-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BMRqnf++cqzpd40XecO6wf26omxniId/tqYf7kik1oq/zKz+33JMLA5C6WorYPQI UFY134tpOruMegwMfGhP1Q== 0000950134-98-000317.txt : 19980119 0000950134-98-000317.hdr.sgml : 19980119 ACCESSION NUMBER: 0000950134-98-000317 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980102 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980116 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROCENTURY CORP CENTRAL INDEX KEY: 0001036848 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943263974 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13387 FILM NUMBER: 98508720 BUSINESS ADDRESS: STREET 1: 1440 CHAPIN AVENUE SUITE 310 CITY: BURLINGAME STATE: CA ZIP: 94010 BUSINESS PHONE: 4156963900 MAIL ADDRESS: STREET 1: 1440 CHAPIN AVENUE SUITE 310 CITY: BURLINGAME STATE: CA ZIP: 94010 FORMER COMPANY: FORMER CONFORMED NAME: AEROMAX INC DATE OF NAME CHANGE: 19970331 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: January 16, 1998 Date of Earliest Event Reported: January 2, 1998 AEROCENTURY CORP. -------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE ----------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 001-13387 94-3263974 - ------------------------ ------------------------------------ (Commission File Number) (I.R.S. Employer Identification No.) 1440 CHAPIN AVENUE SUITE 310, BURLINGAME, CA 94010 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415)696-3900 ----------------------------- 2 ITEM 2. Acquisition or Disposition of Assets. ------------------------------------ On January 1, 1998, AeroCentury Corp. (the "Company"), the registrant, completed its acquisition of JetFleet Aircraft, L.P. ("JetFleet I") and JetFleet Aircraft II, L.P. ("JetFleet II") (collectively, the "Partnerships"), by means of a consolidation by merger (the "Consolidation") of the Partnerships with and into the Company, pursuant to a Merger Agreement dated as of January 1, 1998, as amended, among the Company and the Partnerships. The Consolidation was approved by the majority of the limited partners in each of the Partnerships on November 15, 1997, and effected by the filing of a Certificate of Merger with the Secretary of State of the State of Delaware effective on January 1, 1998. Pursuant to the Merger Agreement, at the effective time of the Consolidation on January 1, 1998 the non-dissenting limited partners of the Partnerships had the right to receive Common Stock of the Company. The non-dissenting limited partners of JetFleet I and JetFleet II received the number of shares of Common Stock equal to the product, of the number of limited partnership interests owned by the individual limited partner multiplied by .455931 or 1.819989 respectively, rounded to the nearest whole number. This description is qualified in its entirety by "The Consolidation" section of the final Prospectus (Registration No. 333-24743) filed with the Securities and Exchange Commission on October 14, 1997 pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended and incorporated by reference herein. ITEM 7. Financial Statements and Exhibits. --------------------------------- (a) Financial statements of business acquired. It is impractical to provide the required financial statements at the time of filing this report. The required financial statements will be filed by amendment to this Form 8-K no later than March 17, 1998. (b) Pro forma financial information. It is impractical to provide the required financial information at the time of filing this report. The required financial information will be filed by amendment to this Form 8-K no later than March 17, 1998. (c) Exhibits. Exhibit Number Description -------------- ----------- 2.1 Merger Agreement dated January 1, 1998 among AeroCentury Corp., JetFleet Aircraft, L.P. and JetFleet Aircraft II, L.P. 20.1 "The Consolidation" Section of the Company's Final Prospectus (Registration No. 333-24743) filed with the Securities and Exchange Commission on October 14, 1997 pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended. 3 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AeroCentury Corp. (Registrant) Date: January 16, 1998 By: /s/ Neal D. Crispin -------------------- Neal D. Crispin Title: President 4 INDEX TO EXHIBITS
Exhibit Number Description -------------- ----------- 2.1 Merger Agreement dated January 1, 1998 among AeroCentury Corp., JetFleet Aircraft, L.P. and JetFleet Aircraft II, L.P. 20.1 "The Consolidation" Section of the Final Prospectus of AeroCentury Corp. (Registration No. 333-24743) filed with the Securities and Exchange Commission on October 14, 1997 pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended.
