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EXHIBIT 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT entered into this 16th day of June, 2005,
by
and between PINNACLE AIRLINES, INC., a
Georgia corporation whose address is 1689
Nonconnah Boulevard, Suite 111, Memphis,
Tennessee 38132 (the "Grantor"), and
FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
a national banking association whose
address is 165 Madison Avenue, Memphis,
Tennessee 38103 (the "Bank").
WITNESSETH:
That for good and valuable considerations, the receipt and
sufficiency
of which are hereby acknowledged, the
Grantor hereby agrees with Bank as
follows:
1. DEFINITIONS. (a) Reference is made to the Loan Agreement (the
"Loan
Agreement") of even date herewith among the
Grantor, Pinnacle Airlines Corp., a
Delaware corporation ("Guarantor"), and the
Bank, said Loan Agreement being
incorporated herein by reference. All terms
used in this Agreement which are
defined in the Loan Agreement or in the
Uniform Commercial Code of the State of
Tennessee, as now or hereafter in effect
(the "Code"), and which are not
otherwise defined herein shall have the
same meanings herein as set forth
therein.
(b) The term "Event of Default" shall have the
meaning set out in Section 7 hereof.
2. GRANT OF SECURITY INTEREST. As collateral security for all of
the
Obligations (as defined in Section 3
hereof), the Grantor hereby pledges and
assigns to Bank, and grants to Bank a
continuing security interest in, the
following personal property of Grantor
wherever located and whether now or
hereafter existing (the "Collateral"):
(a) All furniture, fixtures and equipment of the Grantor,
including without limitation all propellers, appliances and
spare
parts, rotable parts and ground service equipment owned by the
Grantor
but expressly excluding (i) all aircraft, (ii) all leased spare
engines and (iii) all consigned goods;
(b) All records and documents related to Collateral,
including, without limitation, computer programs;
(c) All spare parts (including appliances) now or hereafter
owned by the Grantor that are appropriate for installation on or
use
in:
(i) any aircraft now or hereafter owned or leased by
Grantor; and
(ii) any engine utilized in any such aircraft;
together with all records relating to such spare parts and all
rights of Borrower with respect to such
spare parts (all of the foregoing items
of collateral in this subsection (c)
are
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collectively referred to hereinafter as
"Inventory"). The spare parts included
in Inventory fall into two (2) categories:
"rotables" and "expendables."
"Rotables" are spare parts that wear over
time and can be repeatedly restored to
a serviceable condition over a period of
time approximating the life of the
flight equipment to which they relate.
"Expendables" consist of: (i) parts that
can be restored to a serviceable condition
but which have a life less than that
of the related flight equipment; and (ii)
parts that are generally used once and
thereby consumed or thereafter discarded.
As stated above, the parties hereto
agree that spare engines are not included
in the definition of "Inventory" or
the definition of "Collateral" as provided
herein. The parties hereto further
agree that the lien of this Security
Agreement will not apply to a particular
spare part or piece of Inventory for so
long as such spare part or piece of
Inventory is installed upon, affixed to, or
being used in any aircraft, engine,
or other spare part or piece of Inventory
so installed, affixed, or being used.
(d) All Proceeds, including Cash Proceeds, of any and all of
the foregoing Collateral except Inventory;
in each case, wherever located, whether now
owned or hereafter acquired by the
Grantor. The Collateral described in
subparagraphs (a), (b), and (c) of this
Section are sometimes hereinafter called
the "Tangible Collateral."
3. SECURITY FOR OBLIGATIONS. The security interest created hereby
in
the Collateral constitutes continuing
collateral security for all of the
following obligations, whether now existing
or hereafter incurred (the
"Obligations"):
(a) The full and prompt payment when due of the indebtednesses
evidenced by that certain Revolving Credit Note of even date
herewith,
in the principal sum of SEVENTEEN MILLION Dollars
($17,000,000.00)
executed by Grantor and payable to the order of Bank, and any and
all
renewals, modifications and extensions thereof, in whole or in
part,
and including any obligations under any letters of credit issued
under
said line of credit pursuant to the terms of the Loan Agreement,
and
any and all renewals, modifications and extensions thereof, in
whole or
in part; and
(b) The due performance and observance by the Grantor of all
of its covenants, agreements, representations, liabilities,
obligations, and undertakings as set forth herein, or in the
Loan
Agreement (as the same may be modified renewed or extended from
time to
time), or in any other instrument or document which now or at any
time
hereafter evidences or secures all or any part of the
Obligations
hereby secured howsoever and whensoever arising, whether absolute
or
contingent, joint or several, matured or unmatured, direct or
indirect,
primary or secondary, and including without limitation, all
future
advances to Grantor, all liabilities of the Grantor under any
guaranty
agreement executed in favor of the Bank at any time and all
obligations
of the Grantor with respect to any letters of credit issued at any
time
by Bank for the benefit of Grantor.
4. REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants
as follows:
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(a) All Tangible Collateral now existing is, and all Tangible
Collateral hereafter
existing will be, located at the locations
described in Exhibit "A". The Grantor's chief place of business
and
chief executive office, the place where Grantor keeps Grantor's
records, are located at the address specified for the Grantor in
the
initial paragraph hereof.
(b) The Grantor is a corporation. The Grantor's state of
incorporation is the State identified in the certificate of
existence
attached as Exhibit "B," and the exact legal name of the Grantor is
set
forth in the initial paragraph hereof. The organizational
identification number assigned to Grantor by its state of
organization
is J517167.
