Second Amended and Restated
 
CREDIT AGREEMENT
 

 
among
 

 
AEROCENTURY CORP.
 

 
and
 

 
Certain Banking Institutions Named Herein
 

 
with
 

 
NATIONAL CITY BANK
 
as Agent
 

 
April 17, 2007
 

 

 

 

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[table of contents omitted]

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Second Amended and Restated
 
Credit Agreement
 
This Second Amended and Restated Credit Agreement, dated April 17, 2007 (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 §10.4 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.

 
"Additional Amount" shall have the meaning set forth in §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.
 
"Agent" shall mean National City Bank.
 
"Aggregate Revolving Loan Commitment" shall have the meaning set forth in
§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.
 

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"Alternate Base Rate" shall mean, for any day, the higher of the Federal Funds
Rate plus ½ 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.
 
"Amended and Restated Credit Agreement" shall mean the Credit Agreement, dated
June 28, 2000 as amended March 7, 2002, January 1, 2003, June 28, 2003, August
28, 2003, August 30, 2003, January 4, 2004, October 28, 2004, November 4, 2004,
October 31, 2005, November 9, 2005, December 19, 2005 and May 15, 2006, among
AeroCentury, the banking institutions signatories thereto and named in Exhibit A
attached thereto and National City Bank, as Agent.
 
"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 three 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.
 
"Borrowing Base Certificate" shall mean a certificate in substantially the form
attached hereto as Exhibit C which shall be signed by the chief executive
officer, chief operating officer, chief financial officer or a Senior Vice
President of AeroCentury.
 
"Business Day" shall mean any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required to close under the laws of the
Commonwealth of Pennsylvania or the State of California and, if the applicable
day relates to a LIBO Rate Loan, or notice with respect to a LIBO Rate Loan, a
day on which dealings in Dollar deposits are also carried on in the London
interbank market and banks are open for business in London ("London Business
Day").
 
"Capitalized Lease" shall mean all lease obligations of any Person for any
property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally Accepted
Accounting Principles.
 

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"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 §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) 1/12th 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.
 
"Dollars" shall mean the lawful currency of the United States of America.
 

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"EBITDA" shall mean the sum of Net Income plus the amounts deducted from Net
Income as expenses for interest, 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 Receivables" shall mean a lease for Equipment to an unaffiliated
Person in which (i) AeroCentury is the sole lessor or lessor of 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.
 
"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 regional aircraft and related 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 28 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.
 

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"ERISA Affiliate" shall mean any corporation which is a member of the same
controlled group of corporations as AeroCentury within the meaning of §414(b) of
the Code, or any trade or business which is under common control with
AeroCentury within the meaning of §414(c) of the Code.
 
"Event of Default" shall have the meaning set forth in §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.
 
"Interest" shall mean that amount of interest expense with respect to a Fiscal
Quarter as calculated in accordance with GAAP.
 
"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 § 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).
 

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"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 §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.
 
"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 §2.1.
 

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"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 §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" 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
§4001(a)(3), which covers employees of AeroCentury or any ERISA Affiliate.
 
"Net Income" shall mean net income after income taxes as shown on the income
statement.
 
"Net Worth" shall mean the sum of capital stock, plus paid-in-capital, plus
retained earnings, plus the portion of unsecured subordinated debt which is due
and payable after the Revolver Termination Date, 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 §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.
 

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"Pension Plan" shall mean, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA §302 or Code §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 of the
Issuer existing as of the Initial Closing Date and included on Schedule 1
hereto, (d) Debt which is subordinated to Debt under this Agreement and the
Notes on terms and conditions acceptable to the Banks, in their sole discretion,
including the Satellite Notes, (e) Debt of an Unrestricted Subsidiary for which
AeroCentury is not a guarantor in whole or in part or otherwise liable, (f) Debt
for which the Issuer is a guarantor but which the only recourse to the Issuer in
connection with such Debt is limited solely to the equity interests of such
Unrestricted Subsidiary owned by the Issuer so long as in either case the
aggregate principal amount of such Debt does not exceed an amount equal to 75%
of the aggregate book value of the assets of such Unrestricted Subsidiary.
 
"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 §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 §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
§4975 or ERISA §406 and not exempt under Code §4975 or ERISA §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.
 

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"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, any indebtedness for
money borrowed from an Affiliate and all outstanding letters of credit) 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. For the avoidance of doubt, Recourse
Funded Debt shall not include unsecured Subordinated Debt.
 
