LOAN AGREEMENT

 

This Agreement dated as of January 30, 2012, is between Bank of America, NA (the
"Bank") and Saker Aviation Services, Inc. (the "Borrower").

 

1.DEFINITIONS

 

In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated tor the purposes of this Agreement:

 

1.1"Borrowing Base" means 70% of the balance due on Acceptable Receivables.

 

After calculating the Borrowing Base as provided above, including, without
limitation, reserves for rent at leased locations subject to statutory or
contractual landlord's liens, inventory shrinkage, dilution, customs charges,
warehousemen's or bailees' charges, liabilities to growers of agricultural
products which are entitled to lien rights under the federal Perishable
Agricultural Commodities Act or any applicable state law, and the amount of
estimated maximum exposure, as determined by the Bank from time to time, under
any interest rate contracts which the Borrower enters into with the Bank
(including interest rate swaps, caps, floors, options thereon, combinations
thereof, or similar contracts).

 

1.2"Acceptable Receivable" means an account receivable which satisfies the
following requirements:

 

(a)The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's business and
without any further obligation on the part of the Borrower to service, repair,
or maintain any such goods sold other than pursuant to any applicable warranty.

 

(b)There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD sales,
consignments or guaranteed sales are not acceptable.

 

(c)The debtor upon the account does not claim any defense to payment of the
account, whether well founded or otherwise.

 

(d)The account balance does not include the amount of any counterclaims or
offsets which have been or may be asserted against the Borrower by the account
debtor (including offsets for any "contra accounts" owed by the Borrower to the
account debtor for goods purchased by the Borrower or for services performed for
the Borrower). To the extent any counterclaims, offsets, or contra accounts
exist in favor of the debtor, such amounts shall be deducted from the account
balance.

 

(e)The account represents a genuine obligation of the debtor for goods sold to
and accepted by the debtor or for services performed for and accepted by the
debtor. To the extent any credit balances exist in favor of the debtor, such
credit balances shall be deducted from the account balance.

 

(f)The account balance does not include the amount of any finance or service
charges payable by the account debtor. To the extent any finance charges or
service charges are included, such amounts shall be deducted from the account
balance.

 

(g)The Borrower has sent an invoice to the debtor in the amount of the account.

 

 

 

 

(h)The Borrower is not prohibited by the laws of the state where the account
debtor is located from bringing an action in the courts of that state to enforce
the debtor's obligation to pay the account. The Borrower has taken all
appropriate actions to ensure access to the courts of the state where the
account debtor is located, including, where necessary, the filing of a Notice of
Business Activities Report or other similar filing with the applicable state
agency or the qualification by the Borrower as a foreign corporation authorized
to transact business in such state.

 

(i)The account is owned by the Borrower free of any title defects or any liens
or interests of others except the security interest in favor of the Bank.

 

(j)The debtor upon the account is not any of the following:

 

(i)An employee, affiliate, parent or subsidiary of the Borrower, or an entity
which has common officers or directors with the Borrower.

 

(ii)The U.S. government or any agency or department of the U.S. government
unless the Bank agrees in writing to accept the obligation, the Borrower
complies with the procedures in the Federal Assignment of Claims Act of 1940 (41
U.S.C. §15) with respect to the obligation, and the underlying contract
expressly provides that neither the U.S. government nor any agency or department
thereof shall have the right of set-off against the Borrower.

 

(iii)Any state, county, city, town or municipality.

 

(iv)Any person or entity located in a foreign country.

 

(k)The account is not in default. An account will be considered in default if
any of the following occur:

 

(i)The account is not paid within ninety (90) days from its invoice date.

 

(ii)The debtor obligated upon the account suspends business, makes a general
assignment for the benefit of creditors, or fails to pay its debts generally as
they come due; or

 

(iii)Any petition is filed by or against the debtor obligated upon the account
under any bankruptcy law or any other law or laws for the relief of debtors.

 

(l)The account is not the obligation of a debtor who is in default (as defined
above) on 20% or more of the accounts upon which such debtor is obligated.

 

(m)The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.

 

(n)The account is not evidenced by a promissory note or chattel paper, nor is
the account debtor obligated to the Borrower under any other obligation which is
evidenced by a promissory note.

 

(o)The account is otherwise acceptable to the Bank.

 

In addition to the foregoing limitations, the dollar amount of accounts included
as Acceptable Receivables which are the obligations of a single debtor shall not
exceed the concentration limit established for that debtor. To the extent the
total of such accounts exceeds a debtor's concentration limit, the amount of any
such excess shall be excluded. The concentration limit for each debtor shall be
equal to 50% of the total amount of the Borrower's Acceptable Receivables at
that time.

 

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1.3"Credit Limit" means the amount of One Million One Hundred Fifty Thousand and
00/100 Dollars ($1,150,000.00).

 

2.FACILITY NO.1: LINE OF CREDIT AMOUNT AND TERMS

 

2.1Line of Credit Amount.

 

(a)During the availability period described below, the Bank will provide a line
of credit to the Borrower. The amount of the line of credit (the "Facility No.1
Commitment") is equal to the lesser of (i) the Credit Limit or (ii) the
Borrowing Base.

 

(b)This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.

 

(c)The Borrower agrees not to permit the principal balance outstanding to exceed
the Facility No.1 Commitment. If the Borrower exceeds this limit, the Borrower
will immediately pay the excess to the Bank upon the Bank's demand.

 

2.2Availability Period. The line of credit is available between the date of this
Agreement and June 30, 2012, or such earlier date as the availability may
terminate as provided in this Agreement (the "Facility No.1 Expiration Date").

 

The availability period for this line of credit will be considered renewed if
and only if the Bank has sent to the Borrower a written notice of renewal for
the line of credit (the "Renewal Notice"). If this line of credit is renewed, it
will continue to be subject to all the terms and conditions set forth in this
Agreement except as modified by the Renewal Notice. The Borrower specifically
understands and agrees that the interest rate applicable to this line of credit
may be increased upon renewal and that the new interest rate will apply to the
entire outstanding principal balance of the line of credit. If this line of
credit is renewed, the term "Expiration Date" shall mean the date set forth in
the Renewal Notice as the Expiration Date and the same process for renewal will
apply to any subsequent renewal of this line of credit. A renewal fee may be
charged at the Bank's option. If so, the amount will be specified in the Renewal
Notice.

 

2.3Conditions to Availability of Credit. In addition to the items required to be
delivered to the Bank under the paragraph entitled "Financial Information" in
the "Covenants" section of this Agreement, the Borrower will promptly deliver
the following to the Bank at such times as may be requested by the Bank:

 

(a)A borrowing certificate, in form and detail satisfactory to the Bank, setting
forth the Acceptable Receivables on which the requested extension of credit is
to be based.

 

(b)Copies of the invoices or the record of invoices from the Borrower's sales
journal for such Acceptable Receivables and a listing of the names and addresses
of the debtors obligated thereunder.

 

(c)Copies of the delivery receipts, purchase orders, shipping instructions,
bills of lading and other documentation pertaining to such Acceptable
Receivables.

 

(d)Copies of the cash receipts journal pertaining to the borrowing certificate.

 

2.4Repayment Terms.

 

(a)The Borrower will pay interest on February 20, 2012, and then on the same day
of each month thereafter until payment in full of any principal outstanding
under this facility.

 

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(b)The Borrower will repay in full any principal, interest or other charges
outstanding under this facility no later than the Facility No.1 Expiration Date.

 

2.5Interest Rate.

 

(a)The interest rate is a rate per year equal to the BBA LIBOR Daily Floating
Rate plus 2.50 percentage point(s).

