Document:

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                                                                     EXHIBIT 4.7

                                    AGREEMENT

     THIS AGREEMENT (the "Agreement") is entered into as of May 11th, 2000, by
and among INTEGRAL TECHNOLOGIES, INC., a corporation duly organized and existing
under the laws of the State of Nevada (the "Company") and Swartz Private Equity,
LLC (hereinafter referred to as "Swartz").

                                    RECITALS:

     WHEREAS, pursuant to the Company's offering ("Equity Line") of up to
Twenty-Five Million Dollars ($25,000,000), excluding any funds paid upon
exercise of the Warrants, of Common Stock of the Company pursuant to that
certain Investment Agreement (the "Investment Agreement") between the Company
and Swartz dated on or about May 11th, 2000, the Company has agreed to sell and
Swartz has agreed to purchase, from time to time as provided in the Investment
Agreement, shares of the Company's Common Stock for a maximum aggregate offering
amount of Twenty Five Million Dollars ($25,000,000); and

     WHEREAS, pursuant to the terms of the Investment Agreement, the Company has
agreed, among other things, to issue to the Subscriber Commitment Warrants, as
defined in the Investment Agreement, to purchase a number of shares of Common
Stock, exercisable for five (5) years from their respective dates of issuance.

                                     TERMS:

     NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

1.   Issuance of Commitment Warrants. As compensation for entering into the
     Equity Line, Swartz received a warrant convertible into 495,000 shares of
     the Company's Common Stock, in the form attached hereto as Exhibit A (the
     "Commitment Warrants").

2.   Issuance of Additional Warrants. If the Company shall at any time effect a
     recapitalization, reclassification or other similar transaction of such
     character that the shares of Common Stock shall be changed into or become
     exchangeable for a smaller number of shares (a "Reverse Stock Split"), then
     on the date of such Reverse Stock Split, and on each one year anniversary
     (each, an "Anniversary Date") of the Reverse Stock Split thereafter
     throughout the term of the Commitment Warrants, the Company shall issue to
     Swartz additional warrants (the "Additional Warrants"), in the form of
     Exhibit A, to purchase a number of shares of Common Stock, if necessary,
     such that the sum of the number of Warrants and the number of Additional
     Warrants issued to Swartz shall equal at least 2.5% of the number of shares
     of Common Stock of the Company that are outstanding immediately following
     the Reverse Stock Split or Anniversary Date, as applicable. The Additional
     Warrants shall be exercisable at the same price as the Commitment Warrants,
     shall have the same reset provisions as the Commitment Warrants, shall have
     piggyback registration rights and shall have a 5 year term.

3.   Governing Law. This Agreement shall be governed by and construed in
     accordance with the laws of the State of Georgia applicable to agreements
     made in and wholly to be performed in

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     that jurisdiction, except for matters arising under the Act or the
     Securities Exchange Act of 1934, which matters shall be construed and
     interpreted in accordance with such laws.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
11th day of May, 2000.

INTEGRAL TECHNOLOGIES, INC.             SUBSCRIBER:
                                        SWARTZ PRIVATE EQUITY, LLC.

By: /s/ William S. Robinson             By: /s/ Eric S. Swartz
    -----------------------                 ------------------------
        William S. Robinson, CEO                Eric S. Swartz, Manager

1070 West Pender Street                 1080 Holcomb Bridge Road
Suite 3                                 Bldg. 200, Suite 285
Vancouver, BC  V6E 2N7                  Roswell, GA  30076
Telephone: (604) 685-9933               Telephone: (770) 640-8130
Facsimile: (604) 685-6794               Facsimile: (770) 640-7150

                                       2Amended and Restated
                                CREDIT AGREEMENT

                                      among

                                AEROCENTURY CORP.

                                       and

                    Certain Banking Institutions Named Herein

                                      with

                               NATIONAL CITY BANK
                                    as Agent

                                  June 28, 2000

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                                 - i -
                                                  Table of Contents
<TABLE>
<S>                                                                                                             <C>

1. Certain Definitions............................................................................................1
         1.1.  Definitions........................................................................................1
         1.2.  Accounting Terms..................................................................................12

2. The Credit....................................................................................................12
         2.1.  The Loans.........................................................................................12
                  (a)   Revolving Credit Loans; Commitment.......................................................12
                  (b)   Interest Rate Options....................................................................12
                  (c)   Maximum Loans Outstanding................................................................12
                  (d)   Minimum Loan Amount......................................................................13
                  (e)   Prepayment and Reborrowing...............................................................13
                  (f)   Revolving Loan Commitment Percentages....................................................13
                  (g)   Several Obligations......................................................................13
                  (h)   Payment of Additional Amount.............................................................13
                  (i)   Letters of Credit........................................................................13
         2.2.  The Notes.........................................................................................14
         2.3.  Funding Procedures................................................................................15
                  (a)  Request for Advance.......................................................................15
                  (b)  Actions by Agent..........................................................................15
                  (c)  Availability of Funds.....................................................................15
                  (d)  Funding Assumptions.......................................................................15
                  (e)  Proceeds of Loan Being Repaid.............................................................16
         2.4.  Interest Rates....................................................................................16
                  (a) Alternate Base Rate........................................................................16
                  (b)  LIBO Rate.................................................................................16
                  (c) Renewals and Conversions...................................................................16
                  (d) Reinstatements.............................................................................16
         2.5.  Fees..............................................................................................17
                  (a)  Commitment Fee............................................................................17
                  (b) Structuring and Arranging Fee; Administrative Fee..........................................17
         2.6.  Termination or Reduction of Aggregate Revolving Loan Commitment...................................17
                  (a)  Voluntary.................................................................................17
                  (b) Termination................................................................................17
         2.7.  Loan Prepayments (Optional and Mandatory).........................................................17
                  (a)  Base Rate Loans...........................................................................17
                  (b)  LIBO Rate Loans...........................................................................17
                  (c)  Mandatory Prepayments.....................................................................17
         2.8. Payments...........................................................................................18
                  (a)  Base Rate Loans...........................................................................18
                  (b) LIBO Rate Loans............................................................................18
                  (c) Form of Payments, Application of Payments, Payment Administration, Etc.....................18
                  (d) Net Payments...............................................................................18
                  (e) Demand Deposit Account.  ..................................................................19
         2.9. Change in Circumstances, Yield Protection..........................................................19
         2.10. Illegality........................................................................................21
         2.11. Discretion of Bank as to Manner of Funding........................................................21

3. Representations and Warranties................................................................................21
         3.1.  Organization, Standing............................................................................21
         3.2.  Corporate Authority, Validity, Etc................................................................21
         3.3.  Litigation........................................................................................22
         3.4.  ERISA.............................................................................................22
         3.5.  Financial Statements..............................................................................22
         3.6.  Not in Default, Judgments, Etc....................................................................22
         3.7.  Taxes.............................................................................................23
         3.8.  Permits, Licenses, Etc............................................................................23
         3.9.  Compliance with Laws, Etc.........................................................................23
         3.10.  Solvency.........................................................................................23
         3.11.  No Burdensome Agreements.........................................................................23
         3.12.  Subsidiaries, Etc................................................................................23
         3.13.  Title to Properties, Leases......................................................................23
         3.14.  Public Utility Holding Company; Investment Company...............................................23
         3.15.  Margin Stock.....................................................................................24
         3.16.  Use of Proceeds..................................................................................24
         3.17.  Depreciation Policies............................................................................24
         3.18.  Disclosure Generally.............................................................................24

4. Conditions Precedent..........................................................................................24
         4.1.  All Loans.........................................................................................24
              (a)  Documents.....................................................................................24
              (b)  Borrowing Base Certificate....................................................................24
              (c)  Covenants; Representations....................................................................24
              (d)  Defaults......................................................................................25
              (e)  Material Adverse Change.......................................................................25
         4.2.  Conditions to First Loan..........................................................................25
              (a)  Articles, Bylaws..............................................................................25
              (b)  Evidence of Authorization.....................................................................25
              (c)  Legal Opinions................................................................................25
              (d)  Incumbency....................................................................................25
              (e)  Notes.........................................................................................25
              (f)  Documents.....................................................................................25
              (g)  Consents......................................................................................25
              (h)  Other Agreements..............................................................................26
              (i)   Fees, Expenses...............................................................................26
              (j)   JMC Subordination Agreement..................................................................26

5. Affirmative Covenants.........................................................................................26
         5.1.  Financial Statements and Reports..................................................................26
              (a)  Annual Statements.............................................................................26
              (b)  Quarterly Statements..........................................................................27
              (c)  No Default....................................................................................27
              (d)  ERISA.........................................................................................27
              (e)  Material Changes..............................................................................27
              (f)  Other Information.............................................................................27
              (g)  Borrowing Base Certificates...................................................................27
              (h)  Covenant Complaince Certificate...............................................................28
              (i)  Monthly Lease Portfolio and Receivables Report................................................28
              (j)  Maintenance of Current Depreciation Policies..................................................28
         5.2. Corporate Existence................................................................................28
         5.3. ERISA..............................................................................................28
         5.4. Compliance with Regulations........................................................................28
         5.5. Conduct of Business; Permits and Approvals, Compliance with Laws...................................28
         5.6. Maintenance of Insurance...........................................................................28
         5.7. Payment of Debt; Payment of Taxes, Etc.............................................................29
         5.8. Notice of Events...................................................................................29
         5.9. Inspection Rights; Collateral Appraisal............................................................29
         5.10. Generally Accepted Accounting Principles..........................................................30
         5.11. Compliance with Material Contracts................................................................30
         5.12. Use of Proceeds...................................................................................30
         5.13. Further Assurances................................................................................30
         5.14. Restrictive Covenants in Other Agreements.........................................................30

6. Negative Covenants............................................................................................30
         6.1.  Merger, Consolidation.............................................................................30
         6.2.  Debt..............................................................................................31
         6.3.  Liens.............................................................................................31
         6.4.  Guarantees........................................................................................31
         6.5.  Margin Stock......................................................................................31
         6.6.  Acquisitions and Investments......................................................................31
         6.7.  Transfer of Assets; Nature of Business............................................................31
         6.8.  Restricted Payments...............................................................................32
         6.9.  Accounting Change.................................................................................32
         6.10. Transactions with Affiliates......................................................................32
         6.11. Restriction on Amendment of this Agreement........................................................32

7. Financial Covenants...........................................................................................32
         7.1.  Minimum Tangible Net Worth........................................................................32
         7.2.  Debt Service Coverage Ratio.......................................................................32
         7.3.  Recourse Funded Debt to Tangible Net Worth........................................................33
         7.4.  Absence of Net Loss...............................................................................33
         7.5.  Borrowing Base....................................................................................33

8. Default.......................................................................................................33
         8.1.  Events of Default.................................................................................33
              (a)  Payments......................................................................................33
              (b)  Covenants.....................................................................................33
              (c)   Representations, Warranties..................................................................33
              (d)   Bankruptcy...................................................................................33
              (e)   Certain Other Defaults.......................................................................34
              (f)   Judgments....................................................................................34
              (g)  Attachments...................................................................................34
              (h)  Change in Management..........................................................................34
              (i)   Security Interests...........................................................................34
              (j)   Material Adverse Change......................................................................34

9. Agent 35
         9.1.  Appointment and Authorization.....................................................................35
         9.2.  Duties and Obligations............................................................................35
         9.3.  National City Bank as a Bank......................................................................36
         9.4.  Independent Credit Decisions......................................................................36
         9.5.  Indemnification...................................................................................36
         9.6.  Successor Agent...................................................................................36

10. Miscellaneous................................................................................................37
         10.1.  Waiver...........................................................................................37
         10.2.  Amendments.......................................................................................37
         10.3.  Governing Law....................................................................................37
         10.4.  Participations and Assignments...................................................................37
         10.5.  Captions.........................................................................................38
         10.6.  Notices..........................................................................................38
         10.7.  Sharing of Collections, Proceeds and Set-Offs; Application of Payments...........................38
         10.8.  Expenses; Indemnification........................................................................39
         10.9.  Survival of Warranties and Certain Agreements....................................................40
         10.10.  Severability....................................................................................40
         10.11.  Banks' Obligations Several; Independent Nature of Banks' Rights.................................40
         10.12.  No Fiduciary Relationship.......................................................................40
         10.13.  CONSENT TO JURISDICTION AND SERVICE OF PROCESS..................................................40
         10.14.  WAIVER OF JURY TRIAL............................................................................41
         10.15.  Counterparts; Effectiveness.....................................................................41
         10.16.  Use of Defined Terms............................................................................41
         10.17.  Offsets.........................................................................................41
         10.18.  Entire Agreement................................................................................42
         10.19.  Swap Agreements.................................................................................42
         10.20.   1998 Credit Agreement..........................................................................42
         10.21.   Re-Funding of Loans, Etc.......................................................................42

</TABLE>

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Exhibit A         List of Banks and Commitments
Exhibit B         Note
Exhibit C         Borrowing Base Certificate
Exhibit D         Covenant Compliance Certificate
Exhibit E         Depreciation Policies
Schedule 1        Miscellaneous Information
Schedule 2        Applicable Margins; Commitment Fees

<PAGE>

                                                Amended and Restated
                                                  Credit Agreement
          This Amended and Restated Credit  Agreement,  dated June 28, 2000 (the
          "Agreement"),  is entered  into by and between  AeroCentury  Corp.,  a
          Delaware   corporation   ("AeroCentury"),   the  banking  institutions
          signatories  hereto and named in  Exhibit A  attached  hereto and such
          other   institutions  that  hereafter  become  a  "Bank"  pursuant  to
          Section10.4  hereof  (collectively  the  "Banks"  and  individually  a
          "Bank") and National  City Bank, a national  banking  association,  as
          agent for the Banks under this Agreement ("National City " which shall
          mean in its capacity as agent unless specifically stated otherwise).

                                                Preliminary Statement

         WHEREAS,  AeroCentury desires to have available to it a credit facility
the proceeds of which may be used for (a) the purchase of Equipment  (as defined
herein) for lease to unaffiliated  persons, said Equipment and related leases to
constitute part of the Collateral (as defined herein), (b) working capital needs
and (c) general corporate purposes.

         WHEREAS,   AeroCentury  has  requested  that  the  Bank  or  Banks,  as
applicable, make available to it such credit facility and make loans to it under
the terms and conditions hereinafter set forth.

         WHEREAS,  the Bank or Banks,  as applicable,  is or are willing to make
available such credit facility and to make loans to AeroCentury  under the terms
and conditions hereinafter set forth.

         NOW,   THEREFORE,   in  consideration  of  the  premises  and  promises
hereinafter  set forth and  intending to be legally  bound  hereby,  the parties
hereto agree as follows:

                                               1. Certain Definitions

         1.1.  Definitions.

         "1998 Credit Agreement" shall mean the Credit Agreement, dated June 30,
         1998 as amended  March 30,  1999,  July 16, 1999 and February 22, 2000,
         among AeroCentury,  the banking  institutions  signatories  thereto and
         named in Exhibit A attached  thereto and First Union  National Bank, as
         Agent.

         "Additional Amount" shall have the meaning set forth in Section.2.1(h).

         "Affiliate"  shall mean any Person:  (1) which  directly or  indirectly
         controls,  or  is  controlled  by,  or is  under  common  control  with
         AeroCentury;  (2) which  directly or  indirectly  beneficially  owns or
         holds  ten  percent  (10%)  or more of any  class  of  voting  stock of
         AeroCentury;  or (3) of which ten  percent  (10%) or more of the voting
         stock  is  directly  or  indirectly   beneficially  owned  or  held  by
         AeroCentury.  The term  "control"  means the  possession,  directly  or
         indirectly,  of the  power to  direct  or cause  the  direction  of the
         management and policies of a Person,  whether  through the ownership of
         voting securities, by contract, or otherwise.

<PAGE>

         "Agent" shall mean National City Bank.

         "Aggregate  Revolving Loan Commitment" shall have the meaning set forth
in Section 2.1(a).

         "Agreement" shall mean this Credit Agreement, as amended, supplemented,
         modified,  replaced,  substituted for or restated from time to time and
         all exhibits and schedules attached hereto.

         "Alternate  Base  Rate"  shall  mean,  for any day,  the  higher of the
         Federal Funds Rate plus 1/2 of 1% or the prime commercial  lending rate
         of  National  City  Bank,  as  announced  from time to time at its head
         office, calculated on the basis of the actual number of days elapsed in
         a year of 365 or 366 days, in the case of a leap year.

         "Applicable  Borrowing  Margin"  shall have the  meanings  set forth in
         Schedule 2 attached to this Agreement as it pertains to Base Rate Loans
         and LIBO Rate Loans.

         "Base Rate Loans" shall mean Revolving  Credit Loans accruing  interest
         based on the Alternate Base Rate plus the Applicable Borrowing Margin.

         "Borrowing" shall mean a borrowing  hereunder  consisting of Loans made
to AeroCentury by the Banks on a given occasion.

         "Borrowing  Base"  shall mean 75% of the lowest of (1) the  acquisition
         cost of each item of Equipment included in Eligible Collateral,  or (2)
         the net book  value of each  item of  Equipment  included  in  Eligible
         Collateral,  or (3) the  aggregate  appraised  value  of all  items  of
         Equipment  included  in  Eligible  Collateral  based on the most recent
         independent  appraisal  completed  on behalf of  AeroCentury.  Net book
         value shall be calculated using AeroCentury's then current depreciation
         practices  and both (1) and (2) above shall be calculated in accordance
         with GAAP. The foregoing  test shall be determined  separately for each
         item of Equipment included in Eligible Collateral.  Notwithstanding the
         foregoing,  Equipment  subject to Eligible  Leases which have remaining
         lease  terms of less than six months  shall not at any time be included
         in the Borrowing  Base to the extent such  Equipment  constitutes  more
         than 20% of the Borrowing Base. Remaining lease terms shall not include
         renewal  options,  except in the case of DASH-7 aircraft leased for use
         in the  Marshall  Islands.  Renewal  options  shall be  included in the
         remaining  lease  terms of  leases of  DASH-7  aircraft  for use in the
         Marshall Islands.

         "Borrowing Base Certificate"  shall mean a certificate in substantially
         the form  attached  hereto as  Exhibit  C which  shall be signed by the
         chief  executive  officer,  chief  operating  officer,  chief financial
         officer or a Senior Vice President of AeroCentury.

         "Business  Day" shall mean any day other than a  Saturday,  Sunday,  or
         other day on which commercial banks are authorized or required to close
         under  the laws of the  Commonwealth  of  Pennsylvania  or the State of
         California  and, if the  applicable day relates to a LIBO Rate Loan, or
         notice  with  respect to a LIBO Rate Loan,  a day on which  dealings in
         Dollar deposits are also carried on in the London  interbank market and
         banks are open for business in London ("London Business Day").

<PAGE>

         "Capitalized  Lease" shall mean all lease obligations of any Person for
         any  property  (whether  real,  personal  or mixed)  which have been or
         should be  capitalized  on the books of the lessee in  accordance  with
         Generally Accepted Accounting Principles.

         "Capitalized Lease Obligations" with respect to any Person,  shall mean
         the aggregate  amount which, in accordance with GAAP, is required to be
         reported  as a liability  on the  balance  sheet of such Person at such
         time in respect of such Person's interest as lessee under a Capitalized
         Lease.

         "Closing" shall mean the  consummation of all requirements set forth in
         this Agreement such that  AeroCentury  shall be entitled to request and
         receive Loans hereunder.

         "Closing  Date"  shall  mean  the  first  date on  which  both (i) this
         Agreement  shall have been  executed and delivered by  AeroCentury  and
         each Bank,  and (ii) the  conditions  to the first loan as set forth in
         Section 4.2 shall have been met.

         "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from
         time to time,  and all rules and  regulations  with respect  thereto in
         effect from time to time.

         "Collateral"  shall mean those assets  defined as  "Collateral"  in the
         Security Agreement  (including but not limited to the Equipment and the
         related leases therefor).

         "Covenant   Compliance   Certificate"   shall  mean  a  certificate  in
         substantially the form attached hereto as Exhibit D, or such other form
         as National City shall request from time to time, which shall be signed
         by  the  chief  executive  officer,   chief  operating  officer,  chief
         financial officer or a Senior Vice President of AeroCentury.

         "Debt"  shall mean,  as of any date of  determination  with  respect to
         AeroCentury,  without  duplication,  (i) all items which in  accordance
         with GAAP would be included in determining  total  liabilities as shown
         on the liability  side of a balance sheet of AeroCentury as of the date
         on which Debt is to be determined, (ii) all indebtedness of others with
         respect to which AeroCentury has become liable by way of a guarantee or
         endorsement  (other  than for  collection  or deposit  in the  ordinary
         course of business),  (iii) all contingent  liabilities of AeroCentury,
         including letters of credit, required to be either accrued or disclosed
         in accordance  with GAAP,  (iv) lease  obligations  that, in conformity
         with GAAP, have been  capitalized on  AeroCentury's  balance sheet, and
         (v) the  present  value of any  outstanding  Operating  Lease  payments
         discounted at 10%, LESS (vi) Non-Recourse  Debt and (vii)  Subordinated
         Debt.