"Regulation" shall mean any statute, law, ordinance, regulation, order or rule
of any United States or foreign, federal, state, local or other government or
governmental body, including, without limitation, those covering or related to
banking, financial transactions, securities, public utilities, environmental
control, energy, safety, health, transportation, bribery, record keeping,
zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and
price and wage control matters.
 
"Regulation D" shall mean Regulation D of the Board of Governors of the Federal
Reserve System, as it may be amended from time to time.
 
"Regulatory Change" shall mean any change after the date of this Agreement in
any Regulation (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests of or under any Regulation
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof
applying to a class of banks including any one of the Banks but excluding any
foreign office of any Bank.
 
"Reportable Event" shall mean, with respect to a Pension Plan: (a) Any of the
events set forth in ERISA Sections 4043(b) (other than a reportable event as to
which the provision of 30 days' notice to the PBGC is waived under applicable
regulations) or 4063(a) or the regulations thereunder, (b) an event requiring
any AeroCentury or any ERISA Affiliate to provide security to a Pension Plan
under Code §401 (a)(29) and (c) any failure by any AeroCentury or any ERISA
Affiliate to make payments required by Code §412(m).
 
"Request for Advance" shall have the meaning set forth in §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.
 
"Revolver Termination Date" shall have the meaning set forth in §2.1(a).
 
"Revolving Loan Commitment" shall have the meaning set forth in §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.
 

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"Revolving Credit Loan" shall have the meaning set forth in §2.1(a).
 
"Revolving Credit Note" shall have the meaning set forth in §2.2.
 
“Satellite Notes" shall mean the senior subordinated notes issued by AeroCentury
from time to time, pursuant to that certain Note Purchase Agreement, dated as of
April 17, 2007, in the aggregate principal amount of up to $28,000,000.00, in
favor of the purchasers listed on Schedule I thereto.
 
"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, as further amended on April 17, 2007, 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 the Satellite Notes and any other 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.
 

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"Swap Agreement" shall have the meaning set forth in 11 U.S.C. § 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 §4041(c), (c) the institution of proceedings to
terminate a Pension Plan under ERISA §4042 or (d) the appointment of a trustee
to administer any Pension Plan under ERISA §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 postretirement benefits other than pension benefits, the amount of
the accumulated post-retirement benefit obligation, as determined in accordance
with Statement of Financial Accounting Standards No. 106, as of the most recent
valuation date. Prior to the date such statement is applicable to AeroCentury,
such amount of the obligation shall be based on an estimate made in good faith.
 
"Unrestricted Subsidiaries" shall mean Subsidiaries which are special purpose or
bankruptcy remote that have debt on their respective balance sheets which when
consolidated with AeroCentury is deemed to be Non-Recourse Debt to AeroCentury.
 
“Unrestricted Subsidiary Investment" shall have the meaning specified in §6.6.
 
“Unrestricted Subsidiary Investment Amount" shall mean, at any time with respect
to any Unrestricted Subsidiary, an amount equal to 5% of the net book value of
the assets of such Unrestricted Subsidiary at such time.
 

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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 §3.5, and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.
 

2.  
The Credit

 

2.1.  
The Loans.

 
(a) Revolving Credit Loans; Commitment. 
 
(i) 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 March 31, 2010 or on the earlier date of
termination in full, pursuant to §2.6 or §8.1 hereof, of the obligations of such
Bank under this §2.1 (March 31, 2010 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 §2.6 hereof or increased pursuant to §2.1(a)(ii) 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.
 
(ii) AeroCentury may at any time and from time to time, upon prior written
notice by AeroCentury to National City, increase the Aggregate Revolving Loan
Commitment by up to an additional $30,000,000.00, with additional Revolving Loan
Commitments from any existing Bank or new Revolving Loan Commitments from any
other Person selected by AeroCentury and approved by the Agent; provided that:
 
(A) any such increase shall be in a minimum principal amount of $5,000,000.00
and in integral multiples of $5,000,000.00 in excess thereof;
 
(B) no Event of Default shall have occurred and be continuing at the time of any
such increase;
 
(C) no existing Bank shall be under any obligation to increase its Revolving
Loan Commitment and any such decision whether to increase its Revolving Loan
Commitment shall be in such Bank’s sole and absolute discretion; and
 
(D) any new Person providing a Revolving Loan Commitment shall join this
Agreement by executing such joinder documents reasonable required by the Agent,
whereupon such Person shall be a “Bank” hereunder.
 

