SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported): June 30, 1998
AeroCentury Corp.
(Exact name of Registrant as specified in its charter)
Delaware 94-3263974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 Chapin Avenue, Suite 310
Burlingame, California 94010
(Address of principal executive offices) (Zip code)
(650) 340-1888
(Registrant's telephone number including area code)
Not applicable
(Former name and former address, if changed since last report)
Item 5. Other Events
On June 30, 1998, the Company entered into a Credit Agreement with First
Union National Bank. The Credit Agreement provides for a revolving credit line
of up to $15,000,000, secured by the Company's existing assets, and any assets
acquired with the proceeds of the credit line.
Exhibits
Exhibit 10.1 - Credit Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AeroCentury Corp.
July 2, 1998 By: /s/ Neal D. Crispin
Date --------------------------------------
Neal D. Crispin, Chairman of the Board
and President
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CREDIT AGREEMENT
among
AEROCENTURY CORP.
and
Certain Banking Institutions Named Herein
with
FIRST UNION NATIONAL BANK
as Agent
June 30, 1998
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Table of Contents
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1. Certain Definitions...........................................................................................1
1.1. Definitions..........................................................................................1
1.2. Accounting Terms.....................................................................................11
2. The Credit....................................................................................................11
2.1. The Loans............................................................................................11
(a) Revolving Credit Loans; Commitment. ............................................................11
(b) Interest Rate Options. .........................................................................11
(c) Maximum Loans Outstanding. .....................................................................11
(d) Minimum Loan Amount. ...........................................................................12
(e) Prepayment and Reborrowing. ....................................................................12
(f) Extensions of the Revolver Termination Date. ...................................................12
(g) Revolving Loan Commitment Percentages. .........................................................12
(h) Several Obligations. ...........................................................................12
(i) Payment of Additional Amount. .................................................................13
2.2. The Notes............................................................................................13
2.3. Funding Procedures...................................................................................13
(a) Request for Advance............................................................................13
(b) Actions by Agent...............................................................................13
(c) Availability of Funds..........................................................................14
(d) Funding Assumptions............................................................................14
(e) Proceeds of Loan Being Repaid..................................................................14
2.4. Interest Rates.......................................................................................14
(a) Base Rate......................................................................................14
(b) LIBO Rate......................................................................................14
(c) Renewals and Conversions.......................................................................15
(d) Reinstatements.................................................................................15
2.5. Fees.................................................................................................15
(a) Commitment Fee.................................................................................15
(b) Structuring and Arranging Fee; Administrative Fee..............................................15
2.6. Termination or Reduction of Aggregate Revolving Loan Commitment......................................16
(a) Voluntary......................................................................................16
(b) Termination.....................................................................................16
2.7. Loan Prepayments (Optional and Mandatory)............................................................16
(a) Base Rate Loans................................................................................16
(b) LIBO Rate Loans................................................................................16
2.8. Payments..............................................................................................16
(a) Base Rate Loans................................................................................16
(b) LIBO Rate Loans.................................................................................16
(c) Form of Payments, Application of Payments,
Payment Administration, Etc....................................................................16
(d) Net Payments....................................................................................17
(e) Demand Deposit Account. .......................................................................18
2.9. Change in Circumstances, Yield Protection.............................................................18
2.10. Illegality...........................................................................................19
2.11. Discretion of Bank as to Manner of Funding...........................................................19
3. Representations and Warranties................................................................................20
3.1. Organization, Standing...............................................................................20
3.2. Corporate Authority, Validity, Etc...................................................................20
3.3. Litigation...........................................................................................20
3.4. ERISA................................................................................................20
3.5. Financial Statements.................................................................................21
3.6. Not in Default, Judgments, Etc.......................................................................21
3.7. Taxes................................................................................................21
3.8. Permits, Licenses, Etc...............................................................................21
3.9. Compliance with Laws, Etc............................................................................21
3.10. Solvency............................................................................................21
3.11. No Burdensome Agreements............................................................................22
3.12. Subsidiaries, Etc...................................................................................22
3.13. Title to Properties, Leases.........................................................................22
3.14. Public Utility Holding Company; Investment Company..................................................22
3.15. Margin Stock........................................................................................22
3.16. Use of Proceeds....................................................................................22
3.17. Depreciation Policies...............................................................................22
3.18. Disclosure Generally................................................................................22
4. Conditions Precedent..........................................................................................23
4.1. All Loans............................................................................................23
(a) Documents..........................................................................................23
(b) Borrowing Base Certificate.........................................................................23
(c) Covenants; Representations.........................................................................23
(d) Defaults...........................................................................................23
(e) Material Adverse Change............................................................................23
4.2. Conditions to First Loan.............................................................................23
(a) Articles, Bylaws...................................................................................23
(b) Evidence of Authorization..........................................................................23
(c) Legal Opinions.....................................................................................24
(d) Incumbency.........................................................................................24
(e) Notes..............................................................................................24
(f) Documents..........................................................................................24
(g) Consents...........................................................................................24
(h) Other Agreements....................................................................................24
(i) Fees, Expenses.....................................................................................24
(j) JMC Subordination Agreement........................................................................24
5. Affirmative Covenants.........................................................................................24
5.1. Financial Statements and Reports.....................................................................25
(a) Annual Statements..................................................................................25
(b) Quarterly Statements...............................................................................25
(c) No Default.........................................................................................25
(d) ERISA..............................................................................................26
(e) Material Changes...................................................................................26
(f) Other Information..................................................................................26
(g) Borrowing Base Certificates........................................................................26
(h) Covenant Complaince Certificate....................................................................26
(i) Monthly Lease Portfolio and Receivables Report....................................................26
(j) Maintenance of Current Depreciation Policies......................................................26
5.2. Corporate Existence...................................................................................26
5.3. ERISA.................................................................................................27
5.4. Compliance with Regulations...........................................................................27
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws......................................27
5.6. Maintenance of Insurance..............................................................................27
5.7. Payment of Debt; Payment of Taxes, Etc................................................................27
5.8. Notice of Events......................................................................................27
5.9. Inspection Rights; Collateral Appraisal...............................................................28
5.10. Generally Accepted Accounting Principles.............................................................28
5.11. Compliance with Material Contracts...................................................................28
5.12. Use of Proceeds......................................................................................29
5.13. Further Assurances...................................................................................29
5.14. Restrictive Covenants in Other Agreements............................................................29
6. Negative Covenants............................................................................................29
6.1. Merger, Consolidation.................................................................................29
6.2. Senior Debt..........................................................................................29
6.3. Liens................................................................................................29
6.4. Guarantees...........................................................................................29
6.5. Margin Stock.........................................................................................29
6.6. Acquisitions and Investments.........................................................................30
6.7. Transfer of Assets; Nature of Business...............................................................30
6.8. Restricted Payments..................................................................................30
6.9. Accounting Change....................................................................................30
6.10. Transactions with Affiliates.........................................................................30
6.11. Restriction on Amendment of this Agreement...........................................................31
7. Financial Covenants...........................................................................................31
7.1. Minimum Tangible Net Worth...........................................................................31
7.2. Debt Service Coverage Ratio..........................................................................31
7.3. Debt to Tangible Net Worth...........................................................................31
7.4. Absence of Net Loss..................................................................................31
7.5. Borrowing Base.......................................................................................31
8. Default.......................................................................................................31
8.1. Events of Default....................................................................................31
(a) Payments...........................................................................................32
(b) Covenants..........................................................................................32
(c) Representations, Warranties........................................................................32
(d) Bankruptcy.........................................................................................32
(e) Certain Other Defaults.............................................................................32
(f) Judgments.........................................................................................32
(g) Attachments........................................................................................33
(h) Change in Management...............................................................................33
(i) Security Interests................................................................................33
(j) Material Adverse Change...........................................................................33
9. Agent.........................................................................................................33
9.1. Appointment and Authorization........................................................................33
9.2. Duties and Obligations...............................................................................34
9.3. First Union as a Bank................................................................................34
9.4. Independent Credit Decisions.........................................................................35
9.5. Indemnification......................................................................................35
9.6. Successor Agent......................................................................................35
9.7. Allocations Made By First Union......................................................................35
10. Miscellaneous................................................................................................36
10.1. Waiver..............................................................................................36
10.2. Amendments..........................................................................................36
10.3. Governing Law.......................................................................................36
10.4. Participations and Assignments......................................................................36
10.5. Captions............................................................................................37
10.6. Notices.............................................................................................37
10.7. Sharing of Collections, Proceeds and Set-Offs; Application of Payments..............................37
10.8. Expenses; Indemnification...........................................................................38
10.9. Survival of Warranties and Certain Agreements.......................................................39
10.10. Severability.......................................................................................39
10.11. Banks' Obligations Several; Independent Nature of Banks' Rights....................................39
10.12. No Fiduciary Relationship..........................................................................39
10.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.....................................................39
10.14. WAIVER OF JURY TRIAL...............................................................................40
10.15. Counterparts; Effectiveness........................................................................40
10.16. Use of Defined Terms...............................................................................40
10.17. Offsets............................................................................................40
10.18. Entire Agreement...................................................................................40
Exhibit A List of Banks and Commitments
Exhibit B Note
Exhibit C Borrowing Base Certificate
Exhibit D Mortgage and Security Agreement
Exhibit E Covenant Compliance Certificate
Exhibit F Depreciation Policies
Schedule 1 Miscellaneous Information
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This Credit Agreement, dated June 30, 1998 (the "Agreement"), is entered
into by and between AeroCentury Corp., a Delaware corporation ("AeroCentury"),
the banking institutions signatories hereto and named in Exhibit A attached
hereto and such other institutions that hereafter become a "Bank" pursuant to
Section 10.4 hereof (collectively the "Banks" and individually a "Bank") and
FIRST UNION NATIONAL BANK, a national banking association, as agent for the
Banks under this Agreement ("First Union" which shall mean in its capacity as
agent unless specifically stated otherwise).
Preliminary Statement
WHEREAS, AeroCentury desires to have available to it a credit facility the
proceeds of which may be used for the purchase of Equipment (as defined herein)
for lease to unaffiliated persons, said Equipment and related leases to
constitute part of the Collateral (as defined herein).
WHEREAS, AeroCentury has requested that the Bank or Banks, as applicable,
establish such credit facility and make loans to AeroCentury under the terms and
conditions hereinafter set forth.
WHEREAS, the Bank or Banks, as applicable, is or are willing to establish
such credit facility and to make loans to AeroCentury under the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and promises hereinafter
set forth and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Certain Definitions
1. Definitions
"Additional Amount" shall have the meaning set forth in Section 2.1(i).
"Affiliate" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with AeroCentury; (2)
which directly or indirectly beneficially owns or holds ten percent (10%) or
more of any class of voting stock of AeroCentury; or (3) of which ten percent
(10%) or more of the voting stock is directly or indirectly beneficially owned
or held by AeroCentury. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agent" shall mean First Union National Bank.
"Aggregate Revolving Loan Commitment" shall have the meaning set forth in
Section 2.1(a).
<PAGE>
"Agreement" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and all
exhibits and schedules attached hereto.
"Base Rate" shall mean, for any day, the higher of the Federal Funds Rate
plus 1/2 of 1% or the prime commercial lending rate of First Union National
Bank, as announced from time to time at its head office, calculated on the basis
of the actual number of days elapsed in a year of 360 days.
"Base Rate Loans" shall mean Revolving Credit Loans accruing interest based
on the Base Rate.
"Borrowing" shall mean a borrowing hereunder consisting of Loans made to
AeroCentury by the Banks on a given occasion.
"Borrowing Base" shall mean 70% of the lesser of (1) the acquisition cost
of each item of Equipment included in Eligible Collateral or (2) the net book
value of each item of Equipment included in Eligible Collateral. Net book value
shall be calculated using AeroCentury's then current depreciation practices and
both (1) and (2) above shall be calculated in accordance with GAAP. The
foregoing test shall be determined separately for each item of Equipment
included in Eligible Collateral. Notwithstanding the foregoing, Equipment
subject to Eligible Leases which have remaining lease terms of less than twelve
months shall not at any time be included in the Borrowing Base to the extent
such Equipment constitutes more than 20% of the Borrowing Base. Remaining lease
terms shall not include renewal options, except in the case of DASH-7 aircraft
leased to Raytheon Corporation which are used in the Marshall Islands. Renewal
options shall be included in the remaining lease terms of leases of DASH-7
aircraft to Raytheon Corporation which are used in the Marshall Islands.
"Borrowing Base Certificate" shall mean a certificate in substantially the
form attached hereto as Exhibit C which shall be signed by the chief executive
officer, chief operating officer, chief financial officer or a Senior Vice
President of AeroCentury.
"Business Day" shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the laws
of the Commonwealth of Pennsylvania or the State of California and, if the
applicable day relates to a LIBO Rate Loan, or notice with respect to a LIBO
Rate Loan, a day on which dealings in Dollar deposits are also carried on in the
London interbank market and banks are open for business in London ("London
Business Day").
"Capitalized Lease" shall mean all lease obligations of any Person for any
property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally Accepted
Accounting Principles.
"Capitalized Lease Obligations" with respect to any Person, shall mean the
aggregate amount which, in accordance with GAAP, is required to be reported as a
liability on the balance sheet of such Person at such time in respect of such
Person's interest as lessee under a Capitalized Lease.
"Closing" shall mean the consummation of all requirements set forth in this
Agreement such that AeroCentury shall be entitled to request and receive Loans
hereunder.
"Closing Date" shall mean the first date on which both (i) this Agreement
shall have been executed and delivered by AeroCentury and each Bank, and (ii)
the conditions to the first loan as set forth in Section4.2 shall have been met.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and all rules and regulations with respect thereto in effect from time
to time.
"Collateral" shall mean those assets defined as "Collateral" in the
Security Agreement (including but not limited to the Equipment and the related
leases therefor) in which First Union as Agent is the "Secured Party" (as
defined in the Security Agreement) and possesses a first priority, perfected,
security interest to secure the payment, promptly when due, and the punctual
performance of all of the "Liabilities" as defined in the Security Agreement.
"Covenant Compliance Certificate" shall mean a certificate in substantially
the form attached hereto as Exhibit E, or such other form as First Union shall
request from time to time, which shall be signed by the chief executive officer,
chief operating officer, chief financial officer or a Senior Vice President of
AeroCentury.
"Debt" shall mean, as of any date of determination with respect to
AeroCentury, without duplication, (i) all items which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of AeroCentury as of the date on which Debt is to be
determined, (ii) all indebtedness of others with respect to which AeroCentury
has become liable by way of a guarantee or endorsement (other than for
collection or deposit in the ordinary course of business), (iii) all contingent
liabilities of AeroCentury, including letters of credit, required to be either
accrued or disclosed in accordance with GAAP, (iv) lease obligations that, in
conformity with GAAP, have been capitalized on AeroCentury's balance sheet, and
(v) the present value of any outstanding Operating Lease payments discounted at
10%, LESS (vi) Non-Recourse Debt and (vii) Subordinated debt.
"Debt Service" shall mean the sum of (i) current maturities (amounts due
within the next twelve months) of all Recourse Debt, excluding any lump sum
payments due at the expiration of any Recourse Debt, (ii) current amounts due
(within the next twelve months) in respect of all leases, but excluding any lump
sum payments due at the expiration of any lease, and (iii) 1/7th of the average
principal balance of the Notes outstanding.
"Default Rate" on any Loan shall mean 2% per annum above the Base Rate.
"Dollars" shall mean the lawful currency of the United States of America.