         "Debt  Service" shall mean the sum of (i) current  maturities  (amounts
         due within the next twelve months) of all Recourse Debt,  excluding any
         lump sum payments due at the  expiration  of any  Recourse  Debt,  (ii)
         current  amounts due (within the next twelve  months) in respect of all
         leases,  but excluding  any lump sum payments due at the  expiration of
         any lease,  and (iii)  1/10th of the average  principal  balance of the
         Notes outstanding for the four most recent Fiscal Quarters.

         "Default  Rate" on any Loan shall mean 2% per annum above the Alternate
         Base Rate plus Applicable  Borrowing Margin then in effect. In the case
         of Letter of Credit fees such fees shall be fees then  payable  plus 2%
         per annum in addition thereto calculated on the same base as such fees.

<PAGE>

         "Dollars"  shall  mean the  lawful  currency  of the  United  States of
America.

         "EBTDA" shall mean the sum of Net Income plus the amounts deducted from
         Net Income as expenses for taxes, depreciation and amortization.

         "Eligible  Collateral" shall mean the sum of (1) Equipment  included in
         the Collateral which is subject to an Eligible Lease, and (2) Equipment
         included in the  Collateral  which is not subject to a lease,  provided
         that (a) the aggregate of such  Equipment  shall not at any time exceed
         10% of the Aggregate  Revolving  Loan  Commitment,  and (b) the maximum
         period for which any item of such Equipment shall not have been subject
         to an  Eligible  Lease  does not  exceed  four  months.  In order to be
         Eligible  Collateral,  National  City as Agent  shall  possess  a first
         priority  security  interest in said  Collateral to secure the payment,
         promptly  when  due,  and  the  punctual  performance  of  all  of  the
         "Liabilities" as defined in the Security Agreement.

         "Eligible  Lease" shall mean a lease for  Equipment to an  unaffiliated
         Person in which  (i)  AeroCentury  is the sole  lessor or lessor of not
         less than a 99.9% ownership  interest in the Equipment,  (ii) the lease
         arose in the  ordinary  course of  business of  AeroCentury,  (iii) the
         Equipment has been delivered to the lessee and is currently  subject to
         the lease,  (iv) neither the lease nor the  Equipment is subject to any
         currently  outstanding  assignment,  claim, lien,  security interest or
         other  limitation on the absolute title of  AeroCentury,  (v) the lease
         payments are not more than 30 days past due with respect to any payment
         required  thereby (based on the  contractual  terms in existence at the
         date the lease was included in the  Collateral  and not  including  any
         subsequent amendment or modification thereof,  unless National City has
         specifically  consented  thereto in writing),  (vi) the lease is freely
         assignable  by the lessor  (with any  notices or  consents  required in
         connection  therewith having been previously  obtained,  and subject to
         any lease requirements concerning the net worth of the assignee), (vii)
         the lease and the Equipment being leased constitute Collateral,  (viii)
         the remaining lease term at the time of assignment to the Bank is for a
         period  of seven  years or less,  (ix) the  lease is a  noncancellable,
         triple net lease in which the lessee may not assert, as an offset,  any
         defenses or claims against the lessor arising from the condition or the
         intended use of the subject  matter,  except in the case of leases with
         terms  of  less  than  twelve  months  in  which   AeroCentury  may  be
         responsible  for  maintenance  and except in the case of a lease  where
         AeroCentury  assumes the  obligation  to pay some or all of the cost of
         engine overhaul, airworthiness directives or manufacturer or government
         ordered modifications required during the term of the lease, so long as
         the lease states that such obligation is solely that of AeroCentury and
         imposes no  obligation  on the Banks  (whether  as  secured  parties or
         successor in interest to AeroCentury's ownership interest in the leased
         aircraft) and lessee's  only remedy for breach of the  obligation is an
         independent action against  AeroCentury,  and lessee waives any and all
         right  to  offset  such   obligation   against   lease   payments  owed
         AeroCentury, and (x) the lessee is not a resident of, and the Equipment
         will not be subject to the laws of any, foreign  jurisdiction in which,
         in the sole  determination of National City, the ability of the Bank to
         perfect  a  first  priority  security  interest  in  the  Equipment  is
         unsatisfactory  or the ability of National  City to foreclose  upon the
         Equipment  and  receive   possession  to  or  sell  said  Equipment  is
         unsatisfactory.

<PAGE>

         "Environmental  Control  Statutes" shall mean each and every applicable
         federal, state, county or municipal  environmental statute,  ordinance,
         rule, regulation,  order,  directive or requirement,  together with all
         successor statutes, ordinances, rules, regulations,  orders, directives
         or  requirements,  of any  Governmental  Authority,  including  without
         limitation laws in any way related to hazardous substances.

         "Equipment"  shall mean new and used  turboprop  aircraft and turboprop
         aircraft  engines each of which is either  subject to an existing lease
         or is intended to be leased or re-leased within four months immediately
         following the date in question. The aircraft or the aircraft engine, as
         applicable,  shall have been  manufactured  within 25 years immediately
         preceding  the  date  in  question,  shall  be in  good  working  order
         immediately  or within a reasonable  period of time,  as  determined by
         National  City,  and shall be usable  for  commercial  flight  purposes
         immediately  or within a reasonable  period of time,  as  determined by
         National City.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.

     "ERISA  Affiliate" shall mean any corporation which is a member of the same
     controlled  group of  corporations  as  AeroCentury  within the  meaning of
     Section  414(b) of the Code, or any trade or business which is under common
     control with AeroCentury within the meaning of Section 414(c) of the Code.

         "Event of Default" shall have the meaning set forth in Section 8.1.

         "Federal  Funds  Rate"  shall  mean,  for any day,  the rate per  annum
         (rounded  upwards,  if necessary,  to the nearest 1/100 of 1%) equal to
         the  weighted   average  of  the  rates  on  overnight   Federal  funds
         transactions  with members of the Federal  Reserve  System  arranged by
         Federal funds brokers on such day, as published by the Federal  Reserve
         Bank of New York on the Business Day next succeeding such day, provided
         that if the day  for  which  such  rate  is to be  determined  is not a
         Business Day, the Federal Funds Rate for such day shall be such rate on
         such transactions on the next preceding Business Day as so published on
         the next succeeding Business Day.

         "Fiscal  Quarter"  shall mean a fiscal  quarter of  AeroCentury,  which
         shall be any quarterly period ending on March 31, June 30, September 30
         or December 31 of any year.

         "Fiscal Year" shall mean a fiscal year of AeroCentury,  which shall end
on the last day of December.

         "Generally  Accepted  Accounting   Principles"  or  "GAAP"  shall  mean
         generally accepted accounting principles as in effect from time to time
         in the United States, consistently applied.

         "Governmental  Authority"  shall  mean the  federal,  state,  county or
         municipal  government,  or any  department,  agency,  bureau  or  other
         similar type body obtaining  authority therefrom or created pursuant to
         any laws.

         "Intangible  Assets" shall mean all assets which would be classified as
         intangible assets under GAAP consistently applied,  including,  without
         limitation, goodwill (whether representing the excess of cost over book
         value of assets  acquired or  otherwise),  patents,  trademarks,  trade
         names, copyrights, franchises, and deferred charges (including, without
         limitation,  unamortized debt discount and expense, organization costs,
         and research and development  costs).  For purposes of this definition,
         prepayments  of taxes,  license  fees and other  expenses  shall not be
         deemed Intangible Assets.

<PAGE>

     "Interest  Period"  shall mean with  respect  to any LIBO Rate  Loan,  each
          period  commencing on the date any such Loan is made, or, with respect
          to a Loan being renewed,  the last day of the next preceding  Interest
          Period  with  respect  to  a  Loan,  and  ending  on  the  numerically
          corresponding day (or, if there is no numerically  corresponding  day,
          on the last day of the calendar month) in the first,  second, third or
          sixth  calendar  month  thereafter  as selected  under the  procedures
          specified  in Section  2.3, if the Banks are then  offering  LIBO Rate
          Loans for such  period;  provided  that  each LIBO Rate Loan  Interest
          Period which would  otherwise end on a day which is not a Business Day
          (or, for purposes of Loans to be repaid on a London Business Day, such
          day is not a London  Business  Day)  shall end on the next  succeeding
          Business Day (or London Business Day, as appropriate) unless such next
          succeeding Business Day (or London Business Day, as appropriate) falls
          in the next  succeeding  calendar  month,  in which case the  Interest
          Period  shall  end on the  next  preceding  Business  Day  (or  London
          Business Day, as appropriate).

         "Investment" in any Person shall mean (a) the acquisition  (whether for
         cash, property,  services or securities or otherwise) of capital stock,
         bonds, notes,  debentures,  partnership or other ownership interests or
         other securities of such Person; (b) any deposit with, or advance, loan
         or other  extension  of credit to,  such  Person  (other  than any such
         deposit,  advance,  loan or  extension  of  credit  having  a term  not
         exceeding 90 days in the case of  unaffiliated  Persons and 120 days in
         the case of Affiliates  representing the purchase price of inventory or
         supplies  purchased in the ordinary course of business) or guarantee or
         assumption of, or other contingent obligation with respect to, Recourse
         Funded  Debt or  other  liability  of  such  Person;  and (c)  (without
         duplication  of the  amounts  included  in (a) and (b)) any amount that
         may, pursuant to the terms of such investment,  be required to be paid,
         deposited,  advanced,  lent or extended to or  guaranteed or assumed on
         behalf of such Person.

         "JMC" shall have the meaning set forth in Section 6.6.

         "Letter of  Credit"  shall  mean only  those  letters of credit  issued
         pursuant  to a  completed  application  on the form of letter of credit
         application  required by National  City Bank at the time of the request
         for each Letter of Credit.

         "LIBO Rate" shall mean, for the  applicable  Interest  Period,  (i) the
         rate,  rounded  upwards  to the  next  one-sixteenth  of  one  percent,
         determined by National City two London  Business Days prior to the date
         of the corresponding  LIBO Rate Loan, at which National City is offered
         deposits in dollars at approximately 11:00 a.m., London time by leading
         banks in the interbank  eurodollar or eurocurrency  market for delivery
         on the date of such Loan in an amount  and for a period  comparable  to
         the amount and Interest Period of such Loan and in like funds,  divided
         by (ii) a number  equal  to one  (1.0)  minus  the  LIBO  Rate  Reserve
         Percentage.  The LIBO Rate shall be adjusted automatically with respect
         to any LIBO Rate Loan  outstanding  on the effective date of any change
         in the LIBO Rate Reserve  Percentage,  as of such effective  date. LIBO
         Rate shall be  calculated on the basis of the number of days elapsed in
         a year of 360 days.

<PAGE>

         "LIBO Rate Reserve  Percentage"  shall mean, for any LIBO Rate Loan for
         any  Interest  Period,  the daily  average of the stated  maximum  rate
         (expressed  as a decimal) at which  reserves  (including  any marginal,
         supplemental,  or emergency  reserves)  are  required to be  maintained
         during such  Interest  Period  under  Regulation  D by any Bank against
         "Eurocurrency  liabilities"  (as such term is used in Regulation D) but
         without benefit of credit proration,  exemptions, or offsets that might
         otherwise be  available to any Bank from time to time under  Regulation
         D. Without limiting the effect of the foregoing,  the LIBO Rate Reserve
         Percentage  shall reflect any other reserves  required to be maintained
         by National City against (1) any category of liabilities which includes
         deposits  by  reference  to which the rate for LIBO Rate Loans is to be
         determined;  or (2) any category of extension of credit or other assets
         which include LIBO Rate Loans.

         "LIBO Rate Loans" shall mean Revolving  Credit Loans accruing  interest
         based on the LIBO Rate plus the Applicable Borrowing Margin.

         "Lien"  shall  mean any  lien,  mortgage,  security  interest,  chattel
         mortgage,  pledge or other encumbrance  (statutory or otherwise) of any
         kind securing  satisfaction of any obligation to any Person,  including
         any agreement to give any of the foregoing,  any  conditional  sales or
         other title retention  agreement,  any lease in the nature thereof, and
         the filing of or the  agreement to give any financing  statement  under
         the Uniform  Commercial Code of any jurisdiction or similar evidence of
         any encumbrance, whether within or outside the United States.

         "Loan" or "Loans" shall have the meanings set forth in Section 2.1.

         "Loan  Documents"  shall mean this Agreement,  the Notes,  the Security
         Agreement,  and all other documents  directly  related or incidental to
         said documents, the Loans or the Collateral,  but shall not include any
         Swap Agreement.

         "Management Agreement" shall have the meaning set forth in Section 6.6.

         "Material  Adverse  Change" shall mean any event or condition which (a)
         is reasonably  likely to result,  in the determination of National City
         or the Required  Banks,  in a material  adverse change in the financial
         condition,  business,  properties or prospects of  AeroCentury,  or (b)
         gives reasonable  grounds to conclude that AeroCentury will not be able
         to perform or observe (in the normal  course) its existing  obligations
         under  the Loan  Documents  to which it is a party,  including  but not
         limited to the Notes.

         "Material  Adverse Effect" shall mean a material  adverse effect on (i)
         the  financial  condition,   business,   properties,  or  prospects  of
         AeroCentury,  (ii) the ability of  AeroCentury  to perform its existing
         obligations  under  this  Agreement,  the  Notes  and  the  other  Loan
         Documents,  or (iii) the legality,  validity or  enforceability of this
         Agreement or the Notes or the rights and remedies of the holders of the
         Loans.

         "Monthly Lease Portfolio and Receivables Report" shall mean a report in
         summary  form of the status of  accounts  receivable  in respect of all
         leases  which  are  part  of  the  Collateral  in  form  and  substance
         reasonably satisfactory to the Required Banks.

     "Multiemployer  Plan" shall mean a  multiemployer  plan as defined in ERISA
          Section 4001(a)(3), which covers employees of AeroCentury or any ERISA
          Affiliate.

         "Net  Income"  shall mean net income after income taxes as shown on the
income statement.

<PAGE>

         "Net Worth" shall mean the sum of capital stock,  plus paid-in capital,
         plus retained  earnings,  minus treasury stock,  minus the net worth of
         any Unrestricted Subsidiaries.

         "Non-Recourse  Debt" shall mean Debt with respect to which the creditor
         or lender does not have recourse  against  AeroCentury by reason of any
         guaranty or other obligation on the part of AeroCentury.

         "Note" or "Notes" shall have the meaning set forth in Section 2.2.

         "Obligations"  shall mean all now existing or hereafter  arising debts,
         obligations,  covenants,  and duties of payment or performance of every
         kind, matured or unmatured, direct or contingent,  owing, arising, due,
         or  payable  to the  Banks  or  National  City,  as  Agent,  by or from
         AeroCentury  arising out of this  Agreement or any other Loan Document,
         including,  without  limitation,  all obligations to repay principal of
         and interest on the Loans, and to pay interest,  fees, costs,  charges,
         expenses,  professional fees, and all sums chargeable to AeroCentury or
         for which AeroCentury is liable as indemnitor under the Loan Documents,
         whether or not evidenced by any note or other instrument as well as any
         and all  existing and future  obligations  of  AeroCentury  under or in
         connection  with  Swap  Agreements  with any one or more of the  Banks,
         including  but not limited to National  City,  pertaining  to the Loans
         hereunder.

         "Operating Lease", with respect to any Person, shall mean the aggregate
         amount which,  in accordance  with GAAP, is not required to be reported
         as a  liability  on the  balance  sheet of such  Person at such time in
         respect of such Person's interest as lessee under an Operating Lease.

     "PBGC"  shall  mean  the  Pension  Benefit  Guaranty  Corporation  and  any
     successor  thereto.  "Pension  Plan"  shall  mean,  at any  time,  any Plan
     (including a Multiemployer  Plan), the funding requirements of which (under
     ERISA  Section 302 or Code  Section 412) are, or at any time within the six
     years immediately preceding the time in question, were in whole or in part,
     the responsibility of AeroCentury or any ERISA Affiliate.

         "Permitted  Debt"  shall  mean  (a)  Debt  of  AeroCentury  under  this
         Agreement and the Notes,  (b) Debt  incurred in the ordinary  course of
         AeroCentury's  business  which is  unsecured  and  does not  constitute
         Recourse Funded Debt, (c) Debt which is subordinated to Debt under this
         Agreement  and the  Notes on terms  and  conditions  acceptable  to the
         Banks,  in  their  sole  discretion,  and (d)  Debt of an  Unrestricted
         Subsidiary for which AeroCentury is not a guarantor in whole or in part
         or otherwise liable.

<PAGE>

               "Permitted  Liens"  shall mean (a) any Liens for  current  taxes,
          assessments and other governmental  charges not yet due and payable or
          being   contested  in  good  faith  by   AeroCentury   by  appropriate
          proceedings and for which adequate  reserves have been  established by
          AeroCentury as reflected in AeroCentury's  financial  statements;  (b)
          any mechanic's,  materialman's,  carrier's,  warehousemen's or similar
          Liens  for  sums  not yet due or  being  contested  in good  faith  by
          AeroCentury by appropriate proceedings and for which adequate reserves
          have been  established by  AeroCentury  as reflected in  AeroCentury's
          financial statements; (c) easements,  rights-of-way,  restrictions and
          other  similar  encumbrances  on the  real  property  or  fixtures  of
          AeroCentury   incurred  in  the  ordinary  course  of  business  which
          individually  or in the  aggregate are not  substantial  in amount and
          which  do not  in any  case  materially  detract  from  the  value  or
          marketability  of the property  subject  thereto or interfere with the
          ordinary conduct of the business of AeroCentury; (d) Liens (other than
          Liens  imposed on any  property  of  AeroCentury  pursuant to ERISA or
          Section 412 of the Code)  incurred or  deposits  made in the  ordinary
          course  of  business,  including  Liens in  connection  with  workers'
          compensation,   unemployment  insurance  and  other  types  of  social
          security  and  Liens  to  secure  performance  of  tenders,  statutory
          obligations, surety and appeal bonds (in the case of appeal bonds such
          Lien shall not secure any reimbursement or indemnity  obligation in an
          amount greater than $250,000),  bids,  leases that are not Capitalized
          Leases,   performance   bonds,   sales  contracts  and  other  similar
          obligations,  in each  case,  not  incurred  in  connection  with  the
          obtaining of credit or the payment of a deferred  purchase price,  and
          which do not, in the aggregate,  result in a Material  Adverse Effect;
          (e) Liens, if any,  existing on the date hereof and listed in Schedule
          1 hereto; and (f) Liens on the assets of Unrestricted Subsidiaries.

         "Person" shall mean any  individual,  corporation,  partnership,  joint
         venture,  association,  company,  business  trust or  entity,  or other
         entity of whatever nature.

  "Plan"  shall mean an  employee  benefit  plan as defined in Section 3(3) of
         ERISA, other than a Multiemployer  Plan, whether formal or informal and
         whether legally binding or not.

         "Potential Default" shall mean an event, condition or circumstance that
         with the  giving  of notice  or lapse of time or both  would  become an
         Event of Default.

     "Prohibited  Transaction" shall mean a transaction that is prohibited under
     Code  Section  4975 or ERISA  Section 406 and not exempt under Code Section
     4975 or ERISA Section 408.

         "Recourse  Debt" shall mean Debt with  respect to which the creditor or
         lender has or may have recourse  against  AeroCentury  by reason of any
         guaranty or other obligation on the part of AeroCentury.

         "Recourse  Funded Debt" shall mean (i) all  indebtedness,  liabilities,
         and obligations,  now existing or hereafter arising, for money borrowed
         by  AeroCentury  on a recourse  basis  whether or not  evidenced by any
         note, indenture, or agreement (including,  without limitation, the Note
         and any indebtedness for money borrowed from an Affiliate) and (ii) all
         indebtedness of others for money borrowed (including indebtedness of an
         Affiliate)  with respect to which  AeroCentury  has become  liable on a
         recourse basis by way of a guarantee or indemnity.

         "Regulation" shall mean any statute, law, ordinance,  regulation, order
         or rule of any United States or foreign, federal, state, local or other
         government or governmental body, including,  without limitation,  those
         covering or related to  banking,  financial  transactions,  securities,
         public  utilities,   environmental  control,  energy,  safety,  health,
         transportation,  bribery, record keeping,  zoning,  antidiscrimination,
         antitrust,  wages  and  hours,  employee  benefits,  and price and wage
         control matters.

         "Regulation D" shall mean Regulation D of the Board of Governors of the
         Federal Reserve System, as it may be amended from time to time.

<PAGE>

         "Regulatory  Change"  shall  mean  any  change  after  the date of this
         Agreement in any Regulation (including Regulation D) or the adoption or
         making after such date of any  interpretations,  directives or requests
         of or under any Regulation  (whether or not having the force of law) by
         any  court or  governmental  or  monetary  authority  charged  with the
         interpretation or  administration  thereof applying to a class of banks
         including any one of the Banks but excluding any foreign  office of any
         Bank.

     "Reportable  Event" shall mean,  with respect to a Pension Plan: (a) Any of
     the events set forth in ERISA  Sections  4043(b)  (other than a  reportable
     event as to which the  provision  of 30 days'  notice to the PBGC is waived
     under applicable regulations) or 4063(a) or the regulations thereunder, (b)
     an event  requiring  any  AeroCentury  or any ERISA  Affiliate  to  provide
     security  to a Pension  Plan  under  Code  Section  401(a)(29)  and (c) any
     failure by any AeroCentury or any ERISA Affiliate to make payments required
     by Code Section 412(m).

         "Request for Advance" shall have the meaning set forth in Section
     2.3.(a).