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In connection with any such increase in the Aggregate Revolving Loan
Commitments, Exhibit A shall be revised by the Agent to reflect the new
Revolving Loan Commitments and distributed to the Banks.
 
(b) Interest Rate Options. AeroCentury may request Revolving Credit Loans to
bear interest at the Alternate Base Rate or LIBO Rate options (described in
§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 six 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 seven, 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 §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.
 
(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.
 

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(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 §2.3, it shall pay to each Bank, in
addition to the principal and interest then to be paid, such additional amounts
as maybe 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.
 
(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.
 

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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 §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.
 
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 (or as to any Revolving
Credit Note issued pursuant to an increase in any Revolving Loan Commitment or
the addition of a new Bank pursuant to §2.1(a)(ii) hereof, the date of such
increase or addition), 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.
 

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(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.
 
(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).
 

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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 §2.4 shall continue
to be effective or be automatically reinstated, as the case may be, if at any
time payment, in whole or in part, of any of the payments to the Banks is
rescinded or must otherwise be restored or returned upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of AeroCentury or any
other person, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to
AeroCentury or any other Person or any substantial part of its property, or
otherwise, all as though such payment had not been made.
 
2.5. Fees.
 
(a) Commitment Fee. AeroCentury agrees to pay to 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 §2.8.
 
 

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    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 §2.1(h).
 
(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.
 

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2.9. Change in Circumstances, Yield Protection.
 
(a) Certain Regulator Chances. 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.
 

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(d) Yield Protection. Determination by a Bank for purposes hereof of the effect
of any Regulatory Change or other change or circumstance referred to above on
its costs of making or maintaining Loans or on amounts receivable by it in
respect of the Loans and of the additional amounts required to compensate such
Bank in respect of any additional costs, shall be made in good faith and shall
be evidenced by a certificate, signed by an officer of such Bank and delivered
to AeroCentury, as to the fact and amount of the increased cost incurred by or
the reduced amount accruing to the Bank owing to such event or events. Such
certificate shall be prepared in reasonable detail and shall be conclusive as to
the facts and amounts stated therein, absent manifest error.
 
(e) Notice of Events. The affected Bank will notify AeroCentury of any event
occurring after the date of this Agreement that will entitle such Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount or amounts
then payable pursuant to this Section. AeroCentury shall pay such Bank the
amount shown as due on such notice within 10 days after its receipt of the same.
 
2.10. Illegality. Notwithstanding any other provision in this Agreement, if the
adoption of any applicable Regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Banks with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Banks to
(1) maintain their Revolving Loan Commitments, then upon notice to AeroCentury
by 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.
 

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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 §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 §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 consolidated financial statements of AeroCentury
as of and for the Fiscal Year ending December 31, 2005 and the consolidated and
consolidating financial statements of AeroCentury and its subsidiaries as of and
for the Fiscal Year ending December 31, 2006, consisting in each case of a
balance sheet, statement of income, a statement of shareholders’ equity (except
in the case of any 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 December 31, 2006.
 
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.
 

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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.
 

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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. Anti-Terrorism Laws.  AeroCentury is not an “enemy” nor an “ally of the
enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the
United States of America (50 U.S.C. App. §§ 1 et seq.), as amended. AeroCentury
is not in violation of (a) the Trading with the Enemy Act, as amended, (b) any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto or (c) the Patriot Act (as
defined in Section 10.22). AeroCentury (i) is not a blocked person described in
Section 1 of the Anti-Terrorism Order or (ii) to the best of its knowledge, does
not engage in any dealings or transactions, or is otherwise associated, with any
such blocked person.
 
3.19. Compliance with OFAC Rules and Regulations. AeroCentury (a) is not a
Sanctioned Person, (b) does not have more than 15% of its assets in Sanctioned
Countries, and (c) does not derive more than 15% of its operating income from
investments in, or transactions with Sanctioned Persons or Sanctioned Countries.
No part of the proceeds of the Loans will be used directly or indirectly to fund
any operations in, finance any investments or activities in or make any payments
to, a Sanctioned Person or a Sanctioned Country
 
3.20. Compliance with FCPA. AeroCentury is in compliance with the Foreign
Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign counterpart
thereto. AeroCentury has not made a payment, offering, or promise to pay, or
authorized the payment of, money or anything of value (a) in order to assist in
obtaining or retaining business for or with, or directing business to, any
foreign official, foreign political party, party official or candidate for
foreign political office, (b) to a foreign official, foreign political party or
party official or any candidate for foreign political office, or (c) with the
intent to induce the recipient to misuse his or her official position to direct
business wrongfully to AeroCentury or to any other Person, in violation of the
Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, , et seq.
 
