be continuing on the date of the requested credit extension or after giving effect thereto.

6.        Representations and Warranties .

To induce the Lender to extend credit hereunder, the Borrower represents and warrants to the Lender that:

(a)     The Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and is duly qualified as a foreign limited liability company or other entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to qualify in such jurisdiction could not reasonably be expected to have a material adverse effect on Borrower’s financial condition, business, properties or assets;

(b)     the Borrower has full power and authority to enter into and to perform its obligations under the Loan Documents to which it is a party;

(c)    the Loan Documents constitute the legal, valid, and binding obligations of the Loan Parties and are enforceable against the Borrower in accordance with their respective terms subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability of rights of creditors generally and by general equitable principles which may limit the right to obtain equitable remedies;

(d)    the Borrower’s execution, delivery and performance of the Loan Documents to which the Borrower is a party have been duly authorized by all necessary corporate or company action, do not require the consent or approval of any Person which has not been obtained, and do not conflict with any agreement binding upon the Borrower or any of Borrower’s property;

(e)    there is no litigation, bankruptcy proceeding, arbitration or governmental proceeding pending against the Borrower or affecting the business, property or operations of the Borrower which, if determined adversely to the Borrower, could reasonably be expected to constitute a Material Adverse Occurrence;

(f)     neither the Borrower nor any member of a group which is under common control with the Borrower (within the meaning of Section 414 of the IRC or Section 4001(a)(14) or 4001(b) of ERISA) (the Borrower’s “ ERISA Affiliates ”) has maintained, established, sponsored or contributed to any employee benefit plan which is a defined benefit plan (“ Plan ”) covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder (“ ERISA ”);

(g)     the proceeds of the Revolving Loans will be used finance a portion of the cost of acquiring of decommissioned commercial aircraft airframes by the Borrower that will then be disassembled and sold for parts; and (ii); no part of the proceeds of the Revolving Loans will be used for any purpose which violates, or which is inconsistent with, any regulations promulgated by the Board of Governors of the Federal Reserve System;

(h)     (i) the Borrower is in compliance in all material respects with all federal, state and local laws, rules and regulations applicable to it including, without limitation, all pollution control and environmental regulations in each jurisdiction where the Borrower is doing business; and (ii) the Borrower does not have any material liability for the release or threatened release of any toxic or hazardous waste, substance or constituent into the environment;

(i)     the Borrower’s internally prepared financial statements for the fiscal quarter that ended on December 31, 2018, copies of which have been furnished to the Lender, have been prepared in accordance with GAAP (except for the absence of footnotes and subject to customary year-end adjustments) and present fairly the financial condition of the Borrower as of such date and the result of its operation for the periods then ended;

(j)     since the date on which the financial statements described in Section 6(i) were prepared, there has not been any material adverse change in the business, operations, prospects, assets, results of operations or condition (financial or other) of the Borrower that have not been otherwise reported to the Lender via applicable regulatory filings, copies of which have been provided to Lender;

(k)    the Borrower has filed all Federal and State income tax and other tax returns which are required to be filed, and has paid all taxes as shown on said returns and all assessments received by the Borrower to the extent that such taxes have become due, except to the extent that the Borrower is disputing such taxes in good faith and has established adequate reserves on its books;

(l)     the Borrower possesses adequate licenses, permits, franchises, patents, copyrights, trademarks and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted;

(m)   the Borrower is not in default of a material provision under any material agreement, instrument, decree or order to which it is a party or by which it or its property is bound or affected and assuming that this Agreement had been previously executed and delivered no Default or Event of Default has occurred and is continuing hereunder;

(n)    the Borrower has good title to all of its properties and assets, including, without limitation, the Collateral, free and clear of all mortgages, security interests, Liens and encumbrances, except as permitted by Section 8(a);

(o)    the Borrower is a wholly-owned Subsidiary of Airco, which, in turn, is a wholly-owned Subsidiary of Stratus Aero Partners, LLC (“ Stratus ”) which is a wholly-owned subsidiary of Air T. For the avoidance of doubt, neither Stratus nor Air T are parties to this agreement, nor guarantors of the obligations created hereunder;

(p)    the Borrower is Solvent after giving effect to the making of the initial Revolving Loans hereunder and the granting of Liens pursuant to the Loan Documents;

(q)    (i) the Borrower is not a party to any labor dispute; and (ii) there are no strikes or walkouts relating to any labor contracts to which the Borrower is subject;

(r)     the Borrower is not an “investment company” and is not “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

(s)     the Borrower is not a partner (limited or general) or joint venturer in any partnerships or joint ventures;

(t)     the Borrower is not a “holding company” or a “subsidiary company” of a holding company or an “affiliate” of a holding company or of a subsidiary company of a holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended;

(u)     the Borrower is not subject to or in violation of any law or regulation, or listed on any list of any government agency including, without limitation, the U.S. Office of Foreign Asset Control list, Executive Order 13224 or the USA PATRIOT Act (Title III of Pub. L. 107-56, signed into law October 26, 2001, as amended) (the “ Patriot Act ”) that prohibits or limits the conduct of business with or receiving of funds, goods or services to or for the benefit of certain Persons specified therein or that prohibits or limits Lender from making any Revolving Loan or other extension of credit to Borrower or from otherwise conducting business with Borrower;

(v)     neither the execution of this Agreement nor the use of the proceeds of any Loan violates the Trading with the Enemy Act of 1917, as amended, nor any of the foreign assets control regulations promulgated thereunder or under the International Emergency Economic Powers Act or the U.N. Participation Act of 1945; and (ii) neither the Borrower nor any Person who owns a controlling interest in or otherwise controls the Borrower is listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control, the Department of the Treasury or included in Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001; and

(w)    the Borrower does not have any Subsidiaries.

All representations and warranties contained in this Section 6 shall survive the delivery of the Loan Documents, and the making of the Loans, and no investigation at any time made by or on behalf of Lender shall diminish its rights to rely thereon.

7.        Affirmative Covenants .

The Borrower covenants and agrees with the Lender that, for so long as any Loan remains unpaid or the Line of Credit is available to the Borrower, the Borrower shall:

(a)     furnish to the Lender:

(i)     as soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual audit report of Air T and its Subsidiaries for such year including a copy of the audited consolidated balance sheet of Air T and its Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, together with an opinion as to such audit report of Deloitte LLP or other independent certified public accountants of nationally recognized standing which does not contain a “going concern” or similar qualification or exception, or qualification arising out of the scope of the audit, together with related consolidating financial statements and a certificate of such accounting firm to the Lender stating that in the course of the regular audit of the business of Air T and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards; provided that, in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrowers shall also provide a reconciliation of such financial statements to GAAP;

(ii)     as soon as available and in any event within thirty (30) days after the end of each of fiscal quarter of the Borrower’s fiscal year, a copy of the Borrower’s internally prepared financial statements consisting of a balance sheet as of the close of such fiscal quarter and related income statement and cash flow statement for such fiscal quarter and from the beginning of such fiscal year to the end of such fiscal quarter;

(iii)    as soon as available and in any event within fifteen (15) days after the end of each fiscal month of the Borrower’s fiscal year, a borrowing base certificate, in the form of Exhibit B attached hereto (the “ Borrowing Base Certificate ”), showing the relevant information for the Borrower as of the end of business on the last business day of the then most recently-ended month of the Borrower’s fiscal year; each Borrowing Base Certificate shall be accompanied by a detailed inventory report by part serial number, an accounts receivable aging, a purchase order report, and other supporting reports such as may be required by the Lender and the Borrowing Base Certificate and such supporting reports shall be in a form acceptable to the Lender and certified as accurate by the Borrower’s chief financial officer, treasurer or controller;

(iv)    as soon as available and in any event within fifteen (15) days after the end of each fiscal month of the Borrower’s fiscal year, a report, in form and detail acceptable to the Lender in its sole discretion, showing sales made (by part serial number) during such month and a timeline of anticipated sales of the remaining Acquired Assets;

(v)     (ii)     as soon as available and in any event within thirty (30) days after the end of each of fiscal quarter of Airco’s fiscal year, a copy of Airco’s internally prepared financial statements consisting of a balance sheet as of the close of such fiscal quarter and related income statement and cash flow statement for such fiscal quarter and from the beginning of such fiscal year to the end of such fiscal quarter;

(vi)    by not later than five (5) business days after becoming aware of any Default or Event of Default, a notice describing the nature thereof and what action the Borrower proposes to take with respect thereto;

(vii)   by not later than five (5) business days after becoming aware of the institution of any litigation, arbitration or governmental proceeding against Borrower which, if determined adversely to Borrower, could reasonably be expected to be a Material Adverse Occurrence, or the rendering of a judgment or decision in such litigation or proceeding which could reasonably be expected to constitute a Material Adverse Occurrence, and the steps being taken by the Borrower with respect thereto; and

(viii)  such other financial or other information or certification as the Lender may reasonably request;

(b)     maintain and preserve its existence as a limited liability company organized and in good standing under the laws of the state of its organization and in each other jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary and where the failure to qualify could constitute a Material Adverse Occurrence;

(c)     maintain insurance of such types and in such amounts as are maintained by companies of similar size engaged in the same or similar businesses and as may be required by any Loan Document; provided , that , each policy insuring any Collateral securing the Loans shall name the Lender as the lender loss payee and each policy of the liability insurance shall name the Lender as an additional insured;

(d)    file all federal and state income tax and other tax returns (including, without limitation, withholding tax returns) which are required and make payments as required of such taxes; provided, however, that: (i) the Borrower shall not be required to pay any such tax so long as the validity thereof is being contested in good faith by appropriate proceedings, the Borrower’s title to its property is not materially adversely affected, its use of such property in the ordinary course of its business is not materially interfered with and adequate reserves with respect thereto have been set aside on the Borrower’s books in accordance with GAAP; and (ii) in all events, the Borrower shall pay, or cause to be paid, all such taxes forthwith upon the commencement of foreclosure of any Lien which may have attached as security therefor;

(e)    reimburse the Lender for reasonable expenses, fees and disbursements (including, without limitation, reasonable attorneys’ fees and legal expenses), incurred in connection with the preparation or administration of this Agreement or any other Loan Document or the Lender’s enforcement of the obligations of the Borrower under any Loan Document, whether or not suit is commenced, which attorneys’ fees and legal expenses shall include, but not be limited to, any attorneys’ fees and legal expenses incurred in connection with any appeal of a lower court’s judgment or order;

(f)     permit the Lender and its representatives at reasonable times and intervals and upon reasonable notice to visit the Borrower’s offices and the offices and locations of each other Person storing any Collateral and inspect their respective books and records including, without limitation, permitting the Lender to examine any Collateral securing the Loans and reimburse the Lender for all examination fees and expenses incurred in connection with such examinations at its then current rate for such services and for its out-of-pocket expenses incurred in connection therewith;

(g)     maintain in full force and effect all of the Borrower’s material rights, licenses, certifications, franchises and comply with all applicable laws and regulations necessary to enable it to conduct its business;

(h)   promptly, upon request by the Lender: (i) correct any defect or error that may be discovered in any Loan Document or in the execution, acknowledgment or recordation thereof; and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as the Lender may reasonably require from time to time in order: (A) to carry out more effectively the purposes of the Loan Documents; (B) to perfect and maintain the validity, effectiveness and priority of any Liens intended to be created by the Loan Documents; and (C) to better assure, convey, grant, assign, transfer, preserve, protect and confirm unto the Lender the rights granted now or hereafter intended to be granted to the Lender under any Loan Document or under any other instrument executed in connection with any Loan Document or that the Borrower may be or become bound to convey, mortgage or assign to the Lender in order to carry out the intention or facilitate the performance of the provisions of any Loan Document;

(i)     Borrower shall pay in a timely manner all applicable duties, freight, charges and like fees and charges of shippers, freight forwarders, carriers and warehousemen;

(j)     Deliver a copy of the FAA decommissioning certificate for each Airframe to the Lender by not later than two months after the date such Airframe is acquired by the Borrower; and

(k)     maintain the Borrower’s primary depository accounts with the Lender.

8.        Negative Covenants .

The Borrower hereby agrees that, for so long as any Loan remains unpaid or the Line of Credit is available to the Borrower, the Borrower shall not:

(a)     create, incur or suffer to exist any Liens encumbering any of its assets, including without limitation any real or personal property owned by the Borrower, except: (i) Liens in favor of the Lender; or (ii) Permitted Liens;

(b)    create, incur, assume or suffer to exist any Indebtedness except: (i) the Indebtedness under this Agreement or any other Loan Document; (ii) current liabilities (other than borrowed money) incurred in the ordinary course of business; (iii) Indebtedness in respect of hedge agreements, including Hedge Agreements, entered into in the ordinary course of business to hedge or mitigate risks to which Borrower is exposed in the conduct of its business or the management of its liabilities and not for speculative purposes; (iv) Indebtedness in respect of taxes, assessments or government charges to the extent that payment thereof shall not at the time be required to be made under this Agreement; (v) Indebtedness owing to the Lender; or (vi) Subordinated Debt;

(c)     lease, sell or otherwise convey all or any substantial portion of its property and business to any other entity or entities, whether in one transaction or a series of related transactions, except for sales of Inventory in the ordinary course of Borrower’s business;

(d)    consolidate with or merge into or with any other entity or entities or liquidate, wind up or dissolve itself or suffer any liquidation or dissolution;

(e)     declare or pay any cash dividends, purchase, redeem, retire or otherwise acquire for value any of the Borrower’s membership interest (or any warrant or option to purchase any such membership interest) now or hereafter outstanding, or return any capital to its members;

(f)     acquire, make or hold any Investment in any other Person except:

(i)      loans or advances to officers and employees of the Borrower to finance travel, entertainment and relocation expenses and other ordinary business purposes in the ordinary course of business as presently conducted; provided, however, that the aggregate outstanding principal amount of all loans and advances permitted pursuant to this clause shall not exceed $50,000 at any one time;

(ii)     Extensions of credit in the nature of accounts or notes receivable arising from the sale of goods and services in the ordinary course of business;

(iii)    Shares of stock, obligations or other securities received in settlement of claims arising in the ordinary course of business; and

(iv)    investments in Hedge Agreements and other hedging agreements permitted by Section 8(b)(iii);

(g)     (i) assume, guarantee, endorse or otherwise become liable upon the obligation of any Person, firm or corporation except pursuant to the Loan Documents or by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, nor (ii) sell any notes or accounts receivable with or without recourse;

(h)     engage in any business other than the business engaged in by the Borrower on the date of this Agreement, or make any material change in the nature of the business of the Borrower as carried on the date of this Agreement;

(i)     maintain, establish, sponsor or contribute to any Plan which is a defined benefit plan and shall not permit any of its ERISA Affiliates to do so;

(j)     either: (i) form or acquire any corporation or company which would thereby become a Subsidiary; or (ii) form or enter into any partnership as a limited or general partner or form or enter into any joint venture;

(k)    materially change its selling terms of payment on accounts receivable as in effect on the Closing Date;

(l)     either: (i) permit the direct or indirect transfer, distribution or payment of any of its funds, assets or property to any Affiliate, except that the Borrower may pay: (A) bona fide employee compensation (including benefits) to Affiliates for services actually rendered to the Borrower; (B) expenses incurred by an employee in the ordinary course of business; (C) expenses or rents for services or property or the use thereof allocated to the Borrower; provided , however , that all such payments pursuant to subsections (i)(A), (B) and (C) shall not exceed the amount which would be payable in a comparable arm’s length transaction with a third party who is not an Affiliate; (ii) except as otherwise permitted by Sections 8(f)(i) of this Agreement, lend or advance money, credit or property to any Affiliate; (iii) invest in (by capital contribution or otherwise) or purchase or repurchase any stock or Indebtedness, or any assets or properties, of any Affiliate; or (iv) guarantee, assume, endorse or otherwise become responsible for, or enter into any agreement or instrument for the purpose of discharging or assuming (directly or indirectly, through the purchase of goods, supplies or services or otherwise) the Indebtedness, performance, capability, obligations, dividends or agreement for the furnishing of funds of any Affiliate or any officer, director or employee;

(m)    make any loan to, or otherwise extend any credit to, Borrower’s officers, directors, shareholders, partners, members, managers or Affiliates or to any member of any such Person’s immediate family, except for loans expressly permitted by Section 8(f)(i);

(n)     materially change its selling terms of payment on Accounts as in effect on the date of this Agreement or provide dating terms except on a basis consistent with past business practices of the Borrower;

(o)    except as permitted by the Subordination Agreement pertaining to an item of Subordinated Debt: (i) make any payment of, or purchase, redeem, or acquire, any Subordinated Debt; (ii) give security for all or any part of any Subordinated Debt; (iii) take or omit to take any action whereby the subordination of any Subordinated Debt or any part thereof to the Obligations might be terminated, impaired or adversely affected; (iv) settle, compromise, discharge or otherwise reduce the outstanding principal amount of any Subordinated Debt or exercise any right to convert the Subordinated Debt to equity; or (v) omit to give the Lender prompt written notice of any default or event which, with the giving of notice or lapse of time, would constitute a default under any other agreement or instrument relating to any Subordinated Creditor;

(p)     use Loan proceeds for any purpose other than to finance a portion of the purchase price of Acquired Assets or for the refurbishment of Acquired Assets in preparation for the sale thereof; or

(q)     change the Borrower’s fiscal year end to a date other than March 31.

