Amended and Restated
CREDIT AGREEMENT
among
AEROCENTURY CORP.
and
Certain Banking Institutions Named Herein
with
NATIONAL CITY BANK
as Agent
June 28, 2000
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Table of Contents
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<S> <C>
1. Certain Definitions............................................................................................1
1.1. Definitions........................................................................................1
1.2. Accounting Terms..................................................................................12
2. The Credit....................................................................................................12
2.1. The Loans.........................................................................................12
(a) Revolving Credit Loans; Commitment.......................................................12
(b) Interest Rate Options....................................................................12
(c) Maximum Loans Outstanding................................................................12
(d) Minimum Loan Amount......................................................................13
(e) Prepayment and Reborrowing...............................................................13
(f) Revolving Loan Commitment Percentages....................................................13
(g) Several Obligations......................................................................13
(h) Payment of Additional Amount.............................................................13
(i) Letters of Credit........................................................................13
2.2. The Notes.........................................................................................14
2.3. Funding Procedures................................................................................15
(a) Request for Advance.......................................................................15
(b) Actions by Agent..........................................................................15
(c) Availability of Funds.....................................................................15
(d) Funding Assumptions.......................................................................15
(e) Proceeds of Loan Being Repaid.............................................................16
2.4. Interest Rates....................................................................................16
(a) Alternate Base Rate........................................................................16
(b) LIBO Rate.................................................................................16
(c) Renewals and Conversions...................................................................16
(d) Reinstatements.............................................................................16
2.5. Fees..............................................................................................17
(a) Commitment Fee............................................................................17
(b) Structuring and Arranging Fee; Administrative Fee..........................................17
2.6. Termination or Reduction of Aggregate Revolving Loan Commitment...................................17
(a) Voluntary.................................................................................17
(b) Termination................................................................................17
2.7. Loan Prepayments (Optional and Mandatory).........................................................17
(a) Base Rate Loans...........................................................................17
(b) LIBO Rate Loans...........................................................................17
(c) Mandatory Prepayments.....................................................................17
2.8. Payments...........................................................................................18
(a) Base Rate Loans...........................................................................18
(b) LIBO Rate Loans............................................................................18
(c) Form of Payments, Application of Payments, Payment Administration, Etc.....................18
(d) Net Payments...............................................................................18
(e) Demand Deposit Account. ..................................................................19
2.9. Change in Circumstances, Yield Protection..........................................................19
2.10. Illegality........................................................................................21
2.11. Discretion of Bank as to Manner of Funding........................................................21
3. Representations and Warranties................................................................................21
3.1. Organization, Standing............................................................................21
3.2. Corporate Authority, Validity, Etc................................................................21
3.3. Litigation........................................................................................22
3.4. ERISA.............................................................................................22
3.5. Financial Statements..............................................................................22
3.6. Not in Default, Judgments, Etc....................................................................22
3.7. Taxes.............................................................................................23
3.8. Permits, Licenses, Etc............................................................................23
3.9. Compliance with Laws, Etc.........................................................................23
3.10. Solvency.........................................................................................23
3.11. No Burdensome Agreements.........................................................................23
3.12. Subsidiaries, Etc................................................................................23
3.13. Title to Properties, Leases......................................................................23
3.14. Public Utility Holding Company; Investment Company...............................................23
3.15. Margin Stock.....................................................................................24
3.16. Use of Proceeds..................................................................................24
3.17. Depreciation Policies............................................................................24
3.18. Disclosure Generally.............................................................................24
4. Conditions Precedent..........................................................................................24
4.1. All Loans.........................................................................................24
(a) Documents.....................................................................................24
(b) Borrowing Base Certificate....................................................................24
(c) Covenants; Representations....................................................................24
(d) Defaults......................................................................................25
(e) Material Adverse Change.......................................................................25
4.2. Conditions to First Loan..........................................................................25
(a) Articles, Bylaws..............................................................................25
(b) Evidence of Authorization.....................................................................25
(c) Legal Opinions................................................................................25
(d) Incumbency....................................................................................25
(e) Notes.........................................................................................25
(f) Documents.....................................................................................25
(g) Consents......................................................................................25
(h) Other Agreements..............................................................................26
(i) Fees, Expenses...............................................................................26
(j) JMC Subordination Agreement..................................................................26
5. Affirmative Covenants.........................................................................................26
5.1. Financial Statements and Reports..................................................................26
(a) Annual Statements.............................................................................26
(b) Quarterly Statements..........................................................................27
(c) No Default....................................................................................27
(d) ERISA.........................................................................................27
(e) Material Changes..............................................................................27
(f) Other Information.............................................................................27
(g) Borrowing Base Certificates...................................................................27
(h) Covenant Complaince Certificate...............................................................28
(i) Monthly Lease Portfolio and Receivables Report................................................28
(j) Maintenance of Current Depreciation Policies..................................................28
5.2. Corporate Existence................................................................................28
5.3. ERISA..............................................................................................28
5.4. Compliance with Regulations........................................................................28
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws...................................28
5.6. Maintenance of Insurance...........................................................................28
5.7. Payment of Debt; Payment of Taxes, Etc.............................................................29
5.8. Notice of Events...................................................................................29
5.9. Inspection Rights; Collateral Appraisal............................................................29
5.10. Generally Accepted Accounting Principles..........................................................30
5.11. Compliance with Material Contracts................................................................30
5.12. Use of Proceeds...................................................................................30
5.13. Further Assurances................................................................................30