"EBTDA" shall mean the sum of Net Income plus the amounts deducted from Net
Income as expenses for taxes, depreciation and amortization.
<PAGE>
"Equipment" shall mean new and used turboprop aircraft and turboprop
aircraft engines each of which is either subject to an existing lease or is
intended to be leased or re-leased within four months immediately following the
date in question. The aircraft or the aircraft engine, as applicable, shall have
been manufactured within 25 years immediately preceding the date in question,
shall be in good working order immediately or within a reasonable period of
time, as determined by First Union, and shall be usable for commercial flight
purposes immediately or within a reasonable period of time, as determined by
First Union.
"Eligible Collateral" shall mean the sum of (1) Equipment included in the
Collateral which is subject to an Eligible Lease, and (2) Equipment included in
the Collateral which is not subject to a lease, provided that (a) the aggregate
of such Equipment shall not at any time exceed 10% of the Aggregate Revolving
Loan Commitment, and (b) the maximum period for which any item of such Equipment
shall not have been subject to an Eligible Lease does not exceed four months.
"Eligible Lease" shall mean a lease for Equipment to an unaffiliated Person
in which (i) AeroCentury is the sole lessor or lessor of not less than a 99.9%
ownership interest in the Equipment, (ii) the lease arose in the ordinary course
of business of AeroCentury, (iii) the Equipment has been delivered to the lessee
and is currently subject to the lease, (iv) neither the lease nor the Equipment
is subject to any currently outstanding assignment, claim, lien, security
interest or other limitation on the absolute title of AeroCentury, (v) the lease
payments are not more than 30 days past due with respect to any payment required
thereby (based on the contractual terms in existence at the date the lease was
included in the Collateral and not including any subsequent amendment or
modification thereof, unless First Union has specifically consented thereto in
writing), (vi) the lease is freely assignable by the lessor (with any notices or
consents required in connection therewith having been previously obtained, and
subject to any lease requirements concerning the net worth of the assignee),
(vii) the lease and the Equipment being leased constitute Collateral, (viii) the
remaining lease term at the time of assignment to the Bank is for a period of
seven years or less, (ix) the lease is a noncancellable, triple net lease in
which the lessee may not assert, as an offset, any defenses or claims against
the lessor arising from the condition or the intended use of the subject matter,
except in the case of leases with terms of less than twelve months in which
AeroCentury may be responsible for maintenance and except in the case where of a
lease where AeroCentury assumes the obligation to pay some or all of the cost of
engine overhaul, airworthiness directives or manufacturer or government ordered
modifications required during the term of the lease, so long as the lease states
the such obligation is solely that of AeroCentury and imposes no obligation on
the Banks (whether as secured parties or successor in interest to AeroCentury's
ownership interest in the lease aircraft) and lessee's only remedy for breach of
the obligation is an independent action against AeroCentury, and lessee waives
any and all right to offset such obligation against lease payments owed
AeroCentury, and (x) the lessee is not a resident of, and the Equipment will not
be subject to the laws of any, foreign jurisdiction in which, in the sole
determination of First Union, the ability of the Bank to perfect a first
priority security interest in the Equipment is unsatisfactory or the ability of
First Union to foreclose upon the Equipment and receive possession to or sell
said Equipment is unsatisfactory.
"Environmental Control Statutes" shall mean each and every applicable
federal, state, county or municipal environmental statute, ordinance, rule,
regulation, order, directive or requirement, together with all successor
statutes, ordinances, rules, regulations, orders, directives or requirements, of
any Governmental Authority, including without limitation laws in any way related
to hazardous substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the same
controlled group of corporations as AeroCentury within the meaning of Section
414(b) of the Code, or any trade or business which is under common control with
AeroCentury within the meaning of Section 414(c) of the Code.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day.
"Fiscal Quarter" shall mean a fiscal quarter of AeroCentury, which shall be
any quarterly period ending on March 31, June 30, September 30 or December 31 of
any year.
"Fiscal Year" shall mean a fiscal year of AeroCentury, which shall end on
the last day of December.
"Generally Accepted Accounting Principles" or "GAAP" shall mean generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.
"Governmental Authority" shall mean the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom or created pursuant to any laws.
"Indebtedness for Borrowed Money" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising, for money
borrowed by AeroCentury on a recourse basis whether or not evidenced by any
note, indenture, or agreement (including, without limitation, the Note and any
indebtedness for money borrowed from an Affiliate) and (ii) all indebtedness of
others for money borrowed (including indebtedness of an Affiliate) with respect
to which AeroCentury has become liable on a recourse basis by way of a guarantee
or indemnity.
"Intangible Assets" shall mean all assets which would be classified as
intangible assets under GAAP consistently applied, including, without
limitation, goodwill (whether representing the excess of cost over book value of
assets acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, and deferred charges (including, without limitation, unamortized
debt discount and expense, organization costs, and research and development
costs). For purposes of this definition, prepayments of taxes, license fees and
other expenses shall not be deemed Intangible Assets.
<PAGE>
"Interest Period" shall mean with respect to any LIBO Rate Loan, each
period commencing on the date any such Loan is made, or, with respect to a Loan
being renewed, the last day of the next preceding Interest Period with respect
to a Loan, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day of the calendar month) in the
first, second, third or sixth calendar month thereafter as selected under the
procedures specified in Section 2.3, if the Banks are then offering LIBO Rate
Loans for such period; provided that each LIBO Rate Loan Interest Period which
would otherwise end on a day which is not a Business Day (or, for purposes of
Loans to be repaid on a London Business Day, such day is not a London Business
Day) shall end on the next succeeding Business Day (or London Business Day, as
appropriate) unless such next succeeding Business Day (or London Business Day,
as appropriate) falls in the next succeeding calendar month, in which case the
Interest Period shall end on the next preceding Business Day (or London Business
Day, as appropriate).
"Investment" in any Person shall mean (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of such Person; (b) any deposit with, or advance, loan or other extension of
credit to, such Person (other than any such deposit, advance, loan or extension
of credit having a term not exceeding 90 days in the case of unaffiliated
Persons and 120 days in the case of Affiliates representing the purchase price
of inventory or supplies purchased in the ordinary course of business) or
guarantee or assumption of, or other contingent obligation with respect to,
Indebtedness for Borrowed Money or other liability of such Person; and (c)
(without duplication of the amounts included in (a) and (b)) any amount that
may, pursuant to the terms of such investment, be required to be paid,
deposited, advanced, lent or extended to or guaranteed or assumed on behalf of
such Person.
"JMC" shall have the meaning set forth in Section 6.6.
"LIBO Rate" shall mean, for the applicable Interest Period, (i) the rate,
rounded upwards to the next one-sixteenth of one percent, determined by First
Union two London Business Days prior to the date of the corresponding LIBO Rate
Loan, at which First Union is offered deposits in dollars at approximately 11:00
A.M., London time by leading banks in the interbank eurodollar or eurocurrency
market for delivery on the date of such Loan in an amount and for a period
comparable to the amount and Interest Period of such Loan and in like funds,
divided by (ii) a number equal to one (1.0) minus the LIBO Rate Reserve
Percentage. The LIBO Rate shall be adjusted automatically with respect to any
LIBO Rate Loan outstanding on the effective date of any change in the LIBO Rate
Reserve Percentage, as of such effective date. LIBO Rate shall be calculated on
the basis of the number of days elapsed in a year of 360 days.
<PAGE>
"LIBO Rate Reserve Percentage" shall mean, for any LIBO Rate Loan for any
Interest Period, the daily average of the stated maximum rate (expressed as a
decimal) at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by First Union against "Eurocurrency liabilities" (as such term is
used in Regulation D) but without benefit of credit proration, exemptions, or
offsets that might otherwise be available to First Union from time to time under
Regulation D. Without limiting the effect of the foregoing, the LIBO Rate
Reserve Percentage shall reflect any other reserves required to be maintained by
First Union against (1) any category of liabilities which includes deposits by
reference to which the rate for LIBO Rate Loans is to be determined; or (2) any
category of extension of credit or other assets which include LIBO Rate Loans.
"LIBO Rate Loans" shall mean Revolving Credit Loans accruing interest based
on the LIBO Rate.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of any obligation to any Person, including any agreement to give
any of the foregoing, any conditional sales or other title retention agreement,
any lease in the nature thereof, and the filing of or the agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction or
similar evidence of any encumbrance, whether within or outside the United
States.
"Loan" or "Loans" shall have the meanings set forth in Section 2.1.
"Loan Documents" shall mean this Agreement, the Notes, the Security
Agreement, the Guaranty Agreement and all other documents directly related or
incidental to said documents, the Loans or the Collateral.
"Management Agreement" shall have the meaning set forth in Section 6.6.
"Material Adverse Change" shall mean any event or condition which (a) is
reasonably likely to result, in the determination of First Union or the Required
Banks, in a material adverse change in the financial condition, business,
properties or prospects of AeroCentury, or (b) gives reasonable grounds to
conclude that AeroCentury, will not be able to perform or observe (in the normal
course) its existing obligations under the Loan Documents to which it is a
party, including but not limited to the Notes.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
financial condition, business, properties, or prospects of AeroCentury, (ii) the
ability of AeroCentury to perform its existing obligations under this Agreement,
the Notes and the other Loan Documents, or (iii) the legality, validity or
enforceability of this Agreement or the Notes or the rights and remedies of the
holders of the Loans.
"Monthly Lease Portfolio and Receivables Report" shall mean a report in
summary form of the status of accounts receivable in respect of all leases which
are part of the Collateral in form and substance reasonably satisfactory to
First Union.
"Multiemployer Plan" shall mean a multiemployer plan as defined in ERISA
Section 4001(a)(3), which covers employees of AeroCentury or any ERISA
Affiliate.
"Net Income" shall mean net income after income taxes as shown on the
income statement.
"Net Worth" shall mean the sum of capital stock, plus paid-in capital, plus
retained earnings, minus treasury stock, minus the net worth of any Unrestricted
Subsidiaries.
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"Non-Recourse Debt" shall mean Debt with respect to which the creditor or
lender does not have recourse against AeroCentury by reason of any guaranty or
other obligation on the part of AeroCentury.
"Note" or "Notes" shall have the meaning set forth in Section 2.2.
"Obligations" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Banks or First Union, as Agent, by or from AeroCentury arising out of this
Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest on the Loans, and to pay
interest, fees, costs, charges, expenses, professional fees, and all sums
chargeable to AeroCentury or for which AeroCentury is liable as indemnitor under
the Loan Documents, whether or not evidenced by any note or other instrument.
"Operating Lease", with respect to any Person, shall mean the aggregate
amount which, in accordance with GAAP, is not required to be reported as a
liability on the balance sheet of such Person at such time in respect of such
Person's interest as lessee under an Operating Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" shall mean, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA Section 302 or Code
Section 412) are, or at any time within the six years immediately preceding the
time in question, were in whole or in part, the responsibility of AeroCentury or
any ERISA Affiliate.
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"Permitted Liens" shall mean (a) any Liens for current taxes, assessments
and other governmental charges not yet due and payable or being contested in
good faith by AeroCentury by appropriate proceedings and for which adequate
reserves have been established by AeroCentury as reflected in AeroCentury's
financial statements; (b) any mechanic's, materialman's, carrier's,
warehousemen's or similar Liens for sums not yet due or being contested in good
faith by AeroCentury by appropriate proceedings and for which adequate reserves
have been established by AeroCentury as reflected in AeroCentury's financial
statements; (c) easements, rights-of-way, restrictions and other similar
encumbrances on the real property or fixtures of AeroCentury incurred in the
ordinary course of business which individually or in the aggregate are not
substantial in amount and which do not in any case materially detract from the
value or marketability of the property subject thereto or interfere with the
ordinary conduct of the business of AeroCentury; (d) Liens (other than Liens
imposed on any property of AeroCentury pursuant to ERISA or Section 412 of the
Code) incurred or deposits made in the ordinary course of business, including
Liens in connection with workers' compensation, unemployment insurance and other
types of social security and Liens to secure performance of tenders, statutory
obligations, surety and appeal bonds (in the case of appeal bonds such Lien
shall not secure any reimbursement or indemnity obligation in an amount greater
than $250,000), bids, leases that are not Capitalized Leases, performance bonds,
sales contracts and other similar obligations, in each case, not incurred in
connection with the obtaining of credit or the payment of a deferred purchase
price, and which do not, in the aggregate, result in a Material Adverse Effect;
(e) Liens, if any, existing on the date hereof and listed in Schedule 1 hereto;
and (f) Liens on the assets of Unrestricted Subsidiaries.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity, or other entity of
whatever nature.
"Plan" shall mean an employee benefit plan as defined in Section 3(3) of
ERISA,
other than a Multiemployer Plan, whether formal or informal and whether legally
binding or not.
"Potential Default" shall mean an event, condition or circumstance that
with the giving of notice or lapse of time or both would become an Event of
Default.
"Prohibited Transaction" shall mean a transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"Recourse Debt" shall mean Debt with respect to which the creditor or
lender has or may have recourse against AeroCentury by reason of any guaranty or
other obligation on the part of AeroCentury.
"Regulation" shall mean any statute, law, ordinance, regulation, order or
rule of any United States or foreign, federal, state, local or other government
or governmental body, including, without limitation, those covering or related
to banking, financial transactions, securities, public utilities, environmental
control, energy, safety, health, transportation, bribery, record keeping,
zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and
price and wage control matters.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"Regulatory Change" shall mean any change after the date of this Agreement
in any Regulation (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests of or under any Regulation
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof
applying to a class of banks including any one of the Banks but excluding any
foreign office of any Bank.
"Reportable Event" shall mean, with respect to a Pension Plan: (a) Any of
the events set forth in ERISA Sections 4043(b) (other than a reportable event as
to which the provision of 30 days' notice to the PBGC is waived under applicable
regulations) or 4063(a) or the regulations thereunder, (b) an event requiring
any AeroCentury or any ERISA Affiliate to provide security to a Pension Plan
under Code Section 401(a)(29) and (c) any failure by any AeroCentury or any
ERISA Affiliate to make payments required by Code Section 412(m).
"Request for Advance" shall have the meaning set forth in Section 2.3.(a).
<PAGE>
"Required Banks" at any time shall mean Banks whose Revolving Loan
Commitments equal or exceed 66 2/3% of the total of such Revolving Loan
Commitments if no Loans are outstanding or, if Loans are outstanding, Banks
whose outstanding Loans equal or exceed 66 2/3% of the Loans.
"Revolver Termination Date" shall have the meaning set forth in Section
2.1(a).
"Revolving Loan Commitment" shall have the meaning set forth in Section
2.1(a).
"Revolving Loan Commitment Percentage" shall mean with respect to each Bank
the percentage set forth opposite its name in Exhibit A hereto.
"Revolving Credit Loan" shall have the meaning set forth in Section 2.1(a).
"Revolving Credit Note" shall have the meaning set forth in Section 2.2.
"Security Agreement" shall mean the Mortgage and Security Agreement in the
form and substance attached hereto as Exhibit D.
"Solvent" shall mean, with respect to any Person, that the aggregate
present fair saleable value of such Person's assets is in excess of the total
amount of its probable liabilities on its existing debts as they become absolute
and matured, such Person has not incurred debts beyond its foreseeable ability
to pay such debts as they mature, and such Person has capital adequate to
conduct the business it is presently engaged in or is about to engage in.