9.        Event s of Default .

The occurrence of any one or more of the following shall constitute an Event of Default (“ Event of Default ”) hereunder:

(a)     the Borrower shall default (i) in the due and punctual payment of any installment of interest or principal on any Revolving Loan on the date when due, or (ii) in the due and punctual payment of any other amount which is due and payable to the Lender under any Loan Document within five days of the date when due;

(b)     the Borrower shall default in the due performance or observance of any covenant set forth in Sections 7(b), 7(c), 7(i), 7(h) or in Section 8;

(c)     Borrower shall default (other than those defaults covered by other subsections of this Section 9) in the due performance or observance of any term, covenant, agreement or warranty contained in any Loan Document on its part to be performed, and such default shall continue for a period of thirty (30) days after the earliest of: (i) the date the Borrower gives notice of such default to the Lender; (ii) the date the Borrower should have given notice of such default to the Lender pursuant to Section 7(a)(v); or (iii) the date the Lender gives notice of such default to the Borrower;

(d)    Borrower shall default and fail to cure such default in the time provided therein, under the terms of any other agreement, indenture, deed of trust, mortgage, promissory note or security agreement governing the borrowing of sums money in excess of $10,000; and: (i) the maturity of any amount owed under such document or instrument is accelerated; or (ii) such default shall continue unremedied or unwaived for a period of time to permit such acceleration;

(e)    Borrower shall become insolvent or generally fail to pay, or admit in writing Borrower’s inability to pay its debts as they become due; or Borrower shall apply for, consent to, or acquiesce in, the appointment of a trustee, receiver or other custodian for Borrower or for Borrower’s property, or make a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian shall be appointed for Borrower or for a substantial part of Borrower’s property and not be discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding shall be commenced by or against Borrower and if commenced against Borrower, be consented to or acquiesced in by Borrower or remain for sixty (60) days undismissed; or Borrower shall take any action to authorize any of the foregoing;

(f)     any judgments, writs, warrants of attachment, executions or similar process (not covered by insurance) shall be issued against Borrower or any of Borrower’s assets where the aggregate amount of such judgments, writs, warrants of attachment, executions or similar process exceed $50,000.00 and are not released, vacated, suspended, stayed, abated or fully bonded prior to any sale and in any event within thirty (30) days after its issue or levy;

(g)     Air T shall cease to own, directly or indirectly through its ownership of Airco, all of the Borrower’s issued and outstanding membership interest or shall cease to have the power to elect a majority of the Borrower’s directors or shall cease to direct the Borrower’s management policies;

(h)     the occurrence of any default by Borrower under any Consignment Agreement or Disassembly Agreement or the termination of any such agreement;

(i)     the Lender, in its sole discretion, shall determine in good faith that there has been a Material Adverse Occurrence;

(j)     any representation or warranty set forth in this Agreement or any other Loan Document shall be untrue in any material respect on the date as of which the facts set forth are stated or certified;

(k)     there is instituted against Borrower or any executive officer of Borrower any criminal proceeding for which forfeiture of any material asset is a potential penalty, or the Borrower is enjoined, restrained or in any way prevented by order of any governmental authority from conducting any material part of its business affairs and such order is not completely stayed, to the satisfaction of the Lender, or dissolved within two business days from the Closing Date of such order;

(l)      the occurrence of any Event of Default under the Air T Credit Agreement; or

(m)    the Borrower shall seek to revoke, repudiate or disavow the enforceability of any Loan Document.

Upon: (1) the occurrence of any Event of Default described in Section 9(e), the full unpaid principal amount of the Notes and all other obligations of the Borrower to the Lender shall automatically be due and payable without any declaration, notice, presentment, protest or demand of any kind (all of which are hereby waived); or (2) the occurrence of any other Event of Default, the Lender, upon written notice, may terminate the Line of Credit and may declare the outstanding principal amount of the Notes and all other obligations of the Borrower to the Lender to be due and payable without other notice, presentment, protest or demand of any kind, whereupon the full unpaid amount of the Notes and any and all other obligations, which shall be so declared due and payable, shall be and become immediately due and payable. In addition, the Lender may exercise any right or remedy available to it pursuant to any Loan Document, at law or in equity.

10.      Accounting Terms and Calculations .

Except as may be expressly provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP consistently applied for the Borrower as used in the preparation of the Borrower’s financial statements described in Section 7(a)(i).

11.     Definitions.

For purposes of this Agreement, the following terms shall have the following meanings:

“ Acquired Assets ”: All of the parts, rights and documents included in an Airframe Acquisition.

“ Acquisition ”: Any transaction or series of transactions by which the Borrower acquires, either directly or through a Subsidiary or otherwise, (a) any or all of the stock or other securities of any class of any Person if, after giving effect to such transaction, such Person would be an Affiliate of the Borrower; or (b) a substantial portion of the assets or a division, or line of business of any Person.

“ Affiliate ”: Shall mean, with respect to the Borrower, any Person which directly or indirectly controls, is controlled by, or is under common control with, the Borrower. One Person shall be deemed to control another Person if the controlling Person owns directly or indirectly 10% or more of any class of voting stock of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“ Airco ”: Airco, LLC, a North Carolina corporation.

“ Airco Bailee Agreement ”: That certain Bailee Agreement dated as of October 27, 2017, executed by Airco, the Borrower and the Lender, with regards to Collateral in the possession of Airco, as originally executed and as it may be amended, modified, supplemented, restated or replaced from time to time.

“ Airframe ”: The mechanical structure of an aircraft, including, without limitation, its fuselage, wings and undercarriage, but excluding its jet engines.

“ Airframe Acquisition ”: Shall have the meaning given such term in Section 2(a)(v)(A) of this Agreement.

Airframe Purchase Agreement ”: Shall have the meaning given such term in Section 2(a)(v)(A) of this Agreement.

“ Airframe Transaction Documents ”: Shall have the meaning given such term in Section 2(a)(v)(A)(IV) of this Agreement.

“ Air T ”: Air T, Inc., a Delaware corporation.

“ Air T Credit Agreement ”: Shall mean that certain Amended and Restated Credit Agreement dated on or about the date hereof by and between Air T and the Lender, as originally executed and as it may be amended, modified, supplemented, restated or replaced from time to time.

“ Appraisal ”: As defined in Section 12 of this Agreement.

“ Audit ”: As defined in Section 12 of this Agreement.

“ Bailee Agreement(s) ”: The Jet Yard Bailee Agreement, the Airco Bailee Agreement and each other bailee agreement executed by the owner of a facility where Collateral is located from time to time.

“ Banking Services ”: Each and any of the following bank services provided to Borrower by Lender or any of its affiliates: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“ Banking Services Liabilities ”: Any and all obligations of the Borrower, whether absolute or contingent and howsoever and whenever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“ Borrowing Base . At any date of determination, the sum of: (a) 60% of Eligible Inventory; plus (b) 70% of Eligible Accounts Receivable; provided , however, that the Lender reserves the right, in its discretion, to and to establish reserves as it deems appropriate and to adjust such borrowing base percentages based on its periodic evaluation of the Collateral. The amount of the Borrowing Base shall be determined periodically by the Lender.

“ Borrowing Base Certificate ”: As defined in Section 7(a)(iii) of this Agreement.

“ Cape Town Convention ”: The English language text of the Convention on International Interests in Mobile Equipment, adopted on November 16, 2001 at a diplomatic conference held in Cape Town, South Africa, as implemented and modified by the Protocol to the Convention on Matters Specific to Aircraft Equipment as adopted by the United States of America, and as the same may be further amended or modified from time to time.

“ Capitalized Lease ”: Any lease which, in accordance with GAAP, is capitalized on the books of the lessee.

“Closing Date ”: The date of this Agreement or, if conditions precedent set forth in Section 5 shall not have been satisfied or waived in writing by the Lender on such date, then such later date specified by the Borrower on or after the date on which all of such conditions precedent shall have been satisfied or waived in writing by the Lender.

“ Code ”: As defined in Section 8(e) of this Agreement.

“ Collateral ”: As defined in Section 1 of this Agreement.

“ Consigned Inventory Eligibility Requirements ”: As set forth on Exhibit C to this Agreement.

“ Consignment Agreement ”: As defined in Section 1 of this Agreement.

“ Contrail ”: Contrail Aviation Support, LLC, a Wisconsin limited liability company.

“ Contingent Obligation ”: With respect to any Person at the time of any determination, without duplication, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or otherwise, or entered into for the purpose of assuring in any manner the owner of such Indebtedness of the payment of such Indebtedness or to protect the owner against loss in respect thereof.

“ Default ”: As defined in Section 5(b) of this Agreement.

“ Disassembly Agreement ”: As defined in Section 2(a)(v)(A)(III) of this Agreement.

“ Eligible Accounts ”: At any date of determination, the United States dollar value (net of deposits, finance charges and/or service charges) of only such accounts of the Borrower arising from the rendering of sale of goods in the ordinary course of Borrower’s business in which the Lender holds a perfected first priority Lien and as to which the Lender, in its reasonable business judgment, shall from time to time determine to be collectible in a timely manner in the ordinary course of business without dispute or set-off. Without limiting the Lender’s right, in its reasonable business judgment, to consider any account not to be an Eligible Account, and by way of example only of types of accounts that the Lender will consider not to be Eligible Accounts, the Lender, notwithstanding any earlier classification of eligibility, may consider any account not to be an Eligible Account if: (a) any warranty is breached as to the account or the account debtor disputes liability or makes any claim with respect to the account; (b) (i) the account is not paid by the account debtor within 90 days after its invoice date; or (ii) the account is owed by any account debtor who has not paid 10% or more of such account debtor’s accounts within the time period specified in subsection (b)(i) above; (c) a petition in bankruptcy or other application for relief under any insolvency law is filed with respect to the account debtor owing the account, or the account debtor owing the account assigns for the benefit of creditors, becomes insolvent, fails, suspends, or goes out of business, or the Lender, in its reasonable business judgment, shall become dissatisfied with the creditworthiness of an account debtor owing an account; (d) the account arises from a sale to an account debtor outside the United States, unless the sale is on letter of credit, acceptance or other terms acceptable to the Lender; (e) the account debtor is an employee, or Affiliate of the Borrower, or an entity which has common officers, managers or directors with the Borrower; (f) the account debtor is the United States of America or any agency or department thereof and the account is subject to the Assignment of Claims Act; (g) the account is a bonded account; (h) the account balance includes the amount of any counterclaims or offsets which have been or may be asserted against the Borrower by the account debtor (including offsets for any "contra accounts" owed by the Borrower to the account debtor for goods purchased by the Borrower or for services performed for the Borrower); (i) the account debtor is a state, county, city, town or municipality; or (k) any account for a customer deposit.

“ Eligible Inventory ”: Shall mean the aggregate United States dollar Fair Market Value of the Borrower’s aircraft parts Inventory, in which only the Lender holds a perfected first priority security interest and as to which the Lender, in its reasonable business judgment, shall elect from time to time to constitute Eligible Inventory. Without limiting the Lender’s right, in its reasonable business judgment, to consider any inventory not to be Eligible Inventory, and by way of example only of types of inventory that the Lender will consider not to be Eligible Inventory, the Lender, notwithstanding any earlier classification of eligibility, may consider any inventory not to be Eligible Inventory if: (a) such inventory is not located at (or in transit to or from) a facility owned and operated by either Jet Yard or Airco that is located in the domestic United States; and (b) in the case of Inventory that is consigned by Borrower to a consignee, the Borrower has not complied with any of the Consigned Inventory Eligibility Requirements. The value of Eligible Inventory shall be the lower of the cost or market value of the Eligible Inventory computed on a first-in, first-out basis

“ Event of Default ”: As defined in the introductory paragraph of Section 9 of this Agreement.

“ Existing Loan (s) ”: As defined in the Recitals to this Agreement.

“ Existing Note(s) ”: As defined in the Recitals to this Agreement.

“ Fair Market Value ”: The price a willing non-affiliated buyer would pay a willing seller for an item of Inventory (neither being under any compulsion to buy or sell), whether or not such item of Inventory has been physically removed from the Airframe. The Fair Market Value of an item of Inventory included in Eligible Inventory shall be determined based on the most recent invoice price of a similar item of Inventory actually sold by the Borrower or by an Affiliate of Borrower to a non-affiliated buyer, or other supporting documentation provided by Borrower to Lender that is acceptable to Lender in its sole discretion; provided, however, that the Lender reserves the right to assign a lower Fair Market Value for any such item based on the most recent Appraisal of the Inventory commissioned by Lender. At Lender’s request, Borrower shall promptly provide Lender and/or its appraiser with copies of invoices and other relevant materials to support its determination of Fair Market Value of any item(s) Inventory.

“ Hedge Agreement ”: Any agreement between Borrower and Lender or any affiliate of Lender (a “Hedge Provider”) now existing or hereafter entered into, which provides for and interest rate swap, cap, floor, collar, or any similar transaction or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Borrower’s exposure to fluctuations in interest rates.

“ Hedge Obligations ”: The liabilities, Indebtedness, and obligations of the Borrower, if any, to the Hedge Provider under any Hedge Agreement.

“ Indebtedness ”: Without duplication, all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities, but in any event including the following (whether or not they should be classified as liabilities upon such balance sheet): (a) obligations secured by any mortgage, pledge, security interest, or other Lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the obligation secured thereby shall have been assumed and whether or not the obligation secured is the obligation of the owner or another party, in an amount equal to the lesser of (i) such liabilities and (ii) the greater of the purchase price or the fair market value of such property in such obligations have not been assumed; (b) any obligation on account of deposits or advances; (c) any obligation for the deferred purchase price of any property or services, except Trade Accounts Payable; (d) any obligation as lessee under any Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations in respect to Indebtedness of others; (f) undertakings or agreements to reimburse or indemnify issuers of letters of credit or in connection with bankers’ acceptances; and (g) all Hedge Obligations. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture as to which such Person is or may become personally liable.

“ Inventory ”: Shall have the meaning given such term in the Security Agreement.

“ International Registry ”: Shall mean the International Registry of Mobile Assets located in Dublin, Ireland and established pursuant to the Cape Town Convention, along with any successor registry.

“ Investment ”: The acquisition, purchase, making or holding of any stock or other security, any loan, advance, contribution to capital, extension of credit (except for trade and customer accounts receivable for inventory sold or services rendered in the ordinary course of business and payable in accordance with customary trade terms), any acquisitions of real or personal property (other than real and personal property acquired in the ordinary course of business) and any purchase or commitment or option to purchase stock or other debt or equity securities of, or any interest in, another Person or any integral part of any business or the assets comprising such business or part thereof.

“ Jet Yard ”: Jet Yard, LLC, an Arizona limited liability company.

“ Jet Yard Bailee Agreement ”: That certain Bailee Agreement dated as of October 27, 2017, executed by Jet Yard, the Borrower and the Lender, with regards to Collateral in the possession of Jet Yard, as originally executed and as it may be amended, modified, supplemented, restated or replaced from time to time.

“ Liabilities ”: At any date of determination, the aggregate amount of liabilities appearing on the Borrower’s consolidated balance sheet at such date prepared in accordance with GAAP.

“ Lien(s) ”: Any security interest, mortgage, pledge, lien, hypothecation, judgment lien or similar legal process, charge, encumbrance, title retention agreement or analogous instrument or device (including, without limitation, the interest of the lessors under Capitalized Leases and the interest of a vendor under any conditional sale or other title retention agreement), including without limitation, any registrations on the International Registry without regard to whether such registrations are valid.

“ Line of Credit ”: As defined in the Recitals to this Agreement.

“ Line of Credit Commitment ”: As defined in the Recitals to this Agreement.

“ Loan(s) ”: The Revolving Loans, together with each other loan now or hereafter provided by Lender to Borrower.

“ Loan Document(s) ”: As defined in Section 1 of this Agreement.

Material Adverse Occurrence ”: Any occurrence of whatsoever nature (including, without limitation, any adverse determination in any litigation, arbitration, or governmental investigation or proceeding) which could reasonably be expected to materially and adversely affect: (a) the financial condition or operations of Borrower; (b) the ability of Borrower to perform its obligations under the Loan Documents; (c) the validity or enforceability of the material obligations of Borrower under the Loan Documents; (d) the rights and remedies of the Lender against Borrower; or (e) the timely payment of the principal of and interest on the Loan or other amounts payable by the Borrower hereunder or under any other Loan Document.

“ Net Proceeds ”: With respect to any sale of Inventory, the cash proceeds received by the Borrower from such transaction after deducting the twenty percent (20%) commission payable to Airco pursuant to the Consignment Agreement.

“ Note : The Revolving Credit Note.