         "Required  Banks" at any time  shall mean Banks  whose  Revolving  Loan
         Commitments  equal or exceed  66 2/3 % of the  total of such  Revolving
         Loan  Commitments  if  no  Loans  are  outstanding  or,  if  Loans  are
         outstanding,  Banks whose  outstanding Loans equal or exceed 66 2/3% of
         the Loans, but in no event less than three Banks.

         "Revolver  Termination  Date"  shall  have  the  meaning  set  forth in
         Section 2.1(a).

         "Revolving  Loan  Commitment"  shall  have  the  meaning  set  forth in
         Section 2.1(a).

         "Revolving Loan Commitment  Percentage" shall mean with respect to each
         Bank the percentage set forth opposite its name in Exhibit A hereto.

         "Revolving Credit Loan" shall have the meaning set forth in Section
         2.1(a).

         "Revolving Credit Note" shall have the meaning set forth in Section
         2.2.

<PAGE>

         "Security Agreement" shall mean all writings, agreements, and documents
         in any jurisdiction, whether within the United States or outside of the
         United  States,  the  intended  purpose of which is to grant a security
         interest in property,  whether then owned by  AeroCentury or thereafter
         acquired, and all replacements of said property, as collateral security
         for the payment and performance of the  Obligations,  including but not
         limited to (1) the Mortgage and  Security  Agreement,  dated August 11,
         1998 by  First  Security  Bank,  N.A.  trustee  under  Trust  Agreement
         (N272EP)  dated as of October 31, 1991 in favor of First Union National
         Bank, as Agent,  which has been assigned to National City, as successor
         Agent, (2) the Mortgage and Security  Agreement,  dated August 11, 1998
         by First Security Bank,  N.A.  trustee under Trust  Agreement  (N272EP)
         dated as of October 31, 1991 and trustee under Trust Agreement (N12303)
         dated as of November 15, 1989,  First Union  National  Bank,  as Agent,
         which has been assigned to National City, as successor  Agent,  (3) the
         Mortgage and Security  Agreement,  dated March 31, 1999 by  AeroCentury
         First  Union  National  Bank,  as  Agent,  which has been  assigned  to
         National City, as successor  Agent,  (4) the Security  Agreement  dated
         June 28, 2000 (which  amends,  restates  and  supersedes  that  certain
         Security Agreement, dated December 21, 1998) between AeroCentury Corp.,
         as debtor,  and National City Bank, as Agent,  and (5) all  amendments,
         modifications,  supplements, amendments and restatements,  replacements
         and substitutions of each of the foregoing.

         "Solvent"  shall mean,  with respect to any Person,  that the aggregate
         present fair saleable value of such Person's assets is in excess of the
         total amount of its probable  liabilities on its existing debts as they
         become absolute and matured,  such Person has not incurred debts beyond
         its  foreseeable  ability  to pay such debts as they  mature,  and such
         Person has capital  adequate to conduct  the  business it is  presently
         engaged in or is about to engage in.

         "Subordinated  Debt" shall mean Debt which is  subordinated in right of
         payment and all other  respects to the  Obligations,  including but not
         limited to the Notes, pursuant to a written subordination  agreement in
         form and substance satisfactory to the Banks.

         "Subsidiary"  shall mean a corporation,  limited  liability  company or
         other entity the shares of stock,  membership interests or other equity
         interests  of which  having  ordinary  voting  power (other than stock,
         membership  interests or other equity  interests having such power only
         by reason of the happening of a contingency) to elect a majority of the
         board of directors  or other  managers of such  corporation  are at the
         time  owned,  or the  management  of  which  is  otherwise  controlled,
         directly or indirectly  through one or more  intermediaries or both, by
         AeroCentury.

         "Swap Agreement"  shall have the meaning set forth in 11 U.S.C.Sect.101
         and shall include but not be limited to interest rate swap  agreements,
         interest rate cap agreements, interest collar agreements, interest rate
         hedging  agreements,  interest  rate floor  agreements or other similar
         agreements or arrangements.

         "Tangible Net Worth" shall mean Net Worth, minus Intangible Assets.

         "Termination  Event" shall mean,  with respect to a Pension Plan: (a) a
         Reportable  Event, (b) the termination of a Pension Plan, or the filing
         of a notice of intent to terminate a Pension  Plan, or the treatment of
         a Pension Plan amendment as a termination under ERISA Sect. 4041(c),(c)
         the  institution of proceedings to terminate a Pension Plan under ERISA
         Section 4042 or (d) the  appointment  of a trustee to administer any
         Pension Plan under ERISA Section 4042.

         "Unfunded Pension  Liabilities" shall mean, with respect to any Pension
         Plan at any time,  the  amount  determined  by taking  the  accumulated
         benefit  obligation,  as  disclosed  in  accordance  with  Statement of
         Accounting Standards No. 87, over the fair market value of Pension Plan
         assets.

         "Unrecognized  Retiree Welfare  Liability"  shall mean, with respect to
         any Plan that  provides  post-retirement  benefits  other than  pension
         benefits,  the  amount  of  the  accumulated   post-retirement  benefit
         obligation,  as determined in  accordance  with  Statement of Financial
         Accounting  Standards  No. 106, as of the most recent  valuation  date.
         Prior to the date such  statement is  applicable to  AeroCentury,  such
         amount of the  obligation  shall be based on an  estimate  made in good
         faith.

<PAGE>

         "Unrestricted  Subsidiaries"  shall mean Subsidiaries which are special
         purpose or bankruptcy remote that have debt on their respective balance
         sheets  which  when  consolidated  with  AeroCentury  is  deemed  to be
         Non-Recourse Debt to AeroCentury.

         1.2.  Accounting  Terms. All accounting terms not specifically  defined
herein shall be construed  in  accordance  with  Generally  Accepted  Accounting
Principles  consistent  with those applied in the  preparation  of the financial
statements  referred to in Section 3.5,  and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.

                                                    20 The Credit

         2.1.  The Loans.

               (a) Revolving Credit Loans; Commitment.  Subject to the terms and
          conditions  herein  set forth,  each Bank  agrees,  severally  and not
          jointly, to make revolving credit loans (collectively,  the "Revolving
          Credit Loans" or the "Loans",  and  individually  a "Revolving  Credit
          Loan" or a "Loan") to AeroCentury  from time to time during the period
          beginning  on the date  hereof and  ending on June 28,  2003 or on the
          earlier  date of  termination  in full,  pursuant  to  Section  2.6 or
          Section 8.1 hereof, of the obligations of such Bank under this Section
          2.1 (June 28, 2003 or such  earlier date of  termination  being herein
          called the  "Revolver  Termination  Date") in amounts not to exceed at
          any time  outstanding,  in the aggregate,  the  commitment  amount set
          forth  opposite  the name of such Bank on Exhibit A hereto  (each such
          amount,  as the same may be reduced  pursuant  to  Section  2.6 hereof
          being hereinafter called such Bank's "Revolving Loan Commitment"). The
          Banks'  collective  commitment  to make Loans shall be the  "Aggregate
          Revolving  Loan  Commitment".  All  Loans  shall be made by the  Banks
          simultaneously  and  pro  rata in  accordance  with  their  respective
          Commitments.  All Loans shall be made to  AeroCentury at the principal
          office of National City in Cleveland, Ohio.

          (b) Interest Rate Options.  AeroCentury may request  Revolving  Credit
          Loans to bear interest at the Alternate Base Rate or LIBO Rate options
          (described in Section 2.4). The Loans  outstanding at any one time may
          involve any  combination of such interest rate options in such amounts
          as  AeroCentury  may  determine,  subject to the terms and  conditions
          hereof,  including the requirements  concerning  minimum Loan requests
          and the  requirements  that (i) no  request  may be made  which  would
          require more than one  interest  rate option or more than one Interest
          Period to apply to Loans made on any  single  date,  and (ii),  in the
          case of LIBO Rate  Loans,  (a) not more  than  four such  Loans may be
          outstanding  at any one time,  unless there shall not be any Base Rate
          Loans  outstanding  in which case the  number may be five,  and (b) no
          LIBO  Rate  Loan may have an  Interest  Period  extending  beyond  the
          Revolver Termination Date.

          (c) Maximum Loans  Outstanding.  AeroCentury  shall not be entitled to
          any new  Revolving  Credit Loan if, after giving  effect to such Loan,
          the  unpaid  amount of the then  outstanding  Loans  would  exceed the
          lesser of (i) the Aggregate Revolving Loan Commitment or (ii) the then
          current  Borrowing  Base, as stated in the most recent  Borrowing Base
          Certificate  furnished  to  National  City  as  provided  herein.  For
          purposes  of  determining   the  amount  of  Revolving   Credit  Loans
          outstanding,  the Letters of Credit issued  pursuant to Section 2.1(i)
          hereof  shall be deemed  Revolving  Credit Loans and shall be added to
          the  Revolving  Credit Loans  outstanding  to determine  the aggregate
          Revolving Credit Loans outstanding.

<PAGE>

              (d) Minimum Loan Amount.  Except for Loans which  exhaust the full
remaining  amount of the Aggregate  Revolving Loan  Commitment  and  conversions
which result in the  conversion  of all Loans  subject to a particular  interest
rate  option,  each of which may be in lesser  amounts,  (i) each LIBO Rate Loan
when made (and each conversion of Base Rate Loans into LIBO Rate Loans) shall be
in an amount at least equal to $3,000,000  or, if greater,  then in such minimum
amount plus $100,000 multiples, and (ii) each Base Rate Loan when made (and each
conversion  of LIBO Rate  Loans into Base Rate  Loans)  shall be in an amount at
least equal to $250,000 or, if greater, then in such minimum amount plus $25,000
multiples.

              (e) Prepayment and Reborrowing.  Prior to the Revolver Termination
Date and within the limits of the Aggregate  Revolving  Loan  Commitment and the
Borrowing Base,  AeroCentury may borrow,  prepay and reborrow  Revolving  Credit
Loans.  All  Revolving  Credit  Loans shall mature and be due and payable on the
Revolver Termination Date.

              (f) Revolving Loan Commitment Percentages.  The obligation of each
Bank  to  make a Loan  to  AeroCentury  at any  time  shall  be  limited  to its
percentage (the  "Revolving  Loan Commitment  Percentage") as set forth opposite
its name on Exhibit A hereto multiplied by the aggregate principal amount of the
Loan requested.  The principal amounts of the respective Loans made by the Banks
on the occasion of each  Borrowing  shall be pro rata in  accordance  with their
respective Revolving Loan Commitment  Percentages.  No Bank shall be required or
permitted to make any Loan if, immediately after giving effect to such Loan, and
the application of the proceeds of a Loan to the extent applied to the repayment
of the Loans, the sum of such Bank's Loans  outstanding would exceed such Bank's
Revolving Loan Commitment.

              (g) Several  Obligations.  The failure of any one or more Banks to
make Loans in  accordance  with its or their  obligations  shall not relieve the
other Banks of their several  obligations  hereunder,  but in no event shall the
aggregate amount at any one time outstanding which any Bank shall be required to
lend hereunder exceed its Revolving Loan Commitment.

          (h) Payment of Additional Amount. If any principal of a LIBO Rate Loan
          shall be repaid (whether upon  prepayment,  reduction of the Aggregate
          Revolving Loan Commitment after  acceleration or for any other reason)
          or converted to a Base Rate Loan prior to the last day of the Interest
          Period  applicable to such LIBO Rate Loan or if AeroCentury  fails for
          any reason to borrow a LIBO Rate Loan after giving  irrevocable notice
          pursuant to Section 2.3, it shall pay to each Bank, in addition to the
          principal and interest then to be paid, such additional amounts as may
          be necessary to compensate each Bank for all direct and indirect costs
          and losses (including losses resulting from redeployment of prepaid or
          unborrowed  funds at rates  lower  than the cost of such funds to such
          Bank, and including  lost profits  incurred or sustained by such Bank)
          as a result of such  repayment  or failure to borrow (the  "Additional
          Amount"). The Additional Amount (which each Bank shall take reasonable
          measures  to  minimize)  shall be  specified  in a  written  notice or
          certificate  delivered to AeroCentury  by National City, as Agent,  in
          the form provided by each Bank sustaining  such costs or losses.  Such
          notice or certificate shall contain a calculation in reasonable detail
          of the Additional  Amount to be compensated and shall be conclusive as
          to the facts and the amounts stated therein, absent manifest error.

<PAGE>

              (i) Letters of Credit.  National  City, as Agent,  under the terms
and subject to the  conditions of this  Agreement,  on behalf of itself and each
other Bank in the same  proportions  as each Bank's  Revolving  Loan  Commitment
bears to the Aggregate  Revolving  Loan  Commitment,  shall  provide  Letters of
Credit to AeroCentury, from time to time prior to the Revolver Termination Date,
as requested by AeroCentury,  provided that (A) the aggregate  amount of Letters
of Credit outstanding at any one time shall not exceed $5,000,000 or such lesser
amount,  if any, as will, when added to the amount of the Revolving Credit Loans
then  outstanding,  aggregate more than the Aggregate  Revolving Loan Commitment
(or such lesser amount as  AeroCentury  is entitled to borrow  hereunder at such
time by reason of the limitation of the Borrowing Base or otherwise), and (B) no
Letter of Credit shall be for a term longer than 180 days.

         AeroCentury  shall request a Letter of Credit by delivering a completed
letter of credit  application  to National City on such form as may be specified
by National City not less than three  Business Days prior to the date  specified
by  AeroCentury  as the date the Letter of Credit is to be issued.  The standard
form of National City letter of credit  application as currently in effect shall
be used.

         Letters of Credit  shall not bear  interest  until drawn upon but shall
each be subject to an annual charge,  payable quarterly in arrears from the date
of issuance, equal to (a) the Applicable Borrowing Margin for LIBO Rate Loans as
in effect from time to time times the aggregate  amount of all Letters of Credit
outstanding  which  shall  be  shared  among  the  Banks  pro  rata in the  same
proportions  that  each  Bank's  Loan  Commitment  bears to the  Aggregate  Loan
Commitment,  and (b) 25 basis  points  (1/4 of 1%) times the face amount of each
Letter of Credit outstanding which shall be payable to the issuing Bank.

          If any obligation of  AeroCentury to pay money in connection  with any
          Letter of Credit is not met when requested by National City, as Agent,
          as permitted by the applicable  letter of credit  application  and the
          reimbursement  agreement  contained  therein,  the amount due shall be
          funded  automatically  by a Revolving  Credit Loan which Loan shall be
          made without regard to any minimum  borrowing  requirement,  condition
          precedent  herein, or Event of Default hereunder which would otherwise
          entitle  any Bank or the Banks not to provide  such  Revolving  Credit
          Loan,  and  each  Bank  shall  make  its  proportionate  share of such
          Revolving  Credit Loan.  Any obligation of AeroCentury to pay money in
          connection with any Letter of Credit or the application therefor shall
          be  deemed  secured  as if  made  as a Loan  hereunder.  In the  event
          AeroCentury shall terminate the Aggregate Revolving Loan Commitment as
          provided in Section 2.6 and shall pay the outstanding principal amount
          of the  Revolving  Credit  Loans  in full  and  with  interest  or the
          Revolver  Termination  Date  shall  occur  at a time  when one or more
          Letters of Credit remain  outstanding,  then AeroCentury shall furnish
          to National  City,  as Agent,  within two Business Days such amount of
          cash, to be held as cash  collateral and invested in  certificates  of
          deposit of National City with interest payable to AeroCentury, as will
          pay the maximum amount which may be drawn by  beneficiaries of Letters
          of Credit  outstanding at the date of such termination or the Revolver
          Termination Date, as applicable.

<PAGE>

         2.2. The Notes.  The Revolving Credit Loans made by each Bank shall all
be evidenced by a single  promissory  note of AeroCentury  (each such promissory
note as it may be amended,  extended,  modified or renewed a  "Revolving  Credit
Note" or a "Note" and together the  "Revolving  Credit Notes" or the "Notes") in
principal face amount equal to such Bank's Revolving Loan Commitment, payable to
the order of such Bank and otherwise in the form  attached  hereto as Exhibit B.
The Revolving  Credit Notes shall be dated the Closing Date, shall bear interest
at the rate per annum and be payable as to principal  and interest in accordance
with the terms hereof. The Revolving Credit Notes shall mature upon the Revolver
Termination  Date and, upon maturity,  each  outstanding  Revolving  Credit Loan
evidenced thereby shall be due and payable. Notwithstanding the stated amount of
any Revolving  Credit Note,  the liability of  AeroCentury  under each Revolving
Credit Note shall be limited at all times to the outstanding principal amount of
the Revolving  Credit Loans by each Bank  evidenced  thereby,  plus all interest
accrued thereon and the amount of all costs and expenses then payable hereunder,
as  established  by each such Bank's books and records,  which books and records
shall be conclusive absent manifest error.

         2.3.  Funding Procedures.

              (a) Request for Advance.  Each request for a Revolving Credit Loan
or the conversion or renewal of an interest rate with respect to a Loan shall be
made not later than 1:00 p.m. EST on a Business Day by delivery to National City
of a written request signed by AeroCentury or, in the  alternative,  a telephone
request followed promptly by written confirmation of the request (a "Request for
Advance"),  specifying the date and amount of the Loan to be made,  converted or
renewed,  selecting the interest rate option applicable thereto, and in the case
of LIBO Rate Loans, specifying the Interest Period applicable to such Loans. The
form of request to be used in connection with the making,  conversion or renewal
of Revolving Credit Loans shall be that form provided to AeroCentury by National
City. Each request shall be received not less than one Business Day prior to the
date of the proposed  borrowing,  conversion or renewal in the case of Base Rate
Loans,  and  three  London  Business  Days  prior  to the  date of the  proposed
borrowing,  conversion  or  renewal in the case of LIBO Rate  Loans.  No request
shall be effective  until actually  received in writing by National City, as the
Agent.

              (b) Actions by Agent. Upon receipt of a Request for Advance and if
the conditions  precedent provided herein shall be satisfied at the time of such
request,  National City  promptly  shall notify each Bank of such request and of
such Bank's  ratable  share of such Loan.  Upon  receipt by  National  City of a
Request for Advance, the request shall not be revocable by AeroCentury.

              (c Availability of Funds. Not later than 2:00 p.m. EST on the date
of each Loan,  each Bank shall make available  (except as provided in clause (d)
below) its  ratable  share of such Loan,  in  immediately  available  funds,  to
National City at the address set forth  opposite its name on the signature  page
hereof  or at  such  account  in  London  as  National  City  shall  specify  to
AeroCentury  and the Banks.  Unless  National  City  knows  that any  applicable
condition  specified  herein has not been  satisfied,  it will make the funds so
received from the Banks immediately available to AeroCentury on the date of each
Loan by a credit to the account of AeroCentury at National City at the aforesaid
address.

<PAGE>

              (d  Funding  Assumptions.  Unless  National  City  shall have been
notified by any Bank at least one  Business Day prior to the date of the making,
conversion  or renewal of any LIBO Rate Loan,  or by 3:00 p.m. EST on the date a
Base Rate Loan is requested, that such Bank does not intend to make available to
National  City,  such Bank's portion of the total amount of the Loan to be made,
converted or renewed on such date,  National  City may assume that such Bank has
made such amount available to National City on the date of the Loan and National
City may, in reliance  upon such  assumption,  make  available to  AeroCentury a
corresponding amount. If and to the extent such Bank shall not have so made such
funds  available  to  National  City,  such Bank agrees to repay  National  City
forthwith on demand such  corresponding  amount together with interest  thereon,
for each day from the date such amount is made  available to  AeroCentury  until
the date such amount is repaid to National  City, at the Federal Funds Rate plus
50 basis points for three  Business  Days,  and thereafter at the Alternate Base
Rate plus the Applicable  Borrowing Margin. If such Bank shall repay to National
City such  corresponding  amount,  such amounts so repaid shall  constitute such
Bank's  Loan for  purposes of this  Agreement.  If such Bank does not repay such
corresponding  amount forthwith upon National City's demand  therefor,  National
City shall promptly notify  AeroCentury,  and AeroCentury  shall immediately pay
such  corresponding  amount to National City,  without any prepayment penalty or
premium, but with interest on the amount repaid, for each day from the date such
amount is made available to AeroCentury  until the date such amount is repaid to
National  City,  at the rate of  interest  applicable  at the time to such Loan.
Nothing  herein shall be deemed to relieve any Bank of its obligation to fulfill
its  Revolving  Loan  Commitment  hereunder  or to  prejudice  any rights  which
AeroCentury  may have  against  any Bank as a result of any default by such Bank
hereunder.

              (e  Proceeds of Loan Being  Repaid.  If the Banks make a Loan on a
day on which  all or any part of an  outstanding  Loan  from the  Banks is to be
repaid,  each  Bank  shall  apply  the  proceeds  of its new  Loan to make  such
repayment and only an amount equal to the difference (if any) between the amount
being  borrowed and the amount being repaid shall be made available by such Bank
to National City as provided in clause (c).

         2.4.  Interest Rates.

              (a Alternate Base Rate. Each Base Rate Loan shall bear interest on
the principal  amount thereof from the date made until such Loan is paid in full
or converted,  at a rate per annum equal to the Alternate  Base Rate  determined
from time to time plus the Applicable Borrowing Margin for Base Rate Loans.