"Subordinated Debt" shall mean Debt which is subordinated in right of
payment and all other respects to the Obligations, including but not limited to
the Notes, pursuant to a written subordination agreement in form and substance
satisfactory to the Banks.
"Subsidiary" shall mean a corporation or other entity the shares of stock
or other equity interests of which having ordinary voting power (other than
stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries or both, by AeroCentury.
"Tangible Net Worth" shall mean Net Worth, minus Intangible Assets.
"Termination Event" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under ERISA Section 4041(c), (c) the institution of
proceedings to terminate a Pension Plan under ERISA Section 4042 or (d) the
appointment of a trustee to administer any Pension Plan under ERISA Section
4042.
"Unfunded Pension Liabilities" shall mean, with respect to any Pension Plan
at any time, the amount determined by taking the accumulated benefit obligation,
as disclosed in accordance with Statement of Accounting Standards No. 87, over
the fair market value of Pension Plan assets.
<PAGE>
"Unrecognized Retiree Welfare Liability" shall mean, with respect to any
Plan that provides post-retirement benefits other than pension benefits, the
amount of the accumulated post-retirement benefit obligation, as determined in
accordance with Statement of Financial Accounting Standards No. 106, as of the
most recent valuation date. Prior to the date such statement is applicable to
AeroCentury, such amount of the obligation shall be based on an estimate made in
good faith.
"Unrestricted Subsidiaries" shall mean Subsidiaries which are special
purpose or bankruptcy remote that have debt on their respective balance sheets
which when consolidated with AeroCentury is deemed to be Non-Recourse Debt to
AeroCentury.
1.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with Generally Accepted Accounting Principles
consistent with those applied in the preparation of the financial statements
referred to in Section 3.5, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
2. The Credit
2.1. The Loans.
(a) Revolving Credit Loans; Commitment. Subject to the terms and conditions
herein set forth, each Bank agrees, severally and not jointly, to make revolving
credit loans (collectively, the "Revolving Credit Loans" or the "Loans", and
individually a "Revolving Credit Loan" or a "Loan") to AeroCentury from time to
time during the period beginning on the date hereof and ending on June 30, 2000
or on the earlier date of termination in full, pursuant to Section 2.6 or
Section 6.2 hereof, of the obligations of such Bank under this Section 2.1 (June
30, 2000 or such earlier date of termination being herein called the "Revolver
Termination Date") in amounts not to exceed at any time outstanding, in the
aggregate, the commitment amount set forth opposite the name of such Bank on
Exhibit A hereto (each such amount, as the same may be reduced pursuant to
Section 2.6 hereof being hereinafter called such Bank's "Revolving Loan
Commitment"). The Banks' collective commitment to make Loans shall be the
"Aggregate Revolving Loan Commitment". All Loans shall be made by the Banks
simultaneously and pro rata in accordance with their respective Commitments. All
Loans shall be made to AeroCentury at the main office of First Union, Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19101.
(b) Interest Rate Options. AeroCentury may request Revolving Credit Loans
to bear interest at the Base Rate or LIBO Rate options (described in Section
2.4). The Loans outstanding at any one time may involve any combination of such
interest rate options in such amounts as AeroCentury may determine, subject to
the terms and conditions hereof, including the requirements concerning minimum
Loan requests and the requirements that (i) no request may be made which would
require more than one interest rate option or more than one Interest Period to
apply to Loans made on any single date, and (ii), in the case of LIBO Rate
Loans, (a) not more than five such Loans may be outstanding at any one time, and
(b) no LIBO Rate Loan may have an Interest Period extending beyond the Revolver
Termination Date.
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(c) Maximum Loans Outstanding. AeroCentury shall not be entitled to any new
Revolving Credit Loan if, after giving effect to such Loan, the unpaid amount of
the then outstanding Loans would exceed the lesser of (i) the Aggregate
Revolving Loan Commitment or (ii) the then current Borrowing Base, as stated in
the most recent Borrowing Base Certificate furnished to First Union as provided
herein.
(d) Minumum Loan Amount. Except for Loans which exhaust the full remaining
amount of the Aggregate Revolving Loan Commitment and conversions which result
in the conversion of all Loans subject to a particular interest rate option,
each of which may be in lesser amounts, (i) each LIBO Rate Loan when made (and
each conversion of Base Rate Loans into LIBO Rate Loans) shall be in an amount
at least equal to $3, 000,000 or, if greater, then in such minimum amount plus
$100,000 multiples, and (ii) each Base Rate Loan when made (and each conversion
of LIBO Rate Loans into Base Rate Loans) shall be in an amount at least equal to
$250,000 or, if greater, then in such minimum amount plus $25,000 multiples.
(e) Prepayment and Reborrowing. Prior to the Revolver Termination Date and
within the limits of the Aggregate Revolving Loan Commitment and the Borrowing
Base, AeroCentury may borrow, prepay and reborrow Revolving Credit Loans. All
Revolving Credit Loans shall mature and be due and payable on the Revolver
Termination Date.
(f) Extensions of the Revolver Termination Date. Annually, not less than 90
days prior to the end of the existing Agreement Year, AeroCentury may request in
writing to First Union that the Facility Termination Date be extended for one
full year. The term "Agreement Year" shall mean a one year period ending on the
same month and day as the Revolver Termination Date. Upon receipt, First Union
will promptly distribute notice of such request to the Banks. The Banks shall
notify First Union not less than 60 days prior to the last day of the then
current Agreement Year of their willingness to establish a new Revolver
Termination Date. If all Banks agree to a new Revolver Termination Date, First
Union, on or before the 30th day prior to the end of the existing Agreement
Year, shall advise AeroCentury and the Banks, in writing, that the Revolver
Termination Date has been extended for one full year (stating the date of the
new Revolver Termination Date) and this Agreement shall be deemed amended to
such extent. If AeroCentury shall not have received an extension in writing from
First Union on or before the 30th day prior to the end of the existing Agreement
Year, the Revolver Termination Date shall not be deemed to have been extended.
(g) Revolving Loan Commitment Percentages. The obligation of each Bank to
make a Loan to AeroCentury at any time shall be limited to its percentage (the
"Revolving Loan Commitment Percentage") as set forth opposite its name on
Exhibit A hereto multiplied by the aggregate principal amount of the Loan
requested. The principal amounts of the respective Loans made by the Banks on
the occasion of each Borrowing shall be pro rata in accordance with their
respective Revolving Loan Commitment Percentages. No Bank shall be required or
permitted to make any Loan if, immediately after giving effect to such Loan, and
the application of the proceeds of a Loan to the extent applied to the repayment
of the Loans, the sum of such Bank's Loans outstanding would exceed such Bank's
Revolving Loan Commitment.
(h) Several Obligations. The failure of any one or more Banks to make Loans
in accordance with its or their obligations shall not relieve the other Banks of
their several obligations hereunder, but in no event shall the aggregate amount
at any one time outstanding which any Bank shall be required to lend hereunder
exceed its Revolving Loan Commitment.
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(i) Payment of Additional Amount. If any principal of a LIBO Rate Loan
shall be repaid (whether upon prepayment, reduction of the Aggregate Revolving
Loan Commitment after acceleration or for any other reason) or converted to a
Base Rate Loan prior to the last day of the Interest Period applicable to such
LIBO Rate Loan or if AeroCentury fails for any reason to borrow a LIBO Rate Loan
after giving irrevocable notice pursuant to Section 2.3, it shall pay to each
Bank, in addition to the principal and interest then to be paid, such additional
amounts as may be necessary to compensate each Bank for all direct and indirect
costs and losses (including losses resulting from redeployment of prepaid or
unborrowed funds at rates lower than the cost of such funds to such Bank, and
including lost profits incurred or sustained by such Bank) as a result of such
repayment or failure to borrow (the "Additional Amount"). The Additional Amount
(which each Bank shall take reasonable measures to minimize) shall be specified
in a written notice or certificate delivered to AeroCentury by First Union, as
Agent, in the form provided by each Bank sustaining such costs or losses. Such
notice or certificate shall contain a calculation in reasonable detail of the
Additional Amount to be compensated and shall be conclusive as to the facts and
the amounts stated therein, absent manifest error.
2.2 The Notes. The Revolving Credit Loans made by each Bank shall all be
evidenced by a single promissory note of AeroCentury (each such promissory note
as it may be amended, extended, modified or renewed a "Revolving Credit Note" or
a "Note" and together the "Revolving Credit Notes" or the "Notes") in principal
face amount equal to such Bank's Revolving Loan Commitment, payable to the order
of such Bank and otherwise in the form attached hereto as Exhibit B. The
Revolving Credit Notes shall be dated the Closing Date, shall bear interest at
the rate per annum and be payable as to principal and interest in accordance
with the terms hereof. The Revolving Credit Notes shall mature upon the Revolver
Termination Date and, upon maturity, each outstanding Revolving Credit Loan
evidenced thereby shall be due and payable. Notwithstanding the stated amount of
any Revolving Credit Note, the liability of AeroCentury under each Revolving
Credit Note shall be limited at all times to the outstanding principal amount of
the Revolving Credit Loans by each Bank evidenced thereby, plus all interest
accrued thereon and the amount of all costs and expenses then payable hereunder,
as established by each such Bank's books and records, which books and records
shall be conclusive absent manifest error.
2.3. Funding Procedures.
(a) Request for Advance. Each request for a Revolving Credit Loan or the
conversion or renewal of an interest rate with respect to a Loan shall be made
not later than 1:00 p.m. EST on a Business Day by delivery to First Union of a
written request signed by AeroCentury or, in the alternative, a telephone
request followed promptly by written confirmation of the request (a "Request for
Advance"), specifying the date and amount of the Loan to be made, converted or
renewed, selecting the interest rate option applicable thereto, and in the case
of LIBO Rate Loans, specifying the Interest Period applicable to such Loans. The
form of request to be used in connection with the making, conversion or renewal
of Revolving Credit Loans shall be that form provided to AeroCentury by First
Union. Each request shall be received not less than one Business Day prior to
the date of the proposed borrowing, conversion or renewal in the case of Base
Rate Loans, and three London Business Days prior to the date of the proposed
borrowing, conversion or renewal in the case of LIBO Rate Loans. No request
shall be effective until actually received in writing by First Union, as the
Agent.
<PAGE>
(b) Actions by Agent. Upon receipt of a Request for Advance and if the
conditions precedent provided herein shall be satisfied at the time of such
request, First Union promptly shall notify each Bank of such request and of such
Bank's ratable share of such Loan. Upon receipt by First Union of a Request for
Advance, the request shall not be revocable by AeroCentury.
(c) Availability of Funds. Not later than 12:00 p.m. EST on the date of
each Loan, each Bank shall make available (except as provided in clause (d)
below) its ratable share of such Loan, in immediately available funds, to First
Union at the address set forth opposite its name on the signature page hereof or
at such account in London as First Union shall specify to AeroCentury and the
Banks. Unless First Union knows that any applicable condition specified herein
has not been satisfied, it will make the funds so received from the Banks
immediately available to AeroCentury on the date of each Loan by a credit to the
account of AeroCentury at First Union' aforesaid address.
(d) Funding Assumptions. Unless First Union shall have been notified by any
Bank at least one Business Day prior to the date of the making, conversion or
renewal of any LIBO Rate Loan, or by 3:00 P.M. on the date a Base Rate Loan is
requested, that such Bank does not intend to make available to First Union, such
Bank's portion of the total amount of the Loan to be made, converted or renewed
on such date, First Union may assume that such Bank has made such amount
available to First Union on the date of the Loan and First Union may, in
reliance upon such assumption, make available to AeroCentury a corresponding
amount. If and to the extent such Bank shall not have so made such funds
available to First Union, such Bank agrees to repay First Union forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to AeroCentury until the date such
amount is repaid to First Union, at the Federal Funds Rate plus 50 basis points
for three Business Days, and thereafter at the Base Rate. If such Bank shall
repay to First Union such corresponding amount, such amounts so repaid shall
constitute such Bank's Loan for purposes of this Agreement. If such Bank does
not repay such corresponding amount forthwith upon First Union's demand
therefor, First Union shall promptly notify AeroCentury, and AeroCentury shall
immediately pay such corresponding amount to First Union, without any prepayment
penalty or premium, but with interest on the amount repaid, for each day from
the date such amount is made available to AeroCentury until the date such amount
is repaid to First Union, at the rate of interest applicable at the time to such
Loan. Nothing herein shall be deemed to relieve any Bank of its obligation to
fulfill its Revolving Loan Commitment hereunder or to prejudice any rights which
AeroCentury may have against any Bank as a result of any default by such Bank
hereunder.
(e) Proceeds of Loan Being Repaid. If the Banks make a Loan on a day on
which all or any part of an outstanding Loan from the Banks is to be repaid,
each Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
First Union as provided in clause (c).
2.4. Interest Rates.
(a) Base Rate. Each Base Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full or converted,
at a rate per annum equal to the Base Rate determined from time to time.
<PAGE>
(b) LIBO Rate. Each LIBO Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full, renewed, or
converted, at a rate per annum equal to the LIBO Rate plus 200 basis points
(2.0%). After receipt of a request for a LIBO Rate Loan, First Union shall
proceed to determine the LIBO Rate to be applicable thereto. First Union shall
give prompt notice by telephone or facsimile to AeroCentury and to each Bank of
the LIBO Rate thus determined in respect of each LIBO Rate Loan or any change
therein. In the event AeroCentury fails or is not permitted to select an
Interest Period for any LIBO Rate Loan which is maturing within the time period
and otherwise as provided herein, such Loan shall be automatically converted
into a Base Rate Loan on the last day of the Interest Period for such Loan.
(c) Renewals and Conversions. AeroCentury shall have the right to convert
Base Rate Loans into LIBO Rate Loans, and vice versa, and to renew LIBO Rate
Loans from time to time, provided that: (i) AeroCentury shall give First Union
notice of each permitted conversion or renewal; (ii) LIBO Rate Loans may be
converted or renewed only as of the last day of the applicable Interest Period
for such Loans; (iii) without the consent of each of the Banks, no Base Rate
Loan may be converted into a LIBO Rate Loan, and no Interest Period may be
renewed if on the proposed date of conversion an Event of Default, or Potential
Default exists or would thereby occur. First Union shall use its best efforts to
notify AeroCentury of the effectiveness of such conversion or renewal, and the
new interest rate to which the converted or renewed Loan is subject, as soon as
practicable after the conversion; provided, however, that any failure to give
such notice shall not affect AeroCentury's obligations or the Banks' rights and
remedies hereunder in any way whatsoever.
(d) Reinstatements. The liability of AeroCentury under this Section 2.4
shall continue to be effective or be automatically reinstated, as the case may
be, if at any time payment, in whole or in part, of any of the payments to the
Banks is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of
AeroCentury or any other person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to AeroCentury or any other Person or any substantial part of its property, or
otherwise, all as though such payment had not been made.
2.5. Fees.
(a) Commitment Fee. AeroCentury agrees to pay to First Union, as the Agent,
for the account of each Bank, a commitment fee (the "Commitment Fee") computed
on the basis of a year of 365 days for the actual number of days elapsed in an
amount equal to _ of 1% per annum times the average daily amount of the unused
portion of the Aggregate Revolving Loan Commitment. The Commitment Fee shall be
payable commencing with the date hereof and shall continue to and including the
Revolver Termination Date. The unused portion of the Aggregate Revolving Loan
Commitment shall mean the Aggregate Revolving Loan Commitment less the unpaid
principal amount of all Loans. The Commitment Fee shall be payable in quarterly
installments on the last Business Day of each calendar quarter and on the
Revolver Termination Date.