 

(b)The BBA LIBOR Daily Floating Rate is a fluctuating rate of interest which can
change on each banking day. The rate will be adjusted on each banking day to
equal the British Bankers Association LlBOR Rate ("BBA LlBOR") for U.S. Dollar
deposits for delivery on the date in question for a one month term beginning on
that date. The Bank will use the BBA LlBOR Rate as published by Reuters (or
other commercially available source providing quotations of BBA LlBOR as
selected by the Bank from time to time) as determined at approximately 11:00
a.m. London time two (2) London Banking Days prior to the date in question, as
adjusted from time to time in the Bank's sale discretion for reserve
requirements, deposit insurance assessment rates and other regulatory costs. If
such rate is not available at such time for any reason, then the rate will be
determined by such alternate method as reasonably selected by the Bank. A
"London Banking Day" is a day on which banks in London are open for business and
dealing in offshore dollars.

 

3.FACILITY NO. 2: FIXED RATE TERM LOAN AMOUNT AND TERMS

 

3.1Loan Amount. The Bank agrees 10 provide a term loan to the Borrower in the
amount of Three Hundred Eighteen Thousand One Hundred Ninety Eight and 66/100
Dollars ($318,198.66) (the "Facility No. 2 Commitment").

 

3.2Availability Period. The loan was available in one disbursement from the Bank
on July 20, 2011.

 

3.3Interest Rate. The interest rate is 4.2% per year.

 

3.4Repayment Terms.

 

(a)The Borrower will repay principal and interest in equal combined installments
of Seven Thousand Two Hundred Twenty Two and 77/100 Dollars ($7,222.77)
beginning on August 20, 2011, and on the same day of each month thereafter, and
ending on July 20, 2015 (the "Repayment Period"). In any event, on the last day
of the Repayment Period, the Borrower will repay the remaining principal balance
plus any interest then due. Each installment, when paid, will be applied first
to the payment of interest accrued. The balance of each installment will be
applied to the repayment of principal.

 

3.5Prepayments.

 

The Borrower may prepay principal in full or in part at any time. The prepayment
will be applied to the most remote payment of principal due under this
Agreement. Each prepayment, whether voluntary, by reason of acceleration or
otherwise, will be accompanied by the amount of accrued interest on the amount
prepaid, and a prepayment fee. The prepayment fee will be the sum of the fees
calculated separately for each Prepaid Installment, as follows:

 

(a)The Bank will first determine the amount of interest which would have accrued
each month for the Prepaid Installment had it remained outstanding until the
Original Payment Date, using the Initial Money Market Funds Rate.

 

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(b)The Bank will then subtract from each monthly interest amount determined in
(a), above, the amount of interest which would accrue for that Prepaid
Installment if it were reinvested from the date of prepayment through the
Original Payment Date, using the Treasury Rate.

 

(c)If (a) minus (b) for the Prepaid Installment is greater than zero, the Bank
will calculate the present value of the monthly differences to the date of
prepayment by the rate used in (b) above. The sum of the present values is the
prepayment fee for that Prepaid Installment.

 

(d)The following definitions will apply to the calculation of the prepayment
fee:

 

"Initial Money Market Funds Rate" means the fixed interest rate per annum,
determined solely by the Bank as of the first day of the Interest Period, as the
rate at which the Bank would be able to borrow funds in the Money Market for the
duration of the Interest Period in the amount of the prepaid principal and with
a term, interest payment frequency, and principal repayment schedule equal to
the prepaid principal.

 

"Interest Period" means the period during which the interest rate applicable to
prepaid principal is fixed and not subject to change.

 

"Money Market" means one or more wholesale rate markets available to the Bank,
including the LIBOR, Eurodollar, and SWAP rate markets as applicable and
available, or such other appropriate Money Market as determined by the Bank in
its sale discretion.

 

"Original Payment Dates" mean the dates on which the prepaid principal would
have been paid if there had been no prepayment. If a portion of the principal
would have been paid later than the end of the Interest Period in effect at the
time of prepayment, then the Original Payment Date for that portion will be the
last day of the Interest Period.

 

"Prepaid Installment" means the amount of the prepaid principal which would have
been paid on a single Original Payment Date.

 

"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities for a period of time
approximating the period starting on the date of the prepayment and ending on
the Original Payment Date.

 

The Bank may adjust the Initial Money Market Funds Rate and the Treasury Rate to
reflect the compounding, accrual basis, or other costs of the prepaid amount.
The rates shall include adjustments for reserve requirements, federal deposit
insurance, and any other similar adjustment which the Bank deems appropriate.
Each of the rates is the Bank's estimate only, and the Bank is under no
obligation to actually purchase or match funds for any transaction or reinvest
any prepayment. The rates are not fixed by or related in any way to any rate the
Bank quotes or pays for deposits accepted through its branch system. The rates
will be based on information from either the Telerate or Reuters information
services, The Wall Street Journal, or other information sources the Bank deems
appropriate.

 

4.COLLATERAL

 

The following parties own some or all of the collateral, as shown below:
FirstFlight Heliports, LLC ("FirstFlight Heliports, LLC"), FBO Air-Garden City,
Inc. ("FBO Air-Garden City, Inc.") and FBO Air-Wilkes-Barre, Inc. ("FBO
Air-Wilkes-Barre, Inc.").

 

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4.1Personal Property. The personal property listed below now owned or owned in
the future by the parties listed below will secure the Borrower's obligations to
the Bank under this Agreement or, if the collateral is owned by a guarantor,
will secure the guaranty, if so indicated in the security agreement. The
collateral is further defined in security agreement(s) executed by the owners of
the collateral. In addition, all personal property collateral owned by the
Borrower securing this Agreement shall also secure all other present and future
obligations of the Borrower to the Bank (excluding any consumer credit covered
by the federal Truth in Lending law, unless the Borrower has otherwise agreed in
writing or received written notice thereof). All personal property collateral
securing any other present or future obligations of the Borrower to the Bank
shall also secure this Agreement.

 

(a)Equipment and fixtures owned by the Borrower, FirstFlight Heliports, LLC, FBO
Air-Garden City, Inc. and FBO Air-Wilkes-Barre, Inc.

 

(b)Inventory owned by the Borrower, FirstFlight Heliports, LLC, FBO Air-Garden
City, Inc. and FBO Air-Wilkes-Barre, Inc.

 

(c)Receivables owned by the Borrower, FirstFlight Heliports, LLC, FBO Air-Garden
City, Inc. and FBO Air-Wilkes-Barre, Inc.

 

5.FEES AND EXPENSES

 

5.1Fees.

 

(a)Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any
terms of this Agreement, the Borrower will, at the Bank's option, pay the Bank a
fee for each waiver or amendment in an amount advised by the Bank at the time
the Borrower requests the waiver or amendment. Nothing in this paragraph shall
imply that the Bank is obligated to agree to any waiver or amendment requested
by the Borrower. The Bank may impose additional requirements as a condition to
any waiver or amendment.

 

(b)Late Fee. To the extent permitted by law, the Borrower agrees to pay a late
fee in an amount not to exceed four percent (4%) of any payment that is more
than fifteen (15) days late. The imposition and payment of a late fee shall not
constitute a waiver of the Bank's rights with respect to the default.

 

(c)Expenses. The Borrower agrees to immediately repay the Bank for expenses that
include, but are not limited to, filing, recording and search fees, appraisal
fees, title report fees, and documentation fees.

 

5.2Reimbursement Costs.

 

(a)The Borrower agrees to reimburse the Bank for any expenses it incurs in the
preparation of this Agreement and any agreement or instrument required by this
Agreement. Expenses include, but are not limited to, reasonable attorneys' fees,
including any allocated costs of the Bank's in-house counsel to the extent
permitted by applicable law.