EX-2.1 2 MERGER AGREEMENT DATED JANUARY 2, 1998 1 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this "Agreement") dated as of January 1, 1998, by and among AeroCentury Corp., a Delaware corporation (the "Company"), JetFleet Aircraft, L.P. ("JetFleet I"), a California limited partnership, and JetFleet Aircraft II, L.P. ("JetFleet II"), a California limited partnership, collectively, the "Partnerships" and individually, a "Partnership"). WITNESSETH: WHEREAS, the Company and the Partnerships desire that the Partnerships merge with and into the Company, pursuant to Delaware law, with the Company being the surviving entity (the "Merger"), as part of the merger by consolidation of the Partnerships, and the Company (the "Consolidation") as set forth in the Registration Statement of the Company on Form S-4, No. 333-24743, including all amendments thereto (the "Registration Statement"), filed with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Act"), of which the Prospectus/Consent Solicitation Statement of the Company (the "Prospectus/Consent Solicitation Statement") is a part; and WHEREAS, Section 263 of the General Corporation Law of the State of Delaware, 8 Del.C. #101, et seq. (the "DGCL") and Section 15678.7 of the California Revised Limited Partnership Act (the "Partnership Act") authorize the merger of a Delaware corporation and California limited partnerships; and WHEREAS, the Company's Certificate of Incorporation and Bylaws permit, and resolutions adopted by the Company's Board of Directors authorize, this Agreement and the consummation of the Merger. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement covenant and agree as follows: ARTICLE I THE MERGER 1.01. The Merger; Surviving Corporation. Subject to the terms and conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.02 below), the Partnerships shall each be merged with and into the Company, pursuant to Section 15678.7 of the Partnership Act and Section 263 of the DGCL, and the separate existence of each of the Partnerships shall cease. The Company shall be the surviving entity (the "Surviving Corporation") and shall continue to be governed by the DGCL. 1.02. Effective Time. In accordance with Section 15678.7 of the Partnership Act and Sections 263, 251 and 103 of the DGCL, the Merger shall become effective (the "Effective Time") upon the filing of a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, or at such later time, not later than five business days thereafter, as may be specified in the Certificate of Merger. All other filings or recordings required by Delaware law in connection with the Merger shall also be made. 1.03 Effect of the Merger. The Merger shall have the effects set forth in Section 15678.6 of the Partnership Act and Section 263 of the DGCL. 1 2 ARTICLE II THE SURVIVING CORPORATION 2.01 Name. The name of the Surviving Corporation shall be AeroCentury Corp. 2.02. Certificate of Incorporation and Bylaws. The Certificate of Incorporation and Bylaws of the Company as in effect immediately prior to the Effective Time shall be the Certificate of the Incorporation and Bylaws of the Surviving Corporation unless and until amended in accordance with their terms and applicable law. 2.03. Officers and Directors. The officers of the Company immediately prior to the Effective Time shall continue as officers of the Surviving Corporation and remain officers until their successors are duly appointed or their prior resignation, removal or death. The directors of the Company immediately prior to the Effective Time shall continue as directors of the Surviving Corporation and shall remain directors until their successors are duly elected and qualified or their prior resignation, removal or death. ARTICLE III CONVERSION OF PARTNERSHIP INTERESTS 3.01 Conversion of Limited Partner Interests. At the Effective Time, each limited partner interest ("Unit") in each of the Partnerships shall be converted into the number of shares of Company's Common Stock, $.001 par value per share (the "Common Stock"), as follows:
(Conversion Rate) Number of Shares of Common Stock Partnership Per Unit --------------------------- ------------------- JetFleet I .455931 JetFleet II 1.819989
To determine the the number of shares of Common Stock to be issued as a result of the conversion of Units to a limited partner of the Partnerships ("Existing Investor"), the applicable Conversion Rate as defined on Appendix A shall be multiplied by the number of Units held by the Existing Investor rounding to the nearest whole shares. No fractional shares of Common Stock will be issued. The Conversion Rate shall be calculated as set forth in Schedule 3.0 hereto. 3.02 General Partner Interests. In connection with the Consolidation, the General Partners shall receive shares of Common Stock, in consideration of its general partner interests in the Partnerships as set forth on Schedule 3.04 and their general partner interests in the Partnerships shall be deemed canceled. 3.03. Issuance of Shares. (i) The Company shall designate an exchange agent (the "Exchange Agent") to act as such in connection with the issuance of certificates representing Common Stock pursuant to this Agreement. 2 3 (ii) As soon as practicable after the Effective Time, the Company shall cause the Exchange Agent to distribute to each Existing Investor who is not a "dissenting limited partner" under the Partnership Act certificates representing the number of shares of Common Stock to which such Existing Investor is entitled pursuant to Section 3.01(i) of this Agreement. 