5.14. Restrictive Covenants in Other Agreements.........................................................30
6. Negative Covenants............................................................................................30
6.1. Merger, Consolidation.............................................................................30
6.2. Debt..............................................................................................31
6.3. Liens.............................................................................................31
6.4. Guarantees........................................................................................31
6.5. Margin Stock......................................................................................31
6.6. Acquisitions and Investments......................................................................31
6.7. Transfer of Assets; Nature of Business............................................................31
6.8. Restricted Payments...............................................................................32
6.9. Accounting Change.................................................................................32
6.10. Transactions with Affiliates......................................................................32
6.11. Restriction on Amendment of this Agreement........................................................32
7. Financial Covenants...........................................................................................32
7.1. Minimum Tangible Net Worth........................................................................32
7.2. Debt Service Coverage Ratio.......................................................................32
7.3. Recourse Funded Debt to Tangible Net Worth........................................................33
7.4. Absence of Net Loss...............................................................................33
7.5. Borrowing Base....................................................................................33
8. Default.......................................................................................................33
8.1. Events of Default.................................................................................33
(a) Payments......................................................................................33
(b) Covenants.....................................................................................33
(c) Representations, Warranties..................................................................33
(d) Bankruptcy...................................................................................33
(e) Certain Other Defaults.......................................................................34
(f) Judgments....................................................................................34
(g) Attachments...................................................................................34
(h) Change in Management..........................................................................34
(i) Security Interests...........................................................................34
(j) Material Adverse Change......................................................................34
9. Agent 35
9.1. Appointment and Authorization.....................................................................35
9.2. Duties and Obligations............................................................................35
9.3. National City Bank as a Bank......................................................................36
9.4. Independent Credit Decisions......................................................................36
9.5. Indemnification...................................................................................36
9.6. Successor Agent...................................................................................36
10. Miscellaneous................................................................................................37
10.1. Waiver...........................................................................................37
10.2. Amendments.......................................................................................37
10.3. Governing Law....................................................................................37
10.4. Participations and Assignments...................................................................37
10.5. Captions.........................................................................................38
10.6. Notices..........................................................................................38
10.7. Sharing of Collections, Proceeds and Set-Offs; Application of Payments...........................38
10.8. Expenses; Indemnification........................................................................39
10.9. Survival of Warranties and Certain Agreements....................................................40
10.10. Severability....................................................................................40
10.11. Banks' Obligations Several; Independent Nature of Banks' Rights.................................40
10.12. No Fiduciary Relationship.......................................................................40
10.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS..................................................40
10.14. WAIVER OF JURY TRIAL............................................................................41
10.15. Counterparts; Effectiveness.....................................................................41
10.16. Use of Defined Terms............................................................................41
10.17. Offsets.........................................................................................41
10.18. Entire Agreement................................................................................42
10.19. Swap Agreements.................................................................................42
10.20. 1998 Credit Agreement..........................................................................42
10.21. Re-Funding of Loans, Etc.......................................................................42
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Exhibit A List of Banks and Commitments
Exhibit B Note
Exhibit C Borrowing Base Certificate
Exhibit D Covenant Compliance Certificate
Exhibit E Depreciation Policies
Schedule 1 Miscellaneous Information
Schedule 2 Applicable Margins; Commitment Fees
<PAGE>
Amended and Restated
Credit Agreement
This Amended and Restated Credit Agreement, dated June 28, 2000 (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
Section10.4 hereof (collectively the "Banks" and individually a
"Bank") and National City Bank, a national banking association, as
agent for the Banks under this Agreement ("National City " 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 (a) 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), (b) working capital needs
and (c) general corporate purposes.
WHEREAS, AeroCentury has requested that the Bank or Banks, as
applicable, make available to it such credit facility and make loans to it under
the terms and conditions hereinafter set forth.
WHEREAS, the Bank or Banks, as applicable, is or are willing to make
available 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
1.1. Definitions.
"1998 Credit Agreement" shall mean the Credit Agreement, dated June 30,
1998 as amended March 30, 1999, July 16, 1999 and February 22, 2000,
among AeroCentury, the banking institutions signatories thereto and
named in Exhibit A attached thereto and First Union National Bank, as
Agent.
"Additional Amount" shall have the meaning set forth in Section.2.1(h).
"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.
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"Agent" shall mean National City Bank.
"Aggregate Revolving Loan Commitment" shall have the meaning set forth
in Section 2.1(a).
"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.
"Alternate 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 National City 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 365 or 366 days, in the case of a leap year.
"Applicable Borrowing Margin" shall have the meanings set forth in
Schedule 2 attached to this Agreement as it pertains to Base Rate Loans
and LIBO Rate Loans.
"Base Rate Loans" shall mean Revolving Credit Loans accruing interest
based on the Alternate Base Rate plus the Applicable Borrowing Margin.
"Borrowing" shall mean a borrowing hereunder consisting of Loans made
to AeroCentury by the Banks on a given occasion.
"Borrowing Base" shall mean 75% of the lowest 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, or (3) the aggregate appraised value of all items of
Equipment included in Eligible Collateral based on the most recent
independent appraisal completed on behalf of AeroCentury. 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 six 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 for use
in the Marshall Islands. Renewal options shall be included in the
remaining lease terms of leases of DASH-7 aircraft for use 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").
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"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
Section 4.2 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).
"Covenant Compliance Certificate" shall mean a certificate in
substantially the form attached hereto as Exhibit D, or such other form
as National City 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) 1/10th of the average principal balance of the
Notes outstanding for the four most recent Fiscal Quarters.
"Default Rate" on any Loan shall mean 2% per annum above the Alternate
Base Rate plus Applicable Borrowing Margin then in effect. In the case
of Letter of Credit fees such fees shall be fees then payable plus 2%
per annum in addition thereto calculated on the same base as such fees.
<PAGE>
"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.
"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. In order to be
Eligible Collateral, National City as Agent shall possess a first
priority security interest in said Collateral to secure the payment,
promptly when due, and the punctual performance of all of the
"Liabilities" as defined in the Security Agreement.
"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 National City 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 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 that 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 leased
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 National City, the ability of the Bank to
perfect a first priority security interest in the Equipment is
unsatisfactory or the ability of National City to foreclose upon the
Equipment and receive possession to or sell said Equipment is
unsatisfactory.
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"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.