3.21. 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.
 

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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.
 
(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 December 31, 2006, 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.
 
(f) Required Consent. At least twenty (20) days prior to the purchase of
Equipment or entering into leasing arrangements with lessees of Equipment,
AeroCentury shall notify National City and provide National City with such
information as it shall require with respect to such anticipated purchase or
lease arrangements. AeroCentury hereby agrees it will not purchase Equipment or
enter into such leasing arrangements with lessees until such time as National
City and the Banks shall provide their unanimous written consent to
AeroCentury. 
 
4.2. Conditions to First Loan. In addition to the conditions to all Loans and
Letters of Credit as provided in §4.1, the obligation of each Bank to make the
first Loan is conditioned upon the following:
 

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(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.
 
(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.
 

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(k) Evidence of Issuance of Satellite Notes. National City, as the Agent, shall
have received evidence of the issuance of the Satellite Notes on the terms and
conditions, and pursuant to documents and agreements, satisfactory to National
City and the Banks.
 
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:
 
(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 BDO Seidman, 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. 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. The timely filing of AeroCentury’s
Annual Report on Form 10-KSB with the SEC over the EDGAR system shall be deemed
to satisfy this covenant in respect of the consolidated financials.
 
(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). The timely filing of
AeroCentury’s Quarterly Report on Form 10-QSB with the SEC over the EDGAR system
shall be deemed to satisfy this covenant in respect of the consolidated
financials.
 

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(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) by December 31 of each fiscal year,
budgets and forecasts for the ensuing fiscal year (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.
 
(g) Borrowing Base Certificates. In the event AeroCentury shall not have
delivered a Borrowing Base Certificate to the Banks during any calendar month,
it will deliver to the Banks, no later than 30 days after the end of such
calendar month as of the last day of the preceding calendar month, a Borrowing
Base Certificate signed by the chief executive officer, chief operating officer,
chief financial officer or a Senior Vice President of AeroCentury.
 
(h) Covenant Compliance Certificate. AeroCentury will deliver to the Banks, no
later than 60 days after the end of each calendar quarter, a Covenant Compliance
Certificate.
 
(i) Monthly Lease Portfolio and Receivables Report. AeroCentury will deliver to
the Banks, no later than 30 days after the end of each calendar month, a lease
portfolio listing and lease receivables aging report (in form and substance
reasonably satisfactory to 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.
 

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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 §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 §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 §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.
 
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:

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(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 $200,000;
 
(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 $200,000, 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 $200,000, singularly or in the aggregate; or
 
(e) any change in any Regulation, including, without limitation, changes in tax
laws and regulations, which would have a Material Adverse Effect.
 
5.9. Inspection Rights; Collateral Appraisal. At any time during regular
business hours and as often as requested of AeroCentury by 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, 2007. 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.
 

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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 (including without limitation the Securities Purchase Agreement, dated as
of April 17, 2007, by and among AeroCentury and the purchasers named on Schedule
I thereto) which contains covenants or restrictions that are more restrictive on
it than the covenants and restrictions contained in this Agreement, each and
every such covenant and restriction shall be deemed incorporated herein by
reference as fully as if set forth herein for so long as and in such form as
such covenants or restrictions shall remain in effect. If and to the extent that
any such covenant or restriction shall be inconsistent with or otherwise be in
conflict with any covenant or restriction set forth herein (other than by reason
of its being more restrictive), this Agreement shall govern.
 
6. Negative Covenants
 
AeroCentury covenants and agrees that, without the prior written consent of the
Required Banks, from and after the date hereof and so long as the Revolving Loan
Commitments are in effect or any Obligation remains unpaid or outstanding, it
will not:
 
6.1. Merger, Consolidation. Merge or consolidate with or into any corporation
except, if no Potential Default or Event of Default shall have occurred and be
continuing either immediately prior to or upon the consummation of such
transaction, any Person may be merged into AeroCentury as long as AeroCentury is
the surviving entity.
 
6.2. 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 its property or
assets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, except Permitted Liens.
 