 

(b)The Borrower agrees to reimburse the Bank for the cost of periodic field
examinations of the Borrower's books, records and collateral, and appraisals of
the collateral, at such intervals as the Bank may reasonably require. The
actions described in this paragraph may be performed by employees of the Bank or
by independent appraisers.

 

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6.DISBURSEMENTS, PAYMENTS AND COSTS

 

6.1Disbursements and Payments.

 

(a)Each payment by the Borrower will be made in U.S. Dollars and immediately
available funds, without setoff or counterclaim. Payments will be made by debit
to a deposit account, if direct debit is provided for in this Agreement or is
otherwise authorized by the Borrower. For payments not made by direct debit,
payments will be made by mail to the address shown on the Borrower's statement,
or by such other method as may be permitted by the Bank.

 

(b)The Bank may honor instructions for advances or repayments given by the
Borrower (if an individual), or by any one of the individuals authorized to sign
loan agreements on behalf of the Borrower, or any other individual designated by
anyone of authorized signers (each an "Authorized Individual").

 

(c)For any payment under this Agreement made by debit to a deposit account, the
Borrower will maintain sufficient immediately available funds in the deposit
account to cover each debit. If there are insufficient immediately available
funds in the deposit account on the date the Bank enters such debit authorized
by this Agreement, the Bank may reverse the debit.

 

(d)Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.

 

(e)Prior to the date each payment of principal and interest and any fees from
the Borrower becomes due (the "Due Date"), the Bank will send to the Borrower a
statement of the amounts that will be due on that Due Date (the "Billed
Amount"). The calculations in the bill will be made on the assumption that no
new extensions of credit or payments will be made between the date of the
billing statement and the Due Date, and that there will be no changes in the
applicable interest rate. If the Billed Amount differs from the actual amount
due on the Due Date (the "Accrued Amount"), the discrepancy will be treated as
follows:

 

(i)If the Billed Amount is less than the Accrued Amount, the Billed Amount for
the following Due Date will be increased by the amount of the discrepancy. The
Borrower will not be in default by reason of any such discrepancy.

 

(ii)If the Billed Amount is more than the Accrued Amount, the Billed Amount for
the following Due Date will be decreased by the amount of the discrepancy.

 

Regardless of any such discrepancy, interest will continue to accrue based on
the actual amount of principal outstanding without compounding. The Bank will
not pay the Borrower interest on any overpayment.

 

6.2Telephone and Telefax Authorization.

 

(a)The Bank may honor telephone or telefax instructions for advances or
repayments given, or purported to be given, by anyone of the Authorized
Individuals.

 

(b)Advances will be deposited in and repayments will be withdrawn from account
number PA-004678015588 owned by Saker Aviation Services, Inc. or such other of
the Borrower's accounts with the Bank as designated in writing by the Borrower.

 

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(c)The Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone or telefax
instructions the Bank reasonably believes are made by any Authorized Individual.
This paragraph will survive this Agreement's termination, and will benefit the
Bank and its officers, employees, and agents.

 

6.3Direct Debit.

 

(a)The Borrower agrees that on the Due Date the Bank will debit the Billed
Amount from deposit account number PA-004678015588 owned by Saker Aviation
Services, Inc. or such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower (the "Designated Account").

 

(b)The Borrower may terminate this direct debit arrangement at any time by
sending written notice to the Bank at the address specified at the end of this
Agreement. If the Borrower terminates this arrangement, then the principal
amount outstanding under this Agreement will at the option of the Bank bear
interest at a rate per annum which is 1.0 percentage point(s) higher than the
rate of interest otherwise provided under this Agreement.

 

6.4Banking Days. Unless otherwise provided in this Agreement, a banking day is a
day other than a Saturday, Sunday or other day on which commercial banks are
authorized to close, or are in fact closed, in the state where the Bank's
lending office is located, and, if such day relates to amounts bearing interest
at an offshore rate (if any), means any such day on which dealings in dollar
deposits are conducted among banks in the offshore dollar interbank market. All
payments and disbursements which would be due on a day which is not a banking
day will be due on the next banking day. All payments received on a day which is
not a banking day will be applied to the credit on the next banking day.

 

6.5Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.

 

6.6Default Rate. Upon the occurrence of any default or after maturity or after
judgment has been rendered on any obligation under this Agreement, all amounts
outstanding under this Agreement, including any unpaid interest, fees, or costs,
will at the option of the Bank bear interest at a rate which is 6.0 percentage
point(s) higher than the rate of interest otherwise provided under this
Agreement. This may result in compounding of interest. This will not constitute
a waiver of any default.

 

6.7Additional Costs.

 

The Borrower will pay the Bank, on demand, for the Bank's costs or losses
arising from any Change in Law which are allocated to this Agreement or any
credit outstanding under this Agreement. The allocation will be made as
determined by the Bank, using any reasonable method. The costs include, without
limitation, the following:

 

(a)any reserve or deposit requirements (excluding any reserve requirement
already reflected in the calculation of the interest rate in this Agreement);
and

 

(b)any capital requirements relating to the Bank's assets and commitments for
credit.

 

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"Change in Law" means the occurrence, after the date of this Agreement, of the
adoption or taking effect of any new or changed law, rule, regulation or treaty,
or the issuance of any request, rule, guideline or directive (whether or not
having the force of law) by any governmental authority; provided that (x) the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives issued in connection with that Act, and (y) all
requests, rules, guidelines or directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a "Change in Law,"
regardless of the date enacted, adopted or issued.

 

7.CONDITIONS

 

Before the Bank is required to extend any credit to the Borrower under this
Agreement, it must receive any documents and other items it may reasonably
require, in form and content acceptable to the Bank, including any items
specifically listed below.

 

7.1Authorizations. If the Borrower or any guarantor is anything other than a
natural person, evidence that the execution, delivery and performance by the
Borrower and/or such guarantor of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.

 

7.2Governing Documents. If required by the Bank, a copy of the Borrower's
organizational documents.

 

7.3Guaranties. Guaranties signed by FirstFlight Heliports, LLC ("FirstFlight
Heliports, LLC"), FBO Air-Garden City, Inc. ("FBO Air-Garden City, Inc.") and
FBO Air-Wilkes-Barre, Inc. ("FBO Air-Wilkes-Barre, Inc.").

 

7.4Security Agreements. Signed original security agreements covering the
personal property collateral which the Bank requires.

 

7.5Good Standing. Certificates of good standing for the Borrower from its state
of formation and from any other state in which the Borrower is required to
qualify to conduct its business.

 

7.6Insurance. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.

 

7.7Environmental Information. A completed Bank form Environmental Questionnaire.

 

8.REPRESENTATIONS AND WARRANTIES

 

When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewal of these representations and
warranties as of the date of the request:

 

8.1Formation. If the Borrower is anything other than a natural person, it is
duly formed and existing under the laws of the state or other jurisdiction where
organized.

 

8.2Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.

 

8.3Enforceable Agreement. This Agreement is a legal, valid and binding agreement
of the Borrower, enforceable against the Borrower in accordance with its terms,
and any instrument or agreement required hereunder, when executed and delivered,
will be similarly legal, valid, binding and enforceable.

 

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8.4Good Standing. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.

 

8.5No Conflicts. This Agreement does not conflict with any law, agreement, or
obligation by which the Borrower is bound.