“ Obligations ”: All Loans, advances, debts, liabilities, obligations, Banking Services Liabilities, covenants and duties, owing by Borrower to the Lender of any kind or nature, present or future, which arise under this Agreement, any other Loan Document or any permitted Hedge Agreement or by operation of law, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guarantying or confirming of a letter of credit, guaranty, indemnification or in any other manner, whether joint, several, or joint and several, direct or indirect (including those acquired by assignment or purchases), absolute or contingent, due or to become due, and however acquired. The term includes, without limitation, all principal, interest, fees, charges, expenses, attorneys’ fees, and any other sum chargeable to Borrower under this Agreement or any other Loan Document or any permitted Hedge Agreement.

“ Patriot Act ”: As defined in Section 6(t) of this Agreement.

“ Permitted Liens ”:

(a)     Deposits or pledges to secure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, in the ordinary course of business of the Borrower; and

(b)     Liens for taxes, fees, assessments and governmental charges not delinquent or to the extent that payments therefor shall not at the time be required to be made in accordance with the provisions of Section 7(d) ;

“ Person ”: Any natural person, corporation, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision, or any other entity, whether acting in an individual, fiduciary or other capacity.

“ Pledge Agreement ”: As defined in Section 1(d) of this Agreement.

“ PSB ”: As defined in the Recitals to this Agreement.

“ Regulatory Change ”: As to the Lender, any change (including any scheduled change) applicable to a class of banks which includes the Lender in any:

(a)     federal or state law or foreign law; or

(b)     regulation, interpretation, directive or request (whether or not having the force of law) of any court or governmental authority charged with the interpretation or administration of any law referred to in clause (a) of this definition or of any fiscal, monetary or other authority having jurisdiction over such class of banks;

or the adoption after the date hereof of any new or final law, regulation, interpretation, directive or request applicable to a class of banks which includes the Lender.

“ Revolving Loan(s) ”: Shall have the meaning given such term in the Recitals to this Agreement.

“ Revolving Loan Request ”: Shall have the meaning given such term in Section 2(a)(v)(A) of this Agreement.

“ Revolving Credit Note ”: The Revolving Credit Note dated as of even date herewith in the original principal amount of $10,000,000, as such Note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, each such Note.

“ Security Agreement ”: That certain Amended and Restated Security Agreement dated as of even date herewith, executed by the Borrower in favor of the Lender, as originally executed and as it may be amended, modified, supplemented, restated or replaced from time to time.

“ Solvent ”: Shall mean, with respect to any Person on any date of determination, that on such date:

(a) the fair value of such Person’s tangible and intangible assets as a going concern is in excess of the total amount of such Person’s liabilities including, without limitation, Contingent Obligations;

(b) such Person is then able to pay its debts as they mature; and

(c) such Person has capital sufficient to carry on its business.

“ Stated Termination Date ”: As defined in Section 2(a)(i) of this Agreement.

“ Subordination Agreement(s) ”: Each subordination agreement now or hereafter executed by a creditor of the Borrower in favor of the Lender.

“ Subordinated Creditor ”: Each holder of Subordinated Debt.

“ Subordinated Debt ”: At any date of determination, the outstanding principal amount of any Indebtedness of the Borrower which has been subordinated to the payment of the Obligations pursuant to a Subordination Agreement acceptable to the Lender in its sole discretion.

“ Subsidiary ”: Any Person of which or in which the Borrower and its other Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (b) the capital interest or profit interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization.

“ Taxes ” All present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments.

“ Termination Date ”: As defined in Section 2(a)(i) of this Agreement.

“ Trade Accounts Payable ”: The trade accounts payable of any Person with a maturity of not greater than 90 days incurred in the ordinary course of such Person’s business.

12.      Collateral Audit ; Appraisals .

(a)     Borrower acknowledges and agrees that, while the Loan or any portion thereof remains outstanding, Lender has the right at any time to obtain an audit (“ Audit ”) of the Collateral (or any portion thereof) performed by employees of the Lender or by a consultant or auditor engaged by the Lender. If any of the Collateral or related books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Lender or its agents to have access to perform inspections or audits and to respond to the Lender’s (or Lender’s agent’s) requests for information concerning such Collateral and records. The Borrower further agrees to promptly reimburse the Lender for all expenses, charges, costs and fees of any such Audit and Lender’s internal review of such Audit; provided , that, prior to the occurrence of an Event of Default, Borrower’s obligation to reimburse Lender pursuant to this Section 12(a) shall be limited to expenses, fees, costs and expenses incurred with respect to one Audit per calendar year.

(b)    Borrower further acknowledges and agrees that the Lender shall have the right to engage an appraiser to prepare an appraisal (“ Appraisal ”) to establish the Fair Market Value of the Borrower’s Inventory, and the Borrower shall promptly reimburse the Lender for all expenses, charges, costs and fees of any such Appraisal; provided , that, prior to the occurrence of an Event of Default, Borrower’s obligation to reimburse Lender pursuant to this Section 12(b) shall be limited to expenses, fees, costs and expenses incurred with respect to one Appraisal per calendar year.

13.      Miscellaneous .

(a)      Notices . Any notices or demands required or contemplated hereunder shall be written and shall be effective two days after the placing thereof in the United States mails postage prepaid or with a nationally-recognized courier service such as Federal Express, addressed to the relevant party at its address set forth on the signature page below or upon transmission by telecopy to the relevant party at the telecopy number set forth on the signature page below and a confirmation is received or at any other address or telecopy number as may be designated by the party in a notice to the other parties provided , however , that any notice to the Lender pursuant to Section 2 shall not be deemed given until actually received by the Lender.

(b)      Counterparts . This Agreement may be executed in counterparts and by separate parties in separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same document. Receipt by telecopy, pdf file or other electronic means of any executed signature page to this Agreement shall constitute effective delivery of such signature page.

(c)      Governing L aw . T his Agreement, the Notes and each other Loan Document shall be governed by, interpreted and construed in accordance with the internal laws, but not the law of conflicts, of the State of Minnesota .

(d)     General Indemnity . In addition to the payment of expenses pursuant to Section 7(f), whether or not the transactions contemplated hereby shall be consummated, the Borrower hereby indemnifies, and agrees to pay and hold the Lender, its affiliates and any holder of any Note, and their respective officers, directors, employees, agents, successors and assigns (collectively called the “Indemnitees”) harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for any of such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not any of such Indemnitees shall be designated a party thereto), that may be imposed on, incurred by, or asserted against the Indemnitees (or any of them), in any manner relating to or arising out of the Loan Documents, the statements contained in any proposal letters or other similar correspondence delivered by the Lender (whether in person, by mail, courier or any electronic means), the Lender's agreement to make the Loans, or the use or intended use of the proceeds of the Loans (the “ Indemnified Liabilities ”); provided , however , that the Borrower shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of an Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. The obligations of the Borrower under this Section 13(d) and under Section 7(f) shall survive any termination of this Agreement.

(e)     All payments made by the Borrower hereunder or under any Note will be made free and clear of, and without deduction or withholding for, any Taxes. If the Borrower shall be required to deduct any Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 13(e) the Lender or other recipient receives an amount equal to the sum it would have received had no such deduction been made; (ii) the Borrower shall make such deduction; and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law.

(f)      Regulatory Change . If, as a result of any Regulatory Change:

(i)     any tax, duty or other charge with respect to any Loan, the Notes, the Letters of Credit or any commitment to lend is imposed, modified or deemed applicable, or the basis of taxation of payments to the Lender of interest or principal of the Loans is changed;

(ii)    any reserve, special deposit, special assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, the Lender is imposed, modified or deemed applicable;

(iii)   any increase in the amount of capital required or expected to be maintained by the Lender or any Person controlling the Lender is imposed, modified or deemed applicable;

(iv)   any other condition affecting this Agreement or any commitment to lend is imposed on the Lender or the relevant funding markets;

(v)    and the Lender determines that, by reason thereof, the cost to the Lender of making or maintaining the Loans or any commitment to lend is increased, or the amount of any sum receivable by the Lender hereunder or under the Notes is reduced, then, the Borrower shall pay to the Lender upon demand such additional amount or amounts as will compensate the Lender (or the controlling Person in the instance of (c) above) on an after-tax basis for such additional costs or reduction. Determinations by the Lender for purposes of this Section 13(f) of the additional amounts required to compensate the Lender shall be conclusive in the absence of manifest error. The Lender’s demand for payment of any amount pursuant to this Section 13(f) shall show the calculation of the amount demanded in reasonable detail. In determining such amounts, the Lender may use any reasonable averaging, attribution and allocation methods.

(g)      Participation . Lender may in its sole and exclusive discretion at any time issue participations in any or all of the Loans and in any or all or a portion of its obligations to make the Loans or to issue Letters of Credit to one or more participants in the Loans. Lender may divulge all information received by it from Borrower or any other source, including but not limited to information relating to the Loans and to the Borrower, to any such participant(s) or other lenders, and Borrower shall cooperate with Lender in satisfying the reasonable requirements of any such participant(s) or other lenders for consummating such a purchase, participation or assignment.

(h)      Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer its rights hereunder without the prior written consent of Lender.

(i)      Waivers, Amendments; etc . The provisions of this Agreement, or any other Loan Document, may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Lender.

(j)      Inconsistencies, etc . In the event of any conflict or inconsistency between or among the provisions of this Agreement and any other Loan Document, it is intended that the provisions of this Agreement and such other Loan Document be enforceable except to the extent that the enforcement of such provisions is irreconcilable and, in that event, the provisions of the Loan Document most favorable to the Lender shall be controlling.

(k)     WAIVER OF TRIAL BY JURY . THE BORROWER AND THE LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR (ii) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

(l)      Limitation of Liability . Neither the Lender nor any affiliate of the Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue upon, any claim for any special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to, this Agreement, the Notes or any other Loan Document, or the transactions contemplated and the relationship established hereby or thereby, or any act, omission or event occurring in connection herewith or therewith.

(m)     Customer Identification - USA PATRIOT Act Notice . The Lender hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, and the Lender’s policies and practices, the Lender is required to obtain, verify and record certain information and documentation that identifies the Borrower, which information includes the name and address of the Borrower and such other information that will allow the Lender to identify the Borrower in accordance with the Patriot Act.

(n)      Venue . AT THE OPTION OF THE LENDER, THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT TO WHICH THE BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

(o)    The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections, Exhibits, Schedules and like references are to this Agreement unless otherwise expressly provided. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or.”

(p)    Entire Agreement; Document Construction. This Agreement, the Notes and the other Loan Documents embody the entire agreement and understanding between the Borrower and the Lender with respect to the subject matter hereof and thereof. This Agreement supersedes all prior agreements and understandings relating to the subject matter hereof. This Agreement, the Note and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement, the Note or any other Loan Document.

(q)      Document Imaging, Electronic Transactions and the UETA . Without notice to or consent of Borrower, Lender may create electronic images of this Agreement and the other Loan Documents and destroy paper originals of any such imaged documents. Provided that such images are maintained by or on behalf of Lender as part of Lender’s normal business processes, Borrower agrees that such images have the same legal force and effect as the paper originals, and are enforceable against Borrower. Furthermore, Borrower agrees that Lender may convert any Loan Document into a “transferrable record” as such term is defined under, and to the extent permitted by, the UETA, with the image of such instrument in Lender’s possession constituting an “authoritative copy” under the UETA.

(r)      Single Purpose Entity . Borrower’s sole business purpose shall be to own and sell the Acquired Assets. Borrower (i) shall conduct business only in its own name, (ii) shall not engage in any business or have any assets unrelated to the Acquired Assets, (iii) shall not have any indebtedness other than as permitted by this Agreement and other than trade payables incurred in the ordinary course of Borrower’s business, (iv) shall have its own separate books, records, and accounts (with no commingling of assets), (v) shall hold itself out as being an entity separate and apart from any other person or entity, (vi) shall not change its name or identity unless Borrower shall have obtained the prior written consent of Lender to such change, and shall have taken all actions necessary or requested by Lender to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents, and (vii) shall not amend its limited liability company agreement in any way that would have a material adverse effect on its ability to own or sell the Acquired Assets or to perform its obligations under the Loan Documents unless Borrower shall have obtained the prior written consent of Lender to such change.

(s)      Document Construction . This Agreement, the Note and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement, the Notes or any other Loan Document.

(t)      Security Agreement . Borrower acknowledges and agrees that its Obligations under this Agreement are secured by a first priority Lien on all of its assets granted by the Borrower to the Lender pursuant to the Security Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above.

Address for Notices:

With a copy to (which shall not constitute notice or service of process):

[signature page to Loan Agreement]

Address for Notices:

[Signature page to Loan Agreement]

EXHIBITS TO LOAN AGREEMENT

EXHIBIT A

FORM OF REVOLVING LOAN REQUEST

[see attached]

REVOLVING LOAN REQUEST

The undersigned, being the Vice President of AIRCO 1, LLC, Delaware limited liability company (the “ Borrower ”), refers to that certain Loan Agreement dated as of April 3, 2019 (said Loan Agreement as it may be amended, modified, supplemented or restated from time to time being the “ Loan Agreement ;” the terms defined therein being used herein as therein defined), by and between MINNESOTA BANK & TRUST, a Minnesota banking corporation (the " Lender ") and the Borrower and hereby requests pursuant to Section 2(a)(iv) of the Loan Agreement, that the Lender make a Revolving Loan to the Borrower in the amount of $________, for the purpose of financing a portion of the cost of acquiring that certain decommissioned _______________ Airframe bearing manufacturer’s serial number _______.

The undersigned further certifies to the Lender that:

[signature page follows]

Witness my hand this ___________ __, 201_

[Signature Page to Revolving Loan Request]

EXHIBIT B

FORM OF BORROWING BASE CERTIFICATE

[see attached]

Form of Borrowing Base Certificate

Minnesota Bank & Trust

9800 Bren Road East, Ste. 200

Minnetonka, MN 55435

Attention: Mr. Eric P. Gundersen, VP

The undersigned is the Borrower under that certain Loan Agreement, dated as of April 3, 2019 (such Loan Agreement as it may be amended, modified, supplemented or restated from time to time being the “ Loan Agreement ”; capitalized terms not otherwise defined herein being used as therein defined) between AIRCO 1, LLC (the “ Borrower ”) and MINNESOTA BANK & TRUST (the “ Lender ”).

The Borrower hereby reaffirms all representations and warranties to the Loan Agreement and certifies and warrants that the Borrower holds, subject to the security interest of the Lender under the Agreement, and the other Loan Documents, the following Collateral computed as of _____________ __, 201_.

A.      ACCOUNTS RECEIVABLE

B.     INVENTORY Report dated                                                     (see attached)

The Borrower further certifies and warrants that no Event of Default is existing as of the date hereof and, to the best knowledge and belief of the officer of the Borrower executing this Borrowing Base Certificate, there has not been (except as may otherwise indicated below) any change to the information set forth above since the computation date specified above which would materially reduce the amounts shown if such amounts were computed as of the date of this Borrowing Base Certificate and the information on the Accounts Receivable aging report attached as Schedule A and the Inventory report attached as Schedule B to this Borrowing Base Certificate is true and correct as of the date hereof.

AIRCO 1, LLC

Schedule A to Borrowing Base Certificate

Detailed Accounts Receivable Aging

[see attached]

Schedule B to Borrowing Base Certificate

Detailed Inventory Report

[see attached]

EXHIBIT C

Consigned Inventory Eligibility Requirements

Exhibit 10.2

REVOLVING CREDIT NOTE

FOR VALUE RECEIVED, on the Termination Date (as defined in the Loan Agreement hereinafter defined) the undersigned, AIRCO 1, LLC, a Delaware limited liability company (the “ Borrower ”), promises to pay to the order of Minnesota Bank & Trust, a Minnesota state banking corporation (the “ Lender ”), the principal sum of TEN MILLION AND NO/100THS DOLLARS (U.S. $10,000,000.00) or, if less, the aggregate unpaid principal amount of all Revolving Loans (as hereinafter defined) made by the Lender to the Borrower pursuant to the Loan Agreement.

Interest. The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full at a fluctuating annual rate of interest equal to the greater of (a) 6.50% or (b) the sum of (i) the Prime Rate (hereinafter defined), as in effect on the date hereof and as the same may adjust from time to time, plus (ii) 2.00%. Interest accrued during each calendar month shall be due and payable on the first day of the following calendar month, with the first such interest payment due on May 1, 2019. Interest shall also be payable at maturity and interest accrued after maturity shall be payable on demand. The term “Prime Rate” shall mean the prime rate published in the money rates section of the Wall Street Journal, floating, and changing with each change of such published rate, or if the Wall Street Journal ceases to publish such rate, as published in the Federal Reserve Board’s Statistical Release H. 15. If the Prime Rate becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. Borrower understands that Lender may make loans based on other rates as well. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph. NOTICE: under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.

Payments . Both principal and interest are payable in lawful money of the United States of America to the Lender at 9800 Bren Road East, Suite 200, Minnetonka, MN 55343 (or other location specified by the Lender) in immediately available funds. By its execution of this Note, the Borrower authorizes the Lender to charge from time to time against any of Borrower’s depository accounts maintained with the Lender any such payments when due and the Lender will use its reasonable efforts to notify the Borrower of such charges.