3.03 Characterization of Merger. For federal income tax purposes, the conversion of the Units in the Partnerships pursuant to this Article III shall be deemed a distribution in liquidation of each of the Partnerships pursuant to the terms of each respective Partnership Agreement (individually, a "Partnership Agreement" and collectively, the "Partnership Agreements"). ARTICLE IV TRANSFER AND CONVEYANCE OF ASSETS AND ASSUMPTION OF LIABILITIES 4.01. Transfer, Conveyance and Assumption. At the Effective Time, the Company shall continue in existence as the Surviving Corporation, and without further action on the part of the Partnerships or the Company, transfer, succeed to and possess all the rights, privileges and powers of the Partnerships, and all the assets and property of whatever kind and character of the Partnerships shall vest in the Company without further act or deed; thereafter, the Company, as the Surviving Corporation, shall be liable for all of the liabilities and obligations of the Partnerships, and any claim or judgement against the Partnerships may be enforced against the Company, as the Surviving Corporation, in accordance with Section 15678.6 of the Partnership Act and Sections 263, 259 and 103 of the DGCL. 4.02. Further Assurances. If at any time the Company shall consider or be advised that any further assignment, conveyance or assurance is necessary or advisable to vest, perfect or confirm of record in the Surviving Corporation the title to any property or right of the Partnerships, or otherwise to carry out the provisions hereof, the General Partners of the Partnerships as of the Effective Time shall execute and deliver any and all proper deeds, assignments and assurances, and do all things necessary and proper to vest, perfect or convey title to such property or right in the Surviving Corporation and otherwise to carry out the provisions hereof. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS The Partnerships each severally represent and warrant the Company and to each other (with respect only to the Partnership making the representation and warranty) as follows: 5.01. Validity of Actions. Each Partnership (i) is a limited partnership duly formed, validly existing and in good standing under the laws of the State of California, (ii) has the authority to conduct its business as currently conducted and to own and operate the properties which it now owns and operates, (iii) is qualified to do business in all jurisdictions in which such qualification is necessary, and (iv) has full power and authority to enter into this Agreement and to carry out all acts contemplated by it. This Agreement has been duly executed and delivered on behalf of the Partnership, and has received all necessary authorization and is a legal, valid and binding obligation of the Partnership, enforceable against the Partnership in accordance with its terms. The execution and delivery of this Agreement and consummation of the transactions contemplated by it will not violate any provision of the Partnership Agreement nor violate, conflict with or result in any breach of any of the terms, provisions or conditions of, or constitute a default or cause acceleration of, any indebtedness under any agreement or instrument to which any of the Partnerships are a party or by which they or their assets may be bound, or cause a breach of any 3 4 applicable federal or state law or governmental regulation, or any applicable order, judgment, writ, award, injunction or decree of any court or governmental instrumentality. 5.02. Partnerships' Financial Statements. The financial statements and schedules of the Partnerships, together with related notes (the "Financial Statements"), set forth in the Registration Statement of the Company, fairly present, on the basis stated in the Registration Statement, the financial position of the Partnerships at the date or for the periods specified in the Registration Statement. The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP"), except to the extent stated therein. 5.03. No Misstatements. The representations of the Partnerships contained in this Agreement and the information supplied by the Partnerships for inclusion in the Registration Statement and the Prospectus/Consent Solicitation Statement do not contain any untrue statements of a material fact or omit to state any fact necessary to make such representations or information not materially misleading. 5.04. No Material Adverse Change. Since the respective dates as to which information is given in the Registration Statement and the Prospectus/Consent Solicitation Statement with respect to the Partnerships, and except as described in the Registration Statement or the Prospectus/Consent Solicitation Statement, there have been no changes in the business, operations, properties, assets or the prospects or condition, financial or otherwise, of the Partnerships which would, in the aggregate, have a material adverse effect on the business, properties, prospects, profitability, assets or financial condition of the Partnerships. 