 

8.6Financial Information. All financial and other information that has been or
will be supplied to the Bank is sufficiently complete to give the Bank accurate
knowledge of the Borrower's (and any guarantor's) financial condition, including
all material contingent liabilities. Since the date of the most recent financial
statement provided to the Bank, there has been no material adverse change in the
business condition (financial or otherwise), operations, properties or prospects
of the Borrower (or any guarantor). If the Borrower is comprised of the trustees
of a trust, the foregoing representations shall also pertain to the trustor(s)
of the trust.

 

8.7Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.

 

8.8Collateral. All collateral required in this Agreement is owned by the grantor
of the security interest free of any title defects or any liens or interests of
others, except those which have been approved by the Bank in writing.

 

8.9Permits, Franchises. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights, copyrights and fictitious name rights necessary to enable
it to conduct the business in which it is now engaged.

 

8.10Other Obligations. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, except as have been disclosed in
writing to the Bank.

 

8.11Tax Matters. The Borrower has no knowledge of any pending assessments or
adjustments of its income tax for any year and all taxes due have been paid,
except as have been disclosed in writing to the Bank.

 

8.12No Event of Default. There is no event which is, or with notice or lapse of
time or both would be, a default under this Agreement.

 

8.13Insurance. The Borrower has obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this Agreement.

 

9.COVENANTS

 

The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:

 

9.1Use of Proceeds.

 

(a)To use the proceeds of Facility No.1 only for business purposes and working
capital.

 

9.2Financial Information. To provide the following financial information and
statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time. The Bank reserves the
right, upon written notice to the Borrower, to require the Borrower to deliver
financial information and statements to the Bank more frequently than otherwise
provided below, and to use such additional information and statements to measure
any applicable financial covenants in this Agreement.

 

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(a)Copies of the Form 10-K Annual Report filed with the Securities and Exchange
Commission, on a consolidated basis, for the Borrower within one hundred twenty
(120) days of the Borrower's fiscal year end.

 

(b)Copies of the of the Borrower's Form 10-Q Quarterly Report filed with the
Securities and Exchange Commission, within sixty (60) days of period end each
March, June, September, on a consolidated basis.

 

(c)A detailed aging of the Borrower's receivables by invoice or a summary aging
by account debtor, as specified by the Bank, within fifteen (15) days after the
end of each month.

 

(d)A detailed aging of the Borrower's accounts payable or a summary aging by
vendor of within fifteen (15) days after the end of each month.

 

(e)Within sixty (60) days of the end of period end March, June, September, on a
consolidated basis, a compliance certificate of the Borrower signed by an
authorized financial officer, and setting forth (i) the information and
computations (in sufficient detail) to establish compliance with all financial
covenants at the end of the period covered by the financial statements then
being furnished and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
default under this Agreement applicable to the party submitting the information
and, if any such default exists, specifying the nature thereof and the action
the party is taking and proposes to take with respect thereto.

 

(f)Within one hundred twenty (120) days of the Borrower's fiscal year end, on a
consolidated basis, a compliance certificate of the Borrower signed by an
authorized financial officer, and setting forth (i) the information and
computations (in sufficient detail) to establish compliance with all financial
covenants at the end of the period covered by the financial statements then
being furnished and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
default under this Agreement applicable to the party submitting the information
and, if any such default exists, specifying the nature thereof and the action
the party is taking and proposes to take with respect thereto.

 

(g)Whether there existed as of the date of such financial statements and whether
there exists as of the date of the certificate, any default under this Agreement
applicable to the party submitting the information and, if any such default
exists, specifying the nature thereof and the action the party is taking and
proposes to take with respect thereto.

 

(h)A borrowing certificate setting forth the amount of Acceptable Receivables as
of the last day of each month within fifteen (15) days after month end and, upon
the Bank's request, copies of the invoices or the record of invoices from the
Borrower's sales journal for such Acceptable Receivables, copies of the delivery
receipts, purchase orders, shipping instructions, bills of lading and other
documentation pertaining to such Acceptable Receivables, and copies of the cash
receipts journal pertaining to the borrowing certificate.

 

(i)If the Bank requires the Borrower to deliver the proceeds of accounts
receivable to the Bank upon collection by the Borrower, a schedule of the
amounts so collected and delivered to the Bank.

 

(j)Promptly upon the Bank's request a listing of the names and addresses of all
debtors obligated upon the Borrower's accounts receivable.

 

11

 

 

(k)Promptly upon the Bank's request, such other books, records, statements,
lists of property and accounts, budgets, forecasts or reports as to the Borrower
and as to each guarantor of the Borrower's obligations to the Bank as the Bank
may request.

 

9.3Debt Service Coverage Ratio. To maintain on a consolidated basis a Debt
Service Coverage Ratio of at least 1.25:1.00.

 

"Debt Service Coverage Ratio" means the ratio of Cash Flow to the sum of the
current portion of long-term debt and the current portion of capitalized lease
obligations, plus interest expense on all obligations.

 

"Cash Flow" is defined as (a) net income, after income tax, (b) less income or
plus loss from discontinued operations and extraordinary items, (c) plus
depreciation, depletion, amortization, and non-cash deferred taxes(d) plus
interest expense on all obligations, and (e) minus dividends, withdrawals, and
other distributions.

 

This ratio will be calculated at the end of each reporting period for which the
Bank requires financial statements, using the results of the twelve-month period
ending with that reporting period. The current portion of long-term liabilities
will be measured as of the last day of the calculation period.

 

9.4Funded Debt to EBITDA Ratio. To maintain on a consolidated basis to be tested
on a quarterly basis ,a ratio of Funded Debt to EBITDA not exceeding the amounts
indicated for each period specified below to be tested on a quarterly basis:

 

Period   Amounts      

From December 31, 2001

Through September 30, 2012

  4.00:1.00      

From October 1, 2012

Thereafter

  3.00:1:00

  

"Funded Debt" means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long-term debt.

 

"EBITDA" means net income, less income or plus loss from discontinued operations
and extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion and amortization. This ratio will be calculated at the
end of Each reporting period for which Bank (Secured Party or Lessor) requires
financial statements from Bank, using the results of the twelve-month period
ending with that reporting period. Funded Debt to include KAC seller note and
liabilities related to the redemption of the non-controlling interest.

 

9.5Bank as Principal Depository. To maintain the Bank or one of its affiliates
as its principal depository bank, including for the maintenance of business,
cash management, operating and administrative deposit accounts.

 

9.6Other Debts. Not to have outstanding or incur any direct or contingent
liabilities or lease obligations (other than those to the Bank), or become
liable for the liabilities of others, without the Bank's written consent. This
does not prohibit:

 

(a)Acquiring goods, supplies, or merchandise on normal trade credit.

 

(b)Endorsing negotiable instruments received in the usual course of business.

 

12

 

 

(c)Obtaining surety bonds in the usual course of business.

 

(d)Liabilities, lines of credit and leases in existence on the date of this
Agreement disclosed in writing to the Bank.

 

9.7Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:

 

(a)Liens and security interests in favor of the Bank.

 

(b)Liens for taxes not yet due.

 

(c)Liens outstanding on the date of this Agreement disclosed in writing to the
Bank.

 

(d)Additional purchase money security interests in assets acquired after the
date of this Agreement.

 

9.8Maintenance of Assets.

 

(a)Not to sell, assign, lease, transfer or otherwise dispose of any part of the
Borrower's business or the Borrower's assets except in the ordinary course of
the Borrower's business.

 

(b)Not to sell, assign, lease, transfer or otherwise dispose of any assets for
less than fair market value, or enter into any agreement to do so.

 

(c)Not to enter into any sale and leaseback agreement covering any of its fixed
assets.

 

(d)To maintain and preserve all rights, privileges, and franchises the Borrower
now has.

 

(e)To make any repairs, renewals, or replacements to keep the Borrower's
properties in good working condition.