Interest Calculation Method . Interest on this Note shall be calculated on the basis of a 360-day year and the actual number of days elapsed in any portion of a month in which interest is due. If any payment to be made by the Borrower hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

REVOLVING CREDIT NOTE

Page 2

Prepayment; Minimum Interest Charge . In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest charge of $10.00. Other than Borrower’s obligations to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early payment will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Minnesota Bank & Trust, 9800 Bren Road East, Suite 200, Minnetonka, MN 55343.

Late Charge . If a payment due hereunder is not made within seven days after the date when due, Borrower shall pay to Lender a late payment charge of 5% of the amount of the overdue payment to compensate Lender for a portion of the cost related to handling the overdue payment.

Interest After Default . Upon the occurrence of an Event of Default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.000 percentage point margin (“ Default Rate Margin ”). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

Loan Agreement . This Note is the Revolving Credit Note referred to in, and is entitled to the benefits of, the Loan Agreement dated as of April 3, 2019 (as amended, modified, supplemented or restated from time to time being the “ Loan Agreement ”; capitalized terms not otherwise defined herein being used herein as therein defined) between the Borrower and the Lender. The Loan Agreement, among other things, (i) provides for the making of Revolving Loans (the “ Revolving Loans ”) by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Loan being evidenced by this Note; (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events prior to the maturity hereof upon the terms and conditions therein specified; and (iii) contains provisions for the mandatory prepayment hereof upon certain conditions.

REVOLVING CREDIT NOTE

Page  3

Security Agreement . This Note is secured by, among other things, that certain Amended and Restated Security Agreement dated of even date herewith executed by the Borrower in favor of the Lender.

Waiver of Presentment and Demand for Payment; Etc. Borrower and any endorsers or guarantors hereof severally waive presentment and demand for payment, notice of intent to accelerate maturity, protest or notice of protest and non-payment, bringing of suit and diligence in taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further security or the release of any security for this Note, all without in any way affecting the liability of Borrower and any endorsers or guarantors hereof. No extension of time for the payment of this Note, or any installment thereof, made by agreement by Lender with any Person now or hereafter liable for the payment of this Note, shall affect the original liability under this Note of the undersigned, even if the undersigned is not a party to such agreement.

Event of Default. Any “Event of Default” (as defined in the Loan Agreement) shall constitute an Event of Default under this Note. Upon the occurrence of an Event of Default, in addition to any other rights or remedies Lender may have at law or in equity or under the Loan Agreement or under any other Loan Document, Lender may, at its option, without notice to Borrower, declare immediately due and payable the entire unpaid principal sum hereof, together with all accrued and unpaid interest thereon plus any other sums owing at the time of such Event of Default pursuant to this Note, the Security Agreement or any other Loan Document. The failure to exercise the foregoing or any other options shall not constitute a waiver of the right to exercise the same or any other option at any subsequent time in respect of the same event or any other event. The acceptance by the holder of any payment hereunder which is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing options at that time or at any subsequent time.

Expense Reimbursement. Borrower agrees to pay all expenses for the preparation of this Note, as set forth in the Loan Agreement, including exhibits, and any amendments to this Note as may from time to time hereafter be required, and the reasonable attorneys’ fees and legal expenses of counsel for Lender from time to time incurred in connection with the preparation and execution of this Note and any document relevant to this Note, any amendments hereto or thereto, and the consideration of legal questions relevant hereto and thereto. Borrower agrees to reimburse Lender upon demand for all reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses) in connection with Lender’s enforcement of the obligations of the Borrower hereunder or under the Security Agreement or any other collateral document, whether or not suit is commenced including, without limitation, attorneys’ fees and legal expenses in connection with any appeal of a lower court’s order or judgment. The obligations of the Borrower under this paragraph shall survive any termination of the Loan Agreement, this Note, the Security Agreement, and any other Loan Document.

REVOLVING CREDIT NOTE

Page  4

Successors and Assigns . This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns except that Borrower may not assign or transfer its rights hereunder without the prior written consent of Lender, which consent may be withheld in Lender’s sole discretion. In connection with the actual or prospective sale by the Lender of any interest or participation in the loan obligation evidenced by this Note, Borrower hereby authorizes the Lender to furnish any information concerning the Borrower or any of its affiliates, however acquired, to any Person or entity.

Usury . Borrower and Lender agree that no payment of interest or other consideration made or agreed to be made by Borrower to Lender pursuant to this Note shall, at any time, be in excess of the maximum rate of interest permissible by law. In the event such payments of interest or other consideration provided for in this Note shall result in an effective rate of interest which, for any period of time, is in excess of the limit of the usury or any other law applicable to the loan evidenced hereby, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied to the unpaid principal balance and not to the payment of interest; if a surplus remains after full payment of principal and lawful interest, the surplus shall be remitted by Lender to Borrower, and Borrower hereby agrees to accept such remittance. This provision shall control every other obligation of the Borrower and Lender relating to this Note.

Business Purpose Loan . The Loan is a business loan. Borrower hereby represents that this loan is for commercial use and not for personal, family or household purposes. The Borrower agrees that the Loan evidenced by this Note is an exempted transaction under the Truth In Lending Act, 15 U.S.C., §1601, et seq.

REVOLVING CREDIT NOTE

Page  5

Governing Law . THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

WAIVER OF DEFENSES . OTHER THAN CLAIMS BASED UPON THE FAILURE OF THE LENDER TO ACT IN A COMMERCIALLY REASONABLE MANNER, THE BORROWER WAIVES EVERY PRESENT AND FUTURE DEFENSE (OTHER THAN THE DEFENSE OF PAYMENT IN FULL), CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS NOTE OR ANY OF THE LOAN DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

Waiver of Right to Jury Trial; Venue . BORROWER WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION RELATING TO OR ARISING FROM THIS NOTE. AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA OR THE STATE COURT SITTING IN HENNEPIN OR RAMSEY COUNTY, MINNESOTA. BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT PROPER OR CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS NOTE, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

REVOLVING CREDIT NOTE

Page  6

IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to be signed by its duly authorized officer in favor of Minnesota Bank & Trust and to be dated as of the date first written above.

Exhibit 10.3

AMENDED AND RESTATED PLEDGE AGREEMENT

THIS AMENDED AND RESTATED PLEDGE AGREEMENT (the “ Pledge Agreement ”), dated as of April 3, 2019, (the “ Effective Date ”), is entered into by and between AIRCO, LLC , a North Carolina limited liability company (the “ Pledgor ”), and MINNESOTA BANK & TRUST , a Minnesota state banking corporation company (the “ Lender ”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement (hereinafter defined).

WHEREAS, Pledgor’s wholly-owned subsidiary, AIRCO 1, LLC, a Delaware limited liability company (“Borrower”), has entered into that certain Second Loan Agreement dated as of February 22, 2018 (the “ Existing Loan Agreement ”), by and between Borrower and Lender, pursuant to which Lender has extended credit to the Borrower;

WHEREAS, as a condition to Lender’s entering into the Existing Loan Agreement, Pledgor has executed and delivered to Lender that certain Pledge Agreement dated as of February 22, 2018 (the “ Existing Pledge Agreement ”), pursuant to which Pledgor pledged to Lender one hundred percent (100%) of the issued limited liability company membership interests (collectively, the "Pledgor Interests"), in the Borrower;

WHEREAS, Lender and Borrower have entered into that certain Loan Agreement dated as of April 3, 2019 (such Loan Agreement, as amended, modified, supplemented, extended, replaced or restated from time to time being referred to herein as, the “ Loan Agreement ”), pursuant to which Lender has agreed, subject to the terms and conditions set forth therein, to provided a revolving line of credit to Borrower in the original principal amount of up to $10,000,000, a portion of the initial proceeds of which will be used to refinance the outstanding indebtedness under the Existing Loan Agreement;

WHEREAS, as set forth on Schedule I , as of the Effective Date, Pledgor owns one hundred percent (100%) of the issued limited liability company membership interests (collectively, the " Pledgor Interests "), in Borrower;

WHEREAS, Lender has required, as a condition to entering into the Loan Agreement, that Pledgor execute and deliver this Pledge Agreement amending and restating the Existing Pledge Agreement in its entirety;

NOW, THEREFORE, for and in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby agree to amend and restate the Existing Pledge Agreement in its entirety to read as follows:

Section 1.      Pledge . Pledgor hereby pledges and grants to Lender a security interest in the collateral described in Sections 1.1 and 1.2 below (collectively, the “ Pledged Collateral ”):

1.1      Pledged Interest .

(a)     The Pledgor Interests (such membership interests being identified on Schedule I attached hereto and referred to as the “ Pledged Interests ”) of Borrower, for which Pledgor shall deliver to Lender stock powers in the form of Exhibit A attached hereto and made a part hereof (the “ Powers ”) duly executed in blank, and all distributions, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Interests.

(b)     All additional membership interests of Borrower described in Section 1.1(a) above from time to time acquired by Pledgor in any manner (any such additional membership interests shall constitute part of the Pledged Interests and Lender is irrevocably authorized to unilaterally amend Schedule I hereto to reflect such additional membership interests and Pledgor shall promptly deliver to Lender an executed Power with respect to the additional membership interests), and all purchase options, distributions, cash, instruments, investment property and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such membership interests.

1.2      Proceeds . All proceeds of the Pledged Collateral described in Section 1.1 above.

Section 2.      Security for Obligations . The Pledged Collateral secures the prompt payment and performance of all Obligations under the Loan Documents.

Section 3.      Pledged Collateral Adjustments . If, during the term of this Pledge Agreement:

(a)     Any distribution, reclassification, readjustment or other change is declared or made in the capital structure of Borrower, or any option included within the Pledged Collateral is exercised, or both, or

(b)     Any rights or options shall be issued in connection with the Pledged Collateral, then One Hundred Percent (100%) of all new, substituted and additional, membership interests, rights, options, investment property or other securities, issued to Pledgor by reason of any of the foregoing, shall be immediately delivered to and held by Lender under the terms of this Pledge Agreement and shall constitute Pledged Collateral hereunder; provided , however , that nothing contained in this Section 3 shall be deemed to permit any distribution, or membership interests, rights or options, reclassification, readjustment or other change in the capital structure of Borrower which is not expressly permitted by the Loan Agreement. Pledgor shall promptly deliver an executed Power to Lender with respect to any new membership interest obtained by Pledgor.

Section 4.      Subsequent Changes Affecting Pledged Collateral . Pledgor represents and warrants that it has made its own arrangements for keeping itself informed of changes or potential changes affecting the Pledged Collateral (including, but not limited to, rights to convert, rights to subscribe, payment of cash distributions or other distributions, reorganization or other exchanges, tender offers and voting rights), and Pledgor agrees that Lender shall not have any obligation to inform Pledgor of any such changes or potential changes or to take any action or omit to take any action with respect thereto. Lender may, during the continuance of an Event of Default, in connection with the exercise of its remedies hereunder, without notice and at its option, transfer or register the Pledged Collateral or any part thereof into its or its nominee’s name with or without any indication that such Pledged Collateral is subject to the security interest hereunder.

Section 5.      Representations and Warranties . Pledgor represents and warrants as follows as of the Effective Date and as of each date on which representations and warranties under the Loan Agreement shall be made:

(a)     Pledgor is the sole legal and beneficial owner of the membership interests of Borrower, as set forth on Schedule I hereto, and the Pledged Interests comprise one hundred percent (100%) of the limited liability membership interests of Borrower;

(b)     Pledgor has full limited liability company power and authority to enter into this Pledge Agreement;

(c)     There are no restrictions upon the voting rights associated with, or upon the transfer of, any of the Pledged Collateral;

(d)     Pledgor has the right to vote, pledge and grant a security interest in or otherwise transfer such Pledged Collateral free of any Liens, except for any Liens permitted hereunder or under the terms of the Loan Agreement, and the Liens created by this Pledge Agreement;

(e)     Pledgor owns the Pledged Collateral free and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or any security interest therein, except for the pledge and security interest granted to Lender hereunder;

(f)     The pledge of the Pledged Collateral does not violate (1) the Articles of Organization or Limited Liability Agreement of Borrower, or any indenture, mortgage, bank loan or credit agreement to which Pledgor or Borrower is a party or by which any of their respective properties or assets may be bound; or (2) any restriction on such transfer or encumbrance of such Pledged Collateral;

(g)     Pledgor hereby authorizes Lender to file financing statements pursuant to the UCC as Lender may request to perfect the security interest granted hereby;

(h)     No authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body that has not been obtained is required either (i) for the pledge of the Pledged Collateral pursuant to this Pledge Agreement or for the execution, delivery or performance of this Pledge Agreement by Pledgor or (ii) for the exercise by Lender of the voting or other rights provided for in this Pledge Agreement or the remedies in respect of the Pledged Collateral pursuant to this Pledge Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally or other applicable law);

(i)     Upon the taking of possession of the Pledged Collateral or the filing of the appropriate UCC filing statements, the pledge of the Pledged Collateral pursuant to this Pledge Agreement will create a valid and perfected first priority security interest in the Pledged Collateral, in favor of Lender for the benefit of Lender, securing the payment and performance of Pledgor’s obligations under the Loan Documents;

(j)     The Powers are duly executed and to Pledgor’s knowledge, give Lender the authority they purport to confer;

(k)     Pledgor has no obligation to make further capital contributions or make any other payments to Borrower with respect to its interest therein other than as specifically set forth in the Borrower Formation Documents (as defined in the Loan Agreement);

(l)     The Pledged Interests have been validly issued, are fully paid and non-assessable;

(m)     Borrower owns all right, title and interest in and to the Collateral (as defined in the Security Agreement); and

(o)     The Acknowledgment and Consent (in the form attached hereto as Exhibit B) has been duly executed by Borrower.

Section 6.      Voting Rights . During the term of this Pledge Agreement, and except as provided in this Section 6 below, Pledgor shall have the right to vote the Pledged Interests on all governing questions in a manner not inconsistent with the terms of this Pledge Agreement, the Loan Agreement and any other agreement, instrument or document executed pursuant thereto or in connection therewith. During the continuation of an Event of Default, Lender or Lender’s nominee may, at Lender’s or such nominee’s option and following written notice from Lender to Pledgor, exercise all voting powers pertaining to the Pledged Collateral, including, if allowed by the terms of the Borrower Formation Documents, the right to take action by written consent, and as such (x) exercise, or direct Pledgor as to the exercise of all voting, consent, managerial, election and other rights to the applicable Pledged Collateral and (y) exercise, or direct Pledgor as to the exercise of any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to the applicable Pledged Collateral, as if Lender were the absolute owner thereof, all without liability except to account for property actually received by it, but Lender shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure so to do or delay in so doing. Such authorization shall constitute an irrevocable voting proxy, coupled with an interest, from Pledgor to Lender or, at Lender’s option, to Lender’s nominee.

Section 7.      Distributions .

(a)     So long as no Event of Default shall have occurred and is continuing:

(i)     Pledgor shall be entitled to receive and retain any and all distributions and interest paid in respect of the Pledged Collateral to the extent such distributions are not prohibited by the Loan Agreement, provided , however , that any and all

(A) distributions and interest paid or payable other than in cash with respect to, and instruments and other property received, receivable or otherwise distributed with respect to, or in exchange for, any of the Pledged Collateral;

(B) distributions paid or payable in cash with respect to any of the Pledged Collateral on account of a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus; and

(C) cash paid, payable or otherwise distributed with respect to principal of, or in redemption of, or in exchange for, any of the Pledged Collateral;

shall be Pledged Collateral, and shall be forthwith delivered to Lender to hold as Pledged Collateral and shall, if received by Pledgor, be received in trust for Lender, be segregated from the other property or funds of Pledgor, and be delivered immediately to Lender as Pledged Collateral in the same form as so received (with any necessary endorsement); and

(b)     Upon the occurrence and during the continuance of an Event of Default:

(i)     All rights of Pledgor to receive the distributions and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(i) hereof shall cease, and all such rights shall thereupon become vested in Lender, which shall thereupon have the sole right to receive and hold as Pledged Collateral such distributions and interest payments;

(ii)     All distributions and interest payments which are received by Pledgor contrary to the provisions of clause (i) of this Section 7(b) shall be received in trust for Lender, shall be segregated from other funds of Pledgor and shall be paid over immediately to Lender as Pledged Collateral in the same form as so received (with any necessary endorsements);

(iii)     Pledgor shall, upon the request of Lender, at Pledgor’s expense, execute and deliver all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the reasonable opinion of Lender, Pledgor or their respective counsel, advisable to register the applicable Pledged Collateral under the provisions of the Securities Act of 1933, as amended (the “ Securities Act ”) and to exercise its best efforts to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Lender, Pledgor or their respective counsel, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto;

(iv)     Pledgor shall, upon the request of Lender, at Pledgor’s expense, use its reasonable efforts to qualify the Pledged Collateral under state securities or “Blue Sky” laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by Lender;

(v)     Pledgor shall, upon the request of Lender, at Pledgor’s expense, cause the Borrower to make available to the holders of its securities, as soon as practicable, earnings statements which will satisfy the provisions of Section 11(a) of the Securities Act to the extent such provisions are applicable to the Borrower; and

(vi)     Pledgor shall, upon the request of Lender, at Pledgor’s expense, do or cause to be done all such other reasonable acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.