5.05. Title to Assets. Each Partnership has good and marketable title to the assets reflected in the most recent balance sheet (the "Balance Sheet") included in the Financial Statements with respect to such Partnership, and will hold good and marketable title to such assets, and any assets acquired by the Partnership prior to the Effective Time, as of the Effective Time, except for assets disposed of in the ordinary course of business. Such assets, together with the related goodwill and rights of each Partnership as a going concern, tangible and intangible, are collectively referred to as the "Assets." Except as otherwise disclosed in the Balance Sheet or related notes accompanying it, all of the Assets are owned free and clear of any and all adverse claims, security interests, charges or other encumbrances or restrictions of every nature, except liens for current taxes not yet due and payable or landlords' liens as provided for in the relevant leases or by applicable law. 5.06 Liabilities of the Partnerships. The Partnerships have no material liabilities, contingent or otherwise, without limitation for state or federal income, withholding or other taxes, except to the extent reflected, reserved against, or provided for in the Balance Sheet, and except for any material liabilities disclosed in the Prospectus/Consent Solicitation Statement or any other obligations incurred after June 30, 1997 in the ordinary course of business which subsequently incurred obligations are of an amount and nature as to be capable of being discharged from the operations of the Partnerships without requiring additional equity or borrowing. 5.09 Taxes. Each Partnership has filed timely all federal, state and local tax returns which it is required to file, has provided to its Existing Investors all required Form K-1's and such other tax forms as may be required by federal, state or local authorities, and has no outstanding liability for any federal, state or local taxes or interest or penalties thereon, whether disputed or not, except taxes not yet payable which have been provided for in accordance with GAAP and are disclosed in the Financial Statements. 5.10. Actions Pending. Except as disclosed in the Prospectus/Consent Solicitation Statement: (i) there are no actions, suits, proceedings or claims pending or threatened against the Partnerships or the general partner of the Partnerships which, if determined adversely to such Partnerships, could (A) have a material adverse effect on the Partnerships, the Assets or the 4 5 business of the Partnerships when taken as a whole, or (B) prevent or delay the consummation of any of the transactions contemplated by this Agreement; (ii) no Partnership, to the best of its knowledge, is the subject of any pending or threatened investigation relating to any aspect of such Partnership's operations by any federal, state or local governmental agency or authority; and (iii) each Partnership, to the best of its knowledge, is not and has not been the subject of any formal or informal complaint, investigation or inspection under the Equal Employment Opportunity Act or the Occupational Safety and Health Act (or their state or local counterparts) or by any other federal, state or local authority. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to the Partnerships as follows: 6.01. Validity of Actions. The Company (i) is duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) has the authority to conduct its business as currently conducted, (iii) is qualified to do business in all jurisdictions in which such qualification is necessary, and (iv) has full power and authority to enter into this Agreement and to carry out all acts contemplated by it. This Agreement has been duly executed and delivered on behalf of the Company, has received all necessary authorization and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The execution and delivery of this Agreement and consummation of the transactions contemplated by it will not violate any provision of the Certificate of Incorporation or Bylaws of the Company nor violate, conflict with or result in any breach of any of the terms, provisions or conditions of, or constitute a default or cause acceleration of, any indebtedness under any agreement or instrument to which the Company is a party or by which it or its assets may be bound, or cause a breach of any applicable federal or state law or regulation, or any applicable order, judgment, writ, award, injunction or decree of any court or governmental instrumentality. 6.02. Capital Stock of the Company. The authorized capital stock of the Company consists of 5,000,000 shares of Common Stock, and 2,000,000 of Preferred Stock, of which 150,000 shares of common stock are issued and outstanding as of the date of this Agreement. The shares of Common Stock of the Company to be delivered to the General Partners and the Existing Investors pursuant to this Agreement have been duly and validly authorized, and when issued and delivered, will be fully paid and nonassessable. 