(b) Structuring and Arranging Fee; Administrative Fee. A Structuring and
Arranging Fee as well as an Administrative Fee shall be payable to First Union
as set forth in a separate letter agreement between First Union and AeroCentury.
<PAGE>
2.6. Termination or Reduction of Aggregate Revolving Loan Commitment.
(a) Voluntary. AeroCentury may at any time, on not less than three Business
Days' written notice, terminate or permanently reduce the Aggregate Revolving
Loan Commitment pro rata among the Banks, provided that any reduction shall be
in the amount of $1,000,000 or a multiple thereof and that no such reduction
shall cause the principal amount of Loans outstanding to exceed the Aggregate
Revolving Credit Commitment as reduced or the Borrowing Base, whichever is less.
(b) Termination. In the event the Aggregate Revolving Loan Commitment is
terminated, the Revolver Termination Date shall accelerate and AeroCentury
shall, simultaneously with such termination, repay the Base Rate Loans and LIBO
Rate Loans in accordance with Section 2.8.
2.7. Loan Prepayments (Optional and Mandatory).
(a) Base Rate Loans. On one Business Day's notice to the Banks, AeroCentury
may, at its option, prepay the Base Rate Loans in whole at any time or in part
from time to time, provided that each partial prepayment shall be in at least
the principal amount of $25,000 or, if greater, then in $10,000 multiples.
(b) LIBO Rate Loans. AeroCentury may, at its option prepay any LIBO Rate
Loan provided that if it shall prepay a LIBO Rate Loan prior to the last day of
the applicable Interest Period, or shall fail to borrow any LIBO Rate Loan on
the date such Loan is to be made, it shall pay to each Bank, in addition to the
principal and interest then to be paid in the case of a prepayment, on such date
of prepayment, the Additional Amount incurred or sustained by such Bank as a
result of such prepayment or failure to borrow as provided in Section 2.1(f).
2.8. Payments.
(a) Base Rate Loans. Accrued interest on all Base Rate Loans shall be due
and payable on the first Business Day of each calendar month and upon the
Revolver Termination Date.
(b) LIBO Rate Loans. Accrued interest on LIBO Rate Loans with Interest
Periods of one, two or three months shall be due and payable on the last day of
such Interest Period. Accrued interest on LIBO Rate Loans with Interest Periods
of six months shall be due and payable at the end of the third month and on the
last day of the Interest Period.
<PAGE>
(c) Form of Payments, Application of Payments, Payment Administration, Etc.
Provided that no Event of Default or Potential Default then exists, all payments
and prepayments shall be applied to the Loans in such order and to such extent
as shall be specified by AeroCentury, by written notice to First Union at the
time of such payment or prepayment. Except as otherwise provided herein, all
payments of principal, interest, fees, or other amounts payable by AeroCentury
hereunder shall be remitted to First Union on behalf of the Banks at the address
set forth opposite its name on the signature page hereof or at such office or
account as First Union shall specify to AeroCentury and the Banks, in
immediately available funds not later than 2:00 p.m. Eastern Time on the day
when due. First Union will promptly distribute to each Bank by wire transfer in
immediately available funds each Bank's pro rata share of such payment based
upon such Bank's Revolving Loan Commitment Percentage. Whenever any payment is
stated as due on a day which is not a Business Day, the maturity of such payment
shall, except as otherwise provided in the definition of "Interest Period", be
extended to the next succeeding Business Day and interest and commitment fees
shall continue to accrue during such extension. AeroCentury authorizes First
Union to deduct from any account of AeroCentury Borrower maintained at First
Union or over which First Union has control any amount payable under this
Agreement, the Notes or any other Loan Document which is not paid in a timely
manner. First Union's failure to deliver any bill, statement or invoice with
respect to amounts due under this Section or under any Loan Document shall not
affect AeroCentury's obligation to pay any installment of principal, interest or
any other amount under this Agreement when due and payable.
(d) Net Payments. All payments made to the Banks and First Union, as the
Agent, by AeroCentury hereunder, under any Note or under any other Loan Document
will be made without set off, counterclaim or other defense. All such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or any
political subdivision or taxing authority thereof or therein (but excluding,
except as provided below, any tax imposed on or measured by the gross or net
income of a Bank (including all interest, penalties or similar liabilities
related thereto) pursuant to the laws of the United States of America or any
political subdivision thereof, or taxing authority of the United States of
America or any political subdivision thereof, in which the principal office or
applicable lending office of such Bank is located), and all interest, penalties
or similar liabilities with respect thereto (collectively, together with any
amounts payable pursuant to the next sentence, "Taxes"). AeroCentury shall also
reimburse each Bank, upon the written request of such Bank, for Taxes imposed on
or measured by the gross or net income of such Bank pursuant to the laws of the
United States of America (or any State or political subdivision thereof), or the
jurisdiction (or any political subdivision or taxing authority thereof) in which
the principal office or applicable lending office of such Bank is located as
such Bank shall determine are payable by such Bank due to the amount of Taxes
paid to or on behalf of such Bank pursuant to this or the preceding sentence. If
any Taxes are so levied or imposed, AeroCentury agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due hereunder, under any Note or under any other Loan
Document, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein or in such Note. AeroCentury
will furnish to First Union upon request certified copies of tax receipts
evidencing such payment by AeroCentury. AeroCentury will indemnify and hold
harmless First Union and each Bank, and reimburse First Union or such Bank upon
its written request, for the amount of any Taxes so levied or imposed and paid
or withheld by such Bank.
Notwithstanding the preceding paragraph, AeroCentury shall be entitled, to
the extent required to do so by law, to deduct or withhold Taxes imposed by the
United States of America (or any political subdivision or taxing authority
thereof) from interest, fees or other amounts payable hereunder for the account
of any Person other than a Bank (x) that is a domestic corporation (as such term
is defined in Section 7701 of the Code) for federal income tax purposes (but
excluding any foreign office of any Bank) or (y) that has necessary forms on
file with AeroCentury for the applicable year to the extent deduction or
withholding of such Taxes is not required as a result of the filing of such
forms, provided that if AeroCentury shall so deduct or withhold any such Taxes,
it shall provide a statement to First Union and such Bank, setting forth the
amount of such Taxes so paid or withheld, the applicable rate and any other
information or documentation which such Bank may reasonably request for
assisting such Bank to obtain any allowable credits or deductions for the taxes
so deducted or withheld in the jurisdiction or jurisdictions in which such Bank
is subject to tax.
<PAGE>
(e) Demand Deposit Account. AeroCentury shall maintain at least one demand
deposit account with First Union for purposes of this Agreement. AeroCentury
authorizes First Union (but First Union shall not be obligated) to deposit into
said account all amounts to be advanced to AeroCentury hereunder. AeroCentury
authorizes First Union (but First Union shall not be obligated) to deduct from
said account, or any other account maintained by AeroCentury at First Union, as
the Agent, any amount payable hereunder on or after the date upon which it is
due and payable. Such authorization shall include but not be limited to amounts
payable with respect to principal, interest, fees and expenses.
2.9. Change in Circumstances, Yield Protection.
(a) Certain Regulatory Changes. If any Regulatory Change or compliance by
the Banks with any request made after the date of this Agreement by the Board of
Governors of the Federal Reserve System or by any Federal Reserve Bank or other
central bank or fiscal, monetary or similar authority (in each case whether or
not having the force of law) shall (i) impose, modify or make applicable any
reserve, special deposit, Federal Deposit Insurance Corporation premium or
similar requirement or imposition against assets held by, or deposits in or for
the account of, or loans made by, or any other acquisition of funds for loans or
advances by, the Banks; (ii) impose on the Banks any other condition regarding
the Notes; (iii) subject the Banks to, or cause the withdrawal or termination of
any previously granted exemption with respect to, any tax (including any
withholding tax but not including any income tax not currently causing the Banks
to be subject to withholding) or any other levy, impost, duty, charge, fee or
deduction on or from any payments due from AeroCentury; or (iv) change the basis
of taxation of payments from AeroCentury to the Banks (other than by reason of a
change in the method of taxation of a Bank's net income); and the result of any
of the foregoing events is to increase the cost to a Bank of making or
maintaining any Loan or to reduce the amount of principal, interest or fees to
be received by the Bank hereunder in respect of any Loan, First Union will
immediately so notify AeroCentury. If a Bank determines in good faith that the
effects of the change resulting in such increased cost or reduced amount cannot
reasonably be avoided or the cost thereof mitigated, then upon notice by First
Union to AeroCentury, AeroCentury shall pay to such Bank on each interest
payment date of the Loan, such additional amount as shall be necessary to
compensate the Bank for such increased cost or reduced amount.
(b) Capital Adequacy. If any Bank shall determine that any Regulation
regarding capital adequacy or the adoption of any Regulation regarding capital
adequacy, which Regulation is applicable to banks (or their holding companies)
generally and not such Bank (or its holding company) specifically, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank (or its
holding company) with any such request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has the effect of reducing the rate of return on such Bank's
capital as a consequence of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, AeroCentury shall
promptly pay to First Union for the account of such Bank, upon the demand of
such Bank, such additional amount or amounts as will compensate such Bank for
such reduction.
<PAGE>
(c) Ability to Determine LIBO Rate. If First Union shall determine (which
determination will be made after consultation with any Bank requesting same and
shall be, in the absence of fraud or manifest error, conclusive and binding upon
all parties hereto) that by reason of abnormal circumstances affecting the
interbank eurodollar or applicable eurocurrency market adequate and reasonable
means do not exist for ascertaining the LIBO Rate to be applicable to the
requested LIBO Rate Loan or that eurodollar or eurocurrency funds in amounts
sufficient to fund all the LIBO Rate Loans are not obtainable on reasonable
terms, First Union shall give notice of such inability or determination by
telephone to AeroCentury and to each Bank at least two Business Days prior to
the date of the proposed Loan and thereupon the obligations of the Banks to
make, convert other Loans to, or renew such LIBO Rate Loan shall be excused,
subject, however, to the right of AeroCentury at any time thereafter to submit
another request.
(d) Yield Protection. Determination by a Bank for purposes hereof of the
effect of any Regulatory Change or other change or circumstance referred to
above on its costs of making or maintaining Loans or on amounts receivable by it
in respect of the Loans and of the additional amounts required to compensate
such Bank in respect of any additional costs, shall be made in good faith and
shall be evidenced by a certificate, signed by an officer of such Bank and
delivered to AeroCentury, as to the fact and amount of the increased cost
incurred by or the reduced amount accruing to the Bank owing to such event or
events. Such certificate shall be prepared in reasonable detail and shall be
conclusive as to the facts and amounts stated therein, absent manifest error.
(e) Notice of Events. The affected Bank will notify AeroCentury of any
event occurring after the date of this Agreement that will entitle such Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount or amounts
then payable pursuant to this Section. AeroCentury shall pay such Bank the
amount shown as due on such notice within 10 days after its receipt of the same.
2.10. Illegality. Notwithstanding any other provision in this Agreement, if
the adoption of any applicable Regulation, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Banks with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Banks to (1)
maintain their Revolving Loan Commitments, then upon notice to AeroCentury by
First Union, the Revolving Loan Commitments shall terminate; or (2) maintain or
fund their LIBO Rate Loans, then upon notice to the Borrower of such event, the
Borrower's outstanding LIBO Rate Loans shall be converted into Base Rate Loans.
2.11. Discretion of Bank as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each LIBO Rate Loan during each Interest Period for such Loan through
the purchase of deposits in the relevant interbank market having a maturity
corresponding to such Interest Period and bearing an interest rate equal to the
LIBO Rate plus 200 basis points (2.0%), for such Interest Period.
<PAGE>
3. Representations and Warranties
AeroCentury represents and warrants to the Banks that:
3.1. Organization Standing. It (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority necessary to own its
assets, carry on its business and enter into and perform its obligations
hereunder, under each Loan Document to which it is a party, and (iii) is
qualified to do business and is in good standing in each jurisdiction where the
nature of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
3.2. Corporate Authority, Validity, Etc. The making and performance of the
Loan Documents to which it is a party are within its power and authority and
have been duly authorized by all necessary corporate action. The making and
performance of the Loan Documents do not and under present law will not require
any consent or approval of any of AeroCentury's shareholders or any other
person, do not and under present law will not violate any law, rule, regulation
order, writ, judgment, injunction, decree, determination or award, do not
violate any provision of its charter or by-laws, do not and will not result in
any breach of any material agreement, lease or instrument to which it is a
party, by which it is bound or to which any of its assets are or may be subject,
and do not and will not give rise to any Lien upon any of its assets. The number
of shares and classes of the capital stock of AeroCentury and the ownership
thereof are accurately set forth on Schedule 1 attached hereto; all such shares
are validly issued, fully paid and non-assessable, and the issuance and sale
thereof are in compliance with all applicable federal and state securities and
other applicable laws. AeroCentury is not in default under any such agreement,
lease or instrument except to the extent such default reasonably could not have
a Material Adverse Effect. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by AeroCentury
of any Loan Document to which it is a party or for the validity or
enforceability thereof. Each Loan Document, when executed and delivered, will be
the legal, valid and binding obligation of AeroCentury enforceable against each
in accordance with its terms.
3.3. Litigation. Except as disclosed on Schedule 1, there are no actions,
suits or proceedings pending or, to its knowledge, threatened against or
affecting it or any of its assets before any court, government agency, or other
tribunal which if adversely determined reasonably could have a Material Adverse
Effect or upon the ability of it to perform under the Loan Documents. If there
is any disclosure on Schedule 1, the status (including the tribunal, the nature
of the claim and the amount in controversy) of each such litigation matter as of
the date of this Agreement is set forth in Schedule 1.
3.4. ERISA. (a) AeroCentury and each ERISA Affiliate are in compliance in
all material respects with all applicable provisions of ERISA and the
regulations promulgated thereunder; and, neither AeroCentury, nor any ERISA
Affiliate maintains or contributes to or has maintained or contributed to any
multiemployer plan (as defined in Section 4001 of ERISA) under which AeroCentury
or any ERISA Affiliate could have any withdrawal liability; (b) neither
AeroCentury nor any ERISA Affiliate, sponsors or maintains any Plan under which
there is an accumulated funding deficiency within the meaning of Section 412 of
the Code, whether or not waived; (c) the aggregate liability for accrued
benefits and other ancillary benefits under each Plan that is or will be
sponsored or maintained by AeroCentury or any ERISA Affiliate (determined on the
basis of the actuarial assumptions prescribed for valuing benefits under
terminating single-employer defined benefit plans under Title IV of ERISA) does
not exceed the aggregate fair market value of the assets under each such defined
benefit pension Plan; (d) the aggregate liability of AeroCentury and each ERISA
Affiliate arising out of or relating to a failure of any Plan to comply with the
provisions of ERISA or the Code, will not have a Material Adverse Effect; and
(e) there does not exist any unfunded liability (determined on the basis of
actuarial assumptions utilized by the actuary for the plan in preparing the most
recent Annual Report) of AeroCentury or any ERISA Affiliate under any plan,
program or arrangement providing post-retirement life or health benefits.
3.5. Financial Statements. The financial statements of AeroCentury as of
and for the Fiscal Years ending December 31, 1997, and the interim financial
statements for the three month period ended March 31, 1998, consisting in each
case of a balance sheet, statement of income, a statement of shareholders'
equity, statement of cash flows, and accompanying notes to financial statements,
furnished to the Banks in connection herewith, present fairly, in all material
respects, the financial position, and results of operations of AeroCentury as of
the dates and for the periods referred to, in conformity with Generally Accepted
Accounting Principles. Except as set forth on Schedule 1 hereto, there are no
liabilities, fixed or contingent, which are not reflected in such financial
statements, other than liabilities which are not required to be reflected in
such balance sheets. There has been no Material Adverse Change since March 31,
1998.