              (b LIBO  Rate.  Each LIBO Rate Loan  shall  bear  interest  on the
principal  amount  thereof  from the date made  until such Loan is paid in full,
renewed,  or  converted,  at a rate per  annum  equal to the LIBO  Rate plus the
Applicable  Borrowing Margin for LIBO Rate Loans. After receipt of a request for
a LIBO Rate Loan,  National  City shall proceed to determine the LIBO Rate to be
applicable  thereto.  National  City shall give prompt  notice by  telephone  or
facsimile to  AeroCentury  and to each Bank of the LIBO Rate thus  determined in
respect of each LIBO Rate Loan or any change therein.  In the event  AeroCentury
fails or is not  permitted  to select an Interest  Period for any LIBO Rate Loan
which is maturing within the time period and otherwise as provided herein,  such
Loan shall be  automatically  converted into a Base Rate Loan on the last day of
the Interest Period for such Loan.

              (c Renewals and Conversions.  AeroCentury  shall have the right to
convert Base Rate Loans into LIBO Rate Loans,  and vice versa, and to renew LIBO
Rate Loans from time to time, provided that: (i) AeroCentury shall give National
City notice of each permitted conversion or renewal; (ii) LIBO Rate Loans may be
converted or renewed only as of the last day of the applicable  Interest  Period
for such Loans;  (iii)  without  the consent of each of the Banks,  no Base Rate
Loan may be  converted  into a LIBO Rate  Loan,  and no  Interest  Period may be
renewed if on the proposed date of conversion an Event of Default,  or Potential
Default exists or would thereby occur.  National City shall use its best efforts
to notify  AeroCentury of the  effectiveness of such conversion or renewal,  and
the new interest rate to which the converted or renewed Loan is subject, as soon
as practicable after the conversion; provided, however, that any failure to give
such notice shall not affect AeroCentury's  obligations or the Banks' rights and
remedies hereunder in any way whatsoever.

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

<PAGE>

         2.5.  Fees.

              (a Commitment Fee.  AeroCentury agrees to pay to National City, as
the Agent, for the account of each Bank, a commitment fee (the "Commitment Fee")
computed  on the basis of a year of 365 days or 366 days,  in the case of a leap
year,  for the actual  number of days elapsed at the rate per annum set forth in
Schedule 2 attached  to this  Agreement  times the average  daily  amount of the
unused portion of the Aggregate  Revolving Loan  Commitment.  The Commitment Fee
shall be  payable  commencing  with the date  hereof and shall  continue  to and
including the Revolver  Termination  Date.  The unused  portion of the Aggregate
Revolving Loan  Commitment  shall mean the Aggregate  Revolving Loan  Commitment
less the unpaid  principal  amount of all  Loans.  The  Commitment  Fee shall be
payable in quarterly  installments  on the last  Business  Day of each  calendar
quarter and on the Revolver Termination Date.

              (b   Structuring   and  Arranging  Fee;   Administrative   Fee.  A
Structuring and Arranging Fee as well as an Administrative  Fee shall be payable
to National City as set forth in a separate letter  agreement  between  National
City and AeroCentury.

         2.6.  Termination or Reduction of Aggregate Revolving Loan Commitment.

              (a Voluntary.  AeroCentury may at any time, on not less than three
Business Days' written  notice,  terminate or  permanently  reduce the Aggregate
Revolving Loan Commitment pro rata among the Banks,  provided that any reduction
shall be in the minimum amount of $5,000,000  and that no such  reduction  shall
cause  the  principal  amount  of Loans  outstanding  to  exceed  the  Aggregate
Revolving Credit Commitment as reduced or the Borrowing Base, whichever is less.

              (b  Termination.   In  the  event  the  Aggregate  Revolving  Loan
Commitment is terminated,  the Revolver  Termination  Date shall  accelerate and
AeroCentury  shall,  simultaneously  with such termination,  repay the Base Rate
Loans and LIBO Rate Loans in accordance with Section 2.8.

         2.7.  Loan Prepayments (Optional and Mandatory).

              (a Base Rate Loans.  On one  Business  Day's  notice to the Banks,
AeroCentury may, at its option,  prepay the Base Rate Loans in whole at any time
or in part from time to time,  provided that each partial prepayment shall be in
at least  the  principal  amount of  $25,000  or, if  greater,  then in  $10,000
multiples.

              (b LIBO Rate Loans. AeroCentury may, at its option prepay any LIBO
Rate Loan  provided  that if it shall  prepay a LIBO Rate Loan prior to the last
day of the  applicable  Interest  Period,  or shall fail to borrow any LIBO Rate
Loan on the date such Loan is to be made, it shall pay to each Bank, in addition
to the principal  and interest  then to be paid in the case of a prepayment,  on
such date of  prepayment,  the Additional  Amount  incurred or sustained by such
Bank as a result  of such  prepayment  or  failure  to  borrow  as  provided  in
Section 2.1(h).

<PAGE>

              (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.

<PAGE>

              (d Net Payments. All payments made to the Banks and National City,
as the Agent, by AeroCentury  hereunder,  under any Note or under any other Loan
Document will be made without set off,  counterclaim or other defense.  All such
payments  will be made free and clear of, and without  deduction or  withholding
for, any present or future taxes, levies, imposts,  duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
any political subdivision or taxing authority thereof or therein (but excluding,
except as  provided  below,  any tax  imposed on or measured by the gross or net
income of a Bank  (including  all  interest,  penalties  or similar  liabilities
related  thereto)  pursuant  to the laws of the United  States of America or any
political  subdivision  thereof,  or taxing  authority  of the United  States of
America or any political  subdivision  thereof, in which the principal office or
applicable lending office of such Bank is located), and all interest,  penalties
or similar  liabilities  with respect thereto  (collectively,  together with any
amounts payable pursuant to the next sentence, "Taxes").  AeroCentury shall also
reimburse each Bank, upon the written request of such Bank, for Taxes imposed on
or measured by the gross or net income of such Bank  pursuant to the laws of the
United States of America (or any State or political subdivision thereof), or the
jurisdiction (or any political subdivision or taxing authority thereof) in which
the  principal  office or applicable  lending  office of such Bank is located as
such Bank shall  determine  are  payable by such Bank due to the amount of Taxes
paid to or on behalf of such Bank pursuant to this or the preceding sentence. If
any Taxes are so levied or imposed, AeroCentury agrees to pay the full amount of
such  Taxes,  and such  additional  amounts  as may be  necessary  so that every
payment of all  amounts  due  hereunder,  under any Note or under any other Loan
Document,  after  withholding or deduction for or on account of any Taxes,  will
not be less than the amount  provided  for  herein or in such Note.  AeroCentury
will  furnish to National  City upon  request  certified  copies of tax receipts
evidencing  such payment by  AeroCentury.  AeroCentury  will  indemnify and hold
harmless  National City and each Bank, and reimburse  National City or such Bank
upon its written  request,  for the amount of any Taxes so levied or imposed and
paid or withheld by such Bank.

         Notwithstanding the preceding paragraph, AeroCentury shall be entitled,
to the extent  required to do so by law, to deduct or withhold  Taxes imposed by
the United States of America (or any political  subdivision or taxing  authority
thereof) from interest,  fees or other amounts payable hereunder for the account
of any Person other than a Bank (x) that is a domestic corporation (as such term
is defined in Section  7701 of the Code) for federal  income tax  purposes  (but
excluding  any foreign  office of any Bank) or (y) that has  necessary  forms on
file  with  AeroCentury  for the  applicable  year to the  extent  deduction  or
withholding  of such  Taxes is not  required  as a result of the  filing of such
forms,  provided that if AeroCentury shall so deduct or withhold any such Taxes,
it shall provide a statement to National  City and such Bank,  setting forth the
amount of such  Taxes so paid or  withheld,  the  applicable  rate and any other
information  or  documentation  which  such  Bank  may  reasonably  request  for
assisting such Bank to obtain any allowable  credits or deductions for the taxes
so deducted or withheld in the  jurisdiction or jurisdictions in which such Bank
is subject to tax.

              (e Demand Deposit Account. AeroCentury shall maintain at least one
demand  deposit  account  with  National  City for  purposes of this  Agreement.
AeroCentury  authorizes National City (but National City shall not be obligated)
to  deposit  into  said  account  all  amounts  to be  advanced  to  AeroCentury
hereunder.  AeroCentury  authorizes National City(but National City shall not be
obligated)  to deduct from said  account,  or any other  account  maintained  by
AeroCentury at National City, as the Agent,  any amount payable  hereunder on or
after  the date  upon  which it is due and  payable.  Such  authorization  shall
include  but not be limited  to  amounts  payable  with  respect  to  principal,
interest, fees and expenses.

         2.9. Change in Circumstances, Yield Protection.

<PAGE>

              (a  Certain  Regulatory  Changes.  If  any  Regulatory  Change  or
compliance  by the Banks with any request made after the date of this  Agreement
by the Board of  Governors  of the  Federal  Reserve  System  or by any  Federal
Reserve Bank or other central bank or fiscal,  monetary or similar authority (in
each case  whether or not having the force of law) shall (i)  impose,  modify or
make  applicable  any  reserve,   special  deposit,  Federal  Deposit  Insurance
Corporation premium or similar requirement or imposition against assets held by,
or deposits in or for the account of, or loans made by, or any other acquisition
of funds for loans or advances by, the Banks; (ii) impose on the Banks any other
condition  regarding  the  Notes;  (iii)  subject  the  Banks  to,  or cause the
withdrawal or termination of any previously  granted  exemption with respect to,
any tax  (including  any  withholding  tax but not  including any income tax not
currently  causing  the Banks to be subject to  withholding)  or any other levy,
impost,  duty,  charge,  fee or  deduction  on or from  any  payments  due  from
AeroCentury;  or (iv) change the basis of taxation of payments from  AeroCentury
to the Banks  (other  than by reason of a change in the method of  taxation of a
Bank's net income); and the result of any of the foregoing events is to increase
the cost to a Bank of making or maintaining  any Loan or to reduce the amount of
principal,  interest or fees to be received by the Bank  hereunder in respect of
any Loan,  National  City will  immediately  so  notify  AeroCentury.  If a Bank
determines  in good faith  that the  effects  of the  change  resulting  in such
increased  cost or  reduced  amount  cannot  reasonably  be  avoided or the cost
thereof mitigated, then upon notice by National City to AeroCentury, AeroCentury
shall  pay to  such  Bank on  each  interest  payment  date  of the  Loan,  such
additional  amount  as  shall  be  necessary  to  compensate  the  Bank for such
increased cost or reduced amount.

              (b  Capital  Adequacy.  If  any  Bank  shall  determine  that  any
Regulation  regarding  capital  adequacy  or  the  adoption  of  any  Regulation
regarding  capital  adequacy,  which Regulation is applicable to banks (or their
holding  companies)  generally  and  not  such  Bank  (or its  holding  company)
specifically,  or any change  therein,  or any change in the  interpretation  or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
by such  Bank  (or its  holding  company)  with any such  request  or  directive
regarding  capital adequacy (whether or not having the force of law) of any such
authority,  central bank or  comparable  agency,  has the effect of reducing the
rate of  return on such  Bank's  capital  as a  consequence  of its  obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption,  change or compliance  (taking into consideration such Bank's policies
with  respect  to  capital  adequacy)  by an  amount  deemed  by such Bank to be
material,  AeroCentury  shall  promptly pay to National  City for the account of
such Bank, upon the demand of such Bank,  such  additional  amount or amounts as
will compensate such Bank for such reduction.

              (c  Ability  to  Determine  LIBO  Rate.  If  National  City  shall
determine (which  determination  will be made after  consultation  with any Bank
requesting  same and  shall  be,  in the  absence  of fraud or  manifest  error,
conclusive  and  binding  upon all  parties  hereto)  that by reason of abnormal
circumstances  affecting  the interbank  eurodollar  or applicable  eurocurrency
market adequate and reasonable means do not exist for ascertaining the LIBO Rate
to be  applicable  to the  requested  LIBO  Rate  Loan  or  that  eurodollar  or
eurocurrency funds in amounts sufficient to fund all the LIBO Rate Loans are not
obtainable  on  reasonable  terms,  National  City  shall  give  notice  of such
inability or determination by telephone to AeroCentury and to each Bank at least
two  Business  Days prior to the date of the  proposed  Loan and  thereupon  the
obligations  of the Banks to make,  convert  other  Loans to, or renew such LIBO
Rate Loan shall be excused, subject, however, to the right of AeroCentury at any
time thereafter to submit another request.

              (d Yield  Protection.  Determination by a Bank for purposes hereof
of the effect of any Regulatory Change or other change or circumstance  referred
to above on its costs of making or maintaining Loans or on amounts receivable by
it in respect of the Loans and of the additional  amounts required to compensate
such Bank in respect of any  additional  costs,  shall be made in good faith and
shall be  evidenced  by a  certificate,  signed by an  officer  of such Bank and
delivered  to  AeroCentury,  as to the fact and  amount  of the  increased  cost
incurred  by or the reduced  amount  accruing to the Bank owing to such event or
events.  Such  certificate  shall be prepared in reasonable  detail and shall be
conclusive as to the facts and amounts stated therein, absent manifest error.

              (e Notice of Events.  The affected Bank will notify AeroCentury of
any event occurring after the date of this Agreement that will entitle such Bank
to  compensation  pursuant to this Section as promptly as  practicable  after it
obtains  knowledge  thereof and  determines to request such  compensation.  Said
notice shall be in writing,  shall specify the applicable Section or Sections of
this  Agreement  to which it  relates  and shall set forth the amount or amounts
then  payable  pursuant  to this  Section.  AeroCentury  shall pay such Bank the
amount shown as due on such notice within 10 days after its receipt of the same.

<PAGE>

         2.10.   Illegality.   Notwithstanding   any  other  provision  in  this
Agreement, if the adoption of any applicable Regulation,  or any change therein,
or  any  change  in  the   interpretation  or  administration   thereof  by  any
governmental  authority,  central bank, or  comparable  agency  charged with the
interpretation  or administration  thereof,  or compliance by the Banks with any
request  or  directive  (whether  or not  having  the  force of law) of any such
authority,  central  bank,  or  comparable  agency  shall  make it  unlawful  or
impossible for the Banks to (1) maintain their Revolving Loan Commitments,  then
upon notice to AeroCentury  by National  City,  the Revolving  Loan  Commitments
shall terminate; or (2) maintain or fund their LIBO Rate Loans, then upon notice
to the Borrower of such event, the Borrower's  outstanding LIBO Rate Loans shall
be converted into Base Rate Loans.

         2.11.  Discretion of Bank as to Manner of Funding.  Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and  maintain  its funding of all or any part of its Loans in any manner it sees
fit, it being understood,  however,  that for the purposes of this Agreement all
determinations  hereunder  shall be made as if each Bank had actually funded and
maintained each LIBO Rate Loan during each Interest Period for such Loan through
the  purchase of deposits in the  relevant  interbank  market  having a maturity
corresponding  to such Interest Period and bearing an interest rate equal to the
LIBO Rate plus the Applicable Borrowing Margin for such Interest Period.

                                          3. Representations and Warranties

         AeroCentury represents and warrants to the Banks that:

         3.1.  Organization,  Standing.  It (i) is a corporation duly organized,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation,  (ii) has the corporate power and authority  necessary to own its
assets,  carry on its  business  and  enter  into and  perform  its  obligations
hereunder,  under  each  Loan  Document  to which it is a  party,  and  (iii) is
qualified to do business and is in good standing in each jurisdiction  where the
nature  of  its  business  or the  ownership  of its  properties  requires  such
qualification,  except  where the  failure to be so  qualified  would not have a
Material Adverse Effect.

<PAGE>

         3.2. Corporate Authority,  Validity, Etc. The making and performance of
the Loan Documents to which it is a party are within its power and authority and
have been duly  authorized by all  necessary  corporate  action.  The making and
performance  of the Loan Documents do not and under present law will not require
any  consent  or  approval  of any of  AeroCentury's  shareholders  or any other
person, do not and under present law will not violate any law, rule,  regulation
order,  writ,  judgment,  injunction,  decree,  determination  or award,  do not
violate any  provision of its charter or by-laws,  do not and will not result in
any  breach of any  material  agreement,  lease or  instrument  to which it is a
party, by which it is bound or to which any of its assets are or may be subject,
and do not and will not give rise to any Lien upon any of its assets. The number
of shares and  classes of the capital  stock of  AeroCentury  and the  ownership
thereof are accurately set forth on Schedule 1 attached hereto;  all such shares
are validly  issued,  fully paid and  non-assessable,  and the issuance and sale
thereof are in compliance with all applicable  federal and state  securities and
other applicable  laws.  AeroCentury is not in default under any such agreement,
lease or instrument except to the extent such default  reasonably could not have
a Material Adverse Effect. No  authorizations,  approvals or consents of, and no
filings or  registrations  with,  any  governmental  or regulatory  authority or
agency are necessary for the  execution,  delivery or performance by AeroCentury
of  any  Loan  Document  to  which  it  is  a  party  or  for  the  validity  or
enforceability thereof. Each Loan Document, when executed and delivered, will be
the legal, valid and binding obligation of AeroCentury  enforceable against each
in accordance with its terms.

         3.3.  Litigation.  Except as  disclosed  on  Schedule  1,  there are no
actions,  suits or proceedings pending or, to its knowledge,  threatened against
or affecting it or any of its assets  before any court,  government  agency,  or
other tribunal which if adversely  determined  reasonably  could have a Material
Adverse Effect or upon the ability of it to perform under the Loan Documents. If
there is any disclosure on Schedule 1, the status  (including the tribunal,  the
nature of the  claim and the  amount  in  controversy)  of each such  litigation
matter as of the date of this Agreement is set forth in Schedule 1.

3.4. ERISA. (a) AeroCentury and each ERISA Affiliate are in compliance
   in all material respects with all applicable  provisions of ERISA
              and  the  regulations   promulgated   thereunder;   and,  neither
               AeroCentury,  nor any ERISA Affiliate maintains or contributes to
               or has maintained or contributed  to any  multiemployer  plan (as
               defined in Section 4001 of ERISA) under which  AeroCentury or any
               ERISA Affiliate could have any withdrawal liability;  (b) neither
               AeroCentury  nor any ERISA  Affiliate,  sponsors or maintains any
               Plan  under  which  there is an  accumulated  funding  deficiency
               within the  meaning of  Section  412 of the Code,  whether or not
               waived;  (c) the  aggregate  liability  for accrued  benefits and
               other  ancillary  benefits  under  each  Plan  that is or will be
               sponsored or maintained  by  AeroCentury  or any ERISA  Affiliate
               (determined on the basis of the actuarial assumptions  prescribed
               for valuing benefits under  terminating  single-employer  defined
               benefit  plans  under  Title IV of  ERISA)  does not  exceed  the
               aggregate fair market value of the assets under each such defined
               benefit pension Plan; (d) the aggregate  liability of AeroCentury
               and each ERISA Affiliate  arising out of or relating to a failure
               of any Plan to comply with the  provisions  of ERISA or the Code,
               will not have a Material  Adverse Effect;  and (e) there does not
               exist  any  unfunded  liability   (determined  on  the  basis  of
               actuarial  assumptions  utilized  by the  actuary for the plan in
               preparing the most recent Annual  Report) of  AeroCentury  or any
               ERISA Affiliate under any plan, program or arrangement  providing
               post-retirement life or health benefits.

         3.5. Financial  Statements.  The financial statements of AeroCentury as
of and for the Fiscal  Year ending  December  31,  1998,  the  consolidated  and
consolidating  financial  statements of AeroCentury and its subsidiary as of and
for  the  Fiscal  Year  ending  December  31,  1999,  and the  consolidated  and
consolidating  interim  financial  statements  for the three month  period ended
March 31, 2000, consisting in each case of a balance sheet, statement of income,
a statement of shareholders' equity (except in the case of the interim financial
statements),  statement  of cash  flows,  and  accompanying  notes to  financial
statements,  furnished to the Banks in connection  herewith,  present fairly, in
all material  respects,  the  financial  position,  and results of operations of
AeroCentury as of the dates and for the periods  referred to, in conformity with
Generally  Accepted  Accounting  Principles.  Except as set forth on  Schedule 1
hereto, there are no liabilities,  fixed or contingent,  which are not reflected
in such financial  statements,  other than liabilities which are not required to
be reflected in such balance sheets.  There has been no Material  Adverse Change
since March 31, 2000.

         3.6. Not in Default,  Judgments,  Etc. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing.  AeroCentury has
satisfied  all  judgments  and is not in default with  respect to any  judgment,
writ,  injunction,  decree,  rule, or regulation  of any court,  arbitrator,  or
federal, state, municipal,  or other governmental authority,  commission,  board
bureau, agency, or instrumentality, domestic or foreign.

<PAGE>

         3.7. Taxes. AeroCentury has filed all federal, state, local and foreign
tax returns and reports  which it is required by law to file and as to which its
failure to file would have a Material  Adverse  Effect,  and has paid all taxes,
including wage taxes,  assessments,  withholdings and other governmental charges
which are  presently due and payable,  other than those being  contested in good
faith by appropriate  proceedings,  if any, and disclosed on Schedule 1. The tax
charges,  accruals and reserves on the books of AeroCentury  are adequate to pay
all such taxes that have accrued but are not presently due and payable.

         3.8.  Permits,   Licenses,  Etc.  AeroCentury  possesses  all  permits,
licenses, franchises,  trademarks, trade names, copyrights and patents necessary
to the conduct of its business as presently  conducted or as presently  proposed
to be  conducted,  except where the failure to possess the same would not have a
Material Adverse Effect.