"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
National City, and shall be usable for commercial flight purposes
immediately or within a reasonable period of time, as determined by
National City.
"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.
"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, Recourse
Funded Debt 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.
"Letter of Credit" shall mean only those letters of credit issued
pursuant to a completed application on the form of letter of credit
application required by National City Bank at the time of the request
for each Letter of Credit.
"LIBO Rate" shall mean, for the applicable Interest Period, (i) the
rate, rounded upwards to the next one-sixteenth of one percent,
determined by National City two London Business Days prior to the date
of the corresponding LIBO Rate Loan, at which National City 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 any Bank 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 any Bank 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 National City 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 plus the Applicable Borrowing Margin.
"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, and all other documents directly related or incidental to
said documents, the Loans or the Collateral, but shall not include any
Swap Agreement.
"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 National City
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 the Required Banks.
"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.
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"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.
"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 National City, 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 as well as any
and all existing and future obligations of AeroCentury under or in
connection with Swap Agreements with any one or more of the Banks,
including but not limited to National City, pertaining to the Loans
hereunder.
"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.
"Permitted Debt" shall mean (a) Debt of AeroCentury under this
Agreement and the Notes, (b) Debt incurred in the ordinary course of
AeroCentury's business which is unsecured and does not constitute
Recourse Funded Debt, (c) Debt which is subordinated to Debt under this
Agreement and the Notes on terms and conditions acceptable to the
Banks, in their sole discretion, and (d) Debt of an Unrestricted
Subsidiary for which AeroCentury is not a guarantor in whole or in part
or otherwise liable.
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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.
"Recourse Funded Debt" 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.
"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.
<PAGE>
"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).
"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, but in no event less than three Banks.
"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.
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"Security Agreement" shall mean all writings, agreements, and documents
in any jurisdiction, whether within the United States or outside of the
United States, the intended purpose of which is to grant a security
interest in property, whether then owned by AeroCentury or thereafter
acquired, and all replacements of said property, as collateral security
for the payment and performance of the Obligations, including but not
limited to (1) the Mortgage and Security Agreement, dated August 11,
1998 by First Security Bank, N.A. trustee under Trust Agreement
(N272EP) dated as of October 31, 1991 in favor of First Union National
Bank, as Agent, which has been assigned to National City, as successor
Agent, (2) the Mortgage and Security Agreement, dated August 11, 1998
by First Security Bank, N.A. trustee under Trust Agreement (N272EP)
dated as of October 31, 1991 and trustee under Trust Agreement (N12303)
dated as of November 15, 1989, First Union National Bank, as Agent,
which has been assigned to National City, as successor Agent, (3) the
Mortgage and Security Agreement, dated March 31, 1999 by AeroCentury
First Union National Bank, as Agent, which has been assigned to
National City, as successor Agent, (4) the Security Agreement dated
June 28, 2000 (which amends, restates and supersedes that certain
Security Agreement, dated December 21, 1998) between AeroCentury Corp.,
as debtor, and National City Bank, as Agent, and (5) all amendments,
modifications, supplements, amendments and restatements, replacements
and substitutions of each of the foregoing.
"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, limited liability company or
other entity the shares of stock, membership interests or other equity
interests of which having ordinary voting power (other than stock,
membership interests 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.
"Swap Agreement" shall have the meaning set forth in 11 U.S.C.Sect.101
and shall include but not be limited to interest rate swap agreements,
interest rate cap agreements, interest collar agreements, interest rate
hedging agreements, interest rate floor agreements or other similar
agreements or arrangements.
"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 Sect. 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.
"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.
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"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.
20 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 28, 2003 or on the
earlier date of termination in full, pursuant to Section 2.6 or
Section 8.1 hereof, of the obligations of such Bank under this Section
2.1 (June 28, 2003 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 principal
office of National City in Cleveland, Ohio.
(b) Interest Rate Options. AeroCentury may request Revolving Credit
Loans to bear interest at the Alternate 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 four such Loans may be
outstanding at any one time, unless there shall not be any Base Rate
Loans outstanding in which case the number may be five, and (b) no
LIBO Rate Loan may have an Interest Period extending beyond the
Revolver Termination Date.
(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 National City as provided herein. For
purposes of determining the amount of Revolving Credit Loans
outstanding, the Letters of Credit issued pursuant to Section 2.1(i)
hereof shall be deemed Revolving Credit Loans and shall be added to
the Revolving Credit Loans outstanding to determine the aggregate
Revolving Credit Loans outstanding.
<PAGE>
(d) Minimum 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) 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.
(g) 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.
(h) 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 National City, 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.
<PAGE>
(i) Letters of Credit. National City, as Agent, under the terms
and subject to the conditions of this Agreement, on behalf of itself and each
other Bank in the same proportions as each Bank's Revolving Loan Commitment
bears to the Aggregate Revolving Loan Commitment, shall provide Letters of
Credit to AeroCentury, from time to time prior to the Revolver Termination Date,
as requested by AeroCentury, provided that (A) the aggregate amount of Letters
of Credit outstanding at any one time shall not exceed $5,000,000 or such lesser
amount, if any, as will, when added to the amount of the Revolving Credit Loans
then outstanding, aggregate more than the Aggregate Revolving Loan Commitment
(or such lesser amount as AeroCentury is entitled to borrow hereunder at such
time by reason of the limitation of the Borrowing Base or otherwise), and (B) no
Letter of Credit shall be for a term longer than 180 days.
AeroCentury shall request a Letter of Credit by delivering a completed
letter of credit application to National City on such form as may be specified
by National City not less than three Business Days prior to the date specified
by AeroCentury as the date the Letter of Credit is to be issued. The standard
form of National City letter of credit application as currently in effect shall
be used.