6.4. Guarantees. Guarantee or otherwise in any way become or be responsible for
indebtedness or obligations (including working capital maintenance, take-or-pay
contracts) of any other Person, contingently or otherwise, other than guarantees
in the nature of performance guarantees which arise in the ordinary course of
AeroCentury's business.
 
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.
 

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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 Holding Corp., a California
corporation ("JHC"), under substantially the terms and conditions set forth in
that certain Amended and Restated Management Agreement (the "Management
Agreement") between AeroCentury and JetFleet Management Corp. ("JMC"), a
California corporation, entered into as of April 23, 1998, and (d) Investments
in Unrestricted Subsidiaries after the Closing Date other than Investments
constituting Restricted Payments to the extent permitted by §6.8 (“Unrestricted
Subsidiary Investments”) so long as all Unrestricted Subsidiary Investments (i)
are for the maintenance, repair and storage expenses (or expenses otherwise
necessary to preserve and maintain the aircraft owned by such Unrestricted
Subsidiary) or to pay the reasonable legal costs and expenses incurred in
connection with the refinancing of the aircraft of such Unrestricted Subsidiary,
(ii) as a result of such Unrestricted Subsidiary Investment the aggregate amount
of Unrestricted Subsidiary Investments in respect of such Unrestricted
Subsidiary shall not exceed the Unrestricted Subsidiary Investment Amount for
such Unrestricted Subsidiary and (iii) immediately prior to and immediately
following such Unrestricted Subsidiary Investment no Default or Event of Default
exists or would exist; provided, however, that notwithstanding the foregoing
AeroCentury may make Unrestricted Subsidiary Investments in respect of taxes,
franchise fees and miscellaneous administrative expenses of the Unrestricted
Subsidiaries so long as the aggregate amount thereof does not exceed $5,000 in
any Fiscal Year.
 
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 and/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 §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.
 

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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. Limitations on Restrictive Agreements. AeroCentury will not enter into, or
permit to exist, any agreement with any Person which prohibits or limits the
ability of AeroCentury and/or any of its Subsidiaries to (a) pay dividends or
make other distributions or prepay any Debt (except for Permitted Debt) owed to
AeroCentury and/or its Subsidiaries, (b) make loans or advances to AeroCentury
and/or its Subsidiaries, (c) transfer any of its Properties to AeroCentury
and/or its Subsidiaries or (d) create, incur, assume or suffer to exist any Lien
upon any of AeroCentury’s and/or its Subsidiaries’ Property whether now owned or
hereafter acquired other than a Permitted Lien; provided that the foregoing
shall not apply to restrictions in effect on the Closing Date contained in
agreements governing Debt outstanding on the Closing Date.
 
6.12. 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) $16,000,000, (ii) 50% of Net Income for each Fiscal Quarter
ending on March 31, 2007 and thereafter, without deduction for net losses, (iii)
50% of the net proceeds from any sale of equity securities after the date of
this Agreement, (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 and (v) 100% of any Subordinated Debt.
 
7.2. EBITDA to Interest Ratio. The ratio of EBITDA to Interest as at the end of
any Fiscal Quarter and for the period of such Fiscal Quarter will not be less
than 2.15:1.0; provided, however, that if AeroCentury raises unsecured
Subordinated Debt of at least $10,000,000 during any Fiscal Quarter, the ratio
of EBITDA to Interest as at the end of such Fiscal Quarter and as at the end of
any Fiscal Quarter thereafter, and for the period of such Fiscal Quarters so
long as unsecured Subordinated Debt in the principal amount of at least
$10,000,000 remains outstanding, will not be less than 1.6:1.0.
 

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7.3. Recourse Funded Debt to Tangible Net Worth. The ratio of Recourse Funded
Debt to Tangible Net Worth will not at each Fiscal Quarter end exceed 4.00:1.0.
 
7.4. Absence of Net Loss. AeroCentury will not suffer a consolidated net loss,
as measured on a consecutive, four-quarter basis.
 
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.
 
7.6. Effect of FASB Staff Position AUG AIR-1, Accounting for Planned Major
Maintenance Activities. All calculations made in Sections 7.1, 7.2, 7.3, 7.4 and
7.5 and referenced definitions used herein shall be adjusted to (i) deduct the
amount of non-refundable maintenance reserves received by the Company and
recorded as income and (ii) add back the payments made from non-refundable
maintenance reserves and recorded as expense, both such deductions adjusted, as
applicable, by the tax rate applicable to the subject reporting period.
 