         3.9.  Compliance  with Laws,  Etc.  AeroCentury is in compliance in all
material  respects with all  Regulations  applicable to its business  (including
obtaining all authorizations,  consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications  with, any court
or governmental department, public body or authority, commission, board, bureau,
agency, or instrumentality),  the noncompliance with which reasonably could have
a Material Adverse Effect.

               3.10.  Solvency.  AeroCentury  is, and after giving effect to the
transactions contemplated hereby, will be, Solvent.

         3.11.  No  Burdensome  Agreements.  AeroCentury  is not  subject to any
charter,  corporate or other legal restriction,  or any judgment, decree, order,
rule or regulation  which in the judgment of its directors or officers has or is
expected in the future to have a materially  adverse  effect on its  operations,
business,  assets,  liabilities  or upon the ability of  AeroCentury  to perform
under  the  Loan  Documents.  AeroCentury  is not a  party  to any  contract  or
agreement  which in the judgment of its directors or officers has or is expected
to have any  materially  adverse  effect on its  business,  except as  otherwise
reflected in adequate reserves.

         3.12.  Subsidiaries,  Etc.  AeroCentury has no Subsidiaries  except for
special  purpose  entities  formed  in  connection  with  financings  which  are
non-recourse  to  AeroCentury.  Set forth in Schedule 1 hereto is a complete and
correct list, as of the date of this Agreement,  of all special purpose entities
owned by  AeroCentury  and all  Investments  held by  AeroCentury  in any  joint
venture or other Person.

         3.13. Title to Properties,  Leases. AeroCentury has good and marketable
title  to all  assets  and  properties  reflected  as  being  owned by it in its
financial statements as well as to all assets and properties acquired since said
date  (except  property  disposed of since said date in the  ordinary  course of
business).  Except  for the Liens set forth in  Schedule  1 hereto and any other
Permitted Liens, there are no Liens on any of such assets or properties.  It has
the right to, and does,  enjoy  peaceful and  undisturbed  possession  under all
material leases under which it is leasing property as a lessee.  All such leases
are valid,  subsisting and in full force and effect,  and none of such leases is
in default,  except where such default, either individually or in the aggregate,
could not have a Material Adverse Effect.

<PAGE>

         3.14. Public Utility Holding Company;  Investment Company.  AeroCentury
is not a "public  utility  company"  or a "holding  company",  or a  "subsidiary
company" of a "holding company",  or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company",  as such terms are defined in the
Public Utility  Holding Company Act of 1935, as amended;  or a "public  utility"
within the meaning of the Federal Power Act, as amended. Further, AeroCentury is
not an "investment company" or an "affiliated person" of an "investment company"
or a company  "controlled" by an "investment  company" as such terms are defined
in the Investment Company Act of 1940, as amended.

         3.15.  Margin  Stock.  AeroCentury  is not  and  will  not  be  engaged
principally  or as one of its important  activities in the business of extending
credit for the purpose of purchasing or carrying or trading in any margin stocks
or  margin  securities  (within  the  meaning  of  Regulation  U of the Board of
Governors  of the  Federal  Reserve  System  as  amended  from  time  to  time).
AeroCentury will not use or permit any proceeds of the Loans to be used,  either
directly or  indirectly,  for the  purpose,  whether  immediate,  incidental  or
ultimate, of buying or carrying margin stocks or margin securities.

         3.16. Use of Proceeds.  AeroCentury  will use the proceeds of each Loan
to be made pursuant  hereto for (a) the purchase or financing of Equipment to be
leased to unaffiliated  persons and the warehouse financing of the lease of that
Equipment, (b) working capital needs, and/or (c) general corporate purposes.

         3.17.    Depreciation  Policies.  AeroCentury's  current  depreciation
policies are as set forth in Exhibit E. These policies have been in effect
without change since January 1, 1997.

         3.18. Disclosure Generally.  The representations and statements made by
AeroCentury  or on its behalf in  connection  with this credit  facility and the
Loans,  including  representations and statements in each of the Loan Documents,
do not and will not contain any untrue  statement of a material  fact or omit to
state a material fact or any fact necessary to make the representations made not
materially  misleading.  No written information,  exhibit,  report,  brochure or
financial  statement  furnished by  AeroCentury  or on its behalf to the Bank in
connection with this credit facility,  the Loans, or any Loan Document  contains
or will  contain any material  misstatement  of fact or omit to state a material
fact or any  fact  necessary  to  make  the  statements  contained  therein  not
misleading.

4. Conditions Precedent

     4.1.  All  Loans.  The  obligation  of each Bank to make any Loan
(including  but not limited to the first Loan  hereunder)  or National
City, as Agent, to issue any Letter of Credit, is conditioned upon the
following:

         (a Documents.  AeroCentury shall have delivered and the Bank shall have
received a Request for Advance in such form as  National  City may request  from
time to time.

         (b Borrowing  Base  Certificate.  AeroCentury  shall have delivered and
National City shall have received a Borrowing Base Certificate dated the date of
the Loan requested under this Agreement.

         (c Covenants; Representations.  AeroCentury shall be in compliance with
all  covenants,  agreements  and  conditions  in each  Loan  Document  and  each
representation  and warranty  contained in each Loan Document shall be true with
the same effect as if such  representation or warranty had been made on the date
such Loan or Letter of Credit, as applicable, is made or issued.

<PAGE>

         (d  Defaults.  Immediately  prior to and  after  giving  effect to such
transaction, no Event of Default or Potential Default shall exist.

         (e Material Adverse Change.  Since March 31, 2000, there shall not have
been any Material  Adverse Change with respect to  AeroCentury,  and there shall
not be any other event or circumstance  which gives National City, as the Agent,
or any Bank reasonable  grounds to conclude that AeroCentury may not or will not
be able to perform or observe (in the normal course) its  obligations  hereunder
and under the Notes or the other Loan Documents.

     4.2. Conditions to First Loan. In addition to the conditions
to all Loans and  Letters  of Credit as  provided  in Section 4.1,  the
obligation  of each  Bank to make the first  Loan is  conditioned
upon the following:

         (a  Articles,  Bylaws.  Each Bank  shall  have  received  copies of the
Articles or Certificate of Incorporation and Bylaws of AeroCentury  certified by
its Secretary or Assistant Secretary; together with Certificate of Good Standing
from any  jurisdiction  where the nature of its business or the ownership of its
properties  requires  such  qualification  except  where  the  failure  to be so
qualified would not have a Material Adverse Effect.

         (b  Evidence of  Authorization.  Each Bank shall have  received  copies
certified by the Secretary or Assistant  Secretary of  AeroCentury  or any other
appropriate  official  (in the case of a Person other than  AeroCentury)  of all
corporate  or other  action  taken by each Person  other than the Banks who is a
party  to any  Loan  Document  to  authorize  its  execution  and  delivery  and
performance of the Loan Documents and to authorize the Loans, together with such
other related papers as National City, as the Agent, shall reasonably require.

                    (c Legal Opinions. Each Bank shall have received a favorable
written  opinion in form and substance  satisfactory  to the Bank
from Christopher B. Tigno,  Esq., General Counsel to AeroCentury,
which shall be addressed to the Bank and be dated the date of the
first Loan.

         (d  Incumbency.  National  City,  as the Agent,  shall have  received a
certificate  signed by the  secretary  or  assistant  secretary  of  AeroCentury
together  with the true  signature  of the  officer or  officers  authorized  to
execute and deliver the Loan Documents and certificates  thereunder,  upon which
the Banks shall be entitled to rely conclusively  until it shall have received a
further  certificate  of the  secretary  or assistant  secretary of  AeroCentury
amending the prior  certificate  and  submitting the signature of the officer or
officers named in the new certificate as being authorized to execute and deliver
Loan Documents and certificates thereunder.

         (e Notes.  Each Bank shall have  received a Revolving  Credit Note duly
executed, completed and issued in accordance herewith.

         (f  Documents.  National  City,  as the Agent,  shall have received all
certificates,  instruments  and other  documents  then  required to be delivered
pursuant  to any  Loan  Documents,  in  each  instance  in  form  and  substance
reasonably satisfactory to it.

         (g  Consents.  AeroCentury  shall have  provided to each Bank  evidence
satisfactory to it that all  governmental,  shareholder and third party consents
and approvals necessary in connection with the transactions  contemplated hereby
have been obtained and remain in effect.

<PAGE>

          (h Other  Agreements.  AeroCentury  shall have  executed and
delivered each other Loan Document required hereunder.

          (i Fees,  Expenses.  AeroCentury shall simultaneously pay or
shall have paid all fees and expenses due  hereunder or any other
Loan Document.

               (j JMC Subordination  Agreement.  Each Bank shall have received a
               subordination  agreement  signed by JMC and in form and substance
               satisfactory  to the Banks whereby JMC agrees to  subordinate  at
               any time an Event of Default as provided in Section 8.1(a) hereof
               shall exist and for so long as such Event of Default  shall exist
               a percentage of its right to receive  management  fees payable to
               it at any time and from time to time,  said  percentage to be the
               greater of (1) 50% of said  fees,  or (2) that  percentage  which
               results  from  dividing  the Loans  outstanding  hereunder by the
               Borrowing Base.

5. Affirmative Covenants

         AeroCentury  covenants  and  agrees  that,  without  the prior  written
consent of the Required Banks, from and after the date hereof and so long as the
Revolving Loan  Commitments  are in effect or any  Obligation  remains unpaid or
outstanding, it will:

                    5.1. Financial Statements and Reports.  Furnish to the Banks
the following financial information:

<PAGE>

         (a Annual  Statements.  As soon as  available  but no later than ninety
(90) days after the end of each Fiscal Year, the consolidated and  consolidating
balance  sheet of  AeroCentury  as of the end of such year and the prior year in
comparative  form,  and related  consolidated  and  consolidating  statements of
income,  shareholders'  equity, and cash flows for the Fiscal Year and the prior
Fiscal Year in  comparative  form (except in the case of the balance sheet which
shall  be only for the  current  year).  The  financial  statements  shall be in
reasonable  detail with  appropriate  notes and be prepared in  accordance  with
Generally Accepted Accounting Principles.  The annual financial statements shall
be certified  (without any qualification or exception) by Arthur Andersen LLP or
other  independent  public  accountants  acceptable to the Required Banks.  Such
financial  statements  shall  be  accompanied  by a report  of such  independent
certified public  accountants  stating that, in the opinion of such accountants,
the consolidated  financial statements present fairly, in all material respects,
the  financial  position,  and the results of  operations  and the cash flows of
AeroCentury  for the period then ended in  conformity  with  Generally  Accepted
Accounting  Principles,  except for  inconsistencies  resulting  from changes in
accounting principles and methods agreed to by such accountants and specified in
such report, and that, in the case of such financial statements, the examination
by such  accountants  of such  financial  statements has been made in accordance
with generally accepted auditing standards and accordingly  included  examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial   statements  and  assessing  the  accounting   principles   used  and
significant  estimates  made,  as  well  as  evaluating  the  overall  financial
statement  presentation.  Each consolidated  financial  statement provided under
this  subsection  (a)  shall be  accompanied  by a  certificate  signed  by such
accountants  either stating that during the course of their examination  nothing
came to their  attention  which would  cause them to believe  that any event has
occurred and is continuing  which  constitutes  an Event of Default or Potential
Default,  or  describing  each such event.  In addition to the annual  financial
statements,  AeroCentury  shall,  promptly upon receipt thereof,  furnish to the
Bank a copy of each other  report  submitted  to its board of  directors  by its
independent  accountants in connection with any annual, interim or special audit
made by them of the financial records of AeroCentury.

         (b Quarterly  Statements.  As soon as available but no later than sixty
(60) calendar days after the end of each Fiscal Quarter of each Fiscal Year, the
consolidated and consolidating  balance sheet and related  statements of income,
and cash flows of AeroCentury for such quarterly  period and for the period from
the  beginning  of such  fiscal  year to the end of such  Fiscal  Quarter  and a
corresponding  statement  of  income  and cash  flow for the same  period in the
preceding Fiscal Year, certified by the chief executive officer, chief operating
officer or chief  financial  officer of  AeroCentury  as having been prepared in
accordance with Generally  Accepted  Accounting  Principles  (subject to changes
resulting from audits and year-end adjustments);  provided, however, that if the
independent  certified public accountants issue a review report on the quarterly
financial  statements of AeroCentury,  the financial statements required by this
subsection (b) shall be accompanied by a certificate  signed by such accountants
either stating that during the course of their examination nothing came to their
attention  which would cause them to believe  that any event has occurred and is
continuing  which  constitutes  an Event of Default  or  Potential  Default,  or
describing each such event and the remedial steps being taken by AeroCentury.

         (c) No Default.  Within sixty (60)  calendar days after the end of each
of the first three  Fiscal  Quarters of each Fiscal Year and within  ninety (90)
calendar  days after the end of each Fiscal  Year, a  certificate  signed by the
chief executive  officer,  chief operating officer or chief financial officer of
AeroCentury certifying that, to the best of such officer's knowledge,  after due
inquiry,  (i)  AeroCentury  has  complied  with all  covenants,  agreements  and
conditions  in each Loan  Document  and that each  representation  and  warranty
contained  in each Loan  Document  is true and  correct  with the same effect as
though each such  representation  and warranty had been made on the date of such
certificate  (except to the extent such  representation or warranty related to a
specific  prior date),  and (ii) no event has occurred and is  continuing  which
constitutes an Event of Default or Potential  Default,  or describing  each such
event and the remedial steps being taken by AeroCentury.

         (d) ERISA.  All  reports  and forms  filed  with  respect to all Plans,
except as filed in the normal course of business and that would not result in an
adverse action to be taken under ERISA, and details of related  information of a
Reportable Event, promptly following each filing.

         (e) Material Changes.  Notification to National City, as the Agent, and
each other Bank, of any litigation,  administrative  proceeding,  investigation,
business  development,  or change in financial  condition which could reasonably
have a Material Adverse Effect, promptly following its discovery.

         (f) Other  Information.  AeroCentury  will provide to National City, as
the Agent,  and each other Bank (i) all  shareholder and Securities and Exchange
Commission notices,  reports and filings (excluding Forms 3, 4, 5, 13-D and 13-G
under the  Securities  Exchange Act of 1934),  (ii) any material  press releases
simultaneously  with  their  release,  (iii)  all  budgets  and  forecasts  made
available to  AeroCentury's  Board of Directors,  and (iv) the annual  "desktop"
appraisal of all aircraft  owned by  AeroCentury.  In addition,  promptly,  upon
request by National  City or any other Bank from time to time (which may be on a
monthly or other basis),  AeroCentury  shall provide such other  information and
reports  regarding its  operations,  business  affairs,  prospects and financial
condition as National City, as the Agent, or the Banks may reasonably request.

<PAGE>

         (g) Borrowing Base  Certificates.  In the event  AeroCentury  shall not
have  delivered a Borrowing  Base  Certificate  to the Banks during any calendar
month, it will deliver to the Banks, no later than 30 days after the end of such
calendar month as of the last day of the preceding  calendar  month, a Borrowing
Base Certificate signed by the chief executive officer, chief operating officer,
chief financial officer or a Senior Vice President of AeroCentury.

     (h)  Covenant  Complaince  Certificate.  AeroCentury  will  deliver  to the
Banks, no later than 60 days after the end of each calendar quarter, a
Covenant Compliance Certificate.

         (i) Monthly Lease Portfolio and Receivables  Report.  AeroCentury  will
deliver  to the  Banks,  no later  than 30 days  after the end of each  calendar
month, a lease portfolio listing and lease receivables aging report (in form and
substance  reasonably  satisfactory  to National City ) applicable to all leases
included in the Collateral.

         (j)  Maintenance of Current  Depreciation  Policies.  AeroCentury  will
maintain its method of  depreciating  its assets  substantially  consistent with
past  practices as set forth in Exhibit E and will  promptly  notify the Bank of
any deviation from such practices.

         5.2.  Corporate  Existence.  Preserve its  corporate  existence and all
material franchises,  licenses, patents, copyrights,  trademarks and trade names
consistent with good business practice; and maintain,  keep, and preserve all of
its properties  (tangible and intangible)  necessary or useful in the conduct of
its  business  in good  working  order  and  condition,  ordinary  wear and tear
excepted.

               5.3. ERISA.  Comply in all material  respects with the provisions
               of ERISA to the extent  applicable to any Plan maintained for the
               employees of AeroCentury or any ERISA  Affiliate;  do or cause to
               be done all such acts and things  that are  required  to maintain
               the  qualified  status of each Plan and tax exempt status of each
               trust  forming  part  of  such  Plan;   not  incur  any  material
               accumulated  funding  deficiency (within the meaning of ERISA and
               the  regulations   promulgated   thereunder),   or  any  material
               liability to the PBGC (as  established by ERISA);  not permit any
               event to occur as described in Section 4042 of ERISA or which may
               result in the  imposition of a lien on its  properties or assets;
               notify  the Banks in  writing  promptly  after it has come to the
               attention of senior management of AeroCentury of the assertion or
               threat of any  "reportable  event" or other  event  described  in
               Section 4042 of ERISA  (relating  to the  soundness of a Plan) or
               the PBGC's ability to assert a material  liability  against it or
               impose a lien on its,  or any ERISA  Affiliates',  properties  or
               assets; and refrain from engaging in any Prohibited  Transactions
               or actions  causing  possible  liability  under  Section  5.02 of
               ERISA.

         5.4.  Compliance  with  Regulations.  Comply in all material  respects
with all  Regulations  applicable to its business,  the noncompliance with which
 reasonably could have a Material Adverse Effect.

         5.5. Conduct of Business; Permits and Approvals,  Compliance with Laws.
Continue to engage in an efficient  and  economical  manner in a business of the
same general type as conducted by it on the date of this Agreement;  maintain in
full force and effect, its franchises,  and all licenses,  patents,  trademarks,
trade names,  contracts,  permits,  approvals and other rights  necessary to the
profitable conduct of its business.

         5.6.  Maintenance of Insurance.  Maintain  insurance  with  financially
sound and  reputable  insurance  companies or  associations  in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar  business  and  similarly  situated,  which  insurance  may  provide for
reasonable deductibility from coverage thereof.

<PAGE>

         5.7. Payment of Debt;  Payment of Taxes, Etc. Where the amount involved
exceeds $250,000 or where the non-payment or non-discharge  would otherwise have
a Material Adverse Effect on AeroCentury or any of its assets:  promptly pay and
discharge  (a) all of its Debt in  accordance  with the terms  thereof;  (b) all
taxes,  assessments,  and governmental charges or levies imposed upon it or upon
its income and profits,  upon any of its property,  real,  personal or mixed, or
upon any part thereof,  before the same shall become in default;  (c) all lawful
claims for labor,  materials and supplies or otherwise,  which, if unpaid, might
become a lien or  charge  upon  such  property  or any part  thereof;  provided,
however, that so long as AeroCentury first notifies National City, as the Agent,
of its  intention  to do  so,  AeroCentury  shall  not be  required  to pay  and
discharge any such Debt, tax,  assessment,  charge, levy or claim so long as the
failure  to so pay or  discharge  does not  constitute  or result in an Event of
Default or a Potential  Default hereunder and so long as no foreclosure or other
similar  proceedings shall have been commenced against such property or any part
thereof and so long as the validity  thereof shall be contested in good faith by
appropriate  proceedings  diligently  pursued and it shall have set aside on its
books adequate reserves with respect thereto.

         5.8. Notice of Events.  Promptly upon discovery of any of the following
events,  AeroCentury  shall provide telephone notice to National City (confirmed
within three (3) calendar days by written notice),  describing the event and all
action AeroCentury proposes to take with respect thereto:

(a) an Event of Default or Potential  Default under this  Agreement or any other
Loan Document;

         (b) any default or event of default  under a contract or contracts  and
the default or event of default involves payments by AeroCentury in an aggregate
amount equal to or in excess of $250,000;

         (c) a default or event of default  under or as defined in any  evidence
of or agreements for Recourse Funded Debt under which AeroCentury's liability is
equal to or in excess of $250,000,  singularly or in the  aggregate,  whether or
not an event  of  default  thereunder  has been  declared  by any  party to such
agreement or any event which,  upon the lapse of time or the giving of notice or
both, would become an event of default under any such agreement or instrument or
would  permit any party to any such  instrument  or  agreement  to  terminate or
suspend any commitment to lend to AeroCentury or to declare or to cause any such
indebtedness to be accelerated or payable before it would otherwise be due;

         (d) the institution of, any material adverse  determination  in, or the
entry of any default  judgment or order or stipulated  judgment or order in, any
suit, action,  arbitration,  administrative proceeding,  criminal prosecution or
governmental   investigation   against   AeroCentury  in  which  the  amount  in
controversy is in excess of $250,000, singularly or in the aggregate; or

         (e)  any  change  in any  Regulation,  including,  without  limitation,
changes in tax laws and regulations, which would have a Material Adverse Effect.