3.6. Not in Default, Judgments, Etc. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing. AeroCentury has
satisfied all judgments and is not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board
bureau, agency, or instrumentality, domestic or foreign.
3.7. Taxes. AeroCentury has filed all federal, state, local and foreign tax
returns and reports which it is required by law to file and as to which its
failure to file would have a Material Adverse Effect, and has paid all taxes,
including wage taxes, assessments, withholdings and other governmental charges
which are presently due and payable, other than those being contested in good
faith by appropriate proceedings, if any, and disclosed on Schedule 1. The tax
charges, accruals and reserves on the books of AeroCentury are adequate to pay
all such taxes that have accrued but are not presently due and payable.
3.8. Permits, Licenses, Etc. AeroCentury possesses all permits, licenses,
franchises, trademarks, trade names, copyrights and patents necessary to the
conduct of its business as presently conducted or as presently proposed to be
conducted, except where the failure to possess the same would not have a
Material Adverse Effect.
3.9. Compliance with Laws, Etc. AeroCentury is in compliance in all
material respects with all Regulations applicable to its business (including
obtaining all authorizations, consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications with, any court
or governmental department, public body or authority, commission, board, bureau,
agency, or instrumentality), the noncompliance with which reasonably could have
a Material Adverse Effect.
3.10. Solvency. AeroCentury is, and after giving effect to the transactions
contemplated hereby, will be, Solvent.
<PAGE>
3.11. No Burdensome Agreements. AeroCentury is not subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of its directors or officers has or is expected
in the future to have a materially adverse effect on its operations, business,
assets, liabilities or upon the ability of AeroCentury to perform under the Loan
Documents. AeroCentury is not a party to any contract or agreement which in the
judgment of its directors or officers has or is expected to have any materially
adverse effect on its business, except as otherwise reflected in adequate
reserves.
3.12. Subsidiaries, Etc. AeroCentury has no Subsidiaries except for special
purpose entities formed in connection with financings which are non-recourse to
AeroCentury. Set forth in Schedule 1 hereto is a complete and correct list, as
of the date of this Agreement, of all special purpose entities owned by
AeroCentury and all Investments held by AeroCentury in any joint venture or
other Person.
3.13. Title to Properties, Leases. AeroCentury has good and marketable
title to all assets and properties reflected as being owned by it in its
financial statements as well as to all assets and properties acquired since said
date (except property disposed of since said date in the ordinary course of
business). Except for the Liens set forth in Schedule 1 hereto and any other
Permitted Liens, there are no Liens on any of such assets or properties. It has
the right to, and does, enjoy peaceful and undisturbed possession under all
material leases under which it is leasing property as a lessee. All such leases
are valid, subsisting and in full force and effect, and none of such leases is
in default, except where such default, either individually or in the aggregate,
could not have a Material Adverse Effect.
3.14. Public Utility Holding Company; Investment Company. AeroCentury is
not a "public utility company" or 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", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended; or a "public utility"
within the meaning of the Federal Power Act, as amended. Further, AeroCentury is
not an "investment company" or an "affiliated person" of an "investment company"
or a company "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
3.15. Margin Stock.AeroCentury is not and will not be engaged principally
or as one of its important activities in the business of extending credit for
the purpose of purchasing or carrying or trading in any margin stocks or margin
securities (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System as amended from time to time). AeroCentury will not use
or permit any proceeds of the Loans to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stocks or margin securities.
3.16. Use of Proceeds. AeroCentury will use the proceeds of each Loan to be
made pursuant hereto for the purchase or financing of Equipment to be leased to
unaffiliated persons and the warehouse financing of the lease of that Equipment.
3.17. Depreciation Policies. AeroCentury's current depreciation policies
are as set forth in Exhibit F. These policies have been in effect without change
since January 1, 1997.
3.18. Disclosure Generally. The representations and statements made by
AeroCentury or on its behalf in connection with this credit facility and the
Loans, including representations and statements in each of the Loan Documents,
do not and will not contain any untrue statement of a material fact or omit to
state a material fact or any fact necessary to make the representations made not
materially misleading. No written information, exhibit, report, brochure or
financial statement furnished by AeroCentury or on its behalf to the Bank in
connection with this credit facility, the Loans, or any Loan Document contains
or will contain any material misstatement of fact or omit to state a material
fact or any fact necessary to make the statements contained therein not
misleading.
4. Conditions Precedent
4.1. All Loans. The obligation of each Bank to make any Loan (including but
not limited to the first Loan hereunder) is conditioned upon the following:
(a) Documents. AeroCentury shall have delivered and the Bank shall have
received a Request for Advance in such form as First Union may request from time
to time.
(b) Borrowing Base Certificate. AeroCentury shall have delivered and First
Union shall have received a Borrowing Base Certificate dated the date of the
Loan requested under this Agreement.
(c) Convenants; Representations. AeroCentury shall be in compliance with
all covenants, agreements and conditions in each Loan Document and each
representation and warranty contained in each Loan Document shall be true with
the same effect as if such representation or warranty had been made on the date
such Loan is made or issued.
(d) Defaults. Immediately prior to and after giving effect to such
transaction, no Event of Default or Potential Default shall exist.
(e) Material Adverse Change. Since March 31, 1998, there shall not have
been any Material Adverse Change with respect to AeroCentury, and there shall
not be any other event or circumstance which gives First Union, as the Agent, or
any Bank reasonable grounds to conclude that AeroCentury may not or will not be
able to perform or observe (in the normal course) its obligations hereunder and
under the Notes or the other Loan Documents.
4.2. Conditions to the First Loan. In addition to the conditions to all
Loans as provided in Section 4.1, the obligation of each Bank to make the first
Loan is conditioned upon the following:
(a) Articles, Bylaws. Each Bank shall have received copies of the Articles
or Certificate of Incorporation and Bylaws of AeroCentury certified by its
Secretary or Assistant Secretary; together with Certificate of Good Standing
from any jurisdiction where the nature of its business or the ownership of its
properties requires such qualification except where the failure to be so
qualified would not have a Material Adverse Effect.
<PAGE>
(b) Evidence of Authorization. Each Bank shall have received copies
certified by the Secretary or Assistant Secretary of AeroCentury or any other
appropriate official (in the case of a Person other than AeroCentury) of all
corporate or other action taken by each Person other than the Banks who is a
party to any Loan Document to authorize its execution and delivery and
performance of the Loan Documents and to authorize the Loans, together with such
other related papers as First Union, as the Agent, shall reasonably require.
(c) Legal Opinions. Each Bank shall have received a favorable written
opinion in form and substance satisfactory to the Bank from Christopher B.
Tigno, Esq., General Counsel to AeroCentury, which shall be addressed to the
Bank and be dated the date of the first Loan.
(d) Incumbency. First Union, as the Agent, shall have received a
certificate signed by the secretary or assistant secretary of AeroCentury
together with the true signature of the officer or officers authorized to
execute and deliver the Loan Documents and certificates thereunder, upon which
the Banks shall be entitled to rely conclusively until it shall have received a
further certificate of the secretary or assistant secretary of AeroCentury
amending the prior certificate and submitting the signature of the officer or
officers named in the new certificate as being authorized to execute and deliver
Loan Documents and certificates thereunder.
(e) Notes. Each Bank shall have received a Revolving Credit Note duly
executed, completed and issued in accordance herewith.
(f) Documents. First Union, as the Agent, shall have received all
certificates, instruments and other documents then required to be delivered
pursuant to any Loan Documents, in each instance in form and substance
reasonably satisfactory to it.
(g) Consents. AeroCentury shall have provided to each Bank evidence
satisfactory to it that all governmental, shareholder and third party consents
and approvals necessary in connection with the transactions contemplated hereby
have been obtained and remain in effect.
(h) Other Agreements. AeroCentury shall have executed and delivered each
other Loan Document required hereunder.
(i) Fees, Expenses. AeroCentury shall simultaneously pay or shall have paid
all fees and expenses due hereunder or any other Loan Document.
(j) JMC Subordination Agreegment. Each Bank shall have received a
subordination agreement signed by JMC and in form and substance satisfactory to
the Banks whereby JMC agrees to subordinate at any time an Event of Default as
provided in Section 8.1(a) hereof shall exist and for so long as such Event of
Default shall exist a percentage of its right to receive management fees payable
to it at any time and from time to time, said percentage to be the greater of
(1) 50% of said fees, or (2) that percentage which results from dividing the
Loans outstanding hereunder by the Borrowing Base.
5. Affirmative Covenants
AeroCentury covenants and agrees that, without the prior written consent of
the Required Banks, from and after the date hereof and so long as the Revolving
Loan Commitments are in effect or any Obligation remains unpaid or outstanding,
it will:
<PAGE>
5.1. Financial Statements and Reports.Furnish to the Banks the following
financial information:
(a) Annual Statements. As soon as available but no later than ninety (90)
days after the end of each Fiscal Year, the balance sheet of AeroCentury as of
the end of such year and the prior year in comparative form, and related
statements of income, shareholders' equity, and cash flows for the Fiscal Year
and the prior Fiscal Year in comparative form. The financial statements shall be
in reasonable detail with appropriate notes and be prepared in accordance with
Generally Accepted Accounting Principles. The annual financial statements shall
be certified (without any qualification or exception) by Arthur Andersen LLP or
other independent public accountants acceptable to the Required Banks. Such
financial statements shall be accompanied by a report of such independent
certified public accountants stating that, in the opinion of such accountants,
such financial statements present fairly, in all material respects, the
financial position, and the results of operations and the cash flows of
AeroCentury for the period then ended in conformity with Generally Accepted
Accounting Principles, except for inconsistencies resulting from changes in
accounting principles and methods agreed to by such accountants and specified in
such report, and that, in the case of such financial statements, the examination
by such accountants of such financial statements has been made in accordance
with generally accepted auditing standards and accordingly included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements and assessing the accounting principles used and
significant estimates made, as well as evaluating the overall financial
statement presentation. Each financial statement provided under this subsection
(a) shall be accompanied by a certificate signed by such accountants either
stating that during the course of their examination nothing came to their
attention which would cause them to believe that any event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event. In addition to the annual financial statements,
AeroCentury shall, promptly upon receipt thereof, furnish to the Bank a copy of
each other report submitted to its board of directors by its independent
accountants in connection with any annual, interim or special audit made by them
of the financial records of AeroCentury.
(b) Quarterly Statements. As soon as available but no later than sixty (60)
calendar days after the end of each Fiscal Quarter of each Fiscal Year, the
balance sheet and related statements of income, shareholders' equity and cash
flows of AeroCentury for such quarterly period and for the period from the
beginning of such fiscal year to the end of such Fiscal Quarter and a
corresponding financial statement for the same periods in the preceding Fiscal
Year, certified by the chief executive officer, chief operating officer or chief
financial officer of AeroCentury as having been prepared in accordance with
Generally Accepted Accounting Principles (subject to changes resulting from
audits and year-end adjustments); provided, however, that if the independent
certified public accountants issue a review report on the quarterly financial
statements of AeroCentury, the financial statements required by this subsection
(b) shall be accompanied by a certificate signed by such accountants either
stating that during the course of their examination nothing came to their
attention which would cause them to believe that any event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event and the remedial steps being taken by AeroCentury.
<PAGE>
(c) No Default. Within sixty (60) calendar days after the end of each of
the first three Fiscal Quarters of each Fiscal Year and within ninety (90)
calendar days after the end of each Fiscal Year, a certificate signed by the
chief executive officer, chief operating officer or chief financial officer of
AeroCentury certifying that, to the best of such officer's knowledge, after due
inquiry, (i) AeroCentury has complied with all covenants, agreements and
conditions in each Loan Document and that each representation and warranty
contained in each Loan Document is true and correct with the same effect as
though each such representation and warranty had been made on the date of such
certificate (except to the extent such representation or warranty related to a
specific prior date), and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Potential Default, or describing each such
event and the remedial steps being taken by AeroCentury.
(d) ERISA. All reports and forms filed with respect to all Plans, except as
filed in the normal course of business and that would not result in an adverse
action to be taken under ERISA, and details of related information of a
Reportable Event, promptly following each filing.
(e) Material Changes. Notification to First Union, as the Agent, and each
other Bank, of any litigation, administrative proceeding, investigation,
business development, or change in financial condition which could reasonably
have a Material Adverse Effect, promptly following its discovery.
(f) Other Information. AeroCentury will provide to First Union, as the
Agent, and each other Bank all shareholder and Securities and Exchange
Commission notices, reports and filings and any material press releases
simultaneously with filing with the Securities and Exchange Commission or
release, respectively. In addition, promptly, upon request by First Union or any
other Bank from time to time (which may be on a monthly or other basis),
AeroCentury shall provide such other information and reports regarding its
operations, business affairs, prospects and financial condition as First Union,
as the Agent, or the Banks may reasonably request.
(g) Borrowing Base Certificates. In the event AeroCentury shall not have
delivered a Borrowing Base Certificate to the Banks during any calendar month,
it will deliver to the Banks, no later than 30 days after the end of such
calendar month as of the last day of the preceding calendar month, a Borrowing
Base Certificate signed by the chief executive officer, chief operating officer,
chief financial officer or a Senior Vice President of AeroCentury.
(h) Covenant Compliance Certificate. AeroCentury will deliver to the Banks,
no later than 60 days after the end of each calendar quarter, a Covenant
Compliance Certificate.
(i) Monthly Lease Portfolio and Receivables Report. AeroCentury will
deliver to the Banks, no later than 30 days after the end of each calendar
month, a lease portfolio listing and lease receivables aging report (in form and
substance reasonably satisfactory to First Union) applicable to all leases
included in the Collateral.
(j) Maintenace of Current Depreciation Policies. AeroCentury will maintain
its method of depreciating its assets substantially consistent with past
practices as set forth in Exhibit F and will promptly notify the Bank of any
deviation from such practices.
5.2. Corporate Existence. Preserve its corporate existence and all material
franchises, licenses, patents, copyrights, trademarks and trade names consistent
with good business practice; and maintain, keep, and preserve all of its
properties (tangible and intangible) necessary or useful in the conduct of its
business in good working order and condition, ordinary wear and tear excepted.
<PAGE>
5.3. ERISA. Comply in all material respects with the provisions of ERISA to
the extent applicable to any Plan maintained for the employees of AeroCentury or
any ERISA Affiliate; do or cause to be done all such acts and things that are
required to maintain the qualified status of each Plan and tax exempt status of
each trust forming part of such Plan; not incur any material accumulated funding
deficiency (within the meaning of ERISA and the regulations promulgated
thereunder), or any material liability to the PBGC (as established by ERISA);
not permit any event to occur as described in Section 4042 of ERISA or which may
result in the imposition of a lien on its properties or assets; notify the Banks
in writing promptly after it has come to the attention of senior management of
AeroCentury of the assertion or threat of any "reportable event" or other event
described in Section 4042 of ERISA (relating to the soundness of a Plan) or the
PBGC's ability to assert a material liability against it or impose a lien on
its, or any ERISA Affiliates', properties or assets; and refrain from engaging
in any Prohibited Transactions or actions causing possible liability under
Section 5.02 of ERISA.