Pledgor will reimburse Lender for all reasonable expenses incurred by Lender, including, without limitation, reasonable attorneys’ and accountants’ fees and expenses in connection with the foregoing. Upon or at any time after the occurrence of an Event of Default, if Lender determines that, prior to any public offering of any securities constituting part of the Pledged Collateral, such securities should be registered under the Securities Act and/or registered or qualified under any other federal or state law and such registration and/or qualification is not practicable, then Pledgor agrees that it will be commercially reasonable if a private sale, upon at least five (5) Business Days’ notice to Pledgor, is arranged so as to avoid a public offering, even though the sales price established and/or obtained at such private sale may be substantially less than prices which could have been obtained for such security on any market or exchange or in any other public sale. Pledgor hereby indemnifies Lender for any and all liabilities incurred by Lender as a result of becoming a member of the Borrower, except to the extent caused by Lender’s gross negligence or willful misconduct.

Section 8.      Transfers and Other Liens; Issuance . Pledgor agrees that it will not (i) sell or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral without the prior written consent of Lender, except as permitted under the Loan Agreement, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the security interest under this Pledge Agreement, and except for any Permitted Lien, or (iii) issue or permit the issuance or grant of any membership interests not currently issued in the Borrower.

Section 9.      Remedies .

(a)     Lender shall have, in addition to any other rights given under this Pledge Agreement or by applicable law, all of the rights and remedies with respect to the Pledged Collateral of a secured party under the Uniform Commercial Code of the State of Minnesota. Lender (personally or through an agent) is hereby authorized and empowered to transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral for the purpose of exercise of rights and remedies available hereunder and under applicable law, to exercise all voting rights with respect thereto, to collect and receive all cash distributions and other distributions made thereon, and to otherwise act with respect to the Pledged Collateral as though Lender were the outright owner thereof, Pledgor hereby irrevocably constituting and appointing Lender as the proxy and attorney-in-fact of Pledgor, with full power of substitution to do so; provided , however , that Lender shall have no duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so; provided , further , however , that Lender agrees to exercise such proxy and other rights and remedies described in this sentence only so long as an Event of Default shall have occurred and is continuing and following written notice thereof to Pledgor. In addition, after the occurrence of an Event of Default and during the continuation thereof, Lender shall have such powers of sale and other powers as may be conferred by applicable law. With respect to the Pledged Collateral or any part thereof which shall then be in or shall thereafter come into the possession or custody of Lender or which Lender shall otherwise have the ability to transfer under this Pledge Agreement and applicable law, Lender may, in its sole discretion, without notice except as specified herein or by applicable law, upon the occurrence and during the continuation of an Event of Default, sell or cause the same to be sold in accordance with applicable law at any exchange, broker’s board or at public or private sale, in one or more sales or lots, at such price as Lender may deem best, for cash or on credit on commercially reasonable terms or for future delivery, without assumption of any credit risk, and the purchaser of any or all of the Pledged Collateral so sold shall thereafter own the same, absolutely free from any claim, encumbrance or right of any kind whatsoever. Lender may, in its own name, or in the name of a designee or nominee, buy the Pledged Collateral at any public sale and, if permitted by applicable law, buy the Pledged Collateral at any private sale. Pledgor will pay to Lender all reasonable expenses (including, without limitation, court costs and reasonable attorneys’ and paralegals’ fees and expenses) of, or incidental to, the enforcement of any of the provisions hereof. Lender agrees to distribute any proceeds of the sale of the Pledged Collateral in accordance with the Loan Agreement and applicable law and Pledgor shall remain liable for any deficiency and shall be entitled to any surplus following the sale of the Pledged Collateral.

(b)     Unless any of the Pledged Collateral threatens to decline speedily in value or is or becomes of a type sold on a recognized market, Lender will give Pledgor reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Pledged Collateral conducted in conformity with reasonable commercial practices of banks, commercial finance companies, insurance companies or other financial institutions disposing of property similar to the Pledged Collateral shall be deemed to be commercially reasonable. Notwithstanding any provision to the contrary contained herein, Pledgor agrees that any requirements of reasonable notice shall be met if such notice is received by Pledgor as provided in Section 19 below at least ten (10) Business Days before the time of the sale or disposition; provided , however , that Lender may give any shorter notice that is commercially reasonable under the circumstances. Any other requirement of notice, demand or advertisement for sale is waived, to the extent permitted by law.

(c)     In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of the Pledged Collateral may be effected after an Event of Default, Pledgor agrees that after the occurrence and during the continuation of an Event of Default, Lender may, from time to time, attempt to sell all or any part of the Pledged Collateral by means of a private placement restricting the bidders and prospective purchasers to those who are qualified and will represent and agree that they are purchasing for investment only and not for distribution. If it elects to sell the Pledged Collateral by means of a private placement, Lender shall offer to sell or solicit offers to buy, and shall sell and transfer, the Pledged Collateral, or any part of it, in accordance with applicable law including without limitation to a limited number of sophisticated investors qualified to purchase the Pledged Collateral. If Lender solicits such offers from not less than four (4) such investors, then the acceptance by Lender of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposing of such Pledged Collateral; provided , however , that this Section does not impose a requirement that Lender solicit offers from four or more investors in order for the sale to be commercially reasonable.

Section 10.      Lender Appointed Attorney-in-Fact .

(a)     Pledgor hereby appoints Lender its attorney-in-fact, coupled with an interest, with full authority, in the name of Pledgor or otherwise, from time to time in Lender’s sole discretion, to take any action and to execute any instrument which Lender may deem necessary or advisable to accomplish the purposes of this Pledge Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any distribution, interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same and to arrange for the transfer of all or any part of the Pledged Collateral on the books of the Borrower to the name of Lender or Lender’s nominee; provided , however, that Lender agrees to exercise such powers only so long as an Event of Default shall have occurred and is continuing.

(b)     Upon the indefeasible payment in full of all Obligations in cash and the termination of any commitment on the part of Lender to lend to Borrower, all Pledged Collateral (and all stock or other powers delivered in connection therewith) shall be returned to Pledgor and all rights with respect to the Pledged Collateral or the Borrower vested in Lender pursuant to this Pledged Agreement shall expire, terminate and be of no further effect whatsoever and Lender shall provide any release or other instruments required to effect such release or as reasonably requested by Pledgor to evidence such release.

Section 11.      Waivers .

(a)     Pledgor waives presentment and demand for payment of any of Pledgor’s obligations under the Loan Documents, protest and notice of dishonor or Event of Default with respect to any of Pledgor’s obligations under the Loan Documents and all other notices to which Pledgor might otherwise be entitled except as otherwise expressly provided herein or in the Loan Agreement except to the extent that applicable law shall prohibit such waiver, protest or notice.

(b)     Pledgor understands and agrees that its obligations and liabilities under this Pledge Agreement shall remain in full force and effect, notwithstanding foreclosure of any property securing all or any part of the Obligations under the Loan Documents by trustee sale or any other reason impairing the right of Pledgor or Lender to proceed against the Borrower, any other guarantor or the Borrower's or such guarantor’s property. Pledgor agrees that all of its obligations under this Pledge Agreement shall remain in full force and effect without defense, offset or counterclaim of any kind, notwithstanding that Pledgor’s rights against the Borrower may be impaired, destroyed or otherwise affected by reason of any action or omission on the part of Lender other than actions or omissions that are determined to constitute gross negligence or willful misconduct on the part of Lender.

(c)     Pledgor hereby expressly waives the benefits of any law in any jurisdiction purporting to allow a guarantor or pledgor to revoke a continuing guaranty or pledge with respect to any transactions occurring after the date of the guaranty or pledge.

Section 12.      Term . This Pledge Agreement shall remain in full force and effect until all Obligations under the Loan Documents have been fully and indefeasibly paid in cash and any commitment on the part of Lender to provide credit has been terminated.

Section 13.      Definitions . The singular shall include the plural and vice versa and any gender shall include any other gender as the context may require.

Section 14.    Successors and Assigns . This Pledge Agreement shall be binding upon and inure to the benefit of Pledgor, Lender, and their respective successors and assigns. Pledgor’s successors and assigns shall include, without limitation, a receiver, trustee or debtor-in-possession of or for Pledgor.

Section 15.     GOVERNING LAW . ANY DISPUTE BETWEEN PLEDGOR AND LENDER OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS PLEDGE AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF MINNESOTA, WHERE APPLICABLE, (EXCEPT TO THE EXTENT THAT THE UCC PROVIDES FOR THE APPLICATION OF LAWS OF ANOTHER STATE). THE PARTIES TO THIS PLEDGE AGREEMENT HAVE VOLUNTARILY ELECTED THAT THIS PLEDGE AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL LOANS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA.

Section 16.      CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL .

(A)   NON-EXCLUSIVE JURISDICTION . EXCEPT AS PROVIDED IN SUBSECTION (B) , EACH OF THE PARTIES HERETO AGREES AND ACCEPTS FOR ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS PLEDGE AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS THE NON-EXCLUSIVE JURISDICTION OF the courts of the State of MINNESOTA sitting in the County of HENNEPIN and of the United States District Court of the District of MINNESOTA, and any appellate court from any thereof. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.

(B)   OTHER JURISDICTIONS . PLEDGOR AGREES THAT LENDER, OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST PLEDGOR OR ITS RESPECTIVE PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER PLEDGOR OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS OR (3) IN ORDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING THAT IS SEPARATE FROM ANY PROCEEDING BROUGHT UNDER CLAUSE (A) ABOVE AND THAT IS BROUGHT BY SUCH PERSON SOLELY TO REALIZE ON ANY SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B) .

(C)   SERVICE OF PROCESS . NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF LENDER TO SERVE ANY WRITS, SERVICE OF PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING ISSUED BY ANY COURT REFERRED TO IN THIS SECTION 16 IN ANY MANNER PERMITTED BY APPLICABLE LAW.

(D)   WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THIS PLEDGE AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

Section 17.      Further Assurances . Pledgor agrees that it will cooperate with Lender and will execute and deliver, or cause to be executed and delivered, all such other stock powers, proxies, instruments and documents, and will take all such other actions, including, without limitation, the authorization and filing of financing statements, as Lender may reasonably request from time to time in order to carry out the provisions and purposes of this Pledge Agreement.

Section 18.     Lender’s Duty of Care . Lender shall not be liable for any acts, omissions, errors of judgment or mistakes of fact or law including, without limitation, acts, omissions, errors or mistakes with respect to the Pledged Collateral, except for those arising out of or in connection with Lender’s (i) gross negligence or willful misconduct, (ii) failure to use reasonable care with respect to the safe custody of the Pledged Collateral in Lender’s possession or (iii) breach of its express obligations under this Pledge Agreement. Without limiting the generality of the foregoing, Lender shall be under no obligation to take any steps necessary to preserve rights in the Pledged Collateral against any other parties but may do so at its option. All reasonable expenses incurred in connection therewith shall be for the sole account of Pledgor, and shall constitute part of Pledgor’s obligations under the Loan Documents secured hereby.

Section 19.      Notices . Any notices or demands required or contemplated hereunder shall be written and shall be effective two days after the placing thereof in the United States mails postage prepaid or with a nationally-recognized courier service such as Federal Express, addressed to the relevant party at its address set forth on the signature page below.

Section 20.     Amendments, Waivers and Consents . No amendment or waiver of any provision of this Pledge Agreement nor consent to any departure by Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by Lender pursuant to the terms of the Loan Agreement, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 21.      Section Headings . The section headings herein are for convenience of reference only, and shall not affect in any way the interpretation of any of the provisions hereof.

Section 22.      Execution in Counterparts . This Pledge Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement.

Section 23.      Merger . This Pledge Agreement and the other Loan Documents embody the final and entire agreement and understanding among Pledgor and Lender and supersede all prior agreements and understandings among Pledgor and Lender relating to the subject matter thereof. This Pledge Agreement and the other Loan Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties hereto.

Section 24.      Irrevocable Proxy . Solely with respect to Article 8 Matters, Pledgor hereby irrevocably grants and appoints Lender, from the date of this Agreement until the termination of this Agreement in accordance with its terms, as Pledgor’s true and lawful proxy, for and in Pledgor’s name, place and stead to vote the Pledged Interest in the Borrower by Pledgor, whether directly or indirectly, beneficially or of record, now owned or hereafter acquired, with respect to such Article 8 Matters. The proxy granted and appointed in this Section 24 shall include the right to sign Pledgor’s name (as a member of the Borrower) to any consent, certificate or other document relating to an Article 8 Matter and the Pledged Interests that applicable law may permit or require, to cause the Pledged Interest to be voted in accordance with the preceding sentence. Pledgor hereby represents and warrants that there are no other proxies and powers of attorney with respect to an Article 8 Matter and the Pledged Interest that Pledgor may have granted or appointed. Pledgor will not give a subsequent proxy or power of attorney or enter into any other voting agreement with respect to the Pledged Interest with respect to any Article 8 Matter and any attempt to do so with respect to an Article 8 Matter shall be void and of no effect.

As used herein, “Article 8 Matter” means any action, decision, determination or election by the Borrower or its members that their membership interests or other equity interests, or any of them, be, or cease to be, a “security” as defined in and governed by Article 8 of the Uniform Commercial Code, and all other matters related to any such action, decision, determination or election.

The proxies and powers granted by the Pledgor pursuant to this Agreement are coupled with an interest and are given to secure the performance of the Pledgor’s obligations.

Section 25.      Effect on Existing Pledge Agreement . On the Effective Date, the Existing Pledge Agreement shall be completely amended and restated by this Agreement, and each reference to the “Pledge Agreement,”“therein,” “thereof,” “thereby,”or words of like import referring to the Existing Pledge Agreement in any Loan Document shall mean and be a reference to this Agreement. This Agreement amends and restates the Existing Pledge Agreement in its entirety, but does not alter the original date and continuing effectiveness of the security interests granted by the Existing Pledge Agreement

(Signature Page Follows)

IN WITNESS WHEREOF, Pledgor and Lender have executed this Pledge Agreement as of the date set forth above.

With a copy to (which shall not constitute notice or service of process):

[ Signature page to Pledge Agreement ]

IN WITNESS WHEREOF, Pledgor and Lender have executed this Pledge Agreement as of the date set forth above.

Address for Notices:

With a copy to (which shall not constitute notice or service of process):

[ Signature page to Pledge Agreement ]

SCHEDULE I

to

PLEDGE AGREEMENT

dated as of April 3, 2019

PLEDGED SUBSIDIARIES

Pledged Membership Interests

EXHIBIT A

to

PLEDGE AGREEMENT

STOCK POWER

FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer to _____________________________ one hundred percent (100%) of the limited liability company membership interests of AIRCO 1, LLC, a Delaware limited liability company (the “ Membership Interests ”), standing in the name of the undersigned on the books of said limited liability company and does hereby irrevocably constitute and appoint ___________________________________ as the undersigned’s true and lawful attorney, for it and in its name and stead, to sell, assign and transfer all or any of the Membership Interests, and for that purpose to make and execute all necessary acts of assignment and transfer thereof; and to substitute one or more persons with like full power, hereby ratifying and confirming all that said attorney or substitute or substitutes shall lawfully do by virtue hereof.

Dated: _______________

EXHIBIT B

to

PLEDGE AGREEMENT

FORM OF ACKNOWLEDGEMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of the Amended and Restated Pledge Agreement dated as of April 3, 2019, made by AIRCO, LLC, a North Carolina limited liability company (" Borrower ") for the benefit of MINNESOTA BANK & TRUST, a Minnesota state banking corporation company, as Lender (the “ Pledge Agreement ”). The undersigned agrees for the benefit of Lender that:

Exhibit 10.4

AMENDED AND RESTATED SECURITY AGREEMENT

(Grantor)

This AMENDED AND RESTATED SECURITY AGREEMENT is made as of April 3, 2019 (the “Agreement”), by AIRCO 1, LLC, a Delaware limited liability company, with its chief executive office at 5930 Balsom Ridge Road, Denver, NC 28037 (“Grantor”), in favor of MINNESOTA BANK & TRUST, a national banking corporation, with an office at 9800 Bren Road East, Suite 200, Minnetonka, MN 55343 (“Secured Party”).

RECITALS:

A.     Grantor has received extensions of credit from (1) Secured Party pursuant to the terms of that Second Loan Agreement dated as of February 22, 2018 (such Second Loan Agreement being, the “February 2018 Loan Agreement”) between Grantor and Secured Party and (2) Secured Party and its co-Lender, Park State Bank (“PSB”) pursuant to the terms of that certain Loan Agreement dated as of January 18, 2019 (such Loan Agreement being, the “January 2019 Loan Agreement”).

B.     Grantor’s obligations under the February 2018 Loan Agreement are secured by, among other things, a perfected security interest in Grantor’s assets granted by Grantor to Secured Party, pursuant to that certain Security Agreement dated as of October 27, 2017 (the “Original Agreement”).