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 §§5.1(a), 5.1(b), 5.1(c), 5.1(g), 5.1(h) or 5.1(j),
§5.2 (first clause only), all sections of Articles 6 and 7 or §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.
 

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(d) Bankruptcy. AeroCentury is dissolved or liquidated, makes an assignment for
the benefit of creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver or
trustee, commences any proceeding relating to itself under any bankruptcy,
reorganization, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction, has commenced against it any such proceeding which remains
undismissed for a period of sixty (60) days, or indicates its consent to,
approval of or acquiescence in any such proceeding, or any receiver of or
trustee for AeroCentury or any substantial part of the property of AeroCentury
is appointed, or if any such receivership or trusteeship continues undischarged
for a period of sixty (60) days.
 
(e) Certain Other Defaults. (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 and Toni M. Perazzo 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 §6.3).
 
(j) Material Adverse Change. Any Material Adverse Change shall have occurred.
 
THEN and in every such event other than that specified in §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 §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
§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.
 

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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.
 
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.
 

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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.
 
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.
 

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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.
 
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.
 

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10.7. Sharing of Collections, Proceeds and Set-Offs; Application of Payments.
 
(a) If any Bank, by exercising any right of set-off, counterclaim or foreclosure
against trade collateral or otherwise, receives payment of principal or interest
or other amount due on any Note which is greater than the percentage share of
such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participation 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 § 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.
 
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.
 

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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
§§2.1(f), 2.5(b), 2.9 and 10.8 and the agreements of the Banks set forth in
§§9.1, 9.5 and 10.8 shall survive the payment of the Loans and the termination
of this Agreement. This Agreement shall remain in full force and effect until
the repayment in full of all amounts owed by AeroCentury under the Notes or any
other Loan Document.
 
10.10. Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Notes
or other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Notes or other Loan Documents or of such provision or obligation in any
other jurisdiction.
 
10.11. Banks' Obligations Several; Independent Nature of Banks' Rights. The
obligation of each Bank hereunder is several and not joint and no Bank shall be
the agent of any other (except to the extent the Agent is authorized to act as
such hereunder). No Bank shall be responsible for the obligation or commitment
of any other Bank hereunder. In the event that any Bank at any time should fail
to make a Loan as herein provided, the other Banks, or any of them as may then
be agreed upon, at their sole option, may make the Loan that was to have been
made by the Bank so failing to make such Loan. Nothing contained in any Loan
Document and no action taken by Agent or any Bank pursuant hereto or thereto
shall be deemed to constitute the Banks to be a partnership, an association, a
joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and, subject to
the terms of this Agreement, each Bank shall be entitled to protect and enforce
its rights arising out of this Agreement and it shall not be necessary for any
other Bank to be joined as an additional party in any proceeding for such
purpose.
 
10.12. No Fiduciary Relationship. No provision in this Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty of any Bank to AeroCentury.
 
10.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. AEROCENTURY, THE AGENT
AND EACH BANK EACH HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE EASTERN DISTRICT OF 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
LENDERIBORROWER 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.
 

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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.
 
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. Amended and Restated Credit Agreement. This Agreement shall be deemed to,
and does hereby, amend and restate in its entirety the Amended and Restated
Credit Agreement. Simultaneous with the execution and delivery of this
Agreement, the commitment of each Bank party to the Amended and Restated Credit
Agreement is hereby modified to be as set forth in Exhibit A to this Agreement.
 
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 each of the other Banks 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 and (b) to provide for application of
the proceeds of such Loans to repayment to each such Bank as shall be necessary
to cause the Loans by each such Bank not to 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.
 
10.22. USA Patriot Act. Each Bank that is subject to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the "Patriot Act") hereby notifies AeroCentury that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies AeroCentury, which information includes the name and
address of AeroCentury and other information that will allow such Bank to
identify AeroCentury in accordance with the Patriot Act.
 