<PAGE>

         5.9.  Inspection  Rights;  Collateral  Appraisal.  At any  time  during
regular  business  hours and as often as  requested of  AeroCentury  by National
City,  permit  National City or any Bank, or any authorized  officer,  employee,
agent, or  representative  of any of them to examine and make abstracts from the
records and books of account of AeroCentury,  wherever located, and to visit the
properties of AeroCentury; and to discuss the affairs, finances, and accounts of
AeroCentury with its chief executive  officer,  chief operating  officer,  chief
financial officer or independent accountants.  In addition,  National City shall
cause an appraisal and audit of the  Collateral  to be made annually  commencing
with the  Fiscal  Year  ending  December  31,  2001.  If no Event of  Default or
Potential Default shall be in existence,  AeroCentury  shall reimburse  National
City for the  reasonable  expense of the  Collateral  appraisal and audit not to
exceed  $7,500 in any  calendar  year  whether the  examination  is performed by
National City or a third party  approved by National  City. If any inspection or
collateral  appraisal  and  audit  shall be made  during  the  continuance  of a
Potential Default or an Event of Default,  AeroCentury shall reimburse  National
City for the reasonable  expense of such inspection or collateral  appraisal and
audit without  limit.  At all times,  it is understood and agreed by AeroCentury
that all expenses in connection with any such  inspection  which may be incurred
by  AeroCentury,  any  officers  and  employees  thereof and the  attorneys  and
independent  certified public accountants  therefor shall be expenses payable by
AeroCentury and shall not be expenses of the Banks.

     5.10. Generally Accepted Accounting Principles.  Maintain books and records
at all times in accordance with Generally Accepted Accounting Principles.

         5.11.  Compliance  with  Material  Contracts.  It  will  comply  in all
material  respects with all  obligations,  terms,  conditions and covenants,  as
applicable,  in all Debt  applicable to it and all  instruments  and  agreements
related thereto, and all other instruments and agreements to which it is a party
or by which it is bound or any of its  properties  is affected and in respect of
which the failure to comply reasonably could have a Material Adverse Effect.

         5.12. Use of Proceeds.  AeroCentury  will use the proceeds of each Loan
for (a) the purchase or  financing  of  Equipment  to be leased to  unaffiliated
persons and the warehouse financing of the lease of that Equipment,  (b) working
capital needs, and/or (c) general corporate purposes.

         5.13. Further  Assurances.  Do such further acts and things and execute
and  deliver to  National  City,  as the  Agent,  such  additional  assignments,
agreements,  powers  and  instruments,  as the Banks may  reasonably  require or
reasonably deem advisable to carry into affect the purposes of this Agreement or
to better  assure and confirm unto the Banks their  rights,  powers and remedies
hereunder.

         5.14.  Restrictive  Covenants  in Other  Agreements.  In the event that
AeroCentury  shall be or become  subject  to or  suffer  to exist any  agreement
pertaining  to Debt  which  contains  covenants  or  restrictions  that are more
restrictive  on it  than  the  covenants  and  restrictions  contained  in  this
Agreement,  each and  every  such  covenant  and  restriction  shall  be  deemed
incorporated  herein by reference as fully as if set forth herein for so long as
and in such form as such covenants or  restrictions  shall remain in effect.  If
and to the extent that any such covenant or  restriction  shall be  inconsistent
with or otherwise  be in conflict  with any  covenant or  restriction  set forth
herein  (other  than by reason of its being more  restrictive),  this  Agreement
shall govern.

                                                6. Negative Covenants

         AeroCentury  covenants  and  agrees  that,  without  the prior  written
consent of the Required Banks, from and after the date hereof and so long as the
Revolving Loan  Commitments  are in effect or any  Obligation  remains unpaid or
outstanding, it will not:

<PAGE>

         6.1.  Merger,  Consolidation.  Merge  or  consolidate  with or into any
corporation  except,  if no  Potential  Default or Event of  Default  shall have
occurred and be continuing either  immediately prior to or upon the consummation
of such  transaction,  any  Person  may be merged  into  AeroCentury  as long as
AeroCentury is the surviving entity.

     6.2. Debt. Create,  assume or permit to exist any Debt except for Permitted
Debt.

     6.3.  Liens.  Create,  assume  or  permit  to exist  any Lien on any of it
property or assets,  whether now owned or hereafter acquired, or upon any income
or profits therefrom, except Permitted Liens.

         6.4.  Guarantees.  Guarantee  or  otherwise  in any  way  become  or be
responsible  for   indebtedness  or  obligations   (including   working  capital
maintenance,  take-or-pay  contracts)  of  any  other  Person,  contingently  or
otherwise,  other than guarantees in the nature of performance  guarantees which
arise in the ordinary course of AeroCentury's business.

         6.5. Margin Stock.  Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate,  of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.

         6.6. Acquisitions and Investments.  Except as may arise in the ordinary
course of AeroCentury's aircraft leasing business, purchase or otherwise acquire
(including  without  limitation by way of share  exchange) any part or amount of
the capital stock or assets of, or make any Investments in any other Person;  or
enter into any new business  activities or ventures not directly  related to its
present business;  or create any Subsidiary,  except (a) it may acquire and hold
stock, obligations or securities received in settlement of debts (created in the
ordinary  course  of  business)  owing  to it,  (b)  it may  make  and  own  (i)
Investments in  certificates  of deposit or time deposits  having  maturities in
each case not exceeding one year from the date of issuance thereof and issued by
a Bank, or any FDIC-insured commercial bank incorporated in the United States or
any  state  thereof  having a  combined  capital  and  surplus  of not less than
$150,000,000,  (ii)  Investments  in  marketable  direct  obligations  issued or
unconditionally  guaranteed by the United States of America, any agency thereof,
or backed by the full faith and credit of the United States of America,  in each
case maturing within one year from the date of issuance or acquisition  thereof,
(iii)  Investments in commercial  paper issued by a corporation  incorporated in
the United States or any State  thereof  maturing no more than one year from the
date of issuance thereof and, at the time of acquisition, having a rating of A-1
(or  better) by  Standard  & Poor's  Corporation  or P-1 (or  better) by Moody's
Investors  Service,  Inc., and (iv) investments in money market mutual funds all
of the assets of which are  invested  in cash or  investments  described  in the
immediately preceding clauses (i), (ii) and (iii), (c) it may acquire all of the
outstanding  capital stock or assets of Jetfleet  Management Corp., a California
corporation  ("JMC"),  under substantially the terms and conditions set forth in
that  certain  Amended  and  Restated  Management   Agreement  (the  "Management
Agreement")  between  AeroCentury and JMC entered into as of April 23, 1998, and
(d) it may  acquire  and hold  capital  stock of or  interests  in  Unrestricted
Subsidiaries.

<PAGE>

         6.7. Transfer of Assets;  Nature of Business.  Sell, transfer,  pledge,
assign or otherwise dispose of any of its assets unless such sale or disposition
shall  be in the  ordinary  course  of  its  business  for  value  received;  or
discontinue, liquidate or change in any material respect any substantial part of
its  operations  or business.  Sales of individual or small groups of leases and
related  equipment  from  time  to  time  and  sales  of  groups  of  leases  in
securitization   transactions   and  transfers  of  assets  in  connection  with
non-recourse financing transactions shall be deemed to be in the ordinary course
of the business of AeroCentury.  Notwithstanding the foregoing and provided that
no Potential  Default or Event of Default  shall have occurred and be continuing
either  immediately  prior  to or  upon  the  consummation  of any  transaction,
AeroCentury  may sell,  transfer  or  dispose of assets  constituting  up to ten
percent (10%) of its total assets during any period of twelve months.

         6.8. Restricted  Payments.  Declare or pay any cash dividends or redeem
or retire any shares of the outstanding  capital stock of AeroCentury,  provided
however,  if no Event of Default or Potential Default exists either  immediately
prior to or would  exist  immediately  following,  cash  dividends,  redemptions
nd/or  retirements  may be made in an aggregate  amount not in excess of 50% of
Net Income earned in the immediately  preceding  Fiscal Year as disclosed in the
financial statements delivered pursuant to Section 5.1(a) hereof.

6.9.  Accounting  Change.  Make or permit  any  change in  financial  accounting
policies or  financial  reporting  practices,  except as  required by  Generally
Accepted  Accounting  Principles or  regulations  of the Securities and Exchange
Commission, if applicable.

         6.10.   Transactions  with  Affiliates.   Enter  into  any  transaction
(including,  without limitation, the purchase, sale or exchange of property, the
rendering of any services or the payment of management fees) with any Affiliate,
except  transactions  in the ordinary  course of, and pursuant to the reasonable
requirements  of its  business,  including the payment of standard and customary
brokerage  fees,   provided  such  transactions  are  in  good  faith  and  upon
commercially reasonable terms. Sales of individual or small groups of leases and
related  equipment  from  time  to  time  and  sales  of  groups  of  leases  in
securitization  transactions  and/or  other  sales of assets to an  Unrestricted
Subsidiary  shall be deemed to be in the  ordinary  course  of the  business  of
AeroCentury.  Management  fees  paid to JMC in  accordance  with the  Management
Agreement as in effect on April 23, 1998 shall be permitted hereunder.

         6.11.  Restriction  on  Amendment  of  this  Agreement.  Enter  into or
otherwise become subject to or suffer to exist any agreement which would require
it to obtain the consent of any other  person as a  condition  to the ability of
the Banks and AeroCentury to amend or otherwise modify this Agreement.

                                               7. Financial Covenants

         AeroCentury  covenants  and agrees  that from and after the date hereof
and so long as the Revolving  Loan  Commitments  are in effect or any Obligation
remains  unpaid  or  outstanding,  it  will  maintain  the  following  financial
covenants:

         7.1.  Minimum  Tangible  Net Worth.  Tangible Net Worth will not at any
time be less  than  the sum of (i)  $16,321,530,  (ii) 50% Net  Income  for each
Fiscal  Quarter  ending  after March 31,  2000,  without  deduction  for any net
losses,  (iii) 50% of the net proceeds from any sale of equity  securities after
the  date of this  Agreement,  and (iv)  50% of the  fair  value  of any  equity
securities  issued  after  the date of this  Agreement  in  connection  with any
acquisition permitted hereunder or by waiver hereto.

7.2.  Debt Service  Coverage  Ratio.  The ratio of EBTDA to Debt Service for the
four (4) most recently ended consecutive Fiscal Quarters will not at any time be
less than 1.1:1.

<PAGE>

7.3.  Recourse  Funded Debt to Tangible Net Worth.  The ratio of Recourse Funded
Debt (including Recourse Funded Debt time exceed 4.0:1.

7.4.  Absence of Net Loss. It will not suffer a net loss for any two consecutive
Fiscal Quarters or two Fiscal Quarters in any Fiscal Year.

         7.5.   Borrowing  Base.  The  aggregate   principal   amount  of  Loans
outstanding  shall not at any time exceed the  Borrowing  Base or the  Aggregate
Revolving  Loan  Commitment,  whichever is less;  provided,  however,  that this
covenant  shall not be deemed  breached  if, at the time such  aggregate  amount
exceeds  said level,  within three  Business  Days after the earlier of the date
AeroCentury first has knowledge of such excess or the date of the next Borrowing
Base Certificate  disclosing the existence of such excess, a prepayment of Loans
shall be made in an amount  sufficient to assure continued  compliance with this
covenant in the future.

                                                    8. Default

8.1.  Events of Default.  AeroCentury  shall be in default if any one or more of
the following events (each an "Event of Default") occurs:

         (a) Payments. AeroCentury fails to pay (1) any principal of or interest
         on the Notes when due and payable  (whether at  maturity,  by notice of
         intention to prepay,  or  otherwise),  or (2) any other amount  payable
         under any Loan  Document  when it is due and payable,  and such failure
         shall  continue  in either case for a period of five  Business  Days or
         more.

        (b) Covenants.  AeroCentury  fails to observe or perform (1)
        any   term,    condition    or   covenant   set   forth   in
        Sections.5.1(a),  5.1(b),  5.1(c), 5.1(g), 5.1(h) or 5.1(j),
        Section 5.2 (first clause only),  all sections of Articles 6
        and 7 or  Section  8.1(a)  of this  Agreement,  as and  when
        required,  or (2) any term,  condition or covenant contained
        in this  Agreement or any other Loan Document  other than as
        set  forth  in (1)  above,  as and  when  required  and such
        failure  shall  continue for a period of 10 Business Days or
        more.

         (c) Representations, Warranties. Any representation or warranty made or
         deemed to be made by  AeroCentury  herein or in any Loan Document or in
         any exhibit,  schedule, report or certificate delivered pursuant hereto
         or thereto  shall prove to have been false,  misleading or incorrect in
         any material respect when made or deemed to have been made.

         (d)  Bankruptcy.  AeroCentury  is  dissolved  or  liquidated,  makes an
         assignment   for  the  benefit  of  creditors,   files  a  petition  in
         bankruptcy, is adjudicated insolvent or bankrupt,  petitions or applies
         to any tribunal for any receiver or trustee,  commences any  proceeding
         relating to itself under any bankruptcy,  reorganization,  readjustment
         of debt, dissolution or liquidation law or statute of any jurisdiction,
         has commenced against it any such proceeding which remains  undismissed
         for a period of sixty (60) days, or indicates its consent to,  approval
         of or  acquiescence  in any  such  proceeding,  or any  receiver  of or
         trustee for  AeroCentury  or any  substantial  part of the  property of
         AeroCentury is appointed,  or if any such  receivership  or trusteeship
         continues undischarged for a period of sixty (60) days.

<PAGE>

         (e) Certain Other Defaults.  (1) AeroCentury shall fail to pay when due
         any Recourse Funded Debt which singularly  exceeds $250,000,  or in the
         aggregate exceeds $250,000,  and such failure shall continue beyond any
         applicable cure period,  or (2)  AeroCentury  shall suffer to exist any
         default or event of default in the  performance or observance,  subject
         to any applicable grace period,  of any agreement,  term,  condition or
         covenant with respect to any agreement or document relating to Recourse
         Funded Debt if the effect of such default is to permit, with the giving
         of notice or  passage  of time or both,  the  holders  thereof,  or any
         trustee  or  agent  for said  holders,  to  terminate  or  suspend  any
         commitment  (which  is  equal  to or  in  excess  of  $250,000  in  any
         individual case or $250,000 in the aggregate) to lend money or to cause
         or declare any portion of any  borrowings  thereunder to become due and
         payable  prior  to the date on  which  it  would  otherwise  be due and
         payable,  or (3) any  default  shall  exist  under any Swap  Agreement;
         provided that during any applicable cure period the Banks'  obligations
         hereunder to make further Loans shall be suspended.

         (f) Judgments.  Any judgments against AeroCentury or against its assets
         or property for amounts in excess of $1,000,000 in the aggregate remain
         unpaid, unstayed on appeal, undischarged,  unbonded and undismissed for
         a period of thirty (30) days.

         (g)  Attachments.  Any  assets  of  AeroCentury  shall  be  subject  to
         attachments,   levies,   or  garnishments  for  amounts  in  excess  of
         $1,000,000 in the aggregate  which have not been dissolved or satisfied
         within thirty (30) days after service of notice thereof to AeroCentury.

     (h)  Change in  Management.  Neal D.  Crispin,  Toni M. Perazzo and Marc J.
          Anderson  shall cease to be executive  officers of  AeroCentury or JMC
          shall  cease  to  be  the  management   company  for   AeroCentury  as
          contemplated by the Management Agreement dated as of April 23, 1998.

         (i) Security  Interests.  Any security interest created pursuant to any
         Loan  Document  shall  cease to be in full force and  effect,  or shall
         cease in any  material  respect to give the Bank,  the  Liens,  rights,
         powers  and  privileges  purported  to be created  thereby  (including,
         without limitation,  a perfected security interest in, and Lien on, all
         of the  Collateral),  superior  to and prior to the rights of all third
         Persons, and subject to no other Liens (except as permitted by Section
         6.3).

     (j)  Material  Adverse  Change.  Any  Material  Adverse  Change  shall have
          occurred.

<PAGE>

                    THEN and in every such event  other than that  specified  in
                    Section  8.1(d),  National  City,  as Agent  may,  or at the
                    written  request of the Required  Banks  shall,  immediately
                    terminate the  Revolving  Loan  Commitments  and declare the
                    Notes  and  all   other   Obligations,   including   without
                    limitation  accrued  interest but excluding  any  obligation
                    under any Swap Agreement then in existence,  to be, and they
                    shall  thereupon  forthwith  become due and payable  without
                    presentment, demand, or notice of any kind, all of which are
                    hereby expressly waived by AeroCentury.  Upon the occurrence
                    of any event specified in Section 8.1(d), the Revolving Loan
                    Commitments shall automatically  terminate and the Notes and
                    all other Obligations,  including without limitation accrued
                    interest  but  excluding  any  obligation   under  any  Swap
                    Agreement  then in existence,  shall  immediately be due and
                    payable without presentment, demand, protest or other notice
                    of any kind,  all of which are  hereby  expressly  waived by
                    AeroCentury.  Any date on which  the  Notes  and such  other
                    obligations  are declared  due and payable  pursuant to this
                    Section  8.1  shall  be the  Revolver  Termination  Date for
                    purposes of this Agreement. From and after the date an Event
                    of Default  shall have  occurred and for so long as an Event
                    of  Default  shall  be  continuing,  the  Loans  shall  bear
                    interest  at the  Default  Rate  whether  or not a  Revolver
                    Termination Date shall have occurred.

                                                      9. Agent

         9.1.  Appointment  and  Authorization.  Each  Bank  hereby  irrevocably
appoints and  authorizes  National  City,  as Agent,  to take such action on its
behalf and to exercise such powers under this  Agreement and the Loan  Documents
as are  specifically  delegated  to it as Agent by the terms  hereof or thereof,
together  with such  other  powers as are  reasonably  incidental  thereto.  The
relationship  between National City and each Bank has no fiduciary aspects,  and
National  City's  duties  as  Agent  hereunder  are   acknowledged  to  be  only
ministerial and not involving the exercise of discretion on its part. Nothing in
this  Agreement  or any Loan  Document  shall be construed to impose on National
City any duties or responsibilities other than those for which express provision
is made herein or therein.  In performing  its duties and  functions  hereunder,
National  City does not  assume  and shall  not be deemed to have  assumed,  and
hereby  expressly  disclaims,  any  obligation  with or for  AeroCentury.  As to
matters not  expressly  provided  for in this  Agreement  or any Loan  Document,
National  City shall not be required to exercise any  discretion  or to take any
action or communicate  any notice,  but shall be fully protected in so acting or
refraining  from acting upon the  instructions  of the Required  Banks and their
respective  successors and assigns;  provided,  however,  that in no event shall
National  City be  required  to take any action  which  exposes  it to  personal
liability  or  which  is  contrary  to this  Agreement,  any  Loan  Document  or
applicable  law,  and  National  City  shall be fully  justified  in  failing or
refusing  to take any action  hereunder  unless it shall  first be  specifically
indemnified to its  satisfaction  by the Banks against any and all liability and
expense  which may be incurred by it by reason of taking or omitting to take any
such action.  If an indemnity  furnished to National City for any purpose shall,
in its reasonable opinion, be insufficient or become impaired, National City may
call for additional indemnity from the Banks and not commence or cease to do the
acts for which such indemnity is requested  until such  additional  indemnity is
furnished.

<PAGE>

         9.2.  Duties and  Obligations.  In performing  its functions and duties
hereunder on behalf of the Banks, National City shall exercise the same care and
skill as it would  exercise in dealing with loans for its own  account.  Neither
National  City nor any of its  directors,  officers,  employees  or other agents
shall be liable for any action  taken or omitted to be taken by it or them under
or in  connection  with this  Agreement or any Loan  Document  except for its or
their  own  gross  negligence  or  willful  misconduct.   Without  limiting  the
generality  of the  foregoing,  National City (a) may consult with legal counsel
and other experts selected by it and shall not be liable for any action taken or
omitted  to be taken by it in good  faith and in  accordance  with the advice of
such  experts;  (b) makes no  representation  or warranty to any Bank as to, and
shall not be responsible to any Bank for, any recital, statement, representation
or warranty made in or in connection with this  Agreement,  any Loan Document or
in  any  written  or  oral  statement  (including  a  financial  or  other  such
statement),  instrument or other  document  delivered in connection  herewith or
therewith  or furnished  to any Bank by or on behalf of  AeroCentury;  (c) shall
have  no  duty  to  ascertain  or  inquire  into  AeroCentury's  performance  or
observance of any of the covenants or conditions  contained herein or to inspect
any of the property  (including the books and records) of AeroCentury or inquire
into the use of the  proceeds  of the  Revolving  Credit  Loans or  (unless  the
officers of National City active in their  capacity as officers of National City
on AeroCentury's  account have actual knowledge thereof or have been notified in
writing  thereof) to inquire  into the  existence  or possible  existence of any
Event of Default or Potential Default;  (d) shall not be responsible to any Bank
for  the  due  execution,  legality,  validity,  enforceability,  effectiveness,
genuineness, sufficiency, collectability or value of this Agreement or any other
Loan Document or any instrument or document  executed or issued  pursuant hereto
or in  connection  herewith,  except to the extent that such may be dependent on
the due  authorization  and  execution by National  City  itself;  (e) except as
expressly  provided  herein in  respect of  information  and data  furnished  to
National  City  for   distribution   to  the  Banks,   shall  have  no  duty  or
responsibility,  either  initially or on a continuing  basis,  to provide to any
Bank any credit or other information with respect to AeroCentury, whether coming
into its  possession  before  the  making  of the  Loans or at any time or times
thereafter;  and (f)  shall  incur  no  liability  under or in  respect  of this
Agreement or any other Loan  Document for, and shall be entitled to rely and act
upon, any notice, consent, certificate or other instrument or writing (which may
be by  facsimile  (telecopier),  telegram,  cable,  or other  electronic  means)
believed  by it to be genuine and correct and to have been signed or sent by the
proper party or parties.