5.4. Complaince with Regulations. Comply in all material respects with all
Regulations applicable to its business, the noncompliance with which reasonably
could have a Material Adverse Effect.
5.5. Conduct of Business; Permits, and Approvals, Compliance with
Laws.Continue to engage in an efficient and economical manner in a business of
the same general type as conducted by it on the date of this Agreement; maintain
in full force and effect, its franchises, and all licenses, patents, trademarks,
trade names, contracts, permits, approvals and other rights necessary to the
profitable conduct of its business.
5.6. Maintenance of Insurance. Maintain insurance with financially sound
and reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
5.7. Payment of Debt; Payment of Taxes, Etc. Where the amount involved
exceeds $250,000 or where the non-payment or non-discharge would otherwise have
a Material Adverse Effect on AeroCentury or any of its assets: promptly pay and
discharge (a) all of its Debt in accordance with the terms thereof; (b) all
taxes, assessments, and governmental charges or levies imposed upon it or upon
its income and profits, upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default; (c) all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might
become a lien or charge upon such property or any part thereof; provided,
however, that so long as AeroCentury first notifies First Union, as the Agent,
of its intention to do so, AeroCentury shall not be required to pay and
discharge any such Debt, tax, assessment, charge, levy or claim so long as the
failure to so pay or discharge does not constitute or result in an Event of
Default or a Potential Default hereunder and so long as no foreclosure or other
similar proceedings shall have been commenced against such property or any part
thereof and so long as the validity thereof shall be contested in good faith by
appropriate proceedings diligently pursued and it shall have set aside on its
books adequate reserves with respect thereto.
5.8. Notice of Events. Promptly upon discovery of any of the following
events, AeroCentury shall provide telephone notice to First Union (confirmed
within three (3) calendar days by written notice), describing the event and all
action AeroCentury proposes to take with respect thereto:
<PAGE>
(a) an Event of Default or Potential Default under this Agreement or any
other Loan Document;
(b) any default or event of default under a contract or contracts and the
default or event of default involves payments by AeroCentury in an aggregate
amount equal to or in excess of $250,000;
(c) a default or event of default under or as defined in any evidence of or
agreements for Indebtedness for Borrowed Money under which AeroCentury's
liability is equal to or in excess of $250,000, singularly or in the aggregate,
whether or not an event of default thereunder has been declared by any party to
such agreement or any event which, upon the lapse of time or the giving of
notice or both, would become an event of default under any such agreement or
instrument or would permit any party to any such instrument or agreement to
terminate or suspend any commitment to lend to AeroCentury or to declare or to
cause any such indebtedness to be accelerated or payable before it would
otherwise be due;
(d) the institution of, any material adverse determination in, or the entry
of any default judgment or order or stipulated judgment or order in, any suit,
action, arbitration, administrative proceeding, criminal prosecution or
governmental investigation against AeroCentury in which the amount in
controversy is in excess of $250,000, singularly or in the aggregate; or
(e) any change in any Regulation, including, without limitation, changes in
tax laws and regulations, which would have a Material Adverse Effect.
5.9. Inspection Rights; Collateral Appraisal. At any time during regular
business hours and as often as requested of AeroCentury by First Union, permit
First Union or any Bank, or any authorized officer, employee, agent, or
representative of any of them to examine and make abstracts from the records and
books of account of AeroCentury, wherever located, and to visit the properties
of AeroCentury; and to discuss the affairs, finances, and accounts of
AeroCentury with its chief executive officer, chief operating officer, chief
financial officer or independent accountants. In addition, First Union shall
cause an appraisal and audit of the Collateral to be made annually with the
first such appraisal and audit expected to be made within 90 days after the date
hereof. If no Event of Default or Potential Default shall be in existence,
AeroCentury shall reimburse First Union for the reasonable expense of the
Collateral appraisal and audit not to exceed $7,500 in any calendar year whether
the examination is performed by First Union or a third party approved by First
Union. If any inspection or collateral appraisal and audit shall be made during
the continuance of a Potential Default or an Event of Default, AeroCentury shall
reimburse First Union for the reasonable expense of such inspection or
collateral appraisal and audit without limit. At all times, it is understood and
agreed by AeroCentury that all expenses in connection with any such inspection
which may be incurred by AeroCentury, any officers and employees thereof and the
attorneys and independent certified public accountants therefor shall be
expenses payable by AeroCentury and shall not be expenses of the Banks.
5.10. Generally Accepted Accounting Principals. Maintain books and records
at all times in accordance with Generally Accepted Accounting Principles.
<PAGE>
5.11 Compliance with Materials Contracts. It will comply in all material
respects with all obligations, terms, conditions and covenants, as applicable,
in all Debt applicable to it and all instruments and agreements related thereto,
and all other instruments and agreements to which it is a party or by which it
is bound or any of its properties is affected and in respect of which the
failure to comply reasonably could have a Material Adverse Effect.
5.12. Use of Proceeds. AeroCentury will use the proceeds of each Loan for
the purchase or financing of Equipment to be leased to unaffiliated persons and
the warehouse financing of the lease of that Equipment.
5.13. Further Assurances. Do such further acts and things and execute and
deliver to First Union, as the Agent, such additional assignments, agreements,
powers and instruments, as the Banks may reasonably require or reasonably deem
advisable to carry into affect the purposes of this Agreement or to better
assure and confirm unto the Banks their rights, powers and remedies hereunder.
5.14. Restrictive Covenants in Other Agreements. In the event that
AeroCentury shall be or become subject to or suffer to exist any agreement
pertaining to Debt which contains covenants or restrictions that are more
restrictive on it than the covenants and restrictions contained in this
Agreement, each and every such covenant and restriction shall be deemed
incorporated herein by reference as fully as if set forth herein for so long as
and in such form as such covenants or restrictions shall remain in effect. If
and to the extent that any such covenant or restriction shall be inconsistent
with or otherwise be in conflict with any covenant or restriction set forth
herein (other than by reason of its being more restrictive), this Agreement
shall govern.
6. Negative Covenants
AeroCentury covenants and agrees that, without the prior written consent of
the Required Banks, from and after the date hereof and so long as the Revolving
Loan Commitments are in effect or any Obligation remains unpaid or outstanding,
it will not:
6.1. Merger, Consolidation. Merge or consolidate with or into any
corporation except, if no Potential Default or Event of Default shall have
occurred and be continuing either immediately prior to or upon the consummation
of such transaction, any Person may be merged into AeroCentury as long as
AeroCentury is the surviving entity.
6.2. Senior Debt. Create, assume or permit to exist any Debt which is parri
passu with the Notes except for Debt of an Unrestricted Subsidiary for which
AeroCentury is not a guarantor in whole or in part or otherwise liable.
6.3. Liens. Create, assume or permit to exist any Lien on any of its
property or assets, whether now owned or hereafter acquired, or upon any income
or profits therefrom, except Permitted Liens.
6.4. Guarantees. Guarantee or otherwise in any way become or be responsible
for indebtedness or obligations (including working capital maintenance,
take-or-pay contracts) of any other Person, contingently or otherwise, other
than guarantees in the nature of performance guarantees which arise in the
ordinary course of AeroCentury's business.
<PAGE>
6.5. Margin Stock. Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.
6.6. Acquisitions and Investments. Except as may arise in the ordinary
course of AeroCentury's aircraft leasing business, purchase or otherwise acquire
(including without limitation by way of share exchange) any part or amount of
the capital stock or assets of, or make any Investments in any other Person; or
enter into any new business activities or ventures not directly related to its
present business; or create any Subsidiary, except (a) it may acquire and hold
stock, obligations or securities received in settlement of debts (created in the
ordinary course of business) owing to it, (b) it may make and own (i)
Investments in certificates of deposit or time deposits having maturities in
each case not exceeding one year from the date of issuance thereof and issued by
a Bank, or any FDIC-insured commercial bank incorporated in the United States or
any state thereof having a combined capital and surplus of not less than
$150,000,000, (ii) Investments in marketable direct obligations issued or
unconditionally guaranteed by the United States of America, any agency thereof,
or backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of issuance or acquisition thereof,
(iii) Investments in commercial paper issued by a corporation incorporated in
the United States or any State thereof maturing no more than one year from the
date of issuance thereof and, at the time of acquisition, having a rating of A-1
(or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's
Investors Service, Inc., and (iv) investments in money market mutual funds all
of the assets of which are invested in cash or investments described in the
immediately preceding clauses (i), (ii) and (iii), (c) it may acquire all of the
outstanding capital stock or assets of Jetfleet Management Corp., a California
corporation ("JMC"), under substantially the terms and conditions set forth in
that certain Amended and Restated Management Agreement (the "Management
Agreement") between AeroCentury and JMC entered into as of April 23, 1998, and
(d) it may acquire and hold capital stock of or interests in Unrestricted
Subsidiaries.
6.7. Transfer of Assets; Nature of Business. Sell, transfer, pledge, assign
or otherwise dispose of any of its assets unless such sale or disposition shall
be in the ordinary course of its business for value received; or discontinue,
liquidate or change in any material respect any substantial part of its
operations or business. Sales of individual or small groups of leases and
related equipment from time to time and sales of groups of leases in
securitization transactions and transfers of assets in connection with
non-recourse financing transactions shall be deemed to be in the ordinary course
of the business of AeroCentury. Notwithstanding the foregoing and provided that
no Potential Default or Event of Default shall have occurred and be continuing
either immediately prior to or upon the consummation of any transaction,
AeroCentury may sell, transfer or dispose of assets constituting up to ten
percent (10%) of its total assets during any period of twelve months.
6.8. Restricted Payments. Declare or pay any cash dividends or redeem or
retire any shares of the outstanding capital stock of AeroCentury.
6.9. Accounting Change. Make or permit any change in financial accounting
policies or financial reporting practices, except as required by Generally
Accepted Accounting Principles or regulations of the Securities and Exchange
Commission, if applicable.
<PAGE>
6.10. Transactions with Affiliates. Enter into any transaction (including,
without limitation, the purchase, sale or exchange of property, the rendering of
any services or the payment of management fees) with any Affiliate, except
transactions in the ordinary course of, and pursuant to the reasonable
requirements of its business, including the payment of standard and customary
brokerage fees, provided such transactions are in good faith and upon
commercially reasonable terms, . Sales of individual or small groups of leases
and related equipment from time to time and sales of groups of leases in
securitization transactions and/or other sales of assets to an Unrestricted
Subsidiary shall be deemed to be in the ordinary course of the business of
AeroCentury. Management fees paid to JMC in accordance with the Management
Agreement as in effect on April 23, 1998 shall be permitted hereunder.
6.11. Restriction on Amendment of the Agreement. Enter into or otherwise
become subject to or suffer to exist any agreement which would require it to
obtain the consent of any other person as a condition to the ability of the
Banks and AeroCentury to amend or otherwise modify this Agreement.
7. Financial Covenants
AeroCentury covenants and agrees that from and after the date hereof and so
long as the Revolving Loan Commitments are in effect or any Obligation remains
unpaid or outstanding, it will maintain the following financial covenants:
7.1. Minimum Tangible Net Worth. Tangible Net Worth will not at any time be
less than the sum of (i) $13,500,000, and (ii) Net Income for each Fiscal
Quarter ending after March 31, 1998, without deduction for any net losses.
7.2. Debt Service Coverage Ratio. The ratio of EBTDA to Debt Service for
the four (4) most recently ended consecutive Fiscal Quarters will not at any
time be less than 1.1:1. Until such time as four (4) actual Fiscal Quarters of
AeroCentury operations shall have occurred, EBTDA shall be determined on an
annualized basis using the actual Fiscal Quarters which have elapsed.
7.3. Debt to Tangible Net Worth. The ratio of Debt (including Debt
represented by the Notes) to Tangible Net Worth will not at any time exceed
3.0:1.
7.4. Absence of Net Loss. It will not suffer a net loss for any Fiscal
Quarter.
7.5. Borrowing Base. The aggregate principal amount of Loans outstanding
shall not at any time exceed the Borrowing Base or the Aggregate Revolving Loan
Commitment, whichever is less; provided, however, that this covenant shall not
be deemed breached if, at the time such aggregate amount exceeds said level,
within three Business Days after the earlier of the date AeroCentury first has
knowledge of such excess or the date of the next Borrowing Base Certificate
disclosing the existence of such excess, a prepayment of Loans shall be made in
an amount sufficient to assure continued compliance with this covenant in the
future.
8. Default
8.1. Events of Default. AeroCentury shall be in default if any one or more
of the following events (each an "Event of Default") occurs:
<PAGE>
(a) Payments. AeroCentury fails to pay (1) any principal of or interest on
the Notes when due and payable (whether at maturity, by notice of intention to
prepay, or otherwise), or (2) any other amount payable under any Loan Document
when it is due and payable, and such failure shall continue in either case for a
period of five Business Days or more.
(b) Covenants. AeroCentury fails to observe or perform (1) any term,
condition or covenant set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(g),
5.1(h) or 5.1(j), Section 5.2 (first clause only), all sections of Articles 6
and 7 or Section 8.1(a) of this Agreement, as and when required, or (2) any
term, condition or covenant contained in this Agreement or any other Loan
Document other than as set forth in (1) above, as and when required and such
failure shall continue for a period of 10 Business Days or more.
(c) Representations, Warranties. Any representation or warranty made or
deemed to be made by AeroCentury herein or in any Loan Document or in any
exhibit, schedule, report or certificate delivered pursuant hereto or thereto
shall prove to have been false, misleading or incorrect in any material respect
when made or deemed to have been made.
(d) Bankruptcy. AeroCentury is dissolved or liquidated, makes an assignment
for the benefit of creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver or
trustee, commences any proceeding relating to itself under any bankruptcy,
reorganization, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction, has commenced against it any such proceeding which remains
undismissed for a period of sixty (60) days, or indicates its consent to,
approval of or acquiescence in any such proceeding, or any receiver of or
trustee for AeroCentury or any substantial part of the property of AeroCentury
is appointed, or if any such receivership or trusteeship continues undischarged
for a period of sixty (60) days.
(e) Certain Other Defaults. AeroCentury shall fail to pay when due any
Indebtedness for Borrowed Money which singularly exceeds $250,000, or in the
aggregate exceeds $250,000, and such failure shall continue beyond any
applicable cure period, or AeroCentury shall suffer to exist any default or
event of default in the performance or observance, subject to any applicable
grace period, of any agreement, term, condition or covenant with respect to any
agreement or document relating to Indebtedness for Borrowed Money if the effect
of such default is to permit, with the giving of notice or passage of time or
both, the holders thereof, or any trustee or agent for said holders, to
terminate or suspend any commitment (which is equal to or in excess of $250,000
in any individual case or $250,000 in the aggregate) to lend money or to cause
or declare any portion of any borrowings thereunder to become due and payable
prior to the date on which it would otherwise be due and payable, provided that
during any applicable cure period the Banks' obligations hereunder to make
further Loans shall be suspended.
(f) Judgments. Any judgments against AeroCentury or against its assets or
property for amounts in excess of $1,000,000 in the aggregate remain unpaid,
unstayed on appeal, undischarged, unbonded and undismissed for a period of
thirty (30) days.
<PAGE>
(g) Attachements. Any assets of AeroCentury shall be subject to
attachments, levies, or garnishments for amounts in excess of $1,000,000 in the
aggregate which have not been dissolved or satisfied within thirty (30) days
after service of notice thereof to AeroCentury.
(h) Change in Management. Neal D. Crispin, Toni M. Perazzo and Marc J.