Letters of Credit shall not bear interest until drawn upon but shall
each be subject to an annual charge, payable quarterly in arrears from the date
of issuance, equal to (a) the Applicable Borrowing Margin for LIBO Rate Loans as
in effect from time to time times the aggregate amount of all Letters of Credit
outstanding which shall be shared among the Banks pro rata in the same
proportions that each Bank's Loan Commitment bears to the Aggregate Loan
Commitment, and (b) 25 basis points (1/4 of 1%) times the face amount of each
Letter of Credit outstanding which shall be payable to the issuing Bank.
If any obligation of AeroCentury to pay money in connection with any
Letter of Credit is not met when requested by National City, as Agent,
as permitted by the applicable letter of credit application and the
reimbursement agreement contained therein, the amount due shall be
funded automatically by a Revolving Credit Loan which Loan shall be
made without regard to any minimum borrowing requirement, condition
precedent herein, or Event of Default hereunder which would otherwise
entitle any Bank or the Banks not to provide such Revolving Credit
Loan, and each Bank shall make its proportionate share of such
Revolving Credit Loan. Any obligation of AeroCentury to pay money in
connection with any Letter of Credit or the application therefor shall
be deemed secured as if made as a Loan hereunder. In the event
AeroCentury shall terminate the Aggregate Revolving Loan Commitment as
provided in Section 2.6 and shall pay the outstanding principal amount
of the Revolving Credit Loans in full and with interest or the
Revolver Termination Date shall occur at a time when one or more
Letters of Credit remain outstanding, then AeroCentury shall furnish
to National City, as Agent, within two Business Days such amount of
cash, to be held as cash collateral and invested in certificates of
deposit of National City with interest payable to AeroCentury, as will
pay the maximum amount which may be drawn by beneficiaries of Letters
of Credit outstanding at the date of such termination or the Revolver
Termination Date, as applicable.
<PAGE>
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 National City
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 National
City. 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 National City, as the
Agent.
(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, National City promptly shall notify each Bank of such request and of
such Bank's ratable share of such Loan. Upon receipt by National City of a
Request for Advance, the request shall not be revocable by AeroCentury.
(c Availability of Funds. Not later than 2:00 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
National City at the address set forth opposite its name on the signature page
hereof or at such account in London as National City shall specify to
AeroCentury and the Banks. Unless National City 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 National City at the aforesaid
address.
<PAGE>
(d Funding Assumptions. Unless National City 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. EST on the date a
Base Rate Loan is requested, that such Bank does not intend to make available to
National City, such Bank's portion of the total amount of the Loan to be made,
converted or renewed on such date, National City may assume that such Bank has
made such amount available to National City on the date of the Loan and National
City 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 National City, such Bank agrees to repay National City
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 National City, at the Federal Funds Rate plus
50 basis points for three Business Days, and thereafter at the Alternate Base
Rate plus the Applicable Borrowing Margin. If such Bank shall repay to National
City 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 National City's demand therefor, National
City shall promptly notify AeroCentury, and AeroCentury shall immediately pay
such corresponding amount to National City, 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
National City, 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 National City as provided in clause (c).
2.4. Interest Rates.
(a Alternate 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 Alternate Base Rate determined
from time to time plus the Applicable Borrowing Margin for Base Rate Loans.
(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 the
Applicable Borrowing Margin for LIBO Rate Loans. After receipt of a request for
a LIBO Rate Loan, National City shall proceed to determine the LIBO Rate to be
applicable thereto. National City 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 National
City 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. National City 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.
<PAGE>
2.5. Fees.
(a Commitment Fee. AeroCentury agrees to pay to National City, 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 or 366 days, in the case of a leap
year, for the actual number of days elapsed at the rate per annum set forth in
Schedule 2 attached to this Agreement 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 National City as set forth in a separate letter agreement between National
City and AeroCentury.
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 minimum amount of $5,000,000 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(h).
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(c Mandatory Prepayments. AeroCentury shall prepay Base Rate Loans
and LIBO Rate Loans, in such order and combination as it may elect, in an amount
equal to 100% of the net proceeds received by it from the sale of any assets
which sale was not made in the ordinary course of the business of AeroCentury
and the aggregate proceeds from any individual assets or group of assets sold at
the same approximate time was at least equal to $100,000. Such prepayment shall
be made promptly but in no event later than three Business Days following the
receipt of any said net proceeds.
2.8. Payments.
(a Base Rate Loans. Accrued interest on all Base Rate Loans shall be
due and payable on the last Business Day of each calendar quarter 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.
(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
National City 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 National City 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 National City shall specify to
AeroCentury and the Banks, in immediately available funds not later than 2:00
p.m. EST on the day when due. National City 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 National City to deduct from any account of AeroCentury
maintained at National City or over which National City has control any amount
payable under this Agreement, the Notes or any other Loan Document which is not
paid in a timely manner. National City'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.
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(d Net Payments. All payments made to the Banks and National City,
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 National City upon request certified copies of tax receipts
evidencing such payment by AeroCentury. AeroCentury will indemnify and hold
harmless National City and each Bank, and reimburse National City 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 National City 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.
(e Demand Deposit Account. AeroCentury shall maintain at least one
demand deposit account with National City for purposes of this Agreement.
AeroCentury authorizes National City (but National City shall not be obligated)
to deposit into said account all amounts to be advanced to AeroCentury
hereunder. AeroCentury authorizes National City(but National City shall not be
obligated) to deduct from said account, or any other account maintained by
AeroCentury at National City, 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.
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(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, National City 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 National City 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 National City 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.
(c Ability to Determine LIBO Rate. If National City 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, National City 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.
<PAGE>
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 National City, 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 the Applicable Borrowing Margin for such Interest Period.
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.
<PAGE>
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 Year ending December 31, 1998, the consolidated and
consolidating financial statements of AeroCentury and its subsidiary as of and
for the Fiscal Year ending December 31, 1999, and the consolidated and
consolidating interim financial statements for the three month period ended
March 31, 2000, consisting in each case of a balance sheet, statement of income,
a statement of shareholders' equity (except in the case of the interim financial
statements), 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, 2000.
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.