         9.3.  National City Bank as a Bank.  With respect to its Revolving Loan
Commitment and the Loans made and to be made by it, National City shall have the
same rights and powers under this  Agreement and all other Loan Documents as the
other  Banks and may  exercise  the same as if it were not the Agent.  The terms
"Bank" and "Banks" as used herein shall, unless otherwise  expressly  indicated,
include  National  City  in its  individual  capacity.  National  City  and  any
successor Agent which is a commercial bank, and their respective affiliates, may
accept  deposits  from,  lend money to, act as trustee  under  indentures of and
generally  engage in any kind of business with,  AeroCentury  and its affiliates
from  time to time,  all as if such  entity  were not the  Agent  hereunder  and
without any duty to account therefor to any Bank.

         9.4.  Independent Credit Decisions.  Each Bank acknowledges to National
City that it has,  independently  and without reliance upon National City or any
other  Bank,  and based upon such  documents  and  information  as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this  Agreement.  Each Bank also  acknowledges  that it will,  independently  or
through other advisers and  representatives  but without  reliance upon National
City or any other Bank,  and based upon such  documents  and  information  as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or  refraining  from taking any action  under this  Agreement or any Loan
Document.

         9.5.  Indemnification.  The Banks agree to indemnify  National City (to
the extent not previously  reimbursed by AeroCentury),  ratably in proportion to
each Bank's  Commitment  Percentage,  from and against any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses and disbursements of any kind or nature whatsoever which may be imposed
on,  incurred by or asserted  against  National City in its capacity as Agent in
any way relating to or arising out of this Agreement or any Loan Document or any
action  taken or omitted to be taken by National  City in its  capacity as Agent
hereunder or under any Loan  Document;  provided that none of the Banks shall be
liable  for any  portion  of such  liabilities,  obligations,  losses,  damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from National City's gross  negligence or willful  misconduct.  Without limiting
the  generality of the foregoing,  each Bank agrees to reimburse  National City,
promptly on demand,  for such Bank's  ratable  share  (based upon the  aforesaid
apportionment)  of  any  out-of-pocket  expenses  (including  counsel  fees  and
disbursements)  incurred by National  City in connection  with the  preparation,
execution,  administration  or enforcement of, or the preservation of any rights
under, this Agreement and the Loan Documents to the extent that National City is
not reimbursed for such expenses by AeroCentury.

<PAGE>

         9.6.  Successor  Agent.  National City may resign at any time by giving
written  notice  of  such  resignation  to  the  Banks  and  AeroCentury,   such
resignation  to be effective only upon the  appointment of a successor  Agent as
hereinafter  provided.  Upon any such  notice of  resignation,  the Banks  shall
jointly  appoint a  successor  Agent  upon  written  notice to  AeroCentury  and
National City. If no successor  Agent shall have been jointly  appointed by such
Banks and shall have  accepted  such  appointment  within thirty (30) days after
National  City shall have given notice of  resignation,  National City may, upon
notice to  AeroCentury  and the  Banks,  appoint  a  successor  Agent.  Upon its
acceptance of any  appointment  as Agent  hereunder,  the successor  Agent shall
succeed to and become vested with all the rights, powers,  privileges and duties
of National  City,  and National  City shall be  discharged  from its duties and
obligations as Agent under this Agreement and the Loan Documents. After National
City's resignation  hereunder,  the provisions hereof shall inure to its benefit
as to any  actions  taken or  omitted  to be taken by it while it was the  Agent
under this Agreement and the Loan Documents.

                                                  10. Miscellaneous

         10.1.  Waiver.  No failure or delay on the part of National City or any
Bank or any holder of any Note in  exercising  any right,  power or remedy under
any Loan  Document  shall operate as a waiver  thereof;  nor shall any single or
partial  exercise  of any such  right,  power or  remedy  preclude  any other or
further  exercise  thereof or the exercise of any other  right,  power or remedy
under any Loan  Document.  The remedies  provided  under the Loan  Documents are
cumulative and not exclusive of any remedies provided by law.

         10.2. Amendments. No amendment, modification,  termination or waiver of
any Loan Document or any  provision  thereof nor any consent to any departure by
AeroCentury  therefrom  shall be  effective  unless  the same  shall  have  been
approved  in  writing by the  Required  Banks,  be in  writing  and be signed by
National  City and  AeroCentury,  and then any such  waiver or consent  shall be
effective only in the instance and for the specific  purpose for which given. No
notice to or demand on  AeroCentury  shall entitle  AeroCentury  to any other or
further notice or demand in similar or other circumstances.  Notwithstanding any
other  provision  contained in any Loan  Document,  no amendment,  modification,
termination or waiver shall affect the payment of principal  (including  without
limitation  the date when  due),  reduce  any  interest  rate  margin or any fee
provided  herein,  increase any Revolving Loan  Commitment,  extend the Revolver
Termination  Date,  modify  the  definitions  of  "Borrowing  Base",   "Eligible
Collateral",  "Eligible  Lease" or "Required  Banks" or any voting rights of the
Banks   without  the  written   consent  of  all  the  Banks.   The  rights  and
responsibilities  of  National  City as the Agent  hereunder  cannot be  changed
without its prior written consent.

10.3.  Governing Law. The Loan  Documents and all rights and  obligations of the
parties  thereunder  shall be  governed  by and be  construed  and  enforced  in
accordance with the laws of the  Commonwealth of Pennsylvania  without regard to
Pennsylvania or federal principles of conflict of laws.

<PAGE>

         10.4.  Participations and Assignments.  AeroCentury hereby acknowledges
and agrees that any Bank may at any time: (a) grant participations in all or any
portion of its Note or of its right, title and interest therein or in or to this
Agreement (collectively, "Participations") to any other lending office or to any
other  bank,  lending  institution  or  other  entity  which  has the  requisite
sophistication to evaluate the merits and risks of investments in Participations
("Participants");   provided,   however,   that:  (i)  all  amounts  payable  by
AeroCentury   shall  be  determined  as  if  such  Bank  had  not  granted  such
Participation;  and  (ii) any  agreement  pursuant  to which a Bank may  grant a
Participation;  (x) shall provide that such Bank shall retain the sole right and
responsibility  to enforce the  obligations  of AeroCentury  including,  without
limitation,  the right to approve any amendment,  modification  or waiver of any
provisions of this Agreement;  (y) such participation agreement may provide that
such  Bank  will not  agree to any  modification,  amendment  or  waiver of this
Agreement without the consent of the Participant if such modification, amendment
or waiver  would  reduce the  principal  of or rate of  interest  on any Loan or
postpone the date fixed for any payment of principal of or interest on any Loan;
and (z) shall not relieve  such Bank from its  obligations,  which shall  remain
absolute,  to make Loans hereunder;  and (b) each Bank may assign all or part of
its Note and its  Revolving  Credit  Commitment  (but only with the  consent  of
AeroCentury  and  National  City,  as the  Agent,  which  consent  shall  not be
unreasonably withheld), provided that each such assignment shall be in an amount
of at least $5,000,000  (unless,  after giving effect to such assignment and all
other such  assignments  by such  assigning  Bank  occurring  simultaneously  or
substantially  simultaneously  therewith,  such  assigning  Bank  shall  hold no
Revolving Credit Commitment or any portion of its Note hereunder); and (ii) each
such assignment by a Bank of its Note or a portion thereof,  or Revolving Credit
Commitment  or a portion  thereof  shall be made in such manner so that the same
portion of its Loans,  Note and Revolving  Credit  Commitment is assigned to the
respective assignee.  Upon execution and delivery by the assignee to AeroCentury
and National City, as the Agent,  of an instrument in writing  pursuant to which
such assignee agrees to become a "Bank" hereunder (if not already a Bank) having
the  Commitment(s)  and Note  interest  specified in such  instrument,  and upon
consent  thereto by AeroCentury  and National City, as the Agent,  to the extent
required  above,  the  assignee  shall  have,  to the extent of such  assignment
(unless  otherwise  provided in such  assignment with the consent of AeroCentury
and National City, as the Agent), the obligations, rights and benefits of a Bank
hereunder  holding the  Revolving  Credit  Commitment(s)  and Loans (or portions
thereof)  assigned to it (in addition to the Revolving Credit  Commitment(s) and
Note interest, if any, theretofore held by such assignee) and the assigning Bank
shall, to the extent of such assignment,  be released from the Commitment(s) (or
portion(s)  thereof) so assigned.  Upon each such  assignment the assigning Bank
shall pay National City as the Agent an assignment fee of $3,500.

                         10.5.  Captions.  Captions  in the Loan  Documents  are
included for  convenience  of  reference  only and shall not
constitute  a part  of  any  Loan  Document  for  any  other
purpose.

         10.6. Notices. All notices, requests, demands, directions, declarations
and other  communications  between the Banks and AeroCentury provided for in any
Loan  Document  shall,  except as  otherwise  expressly  provided,  be mailed by
registered or certified  mail,  return receipt  requested,  or  telegraphed,  or
faxed,  or delivered in hand to the  applicable  party at its address  indicated
opposite  its  name on the  signature  pages  hereto.  The  foregoing  shall  be
effective and deemed  received five (5) days after being deposited in the mails,
postage  prepaid,  addressed as aforesaid  and shall  whenever sent by telegram,
telegraph or fax or overnight  courier service or delivered in hand be effective
when received. Any party may change its address by a communication in accordance
herewith.

10.7. Sharing of Collections, Proceeds and Set-Offs; Application of Payments.

<PAGE>

           (a) If any Bank, by exercising any right of set-off,  counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Note which is greater than the percentage
share of such Bank  (determined  as set forth below),  the Bank  receiving  such
proportionately  greater payment shall purchase such participations in the Loans
held by the other  Banks,  and such  other  adjustments  shall be made as may be
required, so that all such payments shall be shared by the Banks on the basis of
their  percentage  shares;   provided  that  if  all  or  any  portion  of  such
proportionately  greater payment of such  indebtedness  is thereafter  recovered
from, or must otherwise be restored by, such purchasing Bank, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without  interest being paid by such  purchasing  Bank. The percentage  share of
each Bank shall be based on the  portion of the  outstanding  Loans of such Bank
(prior to receiving any payment for which an adjustment  must be made under this
Section)  in  relation  to the  aggregate  outstanding  Loans of all the  Banks.
AeroCentury  agrees,  to the  fullest  extent  it may  effectively  do so  under
applicable  law, that any holder of a participation  in a Loan or  reimbursement
obligation,  whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation  as  fully  as if such  holder  of a  participation  were a direct
creditor  of  AeroCentury  in the  amount  of such  participation.  If under any
applicable  bankruptcy,  insolvency  or other  similar law, any Bank  receives a
secured claim in lieu of a set-off to which this Section would apply,  such Bank
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner  consistent  with the rights of the Banks  entitled under this
Section to share in the benefits of any recovery on such secured claim.

           (b) If an Event of Default or Potential  Default  shall have occurred
and be  continuing  the  Agent  and each  Bank and  AeroCentury  agree  that all
payments  on account of the Loans shall be applied by the Agent and the Banks as
follows:

              First,  to the Agent for any Agent fees then due and payable under
              this Agreement until such fees are paid in full;

              Second,  to the  Agent  for  any  fees,  costs  or  expenses
              (including  expenses  described in Section 10.8) incurred by
              the Agent under any of the Loan Documents or this Agreement,
              then due and payable and not  reimbursed by  AeroCentury  or
              the Banks until such fees,  costs and  expenses  are paid in
              full;

              Third, to the Banks for their percentage  shares of the Commitment
              Fee then due and payable  under this  Agreement  until such fee is
              paid in full;

              Fourth,  to the Banks for their  respective  shares of all  costs,
              expenses and fees then due and payable from AeroCentury until such
              costs, expenses and fees are paid in full;

              Fifth,  to the Banks for their  percentage  shares of all interest
              then due and payable from AeroCentury  until such interest is paid
              in  full,   which   percentage   shares  shall  be  calculated  by
              determining each Bank's  percentage share of the amounts allocated
              in (a) above determined as set forth in said clause (a); and

              Sixth, to the Banks for their  percentage  shares of the aggregate
              principal   amount  of  the  Loans  then  due  and  payable   from
              AeroCentury  and  any  Obligations  of  AeroCentury  under  or  in
              connection with any Swap Agreements, which percentage shares shall
              be calculated by determining  each Bank's  percentage share of the
              aggregate of all Loans and Swap Agreement Obligations  outstanding
              at the time of the  calculation  based on the aggregate  amount of
              Loans  and  Swap  Agreement  Obligations  held  by  each  Bank  in
              proportion   to  all   Loans   and  Swap   Agreement   Obligations
              outstanding.

<PAGE>

         10.8.  Expenses;  Indemnification.  AeroCentury  will from time to time
reimburse  National  City  as  the  Agent  promptly  following  demand  for  all
reasonable out-of-pocket expenses (including the reasonable fees and expenses of
legal counsel) in connection with (i) the preparation of the Loan Documents (not
to exceed $25,000),  (ii) the making of any Loans,  (iii) the  administration or
revision of the Loan Documents,  and (iv) the enforcement of the Loan Documents;
and reimburse the Banks for all  reasonable  out-of-pocket  expenses  (including
reasonable   fees  and  expenses  of  legal  counsel)  in  connection  with  the
enforcement of the Loan  Documents.  In addition to the payment of the foregoing
expenses,  AeroCentury  hereby agrees to indemnify,  protect and hold the Agent,
each Bank and any holder of each Note and the  officers,  directors,  employees,
agents,  affiliates  and  attorneys  of the  Agent,  each  Bank and such  holder
(collectively,  the  "Indemnitees")  harmless  from  and  against  any  and  all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses and disbursements of any kind or nature,  including  reasonable
fees and  expenses of legal  counsel,  which may be imposed on,  incurred by, or
asserted against such Indemnitee by AeroCentury or other third parties and arise
out of or relate to this  Agreement  or the other  Loan  Documents  or any other
matter whatsoever related to the transactions  contemplated by or referred to in
this Agreement or the other Loan Documents;  provided, however, that AeroCentury
shall have no  obligation  to an  Indemnitee  hereunder  to the extent  that the
liability  incurred  by such  Indemnitee  has  been  determined  by a  court  of
competent  jurisdiction  to  be  the  result  of  gross  negligence  or  willful
misconduct of such Indemnitee.

10.9.   Survival  of  Warranties  and  Certain   Agreements.   All   agreements,
representations  and  warranties  made or deemed made herein  shall  survive the
execution and delivery of this Agreement,  the making of the Loans hereunder and
the  execution  and  delivery  of the  Note.  Notwithstanding  anything  in this
Agreement or implied by law to the contrary,  the  agreements of  AeroCentury in
Sections 2.1(f),  2.5(b), 2.9 and 10.8 and the agreements of the Banks set forth
in  Sections  9.1,  9.5 and 10.8 shall  survive the payment of the Loans and the
termination of this  Agreement.  This  Agreement  shall remain in full force and
effect until the repayment in full of all amounts owed by AeroCentury  under the
Notes or any other Loan Document.

         10.10. Severability. The invalidity,  illegality or unenforceability in
any  jurisdiction of any provision in or obligation  under this  Agreement,  the
Notes or other Loan Documents shall not affect or impair the validity,  legality
or  enforceability  of  the  remaining  provisions  or  obligations  under  this
Agreement,  the Notes or other Loan Documents or of such provision or obligation
in any other jurisdiction.

         10.11. Banks' Obligations Several; Independent Nature of Banks' Rights.
The obligation of each Bank hereunder is several and not joint and no Bank shall
be the agent of any other  (except to the extent the Agent is  authorized to act
as  such  hereunder).  No Bank  shall  be  responsible  for  the  obligation  or
commitment of any other Bank  hereunder.  In the event that any Bank at any time
should fail to make a Loan as herein  provided,  the other Banks, or any of them
as may then be agreed upon, at their sole option,  may make the Loan that was to
have been made by the Bank so failing to make such Loan.  Nothing  contained  in
any Loan  Document and no action taken by Agent or any Bank  pursuant  hereto or
thereto  shall  be  deemed  to  constitute  the  Banks to be a  partnership,  an
association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Bank shall be a separate and  independent  debt, and,
subject to the terms of this  Agreement,  each Bank shall be entitled to protect
and  enforce  its  rights  arising  out of this  Agreement  and it shall  not be
necessary  for any  other  Bank  to be  joined  as an  additional  party  in any
proceeding for such purpose.

          10.12. No Fiduciary Relationship. No provision in this Agreement or in
any of the  other  Loan  Documents  and no course of  dealing  between  the
parties  shall  be  deemed  to  create  any  fiduciary  duty of any Bank to
AeroCentury.

<PAGE>

         10.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. AEROCENTURY, THE
AGENT AND EACH BANK EACH  HEREBY  CONSENTS TO THE  JURISDICTION  OF ANY STATE OR
FEDERAL  COURT  LOCATED  WITHIN  THE  EASTERN   DISTRICT  OF  PENNSYLVANIA   AND
IRREVOCABLY  AGREES THAT, ANY ACTIONS OR PROCEEDINGS  ARISING OUT OF OR RELATING
TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY BE LITIGATED IN SUCH
COURTS.  EACH PARTY TO THIS AGREEMENT  ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,  THE NONEXCLUSIVE JURISDICTION OF
THE  AFORESAID  COURTS  AND  WAIVES ANY  DEFENSE  OF FORUM NON  CONVENIENT,  AND
IRREVOCABLY  AGREES TO BE BOUND BY ANY JUDGMENT  RENDERED  THEREBY IN CONNECTION
WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN DOCUMENT.

         10.14. WAIVER OF JURY TRIAL. AEROCENTURY,  THE AGENT AND EACH BANK EACH
HEREBY  WAIVES  ITS  RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS  AGREEMENT,  ANY OF THE LOAN DOCUMENTS,
OR ANY DEALINGS  BETWEEN THEM RELATING TO THE SUBJECT  MATTER OF THIS  AGREEMENT
AND THE  LENDER/BORROWER  RELATIONSHIP  ESTABLISHED  HEREBY.  THE  SCOPE OF THIS
WAIVER IS INTENDED TO BE  ALL-ENCOMPASSING  OF ANY AND ALL DISPUTES  THAT MAY BE
FILED IN ANY COURT AND THAT  RELATE TO THE SUBJECT  MATTER OF THIS  TRANSACTION,
INCLUDING  WITHOUT  LIMITATION,  CONTRACT  CLAIMS,  TORT CLAIMS,  BREACH OF DUTY
CLAIMS,  AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  AEROCENTURY,  THE AGENT
AND EACH BANK EACH ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE
TRANSACTION,  THAT EACH HAS ALREADY  RELIED ON THE WAIVER IN ENTERING  INTO THIS
AGREEMENT  AND THAT EACH WILL  CONTINUE  TO RELY ON THE WAIVER IN THEIR  RELATED
FUTURE DEALINGS.  AEROCENTURY, THE AGENT AND EACH BANK EACH FURTHER WARRANTS AND
REPRESENTS  THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,  AND THAT
EACH  KNOWINGLY  AND  VOLUNTARILY   WAIVES  ITS  JURY  TRIAL  RIGHTS   FOLLOWING
CONSULTATION  WITH LEGAL  COUNSEL.  THIS WAIVER IS  IRREVOCABLE,  AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS,  MODIFICATIONS,
REPLACEMENTS OR RESTATEMENTS  TO THIS AGREEMENT,  THE LOAN DOCUMENTS,  OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

         10.15.  Counterparts;  Effectiveness.  This Agreement and any amendment
hereto or waiver  hereof  may be signed in any number of  counterparts,  each of
which shall be an original,  with the same effect as if the  signatures  thereto
and hereto were upon the same  instrument.  This  Agreement  and any  amendments
hereto or  waivers  hereof  shall  become  effective  when the Agent  shall have
received  signed  counterparts  or notice by fax of the signature  page that the
counterpart  has been signed and is being delivered to it or facsimile that such
counterparts have been signed by all the parties hereto or thereto.

         10.16.  Use of Defined Terms.  All words used herein in the singular or
plural  shall be deemed to have been used in the  plural or  singular  where the
context or  construction  so  requires.  Any defined  term used in the  singular
preceded by "any"  shall be taken to  indicate  any number of the members of the
relevant class.

          10.17. Offsets.  Nothing in this Agreement shall be deemed a waiver or
prohibition of any Bank's right of banker's lien or offset.

<PAGE>

         10.18. Entire Agreement. This Agreement, the Notes issued hereunder and
the other Loan  Documents  constitute  the entire  understanding  of the parties
hereto as of the date  hereof  with  respect to the  subject  matter  hereof and
thereof and supersede any prior agreements, written or oral, with respect hereto
or thereto.

         10.19.  Swap  Agreements.  Notwithstanding  anything  to  the  contrary
contained  in this  Agreement,  AeroCentury  and any Bank may enter  into a swap
agreement  or swap  agreements  at any time  and  from  time to time or amend or
otherwise  modify any such  agreement  and such entry,  amendment,  modification
and/or the existence of any such agreement  shall not constitute a breach of any
provision  of this  Agreement  or any other Loan  Document,  or be in any manner
restricted by this Agreement or any other Loan Document.