6.03. Misstatements. The representations of the Company contained in this Agreement and the information regarding the Company contained in the Registration Statement and the Prospectus/Consent Solicitation Statement do not contain any untrue statements of a material fact or omit to state any fact necessary to make such representations or information not materially misleading. ARTICLE VII COVENANTS OF THE PARTIES 7.01. Prohibited Acts. Pending consummation of the Merger or prior to termination of this Agreement, the Partnerships agree that, without prior written consent of the Company, given in a letter which specifically refers to this Section of the Agreement, the Partnerships shall not: (i) perform any act or omit to take any action that would make any of their representations made above or any information pertaining to them in the Registration Statement or the Prospectus/Consent Solicitation Statement inaccurate 5 6 or materially misleading as of the Effective Time; (ii) enter into any commitment, contract or other transaction in any way affecting any of the Partnership's business, except to carry out its business in the ordinary course, and as contemplated by this Agreement or in the Prospectus/Consent Solicitation Statement; (iii) make any loans or advances to, or investments in, any other corporation, partnership or other legal entity or to any other persons except in the ordinary course of business; (iv) borrow money for any purpose or agree to become contingently liable, by guaranty or otherwise, for the obligations or indebtedness of any other person other than in the ordinary course of business; or (v) mortgage, pledge, encumber, sell, lease or transfer any of the Assets other than in the ordinary course of business. 7.02. Notice. Pending the consummation of the Merger or prior to termination of this Agreement, each party agrees that it will promptly advise the other of the occurrence of any condition or event which would make any of its representations, contained in this Agreement or the Prospectus/Consent Solicitation Statement inaccurate, incorrect, or materially misleading. 7.03. Additional Documents. At the request of any party, each party will execute and deliver any additional documents and perform in good faith such acts as reasonably may be required in order to consummate the transactions contemplated by this Agreement. ARTICLE VIII CONDITIONS TO THE MERGER The obligation of the Company, on the one hand, and each of the Partnerships on the other hand, to consummate the Merger shall be subject to compliance with or satisfaction of the following conditions: 8.01. Bring Down. The representations and warranties set forth in this Agreement shall be true and correct in all material respects at and as of the Effective Time as if then made (except for those representations and warranties made as of a given date, which shall continue to be true and correct as of such given date), as evidenced by a certificate made by the General Partner of each Partnership and the President of the Company, as of the Effective Time. 8.02. Compliance. The Company and each Partnership shall have complied with all of the covenants and agreements in this Agreement on its part to be complied with as of or prior to the Effective Time. 8.03. Partnership Approvals. The affirmative vote approving the Consolidation of Existing Investors holding more than 50% of the outstanding Units shall have been obtained; provided however, that at the Company's sole discretion, the Consolidation may occur between JetFleet II and the Company if only the required approval of JetFleet II Existing Investors is obtained. 8.04. Stock Exchange Listing. At or before the Effective Time, the Common Stock to be issued in the Merger shall be approved for listing on the American Stock Exchange, subject to official notice of issuance. 8.05. Consents Obtained. All necessary consents, waivers, approvals, authorizations or 6 7 orders required to be obtained, and the making of all filings required to be made by any party to the Merger for the authorization, execution and delivery of this Agreement, and the consummation of the transactions contemplated thereby on or before (and remain in effect at) the Effective Time shall have been obtained or made. 8.06. No Material Adverse Change. Since the respective dates as to which information is given in the Registration Statement and the Prospectus/Consent Solicitation Statement, there shall not have occurred or been threatened any material adverse changes in the overall business or prospects of the Partnerships, or in the tax or other regulatory provisions applicable to the Partnerships or the Company, and the Company shall not have become aware of any facts that, in the sole judgment of the Company and the General Partner, have or may have a material effect, whether adverse or otherwise, on the Partnerships, taken as a whole, the Consolidation, or the value to the Company of the properties of the Partnerships, taken as a whole. 8.07. Opinions and Letters. The Company shall have received, on or prior to the Effective Time, the following opinions and letters, which shall not have been withdrawn as of the Effective Time: (i) the opinion of counsel regarding the legality of the issuance of the Shares; (ii) the opinion of counsel regarding the status of the company's Common Stock under ERISA laws. 8.08. No Statute, Rule or Regulation Effecting. At the Effective Time, there shall be no statute, rule or regulation enacted or issued by the United States or any State, or by a court, which prohibits or challenges the consummation of the Consolidation. 