<PAGE>
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.
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.
<PAGE>
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 (a) the purchase or financing of Equipment to be
leased to unaffiliated persons and the warehouse financing of the lease of that
Equipment, (b) working capital needs, and/or (c) general corporate purposes.
3.17. Depreciation Policies. AeroCentury's current depreciation
policies are as set forth in Exhibit E. 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) or National
City, as Agent, to issue any Letter of Credit, 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 National City may request from
time to time.
(b Borrowing Base Certificate. AeroCentury shall have delivered and
National City shall have received a Borrowing Base Certificate dated the date of
the Loan requested under this Agreement.
(c Covenants; 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 or Letter of Credit, as applicable, is made or issued.
<PAGE>
(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, 2000, 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 National City, 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 First Loan. In addition to the conditions
to all Loans and Letters of Credit 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.
(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 National City, 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. National City, 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. National City, 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.
<PAGE>
(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 Agreement. 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:
5.1. Financial Statements and Reports. Furnish to the Banks
the following financial information:
<PAGE>
(a Annual Statements. As soon as available but no later than ninety
(90) days after the end of each Fiscal Year, the consolidated and consolidating
balance sheet of AeroCentury as of the end of such year and the prior year in
comparative form, and related consolidated and consolidating statements of
income, shareholders' equity, and cash flows for the Fiscal Year and the prior
Fiscal Year in comparative form (except in the case of the balance sheet which
shall be only for the current year). 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,
the consolidated 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 consolidated 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
consolidated and consolidating balance sheet and related statements of income,
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 statement of income and cash flow for the same period 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.
(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 National City, 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 National City, as
the Agent, and each other Bank (i) all shareholder and Securities and Exchange
Commission notices, reports and filings (excluding Forms 3, 4, 5, 13-D and 13-G
under the Securities Exchange Act of 1934), (ii) any material press releases
simultaneously with their release, (iii) all budgets and forecasts made
available to AeroCentury's Board of Directors, and (iv) the annual "desktop"
appraisal of all aircraft owned by AeroCentury. In addition, promptly, upon
request by National City 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 National City, as the Agent, or the Banks may reasonably request.
<PAGE>
(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 Complaince 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 National City ) applicable to all leases
included in the Collateral.
(j) Maintenance of Current Depreciation Policies. AeroCentury will
maintain its method of depreciating its assets substantially consistent with
past practices as set forth in Exhibit E 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.
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. Compliance 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.
<PAGE>
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 National City, 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 National City (confirmed
within three (3) calendar days by written notice), describing the event and all
action AeroCentury proposes to take with respect thereto:
(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 Recourse Funded Debt 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.
<PAGE>
5.9. Inspection Rights; Collateral Appraisal. At any time during
regular business hours and as often as requested of AeroCentury by National
City, permit National City 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, National City shall
cause an appraisal and audit of the Collateral to be made annually commencing
with the Fiscal Year ending December 31, 2001. If no Event of Default or
Potential Default shall be in existence, AeroCentury shall reimburse National
City 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
National City or a third party approved by National City. 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 National
City 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 Principles. Maintain books and records
at all times in accordance with Generally Accepted Accounting Principles.
5.11. Compliance with Material 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 (a) the purchase or financing of Equipment to be leased to unaffiliated
persons and the warehouse financing of the lease of that Equipment, (b) working
capital needs, and/or (c) general corporate purposes.
5.13. Further Assurances. Do such further acts and things and execute
and deliver to National City, 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:
<PAGE>
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. Debt. Create, assume or permit to exist any Debt except for Permitted
Debt.
6.3. Liens. Create, assume or permit to exist any Lien on any of it
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.
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.
<PAGE>
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, provided
however, if no Event of Default or Potential Default exists either immediately
prior to or would exist immediately following, cash dividends, redemptions
nd/or retirements may be made in an aggregate amount not in excess of 50% of
Net Income earned in the immediately preceding Fiscal Year as disclosed in the
financial statements delivered pursuant to Section 5.1(a) hereof.
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.
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 this 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) $16,321,530, (ii) 50% Net Income for each
Fiscal Quarter ending after March 31, 2000, without deduction for any net
losses, (iii) 50% of the net proceeds from any sale of equity securities after
the date of this Agreement, and (iv) 50% of the fair value of any equity
securities issued after the date of this Agreement in connection with any
acquisition permitted hereunder or by waiver hereto.
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.
<PAGE>
7.3. Recourse Funded Debt to Tangible Net Worth. The ratio of Recourse Funded
Debt (including Recourse Funded Debt time exceed 4.0:1.
7.4. Absence of Net Loss. It will not suffer a net loss for any two consecutive
Fiscal Quarters or two Fiscal Quarters in any Fiscal Year.
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:
(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.
<PAGE>
(e) Certain Other Defaults. (1) AeroCentury shall fail to pay when due
any Recourse Funded Debt which singularly exceeds $250,000, or in the
aggregate exceeds $250,000, and such failure shall continue beyond any
applicable cure period, or (2) 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 Recourse
Funded Debt 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, or (3) any default shall exist under any Swap Agreement;
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.
(g) Attachments. 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
6.3).
(j) Material Adverse Change. Any Material Adverse Change shall have
occurred.
<PAGE>
THEN and in every such event other than that specified in
Section 8.1(d), National City, 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 but excluding any obligation
under any Swap Agreement then in existence, 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 but excluding any obligation under any Swap
Agreement then in existence, 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 the 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.
9. Agent
9.1. Appointment and Authorization. Each Bank hereby irrevocably
appoints and authorizes National City, 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 National City and each Bank has no fiduciary aspects, and
National City's 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 National
City any duties or responsibilities other than those for which express provision
is made herein or therein. In performing its duties and functions hereunder,
National City 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,
National City 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
National City 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 National City 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 National City for any purpose shall,
in its reasonable opinion, be insufficient or become impaired, National City 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.