 

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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: Toni M. Perazzo
Title: Senior Vice President-Finance
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   
Name: Michael J. Labrum
Title: 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
   
CALIFORNIA BANK & TRUST
 
 
By   
Name: J. Michael Sullivan
Title: Vice President
Notices To:
Mr. J. Michael Sullivan
Vice President
California Bank & Trust
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA 94104
FAX: (415) 875-1456
   
FIRST BANK
 
 
By   
Name: Eva Y. Cheung
Title: Vice President
Notices To:
Ms. Eva Y. Cheung
Vice President
First Bank
550 Montgomery Street,
10th Floor
San Francisco, CA 94111
FAX No. (415) 398-7190
   
BRIDGE BANK, NATIONAL ASSOCIATION
 
 
By   
Name: Lori Edwards
Title: Executive Vice President
Notices to:
Ms. Lori Edwards
Executive Vice President
Bridge Bank, National Association
55 Almaden Boulevard, #100
San Jose, CA 95113
FAX No. (408) 282-1680
 

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Reference Table of Definitions
 
[omitted]
 

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EXHIBIT A
BANKS’ COMMITMENTS AND PERCENTAGES

Bank                                  Commitment                          Percentage

National City Bank                               
$35,000,000                            43.75%
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                          $20,000,000                          25.00%
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA 94104
FAX: (415) 875-1456

First Bank                                
$15,000,000                        18.75%
550 Montgomery Street,
10th Floor
San Francisco, CA 94111
FAX No. (415) 398-7190

Bridge Bank, National Association               
$10,000,000                        12.50%
55 Almaden Boulevard, #100
San Jose, CA 95113
FAX No. (408) 282-1680

TOTAL                                      $80,000,000                              100%

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EXHIBIT B
 
NOTE
 
$_,000,000Philadelphia, 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 amends and restates (but does not satisfy, extinguish or release the
absolute and unconditional obligation to repay the entire indebtedness evidenced
by) the Note, dated ___________ ___, ______, executed by the Bank in favor of
AeroCentury Corp., in the original principal amount of ___________________
Dollars ($_,000,000).
 
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 Second Amended and Restated
Credit Agreement, dated April 17, 2007, 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.
 
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
 

 
AeroCentury Corp.
 
 
By   
Name: 
Title: 

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EXHIBIT C
 
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
§5.1 of the Second Amended and Restated Credit Agreement, dated April 17, 2007,
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:
 
No Potential Default or Event of Default has occurred and is continuing as of
the date of this Borrowing Base Certificate.
 
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 §5.1
of the Credit Agreement], except as disclosed on the attached schedules.
 
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: 

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AeroCentury Corp.
 
Computation of Borrowing Base Availability
 
__________________, ________
 
Collateral Loan Value
 
Total Borrowing Base $ 
 
Maximum Loans
 
Revolving Loan Commitment $ 80,000,000
 
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) $ 
 

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EXHIBIT D
 
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 Second Amended and Restated Credit
Agreement, dated April 17, 2007, by and between AeroCentury and the Bank, as
amended (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:
 
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.
 
Each representation and warranty contained in the Agreement and each of the
other Loan Documents is true and correct on the date hereof.
 
No Potential Default or Event of Default has occurred and is continuing as of
the date of this Compliance Certificate.
 
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 §5.1
of the Credit Agreement], except as disclosed on the attached schedules.
 
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: 

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Attachment 1 to the
 
Covenant Compliance Certificate
AEROCENTURY CORP.
COVENANT COMPLIANCE CALCULATIONS

For the period ending _______

   
§7.1
MINIMUM TANGIBLE NET WORTH
     
REQUIREMENT: - Minimum Tangible Net Worth will not at any time be less than the
sum of (i) $16,000,000 (ii) 50% of Net Income for each Fiscal Quarter ending on
or after March 31, 2007, without deduction for net losses, (iii) 50% of the net
proceeds from any sale of equity securities after the date of this Agreement,
(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 and (v) 100% of any Subordinated Debt.
     
Tangible Net Worth on [date]
 
Capital Stock
     
Paid-In Capital
 
 
 
Retained Earnings, as adjusted on 1/1/07 pursuant to Section 7.6, as of [date]
 
 
 
less: Non-refundable maintenance reserves recorded as income pursuant to FSP AUG
AIR-1 since January 1, 2007, net of tax effect
( )
   
 
plus: Non-refundable maintenance reserves recorded as expense pursuant to FSP
AUG AIR-1 since January 1, 2007, net of tax effect
     
 
Retained Earnings, adjusted for
FSP AUG AIR-1
     
 
plus: Unsecured Subordinated Debt due after the Revolver Termination Date
 
 
 
 
Subtotal
 
 
         
less: Net Worth of Unrestricted Subsidiaries
 
( )
 
less: Intangibles
 
( )
         
Tangible Net Worth
   

--------------------------------------------------------------------------------

 
Required Tangible Net Worth
             
(i) $16,000,000
 
16,000,000
 
 
(ii) 50% of Net Income, adjusted for effect of non-refundable maintenance
reserves recorded as income and expense pursuant to FSP AUG AIR-1, net of tax
effect
     
 
(iii) 50% of net proceeds from any sale of equity securities
 
 
 
 
(iv) 50% of the fair value of any equity securities issued after the date of
this Agreement in connection with any permitted acquisition.
 