8.09. No Declarations. At the Effective Time, there shall be no declaration of suspension of trading in, or limitation on prices for, securities generally on the New York Stock Exchange, declaration of a banking moratorium by federal or state authorities or any suspension of payments by banks in the United States (whether mandatory or not) or of the extension of credit by lending institutions in the United States, or commencement of war, armed hostility, or other international or national calamity directly or indirectly involving the United States, which war, hostility or calamity, in the sole judgment of the Company, would have a material adverse effect on the business objectives of the Company, or, in the case of any of the foregoing existing on the date of the Prospectus/Consent Solicitation Statement, any material acceleration or worsening thereof. 8.10. Effectiveness of Registration Statement. At or prior to the Effective Time, the Registration Statement shall have been declared effective, no stop order suspending the effectiveness of the Registration Statement shall have been issued, no proceedings for such purpose shall have been initiated, and all necessary approvals under state securities or blue sky laws shall have been received. 8.11. Dissenters' Rights. No more than 10 % of the Units held by limited partners of either Partnership shall be "dissenting interests" as defined under Section 15679.2 of the Partnership Act. 8.12. Prospectus/Consent Solicitation Statement. All other conditions to the Merger set forth in the Prospectus/Consent Solicitation Statement shall have been satisfied. 7 8 ARTICLE IX OTHER AGREEMENTS 9.01. Waiver by General Partners. Immediately prior to the Effective Time, the General Partners of the Partnerships shall waive all rights to (i) any fees not accrued to the Effective Time, and (ii) any proceeds from the sale or liquidation of any property of a Partnership to which the General Partners would have been entitled pursuant to the Partnership Agreement of such Partnership. 9.02. Indemnification. (i) To the fullest extent permitted by law, the Partnerships, jointly and severally, agree to defend, indemnify and hold harmless the Company and its directors, officers, employees and agents from and against any losses, claims, damages or liabilities (including, without limitation, attorneys' fees and disbursements) to which the Company may become subject under the Act, the Securities Exchange Act of 1934, as amended, or otherwise, insofar as such losses, claims, damages or liabilities (or actions with respect thereof arise out of or are based upon an untrue statement or an alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus/Consent Solicitation Statement, or any amendment or supplement to such documents, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or to the extent that such losses, claims, damages or liabilities (including, without limitation, attorneys' fees and disbursements) result from a breach by the Partnerships of the representations and warranties of the Company contained in Article V of this Agreement. For the purposes of this subsection (i), the word "Company" shall be deemed to include the Company and its officers, directors, employees and agents of the Company. (ii) To the fullest extent permitted by law, the Company, agrees to defend, indemnify and hold harmless each of the Partnerships from and against any losses, claims, damages or liabilities (including, without limitation, attorneys' fees and disbursements) to which the Partnership may become subject under the Act, the Securities Exchange Act of 1934, as amended, or otherwise, insofar as such losses, claims, damages or liabilities (or actions with respect thereof arise out of or are based upon an untrue statement or an alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus/Consent Solicitation Statement, or any amendment or supplement to such documents, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or to the extent that such losses, claims, damages or liabilities (including, without limitation, attorneys' fees and disbursements) result from a breach by the Company of the representations and warranties of the Company contained in Article VI of this Agreement. For the purposes of this subsection (i), the word "Partnership" shall be deemed to include the Partnership, its general partners and their respective officers, directors, employees and agents. (iii) A party entitled to indemnification hereunder (an "Indemnified Party") shall give (or cause to be given) to the indemnifying party (the "Indemnifying Party") notice of claim or matter for which indemnity is (or will be) sought under this Section 9.02; such notice shall be given promptly after the Indemnified Party receive actual notice or knowledge of the claim or matter that is subject to indemnification. With respect to any claim asserted by a third party against any 8 9 Indemnified Party for which indemnity is sought, the relevant Indemnifying Party shall have the right to employ counsel reasonably acceptable to the relevant Indemnified Party to defend against such assertion, and