<PAGE>
9.2. Duties and Obligations. In performing its functions and duties
hereunder on behalf of the Banks, National City shall exercise the same care and
skill as it would exercise in dealing with loans for its own account. Neither
National City 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, National City (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 National City active in their capacity as officers of National City
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 National City itself; (e) except as
expressly provided herein in respect of information and data furnished to
National City 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.
9.3. National City Bank as a Bank. With respect to its Revolving Loan
Commitment and the Loans made and to be made by it, National City 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 National City in its individual capacity. National City 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 National
City that it has, independently and without reliance upon National City 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 National
City 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 National City (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 National City 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 National City 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 National City's gross negligence or willful misconduct. Without limiting
the generality of the foregoing, each Bank agrees to reimburse National City,
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 National City 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 National City is
not reimbursed for such expenses by AeroCentury.
<PAGE>
9.6. Successor Agent. National City 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
National City. If no successor Agent shall have been jointly appointed by such
Banks and shall have accepted such appointment within thirty (30) days after
National City shall have given notice of resignation, National City 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 National City, and National City shall be discharged from its duties and
obligations as Agent under this Agreement and the Loan Documents. After National
City's 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.
10. Miscellaneous
10.1. Waiver. No failure or delay on the part of National City 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
National City 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 definitions of "Borrowing Base", "Eligible
Collateral", "Eligible Lease" or "Required Banks" or any voting rights of the
Banks without the written consent of all the Banks. The rights and
responsibilities of National City 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 National City, as the Agent, which consent shall not be
unreasonably withheld), provided that each such assignment shall be in an amount
of at least $5,000,000 (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 National City, 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 National City, 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 National City, 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 National City as the Agent an assignment fee of $3,500.
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.
<PAGE>
(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 aggregate
principal amount of the Loans then due and payable from
AeroCentury and any Obligations of AeroCentury under or in
connection with any Swap Agreements, which percentage shares shall
be calculated by determining each Bank's percentage share of the
aggregate of all Loans and Swap Agreement Obligations outstanding
at the time of the calculation based on the aggregate amount of
Loans and Swap Agreement Obligations held by each Bank in
proportion to all Loans and Swap Agreement Obligations
outstanding.
<PAGE>
10.8. Expenses; Indemnification. AeroCentury will from time to time
reimburse National City 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 Banks 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 Agreements. 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), 2.9 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.
<PAGE>
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 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.
10.14. WAIVER OF JURY TRIAL. 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.
10.19. Swap Agreements. Notwithstanding anything to the contrary
contained in this Agreement, AeroCentury and any Bank may enter into a swap
agreement or swap agreements at any time and from time to time or amend or
otherwise modify any such agreement and such entry, amendment, modification
and/or the existence of any such agreement shall not constitute a breach of any
provision of this Agreement or any other Loan Document, or be in any manner
restricted by this Agreement or any other Loan Document.
10.20. 1998 Credit Agreement. This Agreement shall be deemed to, and
does hereby, amend and restate in its entirety the 1998 Credit Agreement.
Simultaneous with the execution and delivery of this Agreement, the commitment
of each Bank party to the 1998 Credit Agreement is hereby modified to be as set
forth in Exhibit A to this Agreement, and First Union is hereby discharged from
its duties and obligations as Agent under the 1998 Credit Agreement as
contemplated by Article 9 of the 1998 Credit Agreement, except as provided
below. Promptly following the effectiveness of this Agreement, National City, as
the Agent under this Agreement and as successor Agent to First Union, shall
coordinate with First Union, as the predecessor Agent, to effect the assignment
of all liens and security interests currently in effect in the name of First
Union National Bank, as Agent, to National City Bank, as successor Agent. Until
such time as said assignments shall have been effectively completed, First Union
National Bank shall continue as an agent for the benefit of the Banks.
10.21. Re-Funding of Loans, Etc. Promptly following the effectiveness
of this Agreement, National City, as the Agent under this Agreement, shall
coordinate with each of the Banks (a) to provide for funding by National City
Bank, in its individual capacity, and California Bank & Trust of Loans to
AeroCentury under this Agreement equal to the proportionate share of each Bank
of the aggregate principal amount of Loans then outstanding to AeroCentury based
on the Revolving Loan Commitment Percentage of each Bank, (b) to provide for
application of the proceeds of such Loans to repayment to Sanwa Bank California
of Loans by it then in effect such that the Loans by it shall not exceed its
proportionate share based on its Revolving Loan Commitment Percentage applied to
the aggregate principal amount of outstanding Loans by the Banks to AeroCentury
on such date, and (c) to provide for application of the proceeds of such Loans
to repayment to First Union National Bank of all Loans (together with all other
amounts payable to First Union National Bank under or in connection with the
1998 Credit Agreement) by it outstanding immediately prior to the effectiveness
of this Agreement.
<PAGE>
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
Senior Vice President-Finance
NATIONAL CITY BANK
By ______________________________
Michael J. Labrum
Senior Vice President
Notices To:
Michael J. Labrum
Senior Vice President
National City Bank
Specialized Banking Group, Philadelphia Region
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
FAX No. (267) 256-4001
<PAGE>
CALIFORNIA BANK & TRUST
By ______________________________
Thomas C. Paton, Jr.
Senior Vice President & Manager
Notices To:
Mr. Thomas C. Paton, Jr.
Senior Vice President & Manager
California Bank & Trust
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA 94104
FAX: (415) 875-1456
SANWA BANK CALIFORNIA
By ______________________________
William G. Nelle, Jr.