C.     Grantor’s obligations under the January 2019 Loan Agreement are secured by, among other things, a perfected security interest in Grantor’s assets granted by Grantor to Secured Party, in its capacity as Collateral Agent for the benefit of itself and PSB, pursuant to that certain Security Agreement dated as of January 18, 2019 (such Security Agreement, together with the Original Agreement being collectively referred to herein as, the “Prior Agreement”)

D.     As a condition to the effectiveness of that certain Loan Agreement (as amended, modified, restated, replaced or restated from time to time, the “Loan Agreement”) dated as of even date herewith by and between Grantor and Secured Party, pursuant to which Secured Party has agreed to extend a revolving line of credit to Grantor, Secured Party has required that the Prior Agreement be amended and restated in its entirety by this Agreement.

E.     Grantor has determined that the execution, delivery and performance of this Agreement are in its best business and pecuniary interest.

NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which are hereby acknowledged by each of the parties hereto, Grantor and Secured Party agree to amend and restate the Prior Agreement in its entirety to read as follows:

ARTICLE I

DEFINITIONS

As used herein, the following terms shall have the meanings set forth in this Section:

“ Accounts ” shall have the meaning provided in the UCC.

“ Chattel Paper ” shall have the meaning provided in the UCC and shall include, without limitation, all Electronic Chattel Paper and Tangible Chattel Paper.

“ Collateral ” shall mean all property in which a security interest is granted hereunder.

“ Commercial Tort Claim ” shall have the meaning provided in the UCC.

“ Controlled Property ” shall mean property of every kind and description in which Grantor has or may acquire any interest, now or hereafter at any time in the possession or control of Secured Party for any reason and all dividends and distributions on or other rights in connection with such property.

“ Data Processing Records and Systems ” shall mean all of Grantor’s now existing or hereafter acquired electronic data processing and computer records, software (including, without limitation, all “Software” as defined in the UCC), systems, manuals, procedures, disks, tapes and all other storage media and memory.

“ Default ” shall mean any event which if it continued uncured would, with notice or lapse of time or both, constitute an Event of Default.

“ Deposit Accounts ” shall have the meaning provided in the UCC and shall include, without limitation, any demand, time, savings, passbook or similar account maintained with a bank.

“ Document ” shall have the meaning provided in the UCC.

“ Electronic Chattel Paper ” shall have the meaning provided in the UCC.

“ Equipment ” shall have the meaning provided in the UCC.

“ Event of Default ” shall have the meaning specified in Article VI hereof.

“ Fixtures ” shall have the meaning provided in the UCC.

“ General Intangibles ” shall have the meaning provided in the UCC and shall include, without limitation, all Payment Intangibles.

“ Goods ” shall have the meaning provided in the UCC and shall include, without limitation, embedded “Software” to the extent included in “Goods” as defined in the UCC.

“ Grantor ” shall have the meaning provided in the preamble hereto.

“ Instruments ” shall have the meaning provided in the UCC.

“ Insurance Proceeds ” shall mean all proceeds of any and all insurance policies payable to Grantor with respect to any Collateral, or on behalf of any Collateral, whether or not such policies are issued to or owned by Grantor.

“ Inventory ” shall have the meaning provided in the UCC.

“ Investment Property ” shall have the meaning provided in the UCC.

“ Letter-of-Credit Rights ” shall have the meaning provided in the UCC.

“ Loan Agreement ” shall have the meaning provided in the recitals hereto.

“ Prior Agreement ” shall have the meaning provided in the recitals hereto.

“ Motor Vehicles ” shall mean all vehicles (including, without limitation all tractors and trailers) for which the title to such vehicle is governed by a certificate of title or ownership.

“ Payment Intangibles ” shall have the meaning provided in the UCC.

“ Proceeds ” shall have the meaning provided in the UCC.

“ Products ” shall mean any goods now or hereafter manufactured, processed or assembled with any of the Collateral.

“ Secured Party ” shall have the meaning provided in the preamble hereto.

“ Supporting Obligations ” shall have the meaning provided in the UCC.

“ Tangible Chattel Paper ” shall have the meaning provided in the UCC.

“ UCC ” shall mean the Uniform Commercial Code as enacted in the State of Minnesota, as amended from time to time; provided , however , that: (a) to the extent that the UCC is used to define any term herein, and such term is defined differently in different Articles of the UCC, the definition of such term contained in Article 9 shall govern; and (b) if, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Secured Party’s security interest in any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Minnesota, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection or priority of, or remedies with respect to, the Secured Party’s security interest and for purposes of definitions related to such provisions.

Other terms defined herein shall have the meanings ascribed to them herein. All capitalized terms used herein, not specifically defined herein, shall have the meaning ascribed to them in the Loan Agreement.

ARTICLE II

SECURITY INTERESTS

As security for the payment of all Obligations, Grantor hereby grants to Secured Party a security interest in all of Grantor’s right, title and interest in and to the following, whether now owned or existing or hereafter acquired or arising:

Accounts;

Chattel Paper;

Commercial Tort Claims, if any, described on Exhibit B attached hereto and incorporated herein by reference;

Controlled Property;

Deposit Accounts;

Documents;

Equipment and Fixtures;

General Intangibles;

Goods;

Instruments;

Inventory;

Investment Property;

Letter-of-Credit Rights;

Proceeds (whether cash or non-cash Proceeds, including Insurance Proceeds and non-cash Proceeds of all types);

Products of all the foregoing; and

Supporting Obligations.

ARTICLE III

REPRESENTATIONS AND COVENANTS OF GRANTOR

 Grantor represents, warrants and covenants that:

3.1       Authorization . The execution and performance of this Agreement have been duly authorized by all necessary action and do not and will not: (a) require any consent or approval of the members or stockholders of any entity, or the consent of any governmental entity, which in each case has not been obtained; or (b) violate any provision of any indenture, contract, agreement or instrument to which it is a party or by which it is bound.

3.2       Title to Collateral . Grantor has good and marketable title to all of the Collateral and none of the Collateral is subject to any security interest except for the security interest created pursuant to this Agreement or other security interests permitted by the Loan Agreement (such other security interests being “Permitted Liens”).

3.3       Disposition or Encumbrance of Collateral . Grantor will not encumber, sell or otherwise transfer or dispose of the Collateral without the prior written consent of Secured Party except as provided in this Section or for Permitted Liens. Until a Default or Event of Default has occurred and is continuing, Grantor may sell Collateral consisting of: (a) Inventory in the ordinary course of business provided that Grantor receives as consideration for such sale an amount not less than the fair market value of the Inventory at the time of such sale; and (b) Equipment and Fixtures which in the judgment of Grantor have become obsolete or unusable in the ordinary course of business, provided that all net Proceeds of such sales of Equipment and Fixtures are (i) used to acquire replacement Equipment or Fixtures or (ii) delivered directly to Secured Party for application to the Obligations in such order as the Secured Party may elect.

3.4       Validity of Accounts . Grantor warrants that all Collateral consisting of Accounts, Chattel Paper and Instruments included in Grantor’s schedules, financial statements or books and records are bona fide existing obligations created by the sale and actual delivery of Inventory or the rendition of services to customers in the ordinary course of business, which Grantor then owns free and clear of any security interest other than the security interest created by this Agreement or other Permitted Liens, and which are then unconditionally owing to Grantor without defenses, offset or counterclaim except those arising in the ordinary course of business that are immaterial in the aggregate and that the unpaid principal amount of any such Chattel Paper or Instrument and any security therefor is and will be as represented to Secured Party on the date of the delivery thereof to Secured Party.

3.5        Maintenance of Tangible Collateral . Grantor will maintain the tangible Collateral in good condition and repair (reasonable wear and tear excepted). At the time of attachment and perfection of the security interest granted pursuant hereto and thereafter, all tangible Collateral will be located and will be maintained only at the locations set forth on Exhibit A hereto. Except as otherwise permitted by Section 3.3, Grantor will not remove such Collateral from such locations unless, prior to any such removal, Grantor has given written notice to Secured Party of the location or locations to which Grantor desires to remove the Collateral, Secured Party has given its written consent to such removal, and Grantor has delivered to Secured Party acknowledgment copies of financing statements filed where appropriate to continue the perfection of Secured Party’s security interest as a first priority security interest on such Collateral. Secured Party’s security interest attaches to all of the Collateral wherever located and Grantor’s failure to inform Secured Party of the location of any item or items of Collateral shall not impair Secured Party’s security interest thereon.

3.6        Notation on Chattel Paper . For purposes of the security interest granted pursuant to this Agreement, Secured Party has been granted a direct security interest in all Chattel Paper constituting part of the Collateral, and such Chattel Paper is not claimed merely as Proceeds of Inventory. Upon Secured Party’s request, Grantor will deliver to Secured Party the original of all Chattel Paper. Grantor will not execute any copies of such Chattel Paper constituting part of the Collateral other than those which are clearly marked as a copy. Secured Party may stamp any such Chattel Paper with a legend reflecting Secured Party’s security interest therein.

3.7      Instruments as Proceeds; Deposit Accounts . Notwithstanding any other provision in this Agreement concerning Instruments, Grantor covenants that Instruments constituting cash Proceeds (for example, money and checks) shall be deposited in Deposit Accounts with the Secured Party. Grantor has granted to the Secured Party a direct security interest in all Deposit Accounts constituting part of the Collateral and such Deposit Accounts are not claimed merely as Proceeds of other Collateral.

3.8      Protection of Collateral . All expenses of protecting, storing, warehousing, insuring, handling and shipping of the Collateral, all costs of keeping the Collateral free of any liens, encumbrances and security interests prohibited by this Agreement and of removing the same if they should arise, and any and all excise, property, sales and use taxes imposed by any state, federal or local authority on any of the Collateral or in respect of the sale thereof, shall be borne and paid by Grantor and if Grantor fails to promptly pay any thereof when due, Secured Party may, at its option, but shall not be required to pay the same whereupon the same shall constitute Obligations and shall bear interest at the Default Rate specified in the Note and shall be secured by the security interest granted hereunder.

3.9      Insurance . Grantor will procure and maintain, or cause to be procured and maintained, insurance issued by responsible insurance companies insuring the Collateral against damage and loss by theft, fire, collision (in the case of Motor Vehicles), and such other risks as are usually carried by owners of similar properties or as may be requested by Secured Party in an amount equal to the replacement value thereof, and, in any event, in an amount sufficient to avoid the application of any co-insurance provisions and payable, in the case of any loss in excess of $50,000.00, to Grantor and Secured Party jointly. All such insurance shall contain an agreement by the insurer to endeavor to provide Secured Party with 30 days’ prior notice of cancellation and an agreement that the interest of Secured Party shall not be impaired or invalidated by any act or neglect of Grantor nor by the occupation of the premises wherein such Collateral is located for purposes more hazardous than are permitted by said policy. Grantor will maintain, with financially sound and reputable insurers, insurance with respect to its properties and business against such casualties and contingencies of such types (which may include, without limitation, public and product liability, larceny, embezzlement, business interruption or other criminal misappropriation insurance) and in such amounts as may from time to time be required by Secured Party. Grantor will deliver evidence of such insurance and the policies of insurance or copies thereof to Secured Party upon request.

3.10     Compliance with Law . Grantor will not use the Collateral, or knowingly permit the Collateral to be used, for any unlawful purpose or in violation of any federal, state or municipal law.

3.11     Books and Records; Access .

(a)      Grantor will permit Secured Party and its representatives to examine Grantor’s books and records (including Data Processing Records and Systems) with respect to the Collateral and make extracts therefrom and copies thereof at any time and from time to time, and Grantor will furnish such information and reports to Secured Party and its representatives regarding the Collateral as Secured Party and its representatives may from time to time request. Grantor will also permit Secured Party and its representatives to inspect the Collateral at any time and from time to time as Secured Party and its representatives may request.

(b)     Secured Party shall have authority, at any time, to place, or require Grantor to place, upon Grantor’s books and records relating to Accounts, Chattel Paper and other rights to payment covered by the security interest granted hereby a notation or legend stating that such Accounts, Chattel Paper and other rights to payment are subject to Secured Party’s security interest.

3.12     Notice of Default . Immediately upon any officer of Grantor becoming aware of the existence of any Default or Event of Default, Grantor will give notice to Secured Party that such Default or Event of Default exists, stating the nature thereof, the period of existence thereof, and what action Grantor proposes to take with respect thereto.

3.13     Additional Documentation . Grantor will execute, from time to time, and authorizes Secured Party to execute from time to time as Grantor’s attorney-in-fact and/or file, such financing statements, assignments, and other documents covering the Collateral, including Proceeds, as Secured Party may request in order to create, evidence, perfect, maintain or continue its security interest in the Collateral (including additional Collateral acquired by Grantor after the date hereof), and Grantor will pay the cost of filing the same in all public offices in which Secured Party may deem filing to be appropriate and will notify Secured Party promptly upon acquiring any additional Collateral that may require an additional filing. Upon request, Grantor will deliver to Secured Party all Grantor’s Documents, Chattel Paper and Instruments constituting part of the Collateral.

3.14     Chief Executive Office; State of Organization . The location of the chief executive office of Grantor is located in the State set forth in the preamble hereto and will not be changed from such state without 30 days’ prior written notice to Secured Party. Grantor warrants that its books and records concerning Accounts and Chattel Paper constituting part of the Collateral are located at its chief executive office. Grantor’s State of organization is the State set forth in the preamble hereto, and such State has been its State of organization since the date of Grantor’s organization. Grantor will not change its State of organization from such State without 30 days’ prior written notice to Secured Party, and without Secured Party’s written consent to such change, and without delivering to Secured Party acknowledgment copies of financing statements filed where appropriate to continue the perfection of Secured Party’s security interest as a first priority security interest therein.

3.15     Name of Grantor . Grantor’s exact legal name and type of legal entity is as set forth in the preamble hereto. Grantor will not further change its legal name without 30 days’ prior written notice to the Secured Party, and without Secured Party’s written consent to such change, and without delivering to the Secured Party acknowledgment copies of financing statements filed where appropriate to continue the perfection of the Secured Party’s security interest as a first priority security interest in the Collateral. Grantor has not used any other name within the past five years except those described on Exhibit A attached hereto. Neither Grantor nor, to Grantor’s knowledge, any predecessor in title to any of the Collateral has executed any financing statements or security agreements presently effective as to the Collateral except those described on Exhibit A attached hereto.

3.16     Disputes, Etc . Grantor shall advise Secured Party promptly of Inventory in excess of $50,000.00 for any one customer in any fiscal year or in excess of $100,000.00 in the aggregate for all customers in any fiscal year which are returned by a customer(s) or otherwise recovered from such customer(s) and unless instructed to deliver such Inventory to Secured Party, Grantor shall resell such Inventory for Secured Party and assign or deliver to Secured Party the resulting Accounts or other Proceeds. Grantor shall also advise Secured Party promptly of all disputes and claims in excess of $50,000.00 for any one obligor on the Collateral in any fiscal year or in excess of $100,000.00 in the aggregate for all obligors in any fiscal year and settle or adjust them at no expense to Secured Party. After the occurrence and during the continuance of an Event of Default, Secured Party may at all times settle or adjust such disputes and claims directly with the customers for amounts and upon terms which Secured Party considers commercially reasonable. No discount, credit, allowance, adjustment or return shall be granted by Grantor to any customer without Secured Party’s written consent other than discounts, credits, allowances, adjustments and returns made or granted by Grantor in the ordinary course of business prior to the occurrence and during the continuance of an Event of Default.

3.17     Power of Attorney . Grantor appoints Secured Party or any other person whom Secured Party may from time to time designate, as Grantor’s attorney in fact, with power to: (a) endorse Grantor’s name on any checks, notes, acceptances, drafts or other forms of payment or security evidencing or relating to any Collateral that may come into Secured Party’s possession; (b) sign Grantor’s name on any invoice or bill of lading relating to any Collateral, on drafts against customers, on schedules and confirmatory assignments of Accounts, Chattel Paper, Documents or other Collateral, on notices of assignment, financing statements under the UCC and other public records, on verifications of accounts and on notices to customers; (c) notify the post office authorities to change the address for delivery of Grantor’s mail to an address designated by Secured Party; (d) receive and open all mail addressed to Grantor; (e) send requests for verification of Accounts, Chattel Paper, Instruments or other Collateral to customers; and (f) do all things necessary to carry out this Agreement; provided , however , that so long as no Event of Default has occurred and is continuing, Lender: (x) shall not exercise the powers granted pursuant to Section 3.17(c) or (d); (y) shall exercise the power granted by Section 3.17(e) through Secured Party’s trade accounting firm name and not in any name identifying the verifying party as a bank, lender or other financial institution; and (z) shall exercise the powers granted by Section 3.17(f) only upon Grantor’s failure to take action requested by Secured Party within five (5) Business Days after the Lender has requested that Borrower take the requested action. Grantor ratifies and approves all acts of the attorney taken within the scope of the authority granted. Neither Secured Party nor the attorney will be liable for any acts of commission or omission, or for any error in judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any Obligation remains unpaid. Grantor waives presentment and protest of all instruments and notice thereof, notice of default and dishonor and all other notices to which Grantor may otherwise be entitled.