(c) The Grantor owns the Collateral free and clear of any
lien, security interest or other charge or encumbrance except for
the
security interest created by this Agreement, and except for the
financing statement filed in favor of Bank relating to this
Agreement,
no other financing statement or other instrument similar in
effect
covering all or any part of the Collateral is on file in any
recording
office.
(d) The exercise by Bank of its rights and remedies hereunder
will not contravene any law or governmental regulation or any
contractual restriction binding on or affecting the Grantor or any
of
the Grantor's properties and will not result in or require the
creation
of any lien, security interest or other charge or encumbrance upon
or
with respect to any of the Grantor's properties.
(e) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or other
regulatory body is required either for the grant by the Grantor of
the
security interest created hereby in the Collateral or for the
exercise
by Bank of its rights and remedies hereunder.
(f) This Agreement creates a valid security interest in favor
of the Bank in the Collateral. The filing of the financing
statements
with the Georgia Secretary of State pursuant to the Loan Agreement
will
perfect and establish the first priority of the Bank's security
interest hereunder in the Collateral (other than the aircraft
component
equipment for which filing is required with the Federal
Aviation
Administration), subject to no other liens and encumbrances. Except
as
set forth in this Section 4(f), no action is necessary or desirable
to
perfect or otherwise protect such security interest.
5. GRANTOR'S COVENANTS. So long as any of the Obligations shall
remain
outstanding, unless Bank shall otherwise
consent in writing:
(a) Further Assurances. The Grantor will at Grantor's expense,
at any time and from time to time, promptly execute and deliver
all
further instruments and documents and take all further action that
Bank
deems necessary or desirable or that Bank may request in order (i)
to
perfect and protect the security interest created or purported to
be
created hereby; (ii) to enable Bank to exercise and enforce its
rights
and remedies hereunder in respect of the Collateral; or (iii)
to
otherwise effect the purposes of this Agreement, including,
without
limitation: (A) authorizing the filing of such financing or
continuation statements, or amendments thereto, as Bank deems
necessary
or desirable or
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that Bank may request in order to perfect and preserve the
security
interest created or purported to be created hereby; (B) furnishing
to
Bank from time to time statements and schedules further identifying
and
describing the Collateral and such other reports in connection with
the
Collateral as Bank may reasonably request, all in reasonable
detail;
(C) if any Inventory shall be represented by a warehouse receipt
or
other document of title, delivering such warehouse receipt or
other
document to Bank duly endorsed or assigned to Bank, all in form
and
substance
satisfactory to the Bank; and (D) where Collateral consisting
of Documents or Goods is held by a third-party bailee, furnish
Bank
evidence in form reasonable satisfactory to Bank of such
bailee's
acknowledgment that it is holding such Collateral for the benefit
of
Bank.
(b) Location of Tangible Collateral. The Grantor will keep all
of the Tangible Collateral, both now owned and hereafter acquired,
at
the locations set forth in Section 4(a) of this Agreement, or at
such
other location or locations to which Bank shall consent in writing
in
advance of placing Tangible Collateral at such location(s)
which
consent shall not be unreasonably withheld, delayed or
conditioned.
(c) Taxes. The Grantor will pay promptly before delinquent all
property and other taxes, assessments, and governmental charges
or
levies imposed upon, and all claims (including claims for
labor,
materials, and supplies) against, the Collateral, except to the
extent
the validity thereof is being contested diligently and in good
faith by
proper proceedings satisfactory to the Bank.
(d) Insurance.
(i) The Grantor will, at Grantor's own expense,
maintain insurance with respect to the Tangible Collateral in
such
amounts, against such risks, in such form and with such insurers,
as
shall be satisfactory to Bank from time to time, and in
accordance
with the provisions of the Loan Agreement. The Bank acknowledges
and
agrees that the insurance presently maintained by Grantor is
satisfactory to the Bank. Each policy for liability insurance
shall
provide for all losses to be paid on behalf of Bank and the Grantor
as
their respective interests may appear, and each policy for
property
damage insurance shall provide for all losses to be paid directly
to
Bank. Each such policy shall in addition (A) name the Grantor and
Bank
as insured parties thereunder (without any representation or
warranty
by or obligation upon Bank) as their interests may appear, (B)
contain
the agreement by the insurer that any loss thereunder shall be
payable
to Bank notwithstanding any action, inaction, or breach of
representation or warranty by the Grantor, (C) provide that
there
shall be no recourse against Bank for payment of premiums or
other
amounts with respect thereto and (D) provide that at least ten
(10)
days' prior written notice of cancellation, amendment, or of
lapse
shall be given to Bank by the insurer. The Grantor will, if so
requested by Bank, deliver to Bank original or duplicate policies
of
such insurance, or satisfactory certificates of insurance, and,
as
often as Bank may reasonably request, a report of a reputable
insurance broker with respect to such insurance.
(ii) Reimbursement under any liability insurance
maintained by the Grantor pursuant to this Section 5(d) may be
paid
directly to the party who shall have
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incurred liability covered by such insurance. In case of any
loss
involving damage to Tangible Collateral as to which paragraph (iii)
of
this Section 5(d) is not applicable, the Grantor will, if so
requested
by Bank, make or cause to be made the necessary repairs to or
replacements of such Tangible Collateral, and any proceeds of
insurance
maintained by the Grantor pursuant to this Section