 
 
 
(v) 100% of any subordinated debt
     
 
Required Tangible Net Worth
             
EXCESS (DEFICIENCY) OF ACTUAL TANGIBLE NET WORTH COMPARED WITH REQUIRED TANGIBLE
NET WORTH
   

--------------------------------------------------------------------------------

   
§7.2
EBITDA TO INTEREST RATIO
     
REQUIREMENT: - The ratio of EBITDA to Interest as at the end of any Fiscal
Quarter and for the period of such Fiscal Quarter will not be less than
2.15:1.0; provided, however, that if AeroCentury raises unsecured Subordinated
Debt of at least $10,000,000 during any Fiscal Quarter, the ratio of EBITDA to
Interest as at the end of such Fiscal Quarter and as at the end of any Fiscal
Quarter thereafter, and for the period of such Fiscal Quarters so long as
unsecured Subordinated Debt in the principal amount of at least $10,000,000
remains outstanding, will not be less than 1.60:1.0.
     
EBITDA -
 
Net Income for the
     
Fiscal Quarter ended ___________
     
 
Interest deducted with respect to
the Fiscal Quarter ended ___________
     
 
Taxes deducted with respect to
the Fiscal Quarter ended ___________
     
 
Depreciation deducted with respect to
the Fiscal Quarter ended ___________
     
 
Amortization deducted with respect to
Fiscal Quarter ended ___________
     
 
Non-refundable maintenance reserves recorded as income pursuant to FSP AUG
AIR-1, with respect to the Fiscal Quarter ended ___________
( )
   
 
Non-refundable maintenance reserves recorded as expense pursuant to FSP AUG
AIR-1, with respect to the Fiscal Quarter ended ____________
           
EBITDA for the Fiscal Quarter
ended ___________
           
Interest -
     
Interest for the Fiscal Quarter
ended ___________
           
RATIO OF EBITDA TO INTEREST
   

   
§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
4.00:1.0.
     
Recourse Funded Debt on [date]:
             
Tangible Net Worth on [date]
           
RATIO OF RECOURSE FUNDED DEBT TO
TANGIBLE NET WORTH
                     
§7.4
ABSENCE OF NET LOSS
     
REQUIREMENT: - AeroCentury will not suffer a consolidated net loss, as measured
on a consecutive, four-quarter basis.
 
     
Net Income for the consecutive four quarters ended ________
     
 
less: Non-refundable maintenance reserves recorded as income pursuant to FSP AUG
AIR-1, net of tax effect
 
( )
 
 
plus: Non-refundable maintenance reserves recorded as expense pursuant to FSP
AUG AIR-1, net of tax effect
     
 
NET INCOME FOR THE CONSECUTIVE FOUR QUARTERS ENDED __________, ADJUSTED FOR
EFFECTS OF FSP
AUG AIR-1
           

1-PH/2368172.8 
   

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

EXHIBIT E
 
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.
 

--------------------------------------------------------------------------------

SCHEDULE 1
 
DISCLOSURE SCHEDULE
 
 

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SCHEDULE 2

APPLICABLE MARGINS, COMMITMENT FEE

Advances under the Revolving Credit shall carry an interest rate based on the
Borrower’s ratio of Total Funded Recourse Indebtedness to Tangible Net Worth
(“Total Funded Recourse Debt to TNW”), as outlined below:

Ratio of Funded
Debt to Tangible  Alternate Base  LIBO   Commitment
Net Worth   Rate Margin  Rate Margin   Fee  

> 3.00    150 bp   325 bp    50 bp 
≥ 2.00 but ≤ 3.00             100 bp   300 bp    50 bp
< 2.00     50 bp   275 bp    40 bp 

The Commitment Fee is computed based upon the applicable Commitment Fee rate on
the average daily unused portion of the Revolving Credit Loan that is due and
payable quarterly in arrears.