 

9.9Investments. Not to have any existing, or make any new, investments in any
individual or entity, or make any capital contributions or other transfers of
assets to any individual or entity, except for:

 

(a)Existing investments disclosed to the Bank in writing.

 

(b)Investments in the Borrower's current subsidiaries.

 

(c)Investments in any of the following:

 

(i)certificates of deposit;

 

(ii)U.S. treasury bills and other obligations of the federal government;

 

(iii)readily marketable securities (including commercial paper, but excluding
restricted stock and stock subject to the provisions of Rule 144 of the
Securities and Exchange Commission).

 

9.10Loans. Not to make any loans, advances or other extensions of credit to any
individual or entity, except for:

 

(a)Existing extensions of credit disclosed to the Bank in writing.

 

13

 

 

(b)Extensions of credit to the Borrower's current subsidiaries.

 

(c)Extensions of credit in the nature of accounts receivable or notes receivable
arising from the sale or lease of goods or services in the ordinary course of
business to non-affiliated entities.

 

9.11Change of Management. Not to make any substantial change in the present
executive or management personnel of the Borrower.

 

9.12Change of Ownership. Not to cause, permit, or suffer any change in capital
ownership such that there is a change of more than 25% in the direct or indirect
capital ownership of the Borrower.

 

9.13Additional Negative Covenants. Not to, without the Bank's written consent:

 

(a)Enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a limited
liability company.

 

(b)Acquire or purchase a business or its assets.

 

(c)Engage in any business activities substantially different from the Borrower's
present business.

 

(d)Liquidate or dissolve the Borrower's business.

 

9.14Notices to Bank. To promptly notify the Bank in writing of:

 

(a)Any lawsuit over One Hundred Thousand and 00/100 Dollars ($100,000.00)
against the Borrower or any Obligor.

 

(b)Any substantial dispute between any governmental authority and the Borrower
or any Obligor.

 

(c)Any event of default under this Agreement, or any event which, with notice or
lapse of time or both, would constitute an event of default.

 

(d)Any material adverse change in the Borrower's or any Obligor's business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.

 

(e)Any change in the Borrower's or any Obligor's name, legal structure,
principal residence (for an individual), state of registration (for a registered
entity), place of business, or chief executive office if the Borrower or any
Obligor has more than one place of business.

 

For purposes of this Agreement, "Obligor" shall mean any guarantor, or any party
pledging collateral to the Bank, or, if the Borrower is comprised of the
trustees of a trust, any trustor.

 

9.15Insurance.

 

(a)General Business Insurance. To maintain insurance satisfactory to the Bank as
to amount, nature and carrier covering property damage (including loss of use
and occupancy) to any of the Borrower's properties, business interruption
insurance, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. Each policy shall provide for at
least 30 days prior notice to the Bank of any cancellation thereof.

 

14

 

 

(b)Insurance Covering Collateral. To maintain all risk property damage insurance
policies (including without limitation windstorm coverage, and hurricane
coverage as applicable) covering the tangible property comprising the
collateral. Each insurance policy must be for the full replacement cost of the
collateral and include a replacement cost endorsement. The insurance must be
issued by an insurance company acceptable to the Bank and must include a
lender's loss payable endorsement in favor of the Bank in a form acceptable to
the Bank.

 

(c)Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a
copy of each insurance policy, or, if permitted by the Bank, a certificate of
insurance listing all insurance in force.

 

9.16Compliance with Laws. To comply with the laws (including any fictitious or
trade name statute), regulations, and orders of any government body with
authority over the Borrower's business. The Bank shall have no obligation to
make any advance to the Borrower except in compliance with all applicable laws
and regulations and the Borrower shall fully cooperate with the Bank in
complying with all such applicable laws and regulations.

 

9.17ERISA Plans. Promptly during each year, to pay and cause any subsidiaries to
pay contributions adequate to meet at least the minimum funding standards under
ERISA with respect to each and every Plan; file each annual report required to
be filed pursuant to ERISA in connection with each Plan for each year; and
notify the Bank within ten (10) days of the occurrence of any Reportable Event
that might constitute grounds for termination of any capital Plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any Plan. "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended from time to time.
Capitalized terms in this paragraph shall have the meanings defined within
ERISA.

 

9.18Books and Records. To maintain adequate books and records.

 

9.19Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.

 

9.20Perfection of Liens. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.

 

9.21Cooperation. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.

 

10.HAZARDOUS SUBSTANCES

 

10.1Indemnity Regarding Hazardous Substances. The Borrower will indemnify and
hold harmless the Bank from any loss or liability the Bank incurs in connection
with or as a result of this Agreement, which directly or indirectly arises out
of the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about the
Borrower's property or operations or property leased to the Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.

 

15

 

 

10.2Compliance Regarding Hazardous Substances. The Borrower represents and
warrants that the Borrower has complied with all current and future laws,
regulations and ordinances or other requirements of any governmental authority
relating to or imposing liability or standards of conduct concerning protection
of health or the environment or hazardous substances.

 

10.3Notices Regarding Hazardous Substances. Until full repayment of the loan,
the Borrower will promptly notify the Bank in writing of any threatened or
pending investigation of the Borrower or its operations by any governmental
agency under any current or future law, regulation or ordinance pertaining to
any hazardous substance.

 

10.4Site Visits, Observations and Testing. The Bank and its agents and
representatives will have the right at any reasonable time, after giving
reasonable notice to the Borrower, to enter and visit any locations where the
collateral securing this Agreement (the "Collateral") is located for the
purposes of observing the Collateral, taking and removing environmental samples,
and conducting tests. The Borrower shall reimburse the Bank on demand for the
costs of any such environmental investigation and testing. The Bank will make
reasonable efforts during any site visit, observation or testing conducted
pursuant to this paragraph to avoid interfering with the Borrower's use of the
Collateral. The Bank is under no duty to observe the Collateral or to conduct
tests, and any such acts by the Bank will be solely for the purposes of
protecting the Bank's security and preserving the Bank's rights under this
Agreement. No site visit, observation or testing or any report or findings made
as a result thereof ("Environmental Report") (i) will result in a waiver of any
default of the Borrower; (ii) impose any liability on the Bank; or (iii) be a
representation or warranty of any kind regarding the Collateral (including its
condition or value or compliance with any laws) or the Environmental Report
(including its accuracy or completeness). In the event the Bank has a duty or
obligation under applicable laws, regulations or other requirements to disclose
an Environmental Report to the Borrower or any other party, the Borrower
authorizes the Bank to make such a disclosure. The Bank may also disclose an
Environmental Report to any regulatory authority, and to any other parties as
necessary or appropriate in the Bank's judgment. The Borrower understands and
agrees that any Environmental Report or other information regarding a site
visit, observation or testing that is disclosed to the Borrower by the Bank or
its agents and representatives is to be evaluated (including any reporting or
other disclosure obligations of the Borrower) by the Borrower without advice or
assistance from the Bank.

 

10.5Definition of Hazardous Substances. "Hazardous substances" means any
substance, material or waste that is or becomes designated or regulated as
"toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or
regulation under any current or future federal, state or local law (whether
under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas.

 

10.6Continuing Obligation. The Borrower's obligations to the Bank under this
Article, except the obligation to give notices to the Bank, shall survive
termination of this Agreement and repayment of the Borrower's obligations to the
Bank under this Agreement.

 

11.DEFAULT AND REMEDIES

 

If any of the following events of default occurs, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. If an event which, with notice or the
passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement. In addition, if any event of default occurs, the
Bank shall have all rights, powers and remedies available under any instruments
and agreements required by or executed in connection with this Agreement, as
well as all rights and remedies available at law or in equity. If an event of
default occurs under the paragraph entitled "Bankruptcy," below, with respect to
the Borrower, then the entire debt outstanding under this Agreement will
automatically be due immediately.