Vice President and Manager
Notices To:
Ms. Katherine Westfall
Assistant Vice President
Sanwa Bank California
444 Market Street, 23rd Floor
San Francisco, CA 94111
FAX No. (415) 597-5435
<PAGE>
Reference Table of Definitions
<TABLE>
<S> <C>
definition page defined
1998 Credit Agreement.............................................................................................1
Additional Amount................................................................................................13
AeroCentury.......................................................................................................1
Affiliate.........................................................................................................1
Agent.............................................................................................................2
Aggregate Revolving Loan Commitment..............................................................................12
Agreement.........................................................................................................2
Alternate Base Rate...............................................................................................2
Applicable Borrowing Margin.......................................................................................2
Bank..............................................................................................................1
Banks.............................................................................................................1
Base Rate Loans...................................................................................................2
Borrowing.........................................................................................................2
Borrowing Base....................................................................................................2
Borrowing Base Certificate........................................................................................2
Business Day......................................................................................................2
Capitalized Lease.................................................................................................3
Capitalized Lease Obligations.....................................................................................3
Closing...........................................................................................................3
Closing Date......................................................................................................3
Code..............................................................................................................3
Commitment Fee...................................................................................................17
control...........................................................................................................1
Covenant Compliance Certificate...................................................................................3
Debt..............................................................................................................3
Debt Service......................................................................................................3
Default Rate......................................................................................................3
Dollars...........................................................................................................4
EBITDA............................................................................................................4
Eligible Collateral...............................................................................................4
Eligible Lease Receivables........................................................................................4
Environmental Control Statutes....................................................................................4
Equipment.........................................................................................................5
ERISA.............................................................................................................5
ERISA Affiliate...................................................................................................5
Event of Default.................................................................................................33
Federal Funds Rate................................................................................................5
First Union.......................................................................................................1
Fiscal Quarter....................................................................................................5
Fiscal Year.......................................................................................................5
GAAP..............................................................................................................5
<PAGE>
Generally Accepted Accounting Principles..........................................................................5
Governmental Authority............................................................................................5
Indemnitees......................................................................................................40
Intangible Assets.................................................................................................5
Interest Period...................................................................................................6
Investment........................................................................................................6
JMC..............................................................................................................31
Letter of Credit..................................................................................................6
LIBO Rate.........................................................................................................6
LIBO Rate Loans...................................................................................................7
LIBO Rate Reserve Percentage......................................................................................6
Lien..............................................................................................................7
Loan.............................................................................................................12
Loan Documents....................................................................................................7
Loans............................................................................................................12
London Business Day...............................................................................................2
Management Agreement.............................................................................................31
Material Adverse Change...........................................................................................7
Material Adverse Effect...........................................................................................7
Monthly Lease Portfolio...........................................................................................7
Multiemployer Plan................................................................................................7
Net Worth.........................................................................................................8
Non-Recourse Debt.................................................................................................8
Note.............................................................................................................14
Notes............................................................................................................14
Obligations.......................................................................................................8
Operating Lease...................................................................................................8
Participants.....................................................................................................37
Participations...................................................................................................37
PBGC..............................................................................................................8
Pension Plan......................................................................................................8
Permitted Debt....................................................................................................8
Permitted Liens...................................................................................................8
Person............................................................................................................9
Plan..............................................................................................................9
Potential Default.................................................................................................9
Prohibited Transaction............................................................................................9
Receivables Report................................................................................................7
Recourse Debt.....................................................................................................9
Recourse Funded Debt..............................................................................................9
Regulation........................................................................................................9
Regulation D......................................................................................................9
Regulatory Change................................................................................................10
Reportable Event.................................................................................................10
Request for Advance..............................................................................................15
Required Banks...................................................................................................10
<PAGE>
Revolver Termination Date........................................................................................12
Revolving Credit Loan............................................................................................12
Revolving Credit Loans...........................................................................................12
Revolving Credit Note............................................................................................14
Revolving Credit Notes...........................................................................................14
Revolving Loan Commitment........................................................................................12
Revolving Loan Commitment Percentage.............................................................................13
Security Agreement...............................................................................................10
Solvent..........................................................................................................11
Subordinated Debt................................................................................................11
Subsidiary.......................................................................................................11
Swap Agreement...................................................................................................11
Tangible Net Worth...............................................................................................11
Taxes............................................................................................................18
Termination Event................................................................................................11
Unfunded Pension Liabilities.....................................................................................11
Unrecognized Retiree Welfare Liability...........................................................................11
Unrestricted Subsidiaries........................................................................................12
</TABLE>
<PAGE>
BANKS' COMMITMENTS AND PERCENTAGES
<TABLE>
<S> <C> <C>
Bank Commitment Percentage
National City Bank $25,000,000 50%
Specialized Banking Group, Philadelphia Region
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
FAX No. (267) 256-4001
California Bank & Trust $15,000,000 30%
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA 94104
FAX: (415) 875-1456
Sanwa Bank California $10,000,000 20%
444 Market Street, 23rd Floor
San Francisco, CA 94111
FAX No. (415) 597-5435
---------- ------
TOTAL $50,000,000 100%
</TABLE>
<PAGE>
EXHIBIT B
NOTE
$__,000,000 Philadelphia, PA -------------, ----
For Value Received, AeroCentury Corp., a Delaware corporation, hereby promises
to pay to the order of ______________ BANK (the "Bank"), in lawful currency of
the United States of America in immediately available funds at principal office
of National City Bank in Cleveland, Ohio, on the Revolver Termination Date or on
such earlier date or dates as provided in the Credit Agreement described below,
the principal sum of _____________ DOLLARS ($__,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
28, 2000, by and between AeroCentury Corp. and the banking institutions named
therein, with National City 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 ________________________
Title:
<PAGE>
Date: ___________
BORROWING BASE CERTIFICATE
Date of Certificate: _________________________
Date of Information: _________________________
To: National City 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 28, 2000, 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
,
<TABLE>
<S> <C>
Collateral Loan Value
Total Borrowing Base $____________________
Maximum Loans
Revolving Loan Commitment $50,000,000
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) $____________________
</TABLE>
<PAGE>
COVENANT COMPLIANCE CERTIFICATE
The undersigned, the [chief executive or chief financial] Officer of
AeroCentury Corp. ("AeroCentury"), does hereby certify to National City Bank,
Agent (the "Bank"), as required by that certain Credit Agreement, dated June 28,
2000, 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 ____
Section 7.1 MINIMUM TANGIBLE NET WORTH
REQUIREMENT: - Tangible Net Worth will not at any time be less than the
sum of (i) $____________, (ii) 50% Net Income for each Fiscal Quarter
ending after March 31, 2000, without deduction for any net losses,
(iii) 50% of the net proceeds from any sale of equity securities after
the date of the Agreement, and (iv) 50% of the fair value of any equity
securities issued after the date of the Agreement in connection with
any acquisition permitted hereunder or by waiver hereto.