Anderson shall cease to be executive officers of AeroCentury or JMC shall cease
to be the management company for AeroCentury as contemplated by the Management
Agreement dated as of April 23, 1998.
(i) Security Interests. Any security interest created pursuant to any Loan
Document shall cease to be in full force and effect, or shall cease in any
material respect to give the Bank, the Liens, rights, powers and privileges
purported to be created thereby (including, without limitation, a perfected
security interest in, and Lien on, all of the Collateral), superior to and prior
to the rights of all third Persons, and subject to no other Liens (except as
permitted by Section 6.2, 6.3).
(j) Material Adverse Change. Any Material Adverse Change shall have
occurred.
THEN and in every such event other than that specified in Section 8.1.(d),
First Union as Agent may, or at the written request of the Required Banks shall,
immediately terminate the Revolving Loan Commitments and declare the Notes and
all other Obligations, including without limitation accrued interest, to be, and
they shall thereupon forthwith become due and payable without presentment,
demand, or notice of any kind, all of which are hereby expressly waived by
AeroCentury. Upon the occurrence of any event specified in Section 8.1.(d), the
Revolving Loan Commitments shall automatically terminate and the Notes and all
other Obligations, including without limitation accrued interest, shall
immediately be due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by AeroCentury. Any
date on which the Notes and such other obligations are declared due and payable
pursuant to this Section 8.1 shall be Revolver Termination Date for purposes of
this Agreement. From and after the date an Event of Default shall have occurred
and for so long as an Event of Default shall be continuing, the Loans shall bear
interest at the Default Rate whether or not a Revolver Termination Date shall
have occurred.
<PAGE>
9. Agent
9.1. Appointment and Authorization. Each Bank hereby irrevocably appoints
and authorizes First Union, as Agent, to take such action on its behalf and to
exercise such powers under this Agreement and the Loan Documents as are
specifically delegated to it as Agent by the terms hereof or thereof, together
with such other powers as are reasonably incidental thereto. The relationship
between First Union and each Bank has no fiduciary aspects, and First Union'
duties as Agent hereunder are acknowledged to be only ministerial and not
involving the exercise of discretion on its part. Nothing in this Agreement or
any Loan Document shall be construed to impose on First Union any duties or
responsibilities other than those for which express provision is made herein or
therein. In performing its duties and functions hereunder, First Union does not
assume and shall not be deemed to have assumed, and hereby expressly disclaims,
any obligation with or for AeroCentury. As to matters not expressly provided for
in this Agreement or any Loan Document, First Union shall not be required to
exercise any discretion or to take any action or communicate any notice, but
shall be fully protected in so acting or refraining from acting upon the
instructions of the Required Banks and their respective successors and assigns;
provided, however, that in no event shall First Union be required to take any
action which exposes it to personal liability or which is contrary to this
Agreement, any Loan Document or applicable law, and First Union shall be fully
justified in failing or refusing to take any action hereunder unless it shall
first be specifically indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
omitting to take any such action. If an indemnity furnished to First Union for
any purpose shall, in its reasonable opinion, be insufficient or become
impaired, First Union may call for additional indemnity from the Banks and not
commence or cease to do the acts for which such indemnity is requested until
such additional indemnity is furnished.
9.2. Duties and Obligations. In performing its functions and duties
hereunder on behalf of the Banks, First Union shall exercise the same care and
skill as it would exercise in dealing with loans for its own account. Neither
First Union nor any of its directors, officers, employees or other agents shall
be liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or any Loan Document except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, First Union (a) may consult with legal counsel and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith and in accordance with the advice of such experts; (b)
makes no representation or warranty to any Bank as to, and shall not be
responsible to any Bank for, any recital, statement, representation or warranty
made in or in connection with this Agreement, any Loan Document or in any
written or oral statement (including a financial or other such statement),
instrument or other document delivered in connection herewith or therewith or
furnished to any Bank by or on behalf of AeroCentury; (c) shall have no duty to
ascertain or inquire into AeroCentury's performance or observance of any of the
covenants or conditions contained herein or to inspect any of the property
(including the books and records) of AeroCentury or inquire into the use of the
proceeds of the Revolving Credit Loans or (unless the officers of First Union
active in their capacity as officers of First Union on AeroCentury's account
have actual knowledge thereof or have been notified in writing thereof) to
inquire into the existence or possible existence of any Event of Default or
Potential Default; (d) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, effectiveness, genuineness,
sufficiency, collectability or value of this Agreement or any other Loan
Document or any instrument or document executed or issued pursuant hereto or in
connection herewith, except to the extent that such may be dependent on the due
authorization and execution by First Union itself; (e) except as expressly
provided herein in respect of information and data furnished to First Union for
distribution to the Banks, shall have no duty or responsibility, either
initially or on a continuing basis, to provide to any Bank any credit or other
information with respect to AeroCentury, whether coming into its possession
before the making of the Loans or at any time or times thereafter; and (f) shall
incur no liability under or in respect of this Agreement or any other Loan
Document for, and shall be entitled to rely and act upon, any notice, consent,
certificate or other instrument or writing (which may be by facsimile
(telecopier), telegram, cable, or other electronic means) believed by it to be
genuine and correct and to have been signed or sent by the proper party or
parties.
<PAGE>
9.3. First Union as a Bank. With respect to its Revolving Loan Commitment
and the Loans made and to be made by it, First Union shall have the same rights
and powers under this Agreement and all other Loan Documents as the other Banks
and may exercise the same as if it were not the Agent. The terms "Bank" and
"Banks" as used herein shall, unless otherwise expressly indicated, include
First Union in its individual capacity. First Union and any successor Agent
which is a commercial bank, and their respective affiliates, may accept deposits
from, lend money to, act as trustee under indentures of and generally engage in
any kind of business with, AeroCentury and its affiliates from time to time, all
as if such entity were not the Agent hereunder and without any duty to account
therefor to any Bank.
9.4. Independent Credit Decisions. Each Bank acknowledges to First Union
that it has, independently and without reliance upon First Union or any other
Bank, and based upon such documents and information as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently or
through other advisers and representatives but without reliance upon First Union
or any other Bank, and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or refraining from taking any action under this Agreement or any Loan
Document.
9.5. Indemnification. The Banks agree to indemnify First Union (to the
extent not previously reimbursed by AeroCentury), ratably in proportion to each
Bank's Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against First Union in its capacity as Agent in any
way relating to or arising out of this Agreement or any Loan Document or any
action taken or omitted to be taken by First Union in its capacity as Agent
hereunder or under any Loan Document; provided that none of the Banks shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from First Union' gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each Bank agrees to reimburse First Union, promptly
on demand, for such Bank's ratable share (based upon the aforesaid
apportionment) of any out-of-pocket expenses (including counsel fees and
disbursements) incurred by First Union in connection with the preparation,
execution, administration or enforcement of, or the preservation of any rights
under, this Agreement and the Loan Documents to the extent that First Union is
not reimbursed for such expenses by AeroCentury.
9.6. Successor Agent. First Union may resign at any time by giving written
notice of such resignation to the Banks and AeroCentury, such resignation to be
effective only upon the appointment of a successor Agent as hereinafter
provided. Upon any such notice of resignation, the Banks shall jointly appoint a
successor Agent upon written notice to AeroCentury and First Union. If no
successor Agent shall have been jointly appointed by such Banks and shall have
accepted such appointment within thirty (30) days after First Union shall have
given notice of resignation, First Union may, upon notice to AeroCentury and the
Banks, appoint a successor Agent. Upon its acceptance of any appointment as
Agent hereunder, the successor Agent shall succeed to and become vested with all
the rights, powers, privileges and duties of First Union, and First Union shall
be discharged from its duties and obligations as Agent under this Agreement and
the Loan Documents. After First Union' resignation hereunder, the provisions
hereof shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was the Agent under this Agreement and the Loan Documents.
<PAGE>
9.7. Allocations Made By First Union. As between First Union, as Agent, and
the Banks, unless a Bank objecting to a determination or allocation made by
First Union pursuant to this Agreement delivers to First Union written notice of
such objection within one hundred twenty (120) days after the date any
distribution was made by First Union, such determination or allocation shall be
conclusive on such one hundred twentieth day and only those items expressly
objected to in such notice shall be deemed disputed by such Bank. First Union
shall not have any duty to inquire as to the application by the Banks of any
amounts distributed to them.
10. Miscellaneous
10.1. Waiver. No failure or delay on the part of First Union or any Bank or
any holder of any Note in exercising any right, power or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under any
Loan Document. The remedies provided under the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
10.2. Amendments. No amendment, modification, termination or waiver of any
Loan Document or any provision thereof nor any consent to any departure by
AeroCentury therefrom shall be effective unless the same shall have been
approved in writing by the Required Banks, be in writing and be signed by First
Union and AeroCentury, and then any such waiver or consent shall be effective
only in the instance and for the specific purpose for which given. No notice to
or demand on AeroCentury shall entitle AeroCentury to any other or further
notice or demand in similar or other circumstances. Notwithstanding any other
provision contained in any Loan Document, no amendment, modification,
termination or waiver shall affect the payment of principal (including without
limitation the date when due), reduce any interest rate margin or any fee
provided herein, increase any Revolving Loan Commitment, extend the Revolver
Termination Date, modify the definition of "Required Banks" or any voting rights
of the Banks without the written consent of all the Banks. The rights and
responsibilities of First Union as the Agent hereunder cannot be changed without
its prior written consent.
10.3. Governing Law. The Loan Documents and all rights and obligations of
the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
<PAGE>
10.4. Participations and Assignments. AeroCentury hereby acknowledges and
agrees that any Bank may at any time: (a) grant participations in all or any
portion of its Note or of its right, title and interest therein or in or to this
Agreement (collectively, "Participations") to any other lending office or to any
other bank, lending institution or other entity which has the requisite
sophistication to evaluate the merits and risks of investments in Participations
("Participants"); provided, however, that: (i) all amounts payable by
AeroCentury shall be determined as if such Bank had not granted such
Participation; and (ii) any agreement pursuant to which a Bank may grant a
Participation; (x) shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of AeroCentury including, without
limitation, the right to approve any amendment, modification or waiver of any
provisions of this Agreement; (y) such participation agreement may provide that
such Bank will not agree to any modification, amendment or waiver of this
Agreement without the consent of the Participant if such modification, amendment
or waiver would reduce the principal of or rate of interest on any Loan or
postpone the date fixed for any payment of principal of or interest on any Loan;
and (z) shall not relieve such Bank from its obligations, which shall remain
absolute, to make Loans hereunder; and (b) each Bank may assign all or part of
its Note and its Revolving Credit Commitment (but only with the consent of
AeroCentury and First Union, as the Agent, which consent shall not be
unreasonably withheld), provided that each such assignment shall be in an amount
of at least $1,000,000 (unless, after giving effect to such assignment and all
other such assignments by such assigning Bank occurring simultaneously or
substantially simultaneously therewith, such assigning Bank shall hold no
Revolving Credit Commitment or any portion of its Note hereunder); and (ii) each
such assignment by a Bank of its Note or a portion thereof, or Revolving Credit
Commitment or a portion thereof shall be made in such manner so that the same
portion of its Loans, Note and Revolving Credit Commitment is assigned to the
respective assignee. Upon execution and delivery by the assignee to AeroCentury
and First Union, as the Agent, of an instrument in writing pursuant to which
such assignee agrees to become a "Bank" hereunder (if not already a Bank) having
the Commitment(s) and Note interest specified in such instrument, and upon
consent thereto by AeroCentury and First Union, as the Agent, to the extent
required above, the assignee shall have, to the extent of such assignment
(unless otherwise provided in such assignment with the consent of AeroCentury
and First Union, as the Agent), the obligations, rights and benefits of a Bank
hereunder holding the Revolving Credit Commitment(s) and Loans (or portions
thereof) assigned to it (in addition to the Revolving Credit Commitment(s) and
Note interest, if any, theretofore held by such assignee) and the assigning Bank
shall, to the extent of such assignment, be released from the Commitment(s) (or
portion(s) thereof) so assigned. Upon each such assignment the assigning Bank
shall pay First Union as the Agent an assignment fee of $3,000.
10.5. Captions. Captions in the Loan Documents are included for convenience
of reference only and shall not constitute a part of any Loan Document for any
other purpose.
10.6 Notices. All notices, requests, demands, directions, declarations and
other communications between the Banks and AeroCentury provided for in any Loan
Document shall, except as otherwise expressly provided, be mailed by registered
or certified mail, return receipt requested, or telegraphed, or faxed, or
delivered in hand to the applicable party at its address indicated opposite its
name on the signature pages hereto. The foregoing shall be effective and deemed
received five (5) days after being deposited in the mails, postage prepaid,
addressed as aforesaid and shall whenever sent by telegram, telegraph or fax or
overnight courier service or delivered in hand be effective when received. Any
party may change its address by a communication in accordance herewith.
10.7. Sharing of Collections, Proceeds and Set-Offs; Application
of Payments.
(a) If any Bank, by exercising any right of set-off, counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Note which is greater than the percentage
share of such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made as may be
required, so that all such payments shall be shared by the Banks on the basis of
their percentage shares; provided that if all or any portion of such
proportionately greater payment of such indebtedness is thereafter recovered
from, or must otherwise be restored by, such purchasing Bank, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest being paid by such purchasing Bank. The percentage share of
each Bank shall be based on the portion of the outstanding Loans of such Bank
(prior to receiving any payment for which an adjustment must be made under this
Section in relation to the aggregate outstanding Loans of all the Banks.
AeroCentury agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Loan or reimbursement
obligation, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of AeroCentury in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Bank receives a
secured claim in lieu of a set-off to which this Section would apply, such Bank
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Banks entitled under this
Section to share in the benefits of any recovery on such secured claim.
(b) If an Event of Default or Potential Default shall have occurred and be
continuing the Agent and each Bank and AeroCentury agree that all payments on
account of the Loans shall be applied by the Agent and the Banks as follows:
First, to the Agent for any Agent fees then due and payable under this
Agreement until such fees are paid in full;
Second, to the Agent for any fees, costs or expenses (including expenses
described in Section 10.8) incurred by the Agent under any of the Loan Documents
or this Agreement, then due and payable and not reimbursed by AeroCentury or the
Banks until such fees, costs and expenses are paid in full;
Third, to the Banks for their percentage shares of the Commitment Fee then
due and payable under this Agreement until such fee is paid in full;
Fourth, to the Banks for their respective shares of all costs, expenses and
fees then due and payable from AeroCentury until such costs, expenses and fees
are paid in full;
Fifth, to the Banks for their percentage shares of all interest then due
and payable from AeroCentury until such interest is paid in full, which
percentage shares shall be calculated by determining each Bank's percentage
share of the amounts allocated in (a) above determined as set forth in said
clause (a); and
Sixth, to the Banks for their percentage shares of the principal amount of
the Loans then due and payable from AeroCentury until such principal is paid in
full, which percentage shares shall be calculated by determining each Bank's
percentage share of the amounts allocated in (a) above determined as set forth
in said clause (a).