 

16

 

 

11.1Failure to Pay. The Borrower fails to make a payment under this Agreement
when due.

 

11.2Other Bank Agreements. Any default occurs under any other agreement the
Borrower (or any Obligor) or any of the Borrower's related entities or
affiliates has with the Bank or any affiliate of the Bank.

 

11.3Cross-default. Any default occurs under any agreement in connection with any
credit the Borrower (or any Obligor) or any of the Borrower's related entities
or affiliates has obtained from anyone else or which the Borrower (or any
Obligor) or any of the Borrower's related entities or affiliates has guaranteed.

 

11.4False Information. The Borrower or any Obligor has given the Bank false or
misleading information or representations.

 

11.5Bankruptcy. The Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is
filed against any of the foregoing parties, or the Borrower, any Obligor, or any
general partner of the Borrower or of any Obligor makes a general assignment for
the benefit of creditors.

 

11.6Receivers. A receiver or similar official is appointed for a substantial
portion of the Borrower's or any Obligor's business, or the business is
terminated, or, if any Obligor is anything other than a natural person, such
Obligor is liquidated or dissolved.

 

11.7Lien Priority. The Bank fails to have an enforceable first lien (except for
any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for this Agreement (or any guaranty).

 

11.8Judgments. Any judgments or arbitration awards are entered against the
Borrower or any Obligor, or the Borrower or any Obligor enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
or more in excess of any insurance coverage.

 

11.9Material Adverse Change. A material adverse change occurs, or is reasonably
likely to occur, in the Borrower's (or any Obligor's) business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit; or the Bank determines that it is insecure for any other
reason.

 

11.10Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's or any Obligor's financial
condition or ability to repay.

 

11.11Default under Related Documents. Any default occurs under any guaranty,
subordination agreement, security agreement, deed of trust, mortgage, or other
document required by or delivered in connection with this Agreement or any such
document is no longer in effect, or any guarantor purports to revoke or disavow
the guaranty.

 

11.12ERISA Plans. Anyone or more of the following events occurs with respect to
a Plan of the Borrower subject to Title IV of ERISA, provided such event or
events could reasonably be expected, in the judgment of the Bank, to subject the
Borrower to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, could have a material adverse effect on the financial
condition of the Borrower:

 

(a)A reportable event shall occur under Section 4043(c) of ERISA with respect to
a Plan.

 

(b)Any Plan termination (or commencement of proceedings to terminate a Plan) or
the full or partial withdrawal from a Plan by the Borrower or any ERISA
Affiliate.

 

17

 

 

11.13Other Breach Under Agreement. A default occurs under any other term or
condition of this Agreement not specifically referred to in this Article. This
includes any failure or anticipated failure by the Borrower (or any other party
named in the Covenants section) to comply with the financial covenants set forth
in this Agreement, whether such failure is evidenced by financial statements
delivered to the Bank or is otherwise known to the Borrower or the Bank.

 

12.ENFORCING THIS AGREEMENT; MISCELLANEOUS

 

12.1GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.

 

12.2Governing Law. This Agreement is governed by and shall be interpreted
according to federal law and the laws of Pennsylvania. If state or local law and
federal law are inconsistent, or if state or local law is preempted by federal
law, federal law governs. If the Bank has greater rights or remedies under
federal law, whether as a national bank or otherwise, this paragraph shall not
be deemed to deprive the Bank of such rights and remedies as may be available
under federal law.

 

12.3Successors and Assigns. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior consent. The Bank may sell participations in
or assign this loan, and may exchange information about the Borrower (including,
without limitation, any information regarding any hazardous substances) with
actual or potential participants or assignees. If a participation is sold or the
loan is assigned, the purchaser will have the right of set-off against the
Borrower.

 

12.4WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES, ARISING OUT OF, IN
CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS AGREEMENT. IT IS AGREED AND
UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE.

 

12.5Severability; Waivers. If any part of this Agreement is not enforceable, the
rest of the Agreement may be enforced. The Bank retains all rights, even if it
makes a loan after default. If the Bank waives a default, it may enforce a later
default. Any consent or waiver under this Agreement must be in writing.

 

12.6Attorneys' Fees. The Borrower shall reimburse the Bank for any reasonable
costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against the
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.

 

18

 

 

12.7Set-Off.

 

(a)In addition to any rights and remedies of the Bank provided by law, upon the
occurrence and during the continuance of any event of default under this
Agreement, the Bank is authorized, at any time, to set off and apply any and all
Deposits of the Borrower or any Obligor held by the Bank or its affiliates
against any and all Obligations owing to the Bank. The set-off may be made
irrespective of whether or not the Bank shall have made demand under this
Agreement or any guaranty, and although such Obligations may be contingent or
unmatured or denominated in a currency different from that of the applicable
Deposits and without regard for the availability or adequacy of other
collateral. Any Deposits may be converted, sold or otherwise liquidated at
prevailing market prices in order to effect such set-off.

 

(b)The set-off may be made without prior notice to the Borrower or any other
party, any such notice being waived by the Borrower (on its own behalf and on
behalf of each Obligor) to the fullest extent permitted by law. The Bank agrees
promptly to notify the Borrower after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.

 

(c)For the purposes of this paragraph, "Deposits" means any deposits (general or
special, time or demand, provisional or final, individual or joint) as well as
any money, instruments, securities, credits, claims, demands, income or other
property, rights or interests owned by the Borrower or any Obligor which come
into the possession or custody or under the control of the Bank or its
affiliates. "Obligations" means all obligations, now or hereafter existing, of
the Borrower to the Bank under this Agreement and under any other agreement or
instrument executed in connection with this Agreement, and the obligations to
the Bank of any Obligor.

 

12.8One Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively:

 

(a)represent the sum of the understandings and agreements between the Bank and
the Borrower concerning this credit;

 

(b)replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and

 

(c)are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.

 

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail. Any reference in any
related document to a "promissory note" or a "note" executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or restated.

 

12.9Disposition of Schedules and Reports. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower. The Bank will destroy or otherwise dispose of
such materials at such time as the Bank, in its discretion, deems appropriate.

 

12.10Returned Merchandise. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon such other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.

 

19

 

 

12.11Verification of Receivables. The Bank may at any time, either orally or in
writing, request confirmation from any debtor of the current amount and status
of the accounts receivable upon which such debtor is obligated.

 

12.12Waiver of Confidentiality. The Borrower authorizes the Bank to discuss the
Borrower's financial affairs and business operations with any accountants,
auditors, business consultants, or other professional advisors employed by the
Borrower, and authorizes such parties to disclose to the Bank such financial and
business information or reports (including management letters) concerning the
Borrower as the Bank may request.

 

12.13Notices. Unless otherwise provided in this Agreement or in another
agreement between the Bank and the Borrower, all notices required under this
Agreement shall be personally delivered or sent by first class mail, postage
prepaid, or by overnight courier, to the addresses on the signature page of this
Agreement, or sent by facsimile to the fax numbers listed on the signature page,
or to such other addresses as the Bank and the Borrower may specify from time to
time in writing. Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or
(iii) if hand-delivered, by courier or otherwise (including telegram, lettergram
or mailgram), when delivered.

 

12.14Headings. Article and paragraph headings are for reference only and shall
not affect the interpretation or meaning of any provisions of this Agreement.