Tangible Net Worth on [date]
Total Assets $ ___________
less: Total Liabilities $ ___________
Intangible Assets $ ___________
Subtotal $ ___________
Tangible Net Worth $
Required Tangible Net Worth
(a) Base Amount $ 16,321,530
(b) 50% of Net Income for each Fiscal Quarter
ending after March 31, 2000,
without deduction for any net losses $ __________
(c) 50% of the net proceeds from any sale of
equity securities after the date of the
Agreement $ __________
(d) 50% of the fair value of any equity securities
issued after the date of this Agreement in connection
with any acquisition permitted under the Agreement
$ ________
Required Tangible Net Worth = (a) + (b) + (c) + (d) $
Excess (deficiency) of Actual Tangible Net Worth
compared with Required Tangible Net Worth $ ___________
<PAGE>
Section 7.2 DEBT SERVICE COVERAGE RATIO
REQUIREMENT: 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.
EBTDA
Net Income for the four
Fiscal Quarters ended ___________ $_______________
Taxes deducted with respect to
four Fiscal Quarters ended __________ + $ _______________
Depreciation deducted with respect to
four Fiscal Quarters ended __________ + $ _______________
Amortization deducted with respect to
four Fiscal Quarters ended __________ + $ _______________
EBTDA for four Fiscal Quarters just ended $
Debt Service
Current Maturities of
Recourse Debt (next 12
months) $_______________
Lump Sum Payments of
Recourse Debt at
expiration included in
Current Maturities $(______________)
Current Maturities of Recourse Debt (net) $ ______________
Current amounts due in
respect of all leases (next
12 months) $_______________
Lump Sum Payments due
at expiration of all leases
included in Lump Sum
Payments $(______________)
Current Lease Payments (net) + $ ______________
<PAGE>
Average Principal Balance
of Loans outstanding (last
12 months) divided by 10 + $ _______________
Debt Service $
RATIO OF EBTDA TO DEBT SERVICE
Section 7.3 RECOURSE FUNDED DEBT TO TANGIBLE NET WORTH
REQUIREMENT: The ratio of Recourse Funded Debt (including Recourse
Funded Debt represented by the Notes) to Tangible Net Worth will not at
any time exceed 4.0:1.
Recourse Funded Debt on [date]: $ __________
Tangible Net Worth on [date] $ __________
RATIO OF RECOURSE FUNDED DEBT TO TANGIBLE NET WORTH
Section 7.4 ABSENCE OF NET LOSS
REQUIREMENT: - It will not suffer a net loss for any two consecutive Fiscal
Quarters or two Fiscal Quarters in any Fiscal Year.
Net Income for the Fiscal Quarter ended _______ $
<PAGE>
Section 7.5 BORROWING BASE
REQUIREMENT: 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.
Collateral Loan Value
Total Borrowing Base $____________________
Maximum Loans
Aggregate Revolving Loan Commitment $ ____,000,000
Credit Usage
Aggregate Loan Balance (principal) at date
of certificate $____________________
Collateral Loan Value exceeds Credit Usage $____________________
Collateral Loan Value is less than Credit Usage $(___________________)
<PAGE>
DEPRECIATION POLICIES
AeroCentury Corp's interest in aircraft and aircraft engines are recorded at
cost, which includes acquisition costs and loan fees. Depreciation is completed
using the straight-line method over the aircraft's estimated economic life
(generally assumed to be twelve years), to an estimated residual value.
<PAGE>
DISCLOSURE SCHEDULE
Section 3.2 Stock Ownership
AeroCentury Corp.: Principal Stockholders
Class Total Authorized Total Issued
Common 3,000,000 1,606,557
Preferred Stock 2,000,000 -0-
Series A 100,000 -0-
undesignated 1,900,000 -0-
In connection with the adoption of a shareholders rights plan, AeroCentury
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.
Of the 1,606,557 shares outstanding, 63,300 are held as treasury stock by
AeroCentury, representing shares repurchased by AeroCentury pursuant to its
stock repurchase plan.
Principal Shareholders
To AeroCentury's best knowledge, the only shareholders of AeroCentury that hold
5% or more of the Common Stock of AeroCentury:
Holder Shares Percent
JetFleet Holding Corp. 193,267 12.5%
Pine Capital Management, 183,300 11.8%
Incorporated/Hoefer & Arnett
Section 3.3 Litigation
None
Section 3.5 Material Adverse Changes
None
Section 3.7 Taxes
None
<PAGE>
AeroCentury holds the entire membership interest of AeroCentury Investments LLC,
a Delaware limited liability company (the "LLC"). The LLC owns two Fokker-50
aircraft on lease to Air Nostrum. The acquisition was financed through seller
financing, which financing was non recourse to AeroCentury Corp.
Section 3.13 Liens
None
<PAGE>
SCHEDULE 2
APPLICABLE MARGINS, COMMITMENT FEE
<TABLE>
<S> <C> <C> <C>
Ratio of Funded
Debt to Tangible Alternate Base LIBO Commitment
Net Worth Rate Margin Rate Margin Fee
> 3.00 25.0 basis points 250.0 basis points 50.00 basis points
$ 2.00 but #3.00 00.0 basis points 225.0 basis points 50.00 basis points
< 2.00 00.0 basis points 200.0 basis points 40.00 basis points
</TABLE>