         10.20.  1998 Credit  Agreement.  This Agreement shall be deemed to, and
does  hereby,  amend and  restate in its  entirety  the 1998  Credit  Agreement.
Simultaneous  with the execution and delivery of this Agreement,  the commitment
of each Bank party to the 1998 Credit  Agreement is hereby modified to be as set
forth in Exhibit A to this Agreement,  and First Union is hereby discharged from
its  duties  and  obligations  as Agent  under  the  1998  Credit  Agreement  as
contemplated  by  Article 9 of the 1998  Credit  Agreement,  except as  provided
below. Promptly following the effectiveness of this Agreement, National City, as
the Agent under this  Agreement  and as successor  Agent to First  Union,  shall
coordinate with First Union, as the predecessor  Agent, to effect the assignment
of all liens and  security  interests  currently  in effect in the name of First
Union National Bank, as Agent, to National City Bank, as successor Agent.  Until
such time as said assignments shall have been effectively completed, First Union
National Bank shall continue as an agent for the benefit of the Banks.

         10.21.  Re-Funding of Loans, Etc. Promptly  following the effectiveness
of this  Agreement,  National  City,  as the Agent under this  Agreement,  shall
coordinate  with each of the Banks (a) to provide for  funding by National  City
Bank,  in its  individual  capacity,  and  California  Bank & Trust  of Loans to
AeroCentury under this Agreement equal to the  proportionate  share of each Bank
of the aggregate principal amount of Loans then outstanding to AeroCentury based
on the Revolving  Loan  Commitment  Percentage of each Bank,  (b) to provide for
application of the proceeds of such Loans to repayment to Sanwa Bank  California
of Loans by it then in effect  such that the  Loans by it shall not  exceed  its
proportionate share based on its Revolving Loan Commitment Percentage applied to
the aggregate  principal amount of outstanding Loans by the Banks to AeroCentury
on such date,  and (c) to provide for  application of the proceeds of such Loans
to repayment to First Union National Bank of all Loans  (together with all other
amounts  payable to First Union  National Bank under or in  connection  with the
1998 Credit Agreement) by it outstanding  immediately prior to the effectiveness
of this Agreement.

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have each caused this Agreement
to be duly  executed  by their duly  authorized  representatives  as of the date
first above written.

                                                     AeroCentury Corp.

                                                     By ________________________
                                                        Name:
                                                        Title:
Notices To:
AeroCentury Corp.
1440 Chapin Avenue, #310
Burlingame, CA 94010
FAX No. (650) 696-3929
Att: Toni M. Perazzo
       Senior Vice President-Finance

                                                     NATIONAL CITY BANK

                        By ______________________________
                                Michael J. Labrum
                              Senior Vice President
Notices To:
Michael J. Labrum
Senior Vice President
National City Bank
Specialized Banking Group, Philadelphia Region
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA  19107
FAX No. (267) 256-4001

<PAGE>

                                                     CALIFORNIA BANK & TRUST

                                         By ______________________________
                                                 Thomas C. Paton, Jr.
                                                 Senior Vice President & Manager
Notices To:
Mr. Thomas C. Paton, Jr.
Senior Vice President & Manager
California Bank & Trust
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA  94104
FAX: (415) 875-1456

                                                     SANWA BANK CALIFORNIA

                                               By ______________________________
                                                     William G. Nelle, Jr.
                                                     Vice President and Manager
Notices To:
Ms. Katherine Westfall
Assistant Vice President
Sanwa Bank California
444 Market Street, 23rd Floor
San Francisco, CA 94111
FAX No. (415) 597-5435

<PAGE>

                                           Reference Table of Definitions

<TABLE>

<S>                                                                                                             <C>
definition                                                                                             page defined

1998 Credit Agreement.............................................................................................1
Additional Amount................................................................................................13
AeroCentury.......................................................................................................1
Affiliate.........................................................................................................1
Agent.............................................................................................................2
Aggregate Revolving Loan Commitment..............................................................................12
Agreement.........................................................................................................2
Alternate Base Rate...............................................................................................2
Applicable Borrowing Margin.......................................................................................2
Bank..............................................................................................................1
Banks.............................................................................................................1
Base Rate Loans...................................................................................................2
Borrowing.........................................................................................................2
Borrowing Base....................................................................................................2
Borrowing Base Certificate........................................................................................2
Business Day......................................................................................................2
Capitalized Lease.................................................................................................3
Capitalized Lease Obligations.....................................................................................3
Closing...........................................................................................................3
Closing Date......................................................................................................3
Code..............................................................................................................3
Commitment Fee...................................................................................................17
control...........................................................................................................1
Covenant Compliance Certificate...................................................................................3
Debt..............................................................................................................3
Debt Service......................................................................................................3
Default Rate......................................................................................................3
Dollars...........................................................................................................4
EBITDA............................................................................................................4
Eligible Collateral...............................................................................................4
Eligible Lease Receivables........................................................................................4
Environmental Control Statutes....................................................................................4
Equipment.........................................................................................................5
ERISA.............................................................................................................5
ERISA Affiliate...................................................................................................5
Event of Default.................................................................................................33
Federal Funds Rate................................................................................................5
First Union.......................................................................................................1
Fiscal Quarter....................................................................................................5
Fiscal Year.......................................................................................................5
GAAP..............................................................................................................5

<PAGE>

Generally Accepted Accounting Principles..........................................................................5
Governmental Authority............................................................................................5
Indemnitees......................................................................................................40
Intangible Assets.................................................................................................5
Interest Period...................................................................................................6
Investment........................................................................................................6
JMC..............................................................................................................31
Letter of Credit..................................................................................................6
LIBO Rate.........................................................................................................6
LIBO Rate Loans...................................................................................................7
LIBO Rate Reserve Percentage......................................................................................6
Lien..............................................................................................................7
Loan.............................................................................................................12
Loan Documents....................................................................................................7
Loans............................................................................................................12
London Business Day...............................................................................................2
Management Agreement.............................................................................................31
Material Adverse Change...........................................................................................7
Material Adverse Effect...........................................................................................7
Monthly Lease Portfolio...........................................................................................7
Multiemployer Plan................................................................................................7
Net Worth.........................................................................................................8
Non-Recourse Debt.................................................................................................8
Note.............................................................................................................14
Notes............................................................................................................14
Obligations.......................................................................................................8
Operating Lease...................................................................................................8
Participants.....................................................................................................37
Participations...................................................................................................37
PBGC..............................................................................................................8
Pension Plan......................................................................................................8
Permitted Debt....................................................................................................8
Permitted Liens...................................................................................................8
Person............................................................................................................9
Plan..............................................................................................................9
Potential Default.................................................................................................9
Prohibited Transaction............................................................................................9
Receivables Report................................................................................................7
Recourse Debt.....................................................................................................9
Recourse Funded Debt..............................................................................................9
Regulation........................................................................................................9
Regulation D......................................................................................................9
Regulatory Change................................................................................................10
Reportable Event.................................................................................................10
Request for Advance..............................................................................................15
Required Banks...................................................................................................10

<PAGE>

Revolver Termination Date........................................................................................12
Revolving Credit Loan............................................................................................12
Revolving Credit Loans...........................................................................................12
Revolving Credit Note............................................................................................14
Revolving Credit Notes...........................................................................................14
Revolving Loan Commitment........................................................................................12
Revolving Loan Commitment Percentage.............................................................................13
Security Agreement...............................................................................................10
Solvent..........................................................................................................11
Subordinated Debt................................................................................................11
Subsidiary.......................................................................................................11
Swap Agreement...................................................................................................11
Tangible Net Worth...............................................................................................11
Taxes............................................................................................................18
Termination Event................................................................................................11
Unfunded Pension Liabilities.....................................................................................11
Unrecognized Retiree Welfare Liability...........................................................................11
Unrestricted Subsidiaries........................................................................................12

</TABLE>

<PAGE>

                                         BANKS' COMMITMENTS AND PERCENTAGES

<TABLE>
<S>                                                  <C>                        <C>
         Bank                                        Commitment                         Percentage

National City Bank                                   $25,000,000                50%
Specialized Banking Group, Philadelphia Region
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA  19107
FAX No. (267) 256-4001

California Bank & Trust                              $15,000,000                30%
San Francisco Regional Corporate Banking
465 California Street, First Floor
San Francisco, CA  94104
FAX: (415) 875-1456

Sanwa Bank California                                $10,000,000                20%
444 Market Street, 23rd Floor
San Francisco, CA 94111
FAX No. (415) 597-5435
                                                     ----------                         ------
         TOTAL                                       $50,000,000                100%

</TABLE>

<PAGE>

                                   EXHIBIT B
                                      NOTE

$__,000,000                      Philadelphia, PA            -------------, ----

For Value Received,  AeroCentury Corp., a Delaware corporation,  hereby promises
to pay to the order of ______________  BANK (the "Bank"),  in lawful currency of
the United States of America in immediately  available funds at principal office
of National City Bank in Cleveland, Ohio, on the Revolver Termination Date or on
such earlier date or dates as provided in the Credit Agreement  described below,
the principal sum of _____________  DOLLARS  ($__,000,000) or, if less, the then
unpaid  principal  amount of all Loans made by the Bank  pursuant  to the Credit
Agreement.

AeroCentury  Corp.  promises also to pay interest on the unpaid principal amount
hereof in like money at such office  from the date hereof  until paid in full at
the rates and at the times provided in the Credit Agreement.

This Note is one of the Notes referred to in, is entitled to the benefits of and
is secured by security interests referred to in the Credit Agreement, dated June
28, 2000, by and between  AeroCentury Corp. and the banking  institutions  named
therein,  with  National  City Bank as Agent (as such may be amended,  modified,
supplemented,  restated or replaced from time to time, the "Credit  Agreement").
This Note is subject to voluntary  prepayment and mandatory  repayment  prior to
the Revolver  Termination  Date,  in whole or in part, as provided in the Credit
Agreement.

In case an Event of Default shall occur and be continuing,  the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.

AeroCentury hereby waives presentment,  demand, protest or notice of any kind in
connection with this Note.

Notwithstanding  the face  amount  of this  Note,  the  undersigned's  liability
hereunder shall be limited,  at all times, to the actual  aggregate  outstanding
indebtedness to the Bank relating to such Bank's Loans,  including all principal
and  interest,  together  with all fees and  expenses  as provided in the Credit
Agreement,  as  established  by the  Bank's  books and  records  which  shall be
conclusive absent manifest error.

Capitalized terms used but not defined herein shall have the respective meanings
assigned to them in the Credit Agreement.

<PAGE>

THIS NOTE SHALL BE  CONSTRUED IN  ACCORDANCE  WITH AND BE GOVERNED BY THE LAW OF
THE  COMMONWEALTH  OF  PENNSYLVANIA  WITHOUT REGARD TO  PENNSYLVANIA  OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.

                                                     AeroCentury Corp.

                                                     By ________________________
                                                     Title:

<PAGE>

                                                               Date: ___________

                           BORROWING BASE CERTIFICATE

Date of Certificate:        _________________________

Date of Information:        _________________________

To:  National City Bank, as Agent

Gentlemen:

This  Borrowing  Base  Certificate  is delivered to you pursuant to the terms of
Section  5.1 of the Credit  Agreement,  dated June 28,  2000,  as  currently  in
effect.  Capitalized terms used without  definition below have the same meanings
as they have in the Credit Agreement.

We hereby certify that:

1.       No  Potential  Default  or Event of  Default  has  occurred  and is
         continuing as of the date of this Borrowing Base Certificate.

2.       There has been no Material  Adverse  Change since [insert
         the date of the most recent financial statements delivered to the
         Bank  pursuant  to  the  terms  of  Section  5.1  of  the  Credit
         Agreement], except as disclosed on the attached schedules.

3.       The  information  set  forth  on the  attached  schedules  is true,
         current and complete as of the date of this Borrowing Base Certificate.

                                                     AeroCentury Corp.

                                                     By ________________________
                                                     Name:
                                                     Title:

<PAGE>

                                                  AeroCentury Corp.
                                     Computation of Borrowing Base Availability

                                                                ,

<TABLE>
        <S>                                                                     <C>
         Collateral Loan Value

         Total Borrowing Base                                                   $____________________

         Maximum Loans

         Revolving Loan Commitment                                              $50,000,000

         Credit Usage

        Aggregate Loan Balance (principal) at date
         of certificate                                                         $____________________

         Loan Availability

         Collateral Loan Value minus Credit Usage                               $____________________

         Maximum Loans minus Credit Usage                                       $____________________

         Loan Availability (lesser of two preceding lines)                      $____________________

         Amount of Loan Requested (not to exceed preceding line)                $____________________

</TABLE>

<PAGE>

                                          COVENANT COMPLIANCE CERTIFICATE

         The undersigned,  the [chief  executive or chief financial]  Officer of
AeroCentury  Corp.  ("AeroCentury"),  does hereby certify to National City Bank,
Agent (the "Bank"), as required by that certain Credit Agreement, dated June 28,
2000,  by and  between  AeroCentury  and the Bank (the  "Agreement")  (terms not
otherwise  defined  herein  shall have the  meanings  given to such terms in the
Agreement),  that as such officer he is  authorized  to execute this  Compliance
Certificate  (this  "Certificate")  on behalf of  AeroCentury  and does  further
certify that:

1. AeroCentury has complied and is in compliance with all covenants,  agreements
and conditions in the Agreement and each of the other Loan Documents on the date
hereof.

2. Each  representation  and warranty contained in the Agreement and each of the
other Loan Documents is true and correct on the date hereof.

3. No Potential Default or Event of Default has occurred and is continuing as of
the date of this Compliance Certificate.

4. There has been no Material  Adverse Change since [insert the date of the
most recent  financial  statements  delivered  to the Bank  pursuant to the
terms of Section 5.1  of the  Credit  Agreement],  except  as  disclosed  on the
attached schedules.

5. The covenant compliance calculations set forth in Attachment 1 hereto are
 true and correct on the dates specified.

         IN WITNESS  WHEREOF,  the undersigned has executed this  Certificate in
his capacity as an officer of AeroCentury on this ___ day of _________, _____.

                                                     AeroCentury Corp.

                                                     By: _______________________
                                                     Name:
                                                     Title:

<PAGE>

                        COVENANT COMPLIANCE CALCULATIONS
                                AeroCentury Corp.
                            for the (quarter, year) ending ____

Section 7.1     MINIMUM TANGIBLE NET WORTH

         REQUIREMENT: - Tangible Net Worth will not at any time be less than the
         sum of (i)  $____________,  (ii) 50% Net Income for each Fiscal Quarter
         ending  after March 31,  2000,  without  deduction  for any net losses,
         (iii) 50% of the net proceeds from any sale of equity  securities after
         the date of the Agreement, and (iv) 50% of the fair value of any equity
         securities  issued after the date of the Agreement in  connection  with
         any acquisition permitted hereunder or by waiver hereto.

         Tangible Net Worth on [date]
              Total Assets                                       $   ___________

              less:  Total Liabilities               $ ___________
                     Intangible Assets               $ ___________
                     Subtotal                                    $   ___________

 Tangible Net Worth                                              $

         Required Tangible Net Worth

              (a) Base Amount                                    $    16,321,530

              (b) 50% of Net Income for each Fiscal Quarter
                  ending after March 31, 2000,
                  without deduction for any net losses           $    __________

              (c) 50% of the net proceeds from any sale of
                  equity securities after the date of the
                  Agreement                                      $    __________

              (d) 50% of the fair value of any equity securities
                  issued after the date of this Agreement in connection
                  with any acquisition permitted under the Agreement
                                                                 $    ________

Required Tangible Net Worth = (a) + (b) + (c) + (d)              $

         Excess (deficiency) of Actual Tangible Net Worth
         compared with Required Tangible Net Worth               $  ___________

<PAGE>

Section 7.2     DEBT SERVICE COVERAGE RATIO

         REQUIREMENT:  The ratio of EBTDA to Debt  Service for the four (4) most
         recently ended consecutive Fiscal Quarters will not at any time be less
         than 1.1:1.

         EBTDA

              Net Income for the four
              Fiscal Quarters ended ___________               $_______________

              Taxes deducted with respect to
              four Fiscal Quarters ended __________         + $ _______________

              Depreciation deducted with respect to
              four Fiscal Quarters ended __________         + $ _______________

              Amortization deducted with respect to
              four Fiscal Quarters ended __________         + $ _______________

         EBTDA for four Fiscal Quarters just ended            $

         Debt Service

              Current Maturities of
              Recourse Debt (next 12
              months)                                         $_______________

              Lump Sum Payments of
              Recourse Debt at
              expiration included in
              Current Maturities                              $(______________)

              Current Maturities of Recourse Debt (net)       $ ______________

              Current amounts due in
              respect of all leases (next
              12 months)                                      $_______________

              Lump Sum Payments due
              at expiration of all leases
              included in Lump Sum
              Payments                                        $(______________)

              Current Lease Payments (net)                  + $ ______________

<PAGE>

              Average Principal Balance
              of Loans outstanding (last
              12 months) divided by 10                      + $ _______________

         Debt Service                                         $

                     RATIO OF EBTDA TO DEBT SERVICE

Section 7.3     RECOURSE FUNDED DEBT TO TANGIBLE NET WORTH

         REQUIREMENT:  The ratio of  Recourse  Funded Debt  (including  Recourse
         Funded Debt represented by the Notes) to Tangible Net Worth will not at
         any time exceed 4.0:1.

         Recourse Funded Debt on [date]:                        $    __________

         Tangible Net Worth on [date]                           $    __________

         RATIO OF RECOURSE FUNDED  DEBT TO TANGIBLE NET WORTH

Section 7.4     ABSENCE OF NET LOSS

     REQUIREMENT: - It will not suffer a net loss for any two consecutive Fiscal
     Quarters or two Fiscal Quarters in any Fiscal Year.

         Net Income for the Fiscal Quarter ended _______         $

<PAGE>

Section 7.5     BORROWING BASE

         REQUIREMENT:  The aggregate principal amount of Loans outstanding shall
         not at any time exceed the Borrowing  Base or the  Aggregate  Revolving
         Loan  Commitment,  whichever  is less;  provided,  however,  that  this
         covenant  shall not be deemed  breached if, at the time such  aggregate
         amount exceeds said level, within three Business Days after the earlier
         of the date AeroCentury  first has knowledge of such excess or the date
         of the next Borrowing Base Certificate disclosing the existence of such
         excess, a prepayment of Loans shall be made in an amount  sufficient to
         assure continued compliance with this covenant in the future.

         Collateral Loan Value

         Total Borrowing Base                             $____________________

         Maximum Loans

         Aggregate Revolving Loan Commitment              $       ____,000,000

         Credit Usage

         Aggregate Loan Balance (principal) at date
         of certificate                                   $____________________

         Collateral Loan Value exceeds Credit Usage       $____________________

         Collateral Loan Value is less than Credit Usage  $(___________________)

<PAGE>

                                                DEPRECIATION POLICIES

AeroCentury  Corp's  interest in aircraft and  aircraft  engines are recorded at
cost, which includes acquisition costs and loan fees.  Depreciation is completed
using the  straight-line  method over the  aircraft's  estimated  economic  life
(generally assumed to be twelve years), to an estimated residual value.

<PAGE>

                                                 DISCLOSURE SCHEDULE

Section 3.2  Stock Ownership

  AeroCentury Corp.: Principal Stockholders

         Class          Total Authorized                      Total Issued

Common                     3,000,000                            1,606,557

Preferred Stock            2,000,000                                   -0-
         Series A            100,000                                   -0-
         undesignated      1,900,000                                   -0-

In  connection  with the adoption of a  shareholders  rights  plan,  AeroCentury
issued  rights to its  shareholders  as of April 23, 1998,  entitling  each such
shareholder the right to purchase 1/100th of a share of Series A Preferred Stock
for each share of Common Stock held by the shareholder.

Of the  1,606,557  shares  outstanding,  63,300  are held as  treasury  stock by
AeroCentury,  representing  shares  repurchased by  AeroCentury  pursuant to its
stock repurchase plan.

Principal Shareholders

To AeroCentury's best knowledge,  the only shareholders of AeroCentury that hold
5% or more of the Common Stock of AeroCentury:

         Holder                     Shares                    Percent

JetFleet Holding Corp.              193,267                    12.5%

Pine Capital Management,            183,300                    11.8%
Incorporated/Hoefer & Arnett

Section 3.3 Litigation

None

Section 3.5 Material Adverse Changes

None

Section 3.7 Taxes

None

<PAGE>

AeroCentury holds the entire membership interest of AeroCentury Investments LLC,
a Delaware  limited  liability  company (the "LLC").  The LLC owns two Fokker-50
aircraft on lease to Air Nostrum.  The acquisition  was financed  through seller
financing, which financing was non recourse to AeroCentury Corp.

Section 3.13 Liens

None

<PAGE>

                                          SCHEDULE 2

                                APPLICABLE MARGINS, COMMITMENT FEE

<TABLE>
<S>                                   <C>                    <C>                       <C>

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

>   3.00 25.0 basis points            250.0 basis points      50.00 basis points
$   2.00 but #3.00                    00.0 basis points       225.0 basis points        50.00 basis points
<   2.00 00.0 basis points            200.0 basis points      40.00 basis points
</TABLE>

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