 

12.15Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement. Delivery of an
executed counterpart of this Agreement (or of any agreement or document required
by this Agreement and any amendment to this Agreement) by telecopy or other
electronic imaging means shall be as effective as delivery of a manually
executed counterpart of this Agreement; provided, however, that the telecopy or
other electronic image shall be promptly followed by an original if required by
the Bank.

 

12.16Borrower Information; Reporting to Credit Bureaus. The Borrower authorizes
the Bank at any time to verify or check any information given by the Borrower to
the Bank, check the Borrower's credit references, verify employment, and obtain
credit reports. The Borrower agrees that the Bank shall have the right at all
times to disclose and report to credit reporting agencies and credit rating
agencies such information pertaining to the Borrower and/or all guarantors as is
consistent with the Bank's policies and practices from time to time in effect.

 

12.17Amendment and Restatement of Prior Agreement. This Agreement is an
amendment and restatement, in its entirety, of the Loan Agreement entered into
as of July 20, 2011, between the Bank and the Borrower, and any indebtedness
outstanding thereunder shall be deemed to be outstanding under this Agreement.
Nothing in this Agreement shall be deemed to be a repayment or novation of the
indebtedness, or to release or otherwise adversely affect any lien, mortgage or
security interest securing such indebtedness or any rights of the Bank against
any guarantor, surety or other party primarily or secondarily liable for such
indebtedness.

 

12.18Limitation of Interest and Other Charges. If, at any time, the rate of
interest, together with all amounts which constitute interest and which are
reserved, charged or taken by the Bank as compensation for fees, services or
expenses incidental to the making, negotiating or collection of the loan
evidenced hereby, shall be deemed by any competent court of law, governmental
agency or tribunal to exceed the maximum rate of interest permitted to be
charged by the Bank to the Borrower under applicable law, then, during such time
as such rate of interest would be deemed excessive, that portion of each sum
paid attributable to that portion of such interest rate that exceeds the maximum
rate of interest so permitted shall be deemed a voluntary prepayment of
principal. As used herein, the term "applicable law" shall mean the law in
effect as of the date hereof; provided, however, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Agreement shall be governed by such new law as of its effective date.

 

20

 

 

The Borrower executed this Agreement as of the date stated at the top of the
first page, intending to be legally bound.

 

Bank:       Bank of America, N.A.       By:       Michael McCarty, Vice
President       Borrower:       Saker Aviation Services, Inc.       By:   (Seal)
     Ronald J. Ricciardi, President/Chief
   Executive Officer/Secretary  

 

Address where notices to Saker Aviation Services, Inc. are to be sent:   Address
where notices to the Bank are to be sent:       101 Hangar Road   Doc Retention
– GCF Avoca, PA 18641-2203   CT2-515-BB-03 US   70 Batterson Park Road    
Farmington, CT 06032 Telephone: (570) 457-3400   Fascimile: (866) 255-9922

 

Federal law requires Bank of America, N.A. (the "Bank") to provide the
following. The not part of the foregoing agreement or instrument and may not be
altered. Please read the carefully.

 

(1)          USA PATRIOT ACT NOTICE

 

Federal law requires all financial institutions to obtain, verify and record
information that identifies each person who opens an account or obtains a loan.
The Bank will ask for the Borrower's legal name, address, tax ID number or
social security number and other identifying information. The Bank may also ask
for additional information or documentation or take other actions reasonably
necessary to verify the identity of the Borrower, guarantors or other related
persons.

 

21

 

 

RIDER TO LOAN AGREEMENT

 

This Rider to Loan Agreement is made this 30'" day of January, 2012, and is
incorporated into and shall be deemed to amend and supplement that certain Loan
Agreement, dated January 30,2012 (as amended, restated, modified or
supplemented, (the "Loan Agreement") from Saker Aviation Services, Inc. (the
"Borrower") in favor of Bank of America, N.A., a national banking association
organized and existing under the laws of the United States of America (the
"Bank").

 

The Borrower and the Bank agree that the Loan Agreement is hereby amended and
supplemented as follows:

 

WARRANT OF ATTORNEY FOR CONFESSION OF JUDGMENT

 

BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ANY CLERK OF
ANY COURT OF RECORD UPON OR AT ANY TIME AFTER THE OCCURRENCE OF AN EVENT OF
DEFAULT TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER (A) FOR SUCH OF THE
OBLIGATIONS AS ARE DUE AND OWING AND/OR MAY BECOME DUE AND OWING AND/OR (B) IN
ANY ACTION OF REPLEVIN INSTITUTED BY BANK TO OBTAIN POSSESSION OF ANY COLLATERAL
SECURING ANY OF THE OBLIGATIONS, IN EITHER CASE WITH OR WITHOUT DECLARATION,
WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH AN AMOUNT EQUAL TO
FIFTEEN PERCENT (15%) OF THE AMOUNT DUE OR TO BECOME DUE HEREUNDER, BUT NOT LESS
THAN ONE THOUSAND ($1,000.00) DOLLARS ADDED FOR ATTORNEYS' COLLECTION FEES
(WHETHER OR NOT SUCH ATTORNEY IS A REGULARLY SALARIED EMPLOYEE OF BANK, ANY
PARENT CORPORATION OR ANY SUBSIDIARY OR AFFILIATE THEREOF, WHETHER NOW EXISTING
OR HEREAFTER CREATED). TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER: (1) WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON,
VOLUNTARILY CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK TO ENTER
UPON THE WRIT OF EXECUTION SAID VOLUNTARY CONDEMNATION AND AGREES THAT SAID REAL
ESTATE MAY BE SOLD ON A WRIT OF EXECUTION; (2) WAIVES AND RELEASES ALL RELIEF
FROM ANY AND ALL APPRAISEMENT, STAY, EXEMPTION OR APPEAL LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED; AND (3) RELEASES ALL ERRORS IN SUCH PROCEEDINGS.
IF A COPY OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF BANK,
SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE
ORIGINAL OF THIS AGREEMENT AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY THE
INITIAL EXERCISE THEREOF, AND THE SAME MAY BE EXERCISED FROM TIME TO TIME, AS
OFTEN AS BANK SHALL DEEM NECESSARY AND DESIRABLE, AND THIS AGREEMENT SHALL BE A
SUFFICIENT WARRANT THEREFOR. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
BANK MAY ENTER ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT COUNTIES FOR ALL
OR ANY PART OF THE OBLIGATIONS, WITHOUT REGARD TO WHETHER JUDGMENT HAS BEEN
ENTERED ON MORE THAN ONE OCCASION FOR THE SAME OBLIGATIONS. IN THE EVENT ANY
JUDGMENT ENTERED AGAINST BORROWER HEREUNDER IS STRICKEN OR OPENED UPON
APPLICATION BY OR ON BORROWER'S BEHALF FOR ANY REASON WHATSOEVER, BANK IS HEREBY
AUTHORIZED AND EMPOWERED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW TO
AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER ON THE BASIS PROVIDED FOR
ABOVE.

 

POWERS OF ATTORNEY

 

THE POWERS OF ATTORNEY GRANTED HEREIN OR IN THE LOAN AGREEMENT ARE NOT REVOCABLE
AND ARE NOT INTENDED TO BE GOVERNED BY THE PROVISIONS OF SECTION 5601 OF CHAPTER
56 OF TITLE 20 OF THE PENNSYLVANIA CONSOLIDATED STATUTES, AS AMENDED. SUCH
POWERS SHALL BE EXERCISED FOR THE BENEFIT OF BANK AND NOT FOR THE BENEFIT OF
BORROWER. IN ACTING UNDER SUCH POWERS, BANK HAS NO FIDUCIARY DUTY TO BORROWER.