3.18     Patents and Trademarks, Etc . Grantor agrees with Secured Party that, until the security interest granted by this Agreement has been terminated in accordance with the terms hereof:

(a)      Grantor will perform all acts and execute all documents including, without limitation, grants of security interest, in form suitable for filing with the United States Patent and Trademark Office, reasonably requested by Secured Party at any time to evidence, perfect, maintain, record and enforce Secured Party’s interest in the Collateral comprised of patents (collectively the “Patents”), patent applications (collectively the “Patent Applications”), trademarks or service marks (collectively the “Trademarks”) or of any applications therefor (collectively the “Trademark Applications”) or otherwise in furtherance of the provisions of this Agreement;

(b)      Except to the extent that Secured Party shall consent in writing, Grantor (either itself or through licensees) will, unless Grantor shall reasonably determine that a Trademark (or the use of a Trademark in connection with a particular class of goods or products) is not of material economic value to Grantor: (i) continue to use each Trademark on each and every trademark class of goods in order to maintain each Trademark in full force free from any claim of abandonment for non-use; (ii) maintain as in the past the quality of products and services offered under each Trademark; (iii) employ each Trademark with the appropriate notice of application or registration to the extent required by applicable law to maintain such Trademark; (iv) not use any Trademark except for the uses for which registration or application for registration of such Trademark has been made, unless such use is otherwise lawful; and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated;

(c)      Except to the extent that Secured Party shall consent in writing, Grantor will not, unless Grantor shall reasonably determine that a Patent is not of material economic value to Grantor, do any act, or not to do any act, whereby any Patent may become abandoned or dedicated;

(d)      Unless Grantor shall reasonably determine that a Patent, Patent Application, Trademark or Trademark Application is not of material economic value to Grantor, Grantor shall notify Secured Party immediately if it knows, or has reason to know, of any reason that any Patent, Patent Application, Trademark or Trademark Application may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court) regarding Grantor’s ownership of any Patent or Trademark, its rights to register the same, or to keep and maintain the same;

(e)      If Grantor, either itself or through any agent, employee, licensee or designee, shall file a Patent Application or Trademark Application for the registration of any Trademark with the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, Grantor shall promptly inform Secured Party, and, upon request of Secured Party, shall promptly execute and deliver any and all agreements, instruments, documents and papers as Secured Party may reasonably request to evidence Secured Party’s security interest in such Patent or Trademark and the goodwill and general intangibles of Grantor relating thereto or represented thereby;

(f)      Unless Grantor shall reasonably determine that a Patent Application or Trademark Application is not of material economic value to Grantor, Grantor will take all necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each Patent Application and Trademark Application (and to obtain the relevant registration) and to maintain each registration of the Patents and Trademarks, including, without limitation, filing of applications for renewal and affidavits of use;

(g)     Unless Grantor shall reasonably determine that a Patent or Trademark is not of material economic value to Grantor, Grantor shall promptly notify Secured Party if any Patent or Trademark is infringed, misappropriated or diluted by a third party and either shall promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as Grantor shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark; and

(h)      Grantor agrees that it will not enter into any agreement (for example, a license agreement) which is inconsistent with Grantor’s obligations under this Agreement.

3.19     Copyrights . Grantor agrees with Secured Party that, until the security interest granted by this Agreement has been terminated in accordance with the terms hereof:

(a)      Grantor will perform all acts and execute all documents including, without limitation, grants of security interest, in form suitable for filing with the United States Copyright Office, reasonably requested by Secured Party at any time to evidence, perfect, maintain, record and enforce Secured Party’s interest in the Collateral comprised of copyrights or copyright applications (collectively the “Copyrights”) or otherwise in furtherance of the provisions of this Agreement;

(b)      Except to the extent that the Secured Party shall consent in writing, Grantor (either itself or through licensees) will, unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, publish the materials for which a Copyright has been obtained (the “Works”) with any notice of copyright registration required by applicable law to preserve the Copyright;

(c)      Unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, Grantor shall notify the Secured Party immediately if it knows, or has reason to know, of any reason that any application or registration relating to any Copyright may become abandoned or dedicated or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Copyright Office or any court) regarding Grantor’s ownership of any Copyright, its right to register the same, or to keep and maintain the same;

(d)      If Grantor, either itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Copyright with the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, Grantor shall promptly inform Secured Party, and, upon request of Secured Party, execute and deliver any and all agreements, instruments, documents and papers as Secured Party may request to evidence Secured Party’s security interest in such Copyright and the Works relating thereto or represented thereby;

(e)      Unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, Grantor will take all commercially reasonable steps, including, without limitation, in any proceeding before the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the Copyrights;

(f)      In the event that any Copyright is infringed by a third party, Grantor shall promptly notify Secured Party and shall, unless Grantor shall reasonably determine that such Copyright is not of material economic value to Grantor, promptly sue to recover any and all damages or take such other actions as Grantor shall reasonably deem appropriate under the circumstances to protect such Copyright; and

(g)      Grantor agrees that it will not enter into any agreement (for example, a license agreement) which is inconsistent with Grantor’s obligations under this Agreement.

3.20     Control . Grantor will cooperate with Secured Party in obtaining control with respect to Collateral consisting of Deposit Accounts, Investment Property, Letter-of-Credit Rights, and Electronic Chattel Paper. Without limiting the foregoing, if Grantor becomes a beneficiary of a letter of credit, then Grantor shall promptly notify the Secured Party thereof and, if then requested by Secured Party, enter into a tri-party agreement with the Secured Party and the issuer and/or confirmation bank with respect to such letter of credit assigning the Letter-of-Credit Rights to the Secured Party and directing all payments thereunder to the Secured Party, all in form and substance reasonably satisfactory to the Secured Party.

3.21     Further Acts . Where Collateral is in the possession of a third party, Grantor will join with Secured Party in notifying such third party of Secured Party’s security interest and in obtaining an acknowledgment from such third party that it is holding such Collateral for the benefit of the Secured Party.

3.22     Commercial Tort Claims . Grantor shall promptly notify the Secured Party of any Commercial Tort Claim acquired by it and, unless otherwise consented to by the Secured Party, Grantor shall promptly enter into a supplement to this Agreement granting to the Secured Party a security interest in such Commercial Tort Claim.

(b)     Grantor shall promptly, but in any event no later than 10 days after the Secured Party’s written request (the date on which the Grantor receives such request being the “ Titles Request Date ”), deliver to the Secured Party originals of the certificates of title or ownership for the Motor Vehicles owned by it together with appropriate grant forms executed in favor of the Secured Party.

(c)      Upon the acquisition after the Titles Request Date by Grantor of any Motor Vehicle, Grantor shall deliver to the Secured Party originals of the certificates of title or ownership for such Motor Vehicle, together with the manufacturer’s statement of origin, with the Secured Party listed as lienholder.

(d)     Grantor hereby appoints the Secured Party as its attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (i) executing on behalf of Grantor title or ownership applications for filing with appropriate state agencies to enable Motor Vehicles now owned or hereafter acquired by Grantor to be retitled and the Secured Party listed as lienholder thereof, (ii) filing such applications with such state agencies, and (iii) executing such other documents and instruments on behalf of, and taking such other action in the name of, Grantor as the Secured Party may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the purpose of creating in favor of the Secured Party a perfected Lien on the Motor Vehicles and exercising the rights and remedies of the Secured Party hereunder). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are paid in full after the termination of the Loan Agreement and the other Loan Documents.

(e)      Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each Motor Vehicle covered thereby.

(f)      So long as no Event of Default shall have occurred and be continuing, upon the request of Grantor, the Secured Party shall execute and deliver to Grantor such instruments as Grantor shall reasonably request to remove the notation of the Secured Party as lienholder on any certificate of title for any Motor Vehicle; provided that any such instruments shall be delivered, and the release effective, only upon receipt by the Secured Party of a certificate from Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss), the amount that Grantor will receive as sale Proceeds or insurance Proceeds, and any Proceeds of such sale or casualty loss shall be paid to the Secured Party hereunder to be applied to the Obligations then outstanding.

ARTICLE IV

COLLECTIONS

Except as otherwise provided in this Article IV, Grantor shall continue to collect, at its own expense, all amounts due or to become due to Grantor under the Accounts constituting part of the Collateral and all other Collateral. In connection with such collections, Grantor may take (and, at Secured Party’s direction given after the occurrence and during the continuance of an Event of Default, shall take) such action as Grantor or Secured Party may deem necessary or advisable to enforce collection of the Accounts and such other Collateral; provided , however , that Secured Party shall have the right at any time, without giving written notice to Grantor of Secured Party’s intention to do so, to notify the account debtors under any Accounts or obligors with respect to such other Collateral of the assignment of such Accounts and such other Collateral to Secured Party and to direct such account debtors or obligors to make payment of all amounts due or to become due to Grantor thereunder directly to Secured Party and, upon such notification and at the expense of Grantor, to enforce collection of any such Accounts or other Collateral, and to adjust, settle or compromise the amount or payment thereof in the same manner and to the same extent as Grantor might have done, but unless and until Secured Party does so or gives Grantor other instructions, Grantor shall make all collections for Secured Party. In addition to its rights under the preceding sentence to this Section, Secured Party, at any time after the occurrence of an Event of Default may require that Grantor instruct all current and future account debtors and obligors on other Collateral to make all payments directly to a lockbox (the “Lockbox”) controlled by Secured Party. All payments received in the Lockbox shall be transferred to a special bank account (the “Collateral Account”) maintained for the benefit of Secured Party subject to withdrawal by Secured Party only. After the earliest to occur of an Event of Default, Secured Party’s exercise of its right to direct account debtors or other obligors on any Collateral to make payments directly to Secured Party or to require Grantor to establish a Lockbox, Grantor shall immediately deliver all full and partial payments on any Collateral received by Grantor to Secured Party in their original form, except for endorsements where necessary. Secured Party, at its sole discretion, may hold any collections on the Collateral delivered to it or deposited in the Collateral Account as cash collateral or may apply such collections to the payment of the Obligations in such order as Secured Party may elect; provided , however , that after an Event of Default has occurred and is continuing, Secured Party shall apply all collections in accordance with Section 7.7. Until such payments are so delivered to Secured Party, such payments shall be held in trust by Grantor for and as Secured Party’s property, and shall not be commingled with any funds of Grantor. Any application of any collection to the payment of any Obligation is conditioned upon final payment of any check or other instrument.

ARTICLE V

ASSIGNMENT OF INSURANCE

Grantor hereby assigns to Secured Party, as additional security for payment of the Obligations, any and all monies due or to become due under, and any and all other rights of Grantor with respect to, any and all policies of insurance covering the Collateral. So long as no Default or Event of Default has occurred and is continuing, Grantor may itself adjust and collect for any losses of up to an aggregate amount of $50,000.00 for all occurrences during any of Grantor’s fiscal years and Grantor may use the resulting Insurance Proceeds for the replacement, restoration or repair of the Collateral. After the occurrence and during the continuance of a Default or an Event of Default, or after the aggregate amount of losses arising out of all occurrences during any of Grantor’s fiscal years exceeds $50,000.00, Secured Party may (but need not) in its own name or in Grantor’s name execute and deliver proofs of claim, receive such monies, and settle or litigate any claim against the issuer of any such policy and Grantor directs the issuer to pay any such monies directly to Secured Party and Secured Party, at its sole discretion and regardless of whether Secured Party exercises its right to collect Insurance Proceeds under this Section, may apply any Insurance Proceeds to the payment of the Obligations, whether due or not, in such order and manner as Secured Party may elect or may permit Grantor to use such Insurance Proceeds for the replacement, restoration or repair of the Collateral.

ARTICLE VI

EVENTS OF DEFAULT

The occurrence of any Event of Default as defined in the Loan Agreement shall constitute an Event of Default hereunder (“Event of Default”).

ARTICLE VII      

RIGHTS AND REMEDIES ON DEFAULT

Upon the occurrence of an Event of Default, and at any time thereafter until such Event of Default is cured to the satisfaction of Secured Party, and in addition to the rights granted to Secured Party under Articles IV and V hereof, Secured Party may exercise any one or more of the following rights and remedies:

7.1       Acceleration of Obligations . Declare any and all Obligations to be immediately due and payable, and the same shall thereupon become immediately due and payable without further notice or demand.

7.2       Right of Offset . Offset any deposits, including unmatured time deposits, then maintained by Grantor with Secured Party, whether or not then due, against any indebtedness then owed by Grantor to Secured Party whether or not then due.

7.3      Deal with Collateral . In the name of Grantor or otherwise, demand, collect, receive and give receipt for, compound, compromise, settle and give acquittance for and prosecute and discontinue any suits or proceedings in respect of any or all of the Collateral.

7.4      Realize on Collateral . Take any action which Secured Party may deem reasonably necessary or desirable in order to realize on the Collateral, including, without limitation, the power to perform any contract, to endorse in the name of Grantor any checks, drafts, notes, or other instruments or documents received in payment of or on account of the Collateral. Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

7.5       Access to Property . Enter upon and into and take possession of all or such part or parts of the properties of Grantor, including lands, plants, buildings, machinery, equipment, Data Processing Records and Systems and other property as may be necessary or appropriate in the reasonable judgment of Secured Party, to permit or enable Secured Party to store, lease, sell or otherwise dispose of or collect all or any part of the Collateral, and use and operate said properties for such purposes and for such length of time as Secured Party may deem necessary or appropriate for said purposes without the payment of any compensation to Grantor therefor. Grantor shall provide Secured Party with all information and assistance requested by Secured Party to facilitate the storage, leasing, sale or other disposition or collection of the Collateral after an Event of Default has occurred and is continuing.

7.6      Other Rights . Exercise any and all other rights and remedies available to it by law or by agreement, including rights and remedies under the UCC as adopted in the relevant jurisdiction or any other applicable law, or under the Loan Agreement and, in connection therewith, Secured Party may require Grantor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, and any notice of intended disposition of any of the Collateral required by law shall be deemed reasonable if such notice is mailed or delivered to Grantor at its address as shown on Secured Party’s records at least 10 days before the date of such disposition.

7.7       Application of Proceeds . All Proceeds of Collateral shall be applied in accordance with the UCC, and such Proceeds applied toward the Obligations shall be applied in such order as Secured Party may elect.

7.8       Patents and Trademarks . Upon the occurrence and during the continuance of an Event of Default:

(a)     Secured Party may, at any time and from time to time, upon thirty (30) days’ prior notice to Grantor, license or, to the extent permitted by an applicable license, sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Patent or Trademark, throughout the world for such term or terms, on such conditions, and in such manner, as Secured Party shall in its sole discretion determine;

(b)     Secured Party may (without assuming any obligations or liability thereunder), at any time enforce (and shall have the exclusive right to enforce) against any licensor, licensee or sublicensee all rights and remedies of Grantor in, to and under any one or more license or other agreements with respect to any Patent or Trademark and take or refrain from taking any action under any such license or other agreement, and Grantor hereby releases Secured Party from, and agrees to hold Secured Party free and harmless from and against, any claims arising out of, any action taken or omitted to be taken with respect to any such license or agreement;

(c)      Any and all payments received by Secured Party under or in respect of any Patent or Trademark (whether from Grantor or otherwise), or received by Secured Party by virtue of the exercise of the license granted to Secured Party by subsection (g) below, shall be applied to the Obligations in accordance with Section 7.7 hereof;

(d)      Secured Party may exercise in respect of the Patents and Trademarks, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC;

(e)      In order to implement the sale, lease, assignment, license, sublicense or other disposition of any of the Patents and Trademarks pursuant to this Section 7.8, Secured Party may, at any time, execute and deliver on behalf of Grantor one or more instruments of assignment of the Patents and Trademarks (or any application or registration thereof), in form suitable for filing, recording or registration in any country. Grantor agrees to pay when due all reasonable costs incurred in any such transfer of the Patents and Trademarks, including any taxes, fees and reasonable attorneys’ fees;

(f)      In the event of any sale, lease, assignment, license, sublicense or other disposition of any of the Patents or Trademarks pursuant to this Section, Grantor shall supply to Secured Party or its designee its know-how and expertise relating to the manufacture and sale of the products relating to any Patent or Trademark subject to such disposition, and its customer lists and other records relating to such Patents or Trademarks and to the distribution of said products; and

(g)      For the purpose of enabling Secured Party to exercise rights and remedies under this Agreement at such time as Secured Party shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, Grantor hereby grants to Secured Party, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense at such time any Patent or Trademark, now owned or hereafter acquired by Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof.