<PAGE>
10.8. Expenses; Indemnification. AeroCentury will from time to time
reimburse First Union as the Agent promptly following demand for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel) in connection with (i) the preparation of the Loan Documents (not to
exceed $25,000), (ii) the making of any Loans, (iii) the administration or
revision of the Loan Documents, and (iv) the enforcement of the Loan Documents;
and reimburse the Bank for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of legal counsel) in connection with the
enforcement of the Loan Documents. In addition to the payment of the foregoing
expenses, AeroCentury hereby agrees to indemnify, protect and hold the Agent,
each Bank and any holder of each Note and the officers, directors, employees,
agents, affiliates and attorneys of the Agent, each Bank and such holder
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature, including reasonable
fees and expenses of legal counsel, which may be imposed on, incurred by, or
asserted against such Indemnitee by AeroCentury or other third parties and arise
out of or relate to this Agreement or the other Loan Documents or any other
matter whatsoever related to the transactions contemplated by or referred to in
this Agreement or the other Loan Documents; provided, however, that AeroCentury
shall have no obligation to an Indemnitee hereunder to the extent that the
liability incurred by such Indemnitee has been determined by a court of
competent jurisdiction to be the result of gross negligence or willful
misconduct of such Indemnitee.
10.9. Survival of Warranties and Certain Agreement. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of AeroCentury in
Sections 2.1(f), 2.5(b), 2.10 and 10.8 and the agreements of the Banks set forth
in Sections 9.1, 9.5 and 10.8 shall survive the payment of the Loans and the
termination of this Agreement. This Agreement shall remain in full force and
effect until the repayment in full of all amounts owed by AeroCentury under the
Notes or any other Loan Document.
10.10. Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Notes
or other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Notes or other Loan Documents or of such provision or obligation in any
other jurisdiction.
10.11. Banks' Obligations Several; Independent Nature of Banks' Rights. The
obligation of each Bank hereunder is several and not joint and no Bank shall be
the agent of any other (except to the extent the Agent is authorized to act as
such hereunder). No Bank shall be responsible for the obligation or commitment
of any other Bank hereunder. In the event that any Bank at any time should fail
to make a Loan as herein provided, the other Banks, or any of them as may then
be agreed upon, at their sole option, may make the Loan that was to have been
made by the Bank so failing to make such Loan. Nothing contained in any Loan
Document and no action taken by Agent or any Bank pursuant hereto or thereto
shall be deemed to constitute the Banks to be a partnership, an association, a
joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and, subject to
the terms of this Agreement, each Bank shall be entitled to protect and enforce
its rights arising out of this Agreement and it shall not be necessary for any
other Bank to be joined as an additional party in any proceeding for such
purpose.
10.12. No Fiduciary Relationship. No provision in this Agreement or in any
of the other Loan Documents and no course of dealing between the parties shall
be deemed to create any fiduciary duty of any Bank to AeroCentury.
10.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. AEROCENTURY, THE
AGENT AND EACH BANK EACH HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF PENNSYLFANIA AND
IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING
TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY BE LITIGATED IN SUCH
COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONIDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENT, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN DOCUMENT.
<PAGE>
10.14. WAIVER OF JURY TRAIL. AEROCENTURY, THE AGENT AND EACH BANK EACH
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE EASTERN DISTRICT OF PENNSYLVANIA AND IRREVOCABLY AGREES THAT, ANY ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS MAY BE LITIGATED IN SUCH COURTS. EACH PARTY TO THIS AGREEMENT
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENT, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR
SUCH OTHER LOAN DOCUMENT.
AEROCENTURY, THE AGENT AND EACH BANK EACH HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER
RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. AEROCENTURY, THE AGENT AND EACH BANK EACH ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. AEROCENTURY,
THE AGENT AND EACH BANK EACH FURTHER WARRANTS AND REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR
RESTATEMENTS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.15. Counterparts; Effectiveness. This Agreement and any amendment hereto
or waiver hereof may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement and any amendments hereto
or waivers hereof shall become effective when the Agent shall have received
signed counterparts or notice by fax of the signature page that the counterpart
has been signed and is being delivered to it or facsimile that such counterparts
have been signed by all the parties hereto or thereto.
10.16. Use of Defined Terms. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
10.17. Offsets. Nothing in this Agreement shall be deemed a waiver or
prohibition of any Bank's right of banker's lien or offset.
<PAGE>
10.18 Entire Agreement. This Agreement, the Notes issued hereunder and the
other Loan Documents constitute the entire understanding of the parties hereto
as of the date hereof with respect to the subject matter hereof and thereof and
supersede any prior agreements, written or oral, with respect hereto or thereto.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed by their duly authorized representatives as of the date first
above written.
AeroCentury Corp.
By ______________________________
Name:
Title:
Notices To:
AeroCentury Corp.
1440 Chapin Avenue, #310
Burlingame, CA 94010
FAX No. (650) 696-3929
Att: Toni M. Perazzo
Vice President-Finance
FIRST UNION NATIONAL BANK
By ______________________________
Hugh W. Connelly
Vice President
Notices To:
Mr. Hugh W. Connelly
Vice President
First Union National Bank
Transportation and Leasing Division
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
<PAGE>
Reference Table of Definitions
<TABLE>
<CAPTION>
definition page defined
<S> <C>
Additional Amount................................................................................................13
AeroCentury.......................................................................................................1
Affiliate.........................................................................................................1
Agent.............................................................................................................1
Aggregate Revolving Loan Commitment..............................................................................11
Agreement.........................................................................................................2
Agreement Year...................................................................................................12
Bank..............................................................................................................1
Banks.............................................................................................................1
Base Rate.........................................................................................................2
Base Rate Loans...................................................................................................2
Borrowing.........................................................................................................2
Borrowing Base....................................................................................................2
Borrowing Base Certificate........................................................................................2
Business Day......................................................................................................2
Capitalized Lease.................................................................................................2
Capitalized Lease Obligations.....................................................................................2
Closing...........................................................................................................2
Closing Date......................................................................................................3
Code..............................................................................................................3
Commitment Fee...................................................................................................15
control...........................................................................................................1
Covenant Compliance Certificate...................................................................................3
Debt..............................................................................................................3
Debt Service......................................................................................................3
Default Rate......................................................................................................3
Dollars...........................................................................................................3
EBITDA............................................................................................................3
Eligible Collateral...............................................................................................4
Eligible Lease Receivables........................................................................................4
Environmental Control Statutes....................................................................................4
Equipment.........................................................................................................3
ERISA.............................................................................................................5
ERISA Affiliate...................................................................................................5
Event of Default.................................................................................................31
Federal Funds Rate................................................................................................5
First Union.......................................................................................................1
Fiscal Quarter....................................................................................................5
Fiscal Year.......................................................................................................5
GAAP..............................................................................................................5
Generally Accepted Accounting Principles..........................................................................5
<PAGE>
Governmental Authority............................................................................................5
Governmental Authority............................................................................................5
Indebtedness for Borrowed Money...................................................................................5
Indemnitees......................................................................................................38
Intangible Assets.................................................................................................5
Interest Period...................................................................................................6
Investment........................................................................................................6
JMC..............................................................................................................30
LIBO Rate.........................................................................................................6
LIBO Rate Loans...................................................................................................7
LIBO Rate Reserve Percentage......................................................................................6
Lien..............................................................................................................7
Loan.............................................................................................................11
Loan Documents....................................................................................................7
Loans............................................................................................................11
London Business Day...............................................................................................2
Management Agreement.............................................................................................30
Material Adverse Change...........................................................................................7
Material Adverse Effect...........................................................................................7
Monthly Lease Portfolio...........................................................................................7
Multiemployer Plan................................................................................................7
Net Worth.........................................................................................................7
Non-Recourse Debt.................................................................................................8
Note.............................................................................................................13
Notes............................................................................................................13
Obligations.......................................................................................................8
Operating Lease...................................................................................................8
Participants.....................................................................................................36
Participations...................................................................................................36
PBGC..............................................................................................................8
Pension Plan......................................................................................................8
Permitted Liens...................................................................................................8
Person............................................................................................................9
Plan..............................................................................................................9
Potential Default.................................................................................................9
Prohibited Transaction............................................................................................9
Receivables Report................................................................................................7
Recourse Debt.....................................................................................................9
Regulation........................................................................................................9
Regulation D......................................................................................................9
Regulatory Change.................................................................................................9
Reportable Event..................................................................................................9
Request for Advance..............................................................................................13
Required Banks...................................................................................................10
Revolver Termination Date........................................................................................11
Revolving Credit Loan............................................................................................11
Revolving Credit Loans...........................................................................................11
<PAGE>
Revolving Credit Note............................................................................................13
Revolving Credit Notes...........................................................................................13
Revolving Loan Commitment........................................................................................11
Revolving Loan Commitment Percentage.............................................................................12
Security Agreement...............................................................................................10
Solvent..........................................................................................................10
Subordinated Debt................................................................................................10
Subsidiary.......................................................................................................10
Tangible Net Worth...............................................................................................10
Taxes............................................................................................................17
Termination Event................................................................................................10
Unfunded Pension Liabilities.....................................................................................10
Unrecognized Retiree Welfare Liability...........................................................................11
Unrestricted Subsidiaries........................................................................................11
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Note
EXHIBIT A
BANKS' COMMITMENTS AND PERCENTAGES
Bank Commitment Percentage
<S> <C> <C>
First Union National Bank $15,000,000 100.0%
Transportation and Leasing Division
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
</TABLE>
<PAGE>
Dated ___________, ____
EXHIBIT B
NOTE
$__,000,000 Philadelphia, PA
_____________, 1998
For Value Received, AeroCentury Corp., a Delaware corporation, hereby
promises to pay to the order of ______________ BANK (the "Bank"), in lawful
currency of the United States of America in immediately available funds at the
offices of First Union located at Broad and Chestnut Streets, Philadelphia,
Pennsylvania, on the Revolver Termination Date or on such earlier date or dates
as provided in the Credit Agreement described below, the principal sum of
_____________ DOLLARS ($__,000,000) or, if less, the then unpaid principal
amount of all Loans made by the Bank pursuant to the Credit Agreement.
AeroCentury Corp. promises also to pay interest on the unpaid principal
amount hereof in like money at such office from the date hereof until paid in
full at the rates and at the times provided in the Credit Agreement.
This Note is one of the Notes referred to in, is entitled to the benefits
of and is secured by security interests referred to in the Credit Agreement,
dated June 30, 1998, by and between AeroCentury Corp. and the banking
institutions named therein, with First Union National Bank as Agent (as such may
be amended, modified, supplemented, restated or replaced from time to time, the
"Credit Agreement"). This Note is subject to voluntary prepayment and mandatory
repayment prior to the Revolver Termination Date, in whole or in part, as
provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity
date of the principal of and the accrued interest on this Note may be
accelerated and be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.
AeroCentury hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the undersigned's liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness to the Bank relating to such Bank's Loans, including all principal
and interest, together with all fees and expenses as provided in the Credit
Agreement, as established by the Bank's books and records which shall be
conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
<PAGE>
This Note shall be construed in accordance with and be governed by the law
of the commonwealth of pennsylvania without regard to pennsylvania or federal
principles or conflict of laws.
AeroCentury Corp.
By ______________________________
Name:
Title:
<PAGE>
Borrowing Base Certificate Date: ___________
EXHIBIT C
BORROWING BASE CERTIFICATE
Date of Certificate: _________________________
Date of Information: _________________________
To: First Union National Bank, as Agent
Gentlemen:
This Borrowing Base Certificate is delivered to you pursuant to the terms
of Section 5.1 of the Credit Agreement, dated June 30, 1998, as currently in
effect. Capitalized terms used without definition below have the same meanings
as they have in the Credit Agreement.
We hereby certify that:
1. No Potential Default or Event of Default has occurred and is continuing
as of the date of this Borrowing Base Certificate.
2. There has been no Material Adverse Change since [insert the date of the
most recent financial statements delivered to the Bank pursuant to the terms of
Section 5.1 of the Credit Agreement], except as disclosed on the attached
schedules.
3. The information set forth on the attached schedules is true, current and
complete as of the date of this Borrowing Base Certificate.
AeroCentury Corp.
By ______________________________
Name:
Title:
<PAGE>
AeroCentury Corp.
Computation of Borrowing Base Availability
Collateral Loan Value
Total Borrowing Base $____________________
Maximum Loans
Revolving Loan Commitment $ ____,000,000
Credit Usage
Aggregate Loan Balance (principal) at date
of certificate $____________________
Loan Availability
Collateral Loan Value minus Credit Usage $____________________
Maximum Loans minus Credit Usage $____________________
Loan Availability (lesser of two preceding lines) $____________________
Amount of Loan Requested (not to exceed
preceding line) $____________________
<PAGE>
Mortgage and Security Agreement Dated ___________, ____
EXHIBIT D
MORTGAGE AND SECURITY AGREEMENT
[to be added]
<PAGE>
Covenant Compliance Certificate Date: ___________
EXHIBIT E
COVENANT COMPLIANCE CERTIFICATE
The undersigned, the [Chief Executive] Officer of AeroCentury Corp.
("AeroCentury"), does hereby certify to First Union National Bank, Agent (the
"Bank"), as required by that certain Credit Agreement, dated June 30, 1998, by
and between AeroCentury and the Bank (the "Agreement") (terms not otherwise
defined herein shall have the meanings given to such terms in the Agreement),
that as such officer he is authorized to execute this Compliance Certificate
(this "Certificate") on behalf of AeroCentury and does further certify that:
1. AeroCentury has complied and is in compliance with all covenants,
agreements and conditions in the Agreement and each of the other Loan Documents
on the date hereof.
2. Each representation and warranty contained in the Agreement and each of
the other Loan Documents is true and correct on the date hereof.
3. No Potential Default or Event of Default has occurred and is continuing
as of the date of this Compliance Certificate.
4. There has been no Material Adverse Change since [insert the date of the
most recent financial statements delivered to the Bank pursuant to the terms of
Section 5.1 of the Credit Agreement], except as disclosed on the attached
schedules.
5. The covenant compliance calculations set forth in Attachment 1 hereto
are true and correct on the dates specified.
IN WITNESS WHEREOF, the undersigned has executed this Certificate in his
capacity as an officer of AeroCentury on this ___ day of _________, _____.
AeroCentury Corp.
By: _______________________________
Name:
Title:
<PAGE>
COVENANT COMPLIANCE CALCULATIONS
AeroCentury Corp.
for the (quarter, year) ending ________
[to be added]
<PAGE>
EXHIBIT F
DEPRECIATION POLICIES
AeroCentury Corp.'s interests in aircraft and aircraft engines are recorded
at cost, which includes acquisition costs and loan fees. Depreciation is
computed using the straight-line method over the aircraft's estimated economic
life (generally assumed to be twelve years), to an estimated residual value.
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
Section 3.2 Stock Ownership
<TABLE>
<CAPTION>
Capitalization
Class Total Authorized Total Issued
<S> <C> <C>
Common 3,000,000 1,606,557
Preferred
Series A 100,000 -0-
undesignated 1,900,000 -0-
</TABLE>
In connection with the adoption of a shareholders rights plan, the Company
issued rights to its shareholders as of April 23, 1998, entitling each such
shareholder the right to purchase 1/100th of a share of Series A Preferred Stock
for each share of Common Stock held by the shareholder.
Principal Holders
To the Company's best knowledge, the only shareholder of the Company that
holds 5% or more off the Common Stock of the Company is JetFleet Management
Corp., which holds 147,667 shares of Common Stock or approximately 9.2% of that
class.
Section 3.3. Litigation
None
Section 3.5 Material Adverse Change
None
Section 3.7 Taxes
None
Section 3.12 Subsidiaries
None
Section 3.13 Liens
AeroCentury IV, Inc. holds a lien against the Shorts SD3-60-100 (S/N
SH3604) aircraft owned by the Company securing a promissory note with original
principal amount of $866,667.