 

22

 

 

This Rider shall amend and supplement the Loan Agreement. In the event of a
conflict between the terms of the Loan Agreement and this Rider, the terms of
this Rider shall control. The Bank and the Borrower agree that this Rider shall
be annexed to the Loan Agreement to evidence the modification of its terms as
set forth herein. The Borrower further acknowledges and agrees that all of the
terms and conditions of the Loan Agreement shall remain in full force and
effect, except as expressly modified herein.

 

IN WITNESS WHEREOF, this Rider is executed as of the date and year first above
written.

 

    Saker Aviation Services, Inc.           By:         Ronald J. Ricciardi,
President/Chief
Executive Officer/Secretary         WITNESS                   Bank of America,
N.A.           By:         Michael McCarthy, Vice President

 

23

 

 

NOTICE AND WAIVER OF RIGHTS REGARDING
WARRANTS OF ATTORNEY, EXECUTION RIGHTS, AND
WAIVER OF RIGHTS TO PRIOR NOTICE AND JUDICIAL HEARING

 

Borrower: Saker Aviation Services, Inc.

Guarantor: FirstFlight Heliports, LLC

Guarantor: FBO Air-Garden City, Inc.

Guarantor: FBO Air-Wilkes-Barre, Inc.

 

Line of Credit in the original principal amount of $1,150,000.00 evidenced by
Facility No.1 of that certain Loan Agreement dated January 30, 2012.

 

This NOTICE AND WAIVER of rights is made by you and given to Bank of America, N.
A. (the "Bank") in connection with the above-described credit transaction. IT IS
IMPORTANT THAT YOU CAREFULLY READ AND UNDERSTAND THIS DOCUMENT. WHEN YOU SIGN
YOUR NAME IN THE SPACE PROVIDED BELOW, YOU ARE ACKNOWLEDGING AND REPRESENTING TO
THE BANK THAT YOU HAVE READ AND UNDERSTAND THE CONTENTS OF THIS DOCUMENT.

 

You will be executing and delivering to the Bank an agreement and/or other loan
documents (collectively, the "Loan Documents") which grant to the Bank, among
other things, the power and authority to enter JUDGMENT BY CONFESSION against
you and to exercise rights of execution, levy, garnishment, seizure of your
property and the like. Other than notices required under the Loan Documents,
these rights and powers may be exercised by the Bank without giving you any
prior notice of its intention to do so. In addition, these powers and rights may
be exercised without a prior hearing of any nature.

 

By executing and delivering this Notice and Waiver, you knowingly, voluntarily
and intelligently waive your rights to prior notice (except for any notice which
may be required under the specific terms of the Loan Documents) and a hearing or
other judicial proceedings to determine your rights and liabilities in
connection with the Loan Documents. By signing this Notice and Waiver, you
acknowledge that you understand that the Bank may obtain a judgment against you
and execute upon and seize forthwith your property and assets without the
opportunity to raise any defense, set-off, counterclaim or other claim that you
may have. You knowingly, voluntarily and intelligently waive your rights to any
prior notice (except for any notice which may be required under the specific
terms of the Loan Documents) or judicial determination as a material part of the
consideration for this transaction and in order to induce the Bank to enter into
this transaction.

 

You have read the Loan Documents, and clearly and specifically understand that,
by signing the Loan Documents which contain the CONFESSION OF JUDGMENT clause:

 

(a)You are authorizing the Bank to enter a judgment against you and in favor of
the Bank, which will give the Bank a lien upon any real estate which you may own
in any county or district where the judgment is entered;

 

(b)You are giving up an important right to any notice or opportunity for a
hearing before the entry of this judgment on the records of the Court;

 

(c)You are agreeing that the Bank may enter this judgment, and understand that
you will be unable to contest the validity of the judgment should the Bank enter
it, unless you successfully challenge entry of the judgment through a petition
to open or strike the judgment, which will require you to retain counsel at your
expense;

 

24

 

 

(d)You may be giving up an important right to any notice or opportunity for a
hearing before the Bank may request and use the power of the state government to
deprive you of your property pursuant to the judgment by seizing or having the
Sheriff or other official seize your bank accounts, inventory, equipment,
furnishings or any other personal property that you may own, to satisfy any and
all obligations owing under the Loan Documents; and

 

(e)You may be deprived of the use of any property that is seized by the Bank
pursuant to the judgment.

 

One or more of the Loan Documents contain or may contain provisions authorizing
the Bank to take one or more actions on your behalf, including (without
limitation), the entry of a judgment by confession as described above. With
respect to any such one or more Loan Documents, you acknowledge that such
Documents contain one or more powers of attorney that are coupled with an
interest, and are for the sole and exclusive benefit of the Bank. Such Loan
Documents are being (or have been) executed in connection with a loan or other
financial transaction for business purposes only, and not primarily for
personal, family or household purposes. The Bank, as your agent under any one or
more powers of attorney, is not your fiduciary, but instead, in exercising
anyone or more rights with respect to such powers of attorney, may do so for the
sole and exclusive benefit of the Bank, and not for your benefit. You
acknowledge and agree that the provisions of Title 20, Pennsylvania Consolidated
Statutes Section 5601 et. seq., as amended (including, without limitation, Act
39 of 1999) shall not be applicable to any one or more powers of attorney
contained in any Loan Document previously, concurrently or in the future
executed and delivered by you to the Bank.

 

You acknowledge and represent that you have consulted (or have had an
opportunity to consult) with legal counsel of your choice and with such other
experts and advisors as you deemed necessary in connection with the execution
and delivery of the Loan Documents (including, without limitation, the provision
of the Loan Documents authorizing the confession of judgment and the execution
upon and seizure of your property and assets without the opportunity for prior
notice or judicial determination of any nature).

 

25

 

 

YOU ACKNOWLEDGE THAT YOU HAVE READ THIS NOTICE AND WAIVER PRIOR TO SIGNING THE
LOAN DOCUMENTS AND FULLY UNDERSTAND ITS CONTENTS.

 

IN WITNESS WHEREOF, this Notice and Waiver is executed as of this 30th day of
January, 2012.

 

    BORROWER       WITNESS(ES)   Saker Aviation Services, Inc.           By:    
    Ronald J. Ricciardi, President/Chief
Executive Officer/Secretary             GUARANTOR       WITNESS(ES)  
FirstFlight Heliports, LLC           By:         Ronald J. Ricciardi,
President/Chief
Executive Officer/Secretary             GUARANTOR       WITNESS(ES)   FBO
Air-Garden City, Inc.           By:         Ronald J. Ricciardi, President/Chief
Executive Officer/Secretary             GUARANTOR       WITNESS(ES)   FBO
Air-Wilkes-Barre, Inc.           By:         Ronald J. Ricciardi,
President/Chief
Executive Officer/Secretary

 

26

 

 

ACKNOWLEDGMENT

 

COMMONWEALTH OF PENNSYLVANIA   )

                                                                             )
SS:

COUNTY OF _______________                       )

 

NATURAL PERSON ACKNOWLEDGMENT

 

On this, the ___ day of ________, 20___, before me, a Notary Public, the
undersigned officer, personally appeared _____________________________________
known to me to be the person whose name is subscribed to the within instrument,
and acknowledged that he/she executed the same for the purposes therein
contained.

 

BUSINESS ENTITY ACKNOWLEDGMENT

On this, the ___ day of ____________, 20___, before me, a Notary Public, the
undersigned officer personally appeared __________________________________, who
acknowledged himself/herself to be the _________________________ of
__________________________, a _________________________________, and that
he/she, in such capacity, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing on behalf of said
_____________________________.

 

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

  

       Notary Public

  

My Commission Expires:    

   

27