7.9       Copyrights . Upon the occurrence and during the continuance of an Event of Default:

(a)      Secured Party may, at any time and from time to time, upon thirty (30) days’ prior notice to Grantor, license or, to the extent permitted by an applicable license, sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Copyright, for such term or terms, on such conditions, and in such manner, as Secured Party shall in its sole discretion determine;

(b)      Secured Party may (without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right to enforce) against any licensor, licensee or sublicensee all rights and remedies of Grantor in, to and under any one or more license or other agreements with respect to any Copyright and take or refrain from taking any action under any such license or other agreement and Grantor hereby releases Secured Party from, and agrees to hold Secured Party free and harmless from and against, any claims arising out of, any action taken or omitted to be taken with respect to any such license or agreement;

(c)      Any and all payments received by Secured Party under or in respect of any Copyright (whether from Grantor or otherwise), or received by Secured Party by virtue of the exercise of the license granted to Secured Party by subsection (f) below, shall be applied to the Obligations in accordance with Section 7.7;

(d)      Secured Party may exercise in respect of the Copyrights, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC;

(e)      In order to implement the sale, lease, assignment, license, sublicense or other disposition of any of the Copyrights pursuant to this Section 7.9, Secured Party may, at any time, execute and deliver on behalf of Grantor one or more instruments of assignment of the Copyrights (or any application or registration thereof), in form suitable for filing, recording or registration in the Copyright Office or any country where the relevant Copyright is of material economic value to Grantor. Grantor agrees to pay when due all reasonable costs incurred in any such transfer of the Copyrights, including any taxes, fees and reasonable attorneys’ fees; and

(f)      For the purpose of enabling Secured Party to exercise rights and remedies under this Agreement at such time as Secured Party shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, Grantor hereby grants to Secured Party an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense any Copyright, now owned or hereafter acquired by Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof.

ARTICLE VIII

MISCELLANEOUS

8.1      No Liability on Collateral . It is understood that Secured Party does not in any way assume any of Grantor’s obligations under any of the Collateral. Grantor hereby agrees to indemnify Secured Party against all liability arising in connection with or on account of any of the Collateral, except for any such liabilities arising on account of Secured Party’s negligence or willful misconduct.

8.2       No Waiver . Secured Party shall not be deemed to have waived any of its rights hereunder or under any other agreement, instrument or paper signed by Grantor unless such waiver is in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion.

8.3       Remedies Cumulative . All rights and remedies of Secured Party shall be cumulative and may be exercised singularly or concurrently, at their option, and the exercise or enforcement of any one such right or remedy shall not bar or be a condition to the exercise or enforcement of any other.

8.4      Governing Law . This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Minnesota, except to the extent that the perfection of the security interest hereunder, or the enforcement of any remedies hereunder, with respect to any particular Collateral shall be governed by the laws of a jurisdiction other than the State of Minnesota.

8.5      Expenses . Grantor agrees to pay the reasonable attorneys’ fees and legal expenses incurred by Secured Party in the exercise of any right or remedy available to it under this Agreement, whether or not suit is commenced, including, without limitation, attorneys’ fees and legal expenses incurred in connection with any appeal of a lower court’s order or judgment.

8.6       Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of Grantor and Secured Party.

8.7       Recitals . The above Recitals are true and correct as of the date hereof and constitute a part of this Agreement.

8.8       Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

8.9      Reinstatement . This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

8.10     No Obligation to Pursue Others . Secured Party has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Secured Party may release, modify or waive any Collateral provided by any other person to secure any of the Obligations, all without affecting Secured Party’s rights against Grantor. Grantor waives any right it may have to require Secured Party to pursue any third person for any of the Obligations.

8.11    Waiver of Jury Trial . GRANTOR HEREBY EXPRESSLY WAIVE(S) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE(S) THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

8.12     Counterparts . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or .pdf file shall be effective as delivery of a manually executed counterpart of this Agreement, but the party delivering a facsimile, pdf or other digital copy shall deliver an original copy of this Agreement as soon as possible after delivering the facsimile or other digital copy.

8.13     Effect on Prior Agreement . The Prior Agreement is amended and restated in its entirety by this Agreement, but such amendment and restatement does not alter the original date and continuing effectiveness of, the Prior Agreement.

IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be effective as of the date and year first above written.

[Signature Page to Security Agreement]

EXHIBIT A

EXHIBIT B

COMMERCIAL TORT CLAIMS

None.

Exhibit 10.5

SUBORDINATION AGREEMENT

WHEREAS, Airco 1, LLC , a Minnesota limited liability company (hereinafter, together with its successors and assigns, called the “ Borrower ”), is now indebted to Air T, Inc. , a Delaware corporation (the “ Subordinated Creditor ”), in the amount of SIX HUNDRED SEVENTEEN THOUSAND AND NO/100THS Dollars ($617,000) and may from time to time hereafter become indebted to the Subordinated Creditor in further amounts, and Borrower has requested, and may from time to time hereafter request, Minnesota Bank & Trust , (hereinafter, together with its successors and assigns, called the “ Lender ”), with an office at 9800 Bren Road East, Suite 200, Minnetonka, MN 55343, to make or agree to make loans, advances or other financial accommodations to the Borrower;

NOW, THEREFORE, to induce the Lender, from time to time, at its option, to make or agree to make loans, advances or other financial accommodations (including, without limitation, renewals or extensions of any loans or advances heretofore or hereafter made) to the Borrower, and for other valuable consideration, receipt whereof is hereby acknowledged, the Subordinated Creditor agrees as follows:

1.     All obligations of the Borrower, howsoever created, arising or evidenced, whether direct or indirect, joint, several and/or joint and several, absolute or contingent or now or hereafter existing, or due or to become due, are hereinafter called “ Liabilities .” All Liabilities to the Lender (other than any arising solely by reason of any pledge or assignment made to the Lender pursuant to paragraph 2(c) hereof) and all Liabilities incurred by the Borrower to any other person to re-finance such Liabilities to the Lender are hereinafter called “ Senior Liabilities ”; and all Liabilities to the Subordinated Creditor (including any that may be pledged or assigned to the Lender pursuant to paragraph 2(c) hereof) arising under the promissory note(s) and the other documents described on Schedule A attached hereto and incorporated herein by reference including, without limitation, all principal, interest, fees, expenses, attorneys’ fees and legal expenses are hereinafter called “ Junior Liabilities ”; it being expressly understood and agreed that: (a) the term “Senior Liabilities,” as used herein, shall include, without limitation, any and all interest accruing on any of the Senior Liabilities after, and all of Lender’s collection expenses including, without limitation, attorneys’ fees and legal expenses incurred, after, the commencement of any proceedings referred to in paragraph 4 hereof, notwithstanding any provision or rule of law which might restrict the rights of the Lender, as against the Borrower or anyone else, to collect such interest; and (b) the term “Junior Liabilities,” as used herein, shall include, without limitation, any and all interest accruing on any of the Junior Liabilities after, and all of the Subordinated Creditor’s collection expenses including, without limitation, attorneys’ fees and legal expenses incurred after, the commencement of any proceedings referred to in paragraph 4 hereof, notwithstanding any provision or rule of law which might restrict the rights of the Subordinated Creditor, as against the Borrower or anyone else, to collect such interest.

2.    The Subordinated Creditor will, from time to time, (a) promptly notify the Lender of the creation of any Junior Liabilities, and of the issuance of any promissory note or other instrument to evidence any Junior Liabilities, (b) upon request by the Lender, cause any Junior Liabilities which are not evidenced by a promissory note or other instrument of Borrower to be so evidenced, and (c) upon request by the Lender, and as collateral security for all Senior Liabilities, endorse without recourse, deliver and pledge to the Lender any or all promissory notes or other instruments evidencing Junior Liabilities, and otherwise assign to the Lender any or all Junior Liabilities and any or all security therefor and guaranties thereof, all in a manner satisfactory to the Lender.

3.    Except as hereinafter in this Agreement expressly otherwise provided or as the Lender may hereafter otherwise expressly consent in writing, the payment of all Junior Liabilities shall be postponed and subordinated to the payment in full of all Senior Liabilities, and neither the Borrower nor any other person obligated on any of the Senior Liabilities (the “Other Obligor(s)” shall make any payments or other distributions whatsoever in respect of any Junior Liabilities; nor shall any property or assets of the Borrower any Other Obligor be applied to the purchase or acquisition or retirement of any Junior Liabilities; provided , however , that the Borrower may make regularly scheduled payments of interest on the Junior Liabilities, so long as no “Event of Default” (each quoted term in this proviso clause being used as defined in that certain Loan Agreement dated as of even date herewith (such Loan Agreement as amended, modified, supplemented or restated from time to time being the “ Credit Agreement ” between the Borrower and the Lender) or “Default” has occurred or is continuing, or would result from the making of any such payment. If any such payment on the Junior Liabilities is prohibited from being paid by the operation of this Agreement, then such payment shall only be payable after the payment in full of the Senior Liabilities following the repayment in full of all Senior Liabilities and the termination of the Credit Agreement. The Borrower’s failure to make a payment on the Junior Liabilities by reason of this Agreement shall not constitute an event of default on the Junior Liabilities. During the term of this Agreement, the Subordinated Creditor shall not commence any action against the Borrower or any Other Obligor to collect the Junior Liabilities.

4.     In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar proceedings relating to the Borrower or any Other Obligor to its creditors, as such, or to its property (whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency or receivership, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Borrower or any Other Obligor, or any sale of all or substantially all of the assets of the Borrower or any Other Obligor, or otherwise), the Senior Liabilities shall first be paid in full before the Subordinated Creditor shall be entitled to receive and to retain any payment or distribution in respect of the Junior Liabilities, and, in order to implement the foregoing, (a) all payments and distributions of any kind or character in respect of the Junior Liabilities to which the Subordinated Creditor would be entitled if the Junior Liabilities were not subordinated, or subordinated and pledged or assigned, pursuant to this Agreement shall be made directly to the Lender, (b) the Subordinated Creditor shall promptly file a claim or claims, in the form required in such proceedings, for the full outstanding amount of the Junior Liabilities, and shall cause said claim or claims to be approved and all payments and other distributions in respect thereof to be made directly to the Lender, and (c) the Subordinated Creditor hereby irrevocably agrees that the Lender may, at its sole discretion, in the name of the Subordinated Creditor or otherwise, demand, sue for, collect, receive and receipt for any and all such payments or distributions, and file, prove, and vote or consent in any such proceedings with respect to, any and all claims of the Subordinated Creditor relating to the Junior Liabilities.

5.     In the event that the Subordinated Creditor receives any payment or other distribution of any kind or character from the Borrower or any Other Obligor or from any other source whatsoever in respect of any of the Junior Liabilities, other than as expressly permitted by the terms of this Agreement, such payment or other distribution shall be received in trust for the Lender and promptly turned over by the Subordinated Creditor to the Lender. The Subordinated Creditor will mark its books and records, and cause the Borrower and each Other Obligor to mark its books and records, so as to clearly indicate that the Junior Liabilities are subordinated in accordance with the terms of this Agreement, and will cause to be clearly inserted in any promissory note or other instrument which at any time evidences any of the Junior Liabilities a statement to the effect that the payment thereof is subordinated in accordance with the terms of this Agreement. The Subordinated Creditor will execute such further documents or instruments and take such further action as the Lender may reasonably from time to time request to carry out the intent of this Agreement.

6.    All payments and distributions received by the Lender in respect of the Junior Liabilities, to the extent received in or converted into cash, may be applied by the Lender first to the payment of any and all expenses (including attorneys’ fees and legal expenses) paid or incurred by the Lender in enforcing this Agreement or in endeavoring to collect or realize upon any of the Junior Liabilities or any security therefor, and any balance thereof shall, solely as between the Subordinated Creditor and the Lender, be applied by the Lender, in such order of application as the Lender may from time to time select, toward the payment of the Senior Liabilities remaining unpaid; but, as between the Borrower or any Other Obligor and its creditors, no such payments or distributions of any kind or character shall be deemed to be payments or distributions in respect of the Senior Liabilities; and, notwithstanding any such payments or distributions received by the Lender in respect of the Junior Liabilities and so applied by the Lender toward the payment of the Senior Liabilities, the Subordinated Creditor shall be subrogated to the then existing rights of the Lender, if any, in respect of the Senior Liabilities only at such time as the Lender shall have indefeasibly received payment of the full amount of the Senior Liabilities.

7.     The Subordinated Creditor hereby waives: (a) notice of acceptance by the Lender of this Agreement; (b) notice of the existence or creation or non-payment of all or any of the Senior Liabilities; and (c) all diligence in collection or protection of or realization upon the Senior Liabilities or any thereof or any security therefor.

8.     The Subordinated Creditor will not without the prior written consent of the Lender: (a) cancel, waive, forgive, transfer or assign, or attempt to enforce or collect, or subordinate to any Liabilities other than the Senior Liabilities, any Junior Liabilities or any rights in respect thereof; (b) take any collateral security for any Junior Liabilities; (c) convert any Junior Liabilities into stock of the Borrower; or (d) commence, or join with any other creditor in commencing, any bankruptcy, reorganization or insolvency proceedings with respect to the Borrower.

9.     Subject to reinstatement in accordance with the following sentence, this Agreement shall in all respects be a continuing agreement and shall remain in full force and effect (notwithstanding, without limitation, the death, incompetency or dissolution of the Subordinated Creditor or that at any time or from time to time all Senior Liabilities may have been paid in full). This Agreement shall be automatically reinstated if any payment received by Lender from any source derived and applied to the Senior Liabilities is subsequently set aside, recovered, rescinded or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of the Borrower or any Other Obligor); the Senior Liabilities to which such payment was applied shall for the purposes of this Agreement be deemed to have continued in existence, notwithstanding such application, and this Agreement shall be enforceable as to such Senior Liabilities as fully as if such application had never been made.

10.   The Lender may, from time to time, at its sole discretion and without notice to the Subordinated Creditor, take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Senior Liabilities, (b) retain or obtain the primary or secondary obligation of any other obligor or obligors with respect to any of the Senior Liabilities, (c) increase, extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Senior Liabilities, or release or compromise any obligation of any nature of any obligor with respect to any of the Senior Liabilities, and (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Senior Liabilities, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property.

11.   The Lender may, from time to time, without notice to the Subordinated Creditor, assign or transfer any or all of the Senior Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Senior Liabilities shall be and remain Senior Liabilities for the purposes of this Agreement, and every immediate and successive assignee or transferee of any of the Senior Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Senior Liabilities, be entitled to the benefits of this Agreement to the same extent as if such assignee or transferee were the Lender; provided , however , that, unless the Lender shall otherwise consent in writing, the Lender shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this Agreement, for the benefit of the Lender, as to those of the Senior Liabilities which the Lender has not assigned or transferred.

12.   The Lender shall not be prejudiced in its rights under this Agreement by any act or failure to act of the Borrower, any Other Obligor or the Subordinated Creditor, or any noncompliance of the Borrower, any Other Obligor or the Subordinated Creditor with any agreement or obligation, regardless of any knowledge thereof which the Lender may have or with which the Lender may be charged; and no action of the Lender permitted hereunder shall in any way affect or impair the rights of the Lender and the obligations of the Subordinated Creditor under this Agreement.

13.   No delay on the part of the Lender in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Lender of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Agreement be binding upon the Lender except as expressly set forth in a writing duly signed and delivered on behalf of the Lender. For the purposes of this Agreement, Senior Liabilities shall include all obligations of the Borrower to the Lender, notwithstanding any right or power of the Borrower or anyone else to assert any claim or defense as to the invalidity or un enforceability of any such obligation, and no such claim or defense shall affect or impair the agreements and obligations of the Subordinated Creditor hereunder.

14.   This Agreement shall be binding upon the Subordinated Creditor and upon the heirs, legal representatives, successors and assigns of the Subordinated Creditor; and, to the extent that the Borrower or the Subordinated Creditor is either a partnership or a corporation, all references herein to the Borrower and to the Subordinated Creditor, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to such partnership or corporation.

15.   THIS AGREEMENT SHALL BE GOVERNED BY, INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, BUT NOT THE LAW OF CONFLICTS, OF THE STATE OF MINNESOTA.

16.   Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

17.  THE SUBORDINATED CREDITOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

18.   AT THE OPTION OF THE LENDER, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS, MINNESOTA; AND THE SUBORDINATED CREDITOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE SUBORDINATED CREDITOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

19.   Each party to this Agreement acknowledges and agrees that this Agreement is a “subordination agreement” for purposes of Section 510(a) of the Bankruptcy Code and should be enforced in bankruptcy in accordance with its terms.

20.   This Agreement has been reviewed by the Subordinated Creditor and incorporates the requirements of the Subordinated Creditor. The Subordinated Creditor waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement.

21.   In the event of any dispute or controversy between the Subordinated Creditor and the Lender in connection with the enforcement of this Agreement, the Lender shall be entitled to reimbursement of its reasonable costs and expenses (including, without limitation, its reasonable attorney’s fees and legal expenses) from the Subordinated Creditor if the Lender is the prevailing party.

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IN WITNESS WHEREOF, this Agreement has been made and delivered at Minneapolis, Minnesota as of April 3, 2019.

Subordinated Creditor:

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ACKNOWLEDGMENT BY BORROWER

AIRCO 1, LLC (the “ Borrower ”) hereby acknowledges receipt of a copy of the foregoing Subordination Agreement (the “ Agreement ”), waives notice of acceptance thereof by the Lender and agrees to be bound by the terms and provisions thereof, to make no payments or distributions contrary to the terms and provisions thereof, and to do every other act and thing necessary or appropriate to carry out such terms and provisions. In the event of any violation of any of the terms and provisions of the Agreement, then, at the election of the Lender, any and all obligations of the Borrower to the Lender shall forthwith become due and payable and any and all agreements of the Lender to make loans, advances or other financial accommodations to the Borrower shall forthwith terminate, notwithstanding any provisions thereof to the contrary.

Dated: April 3, 2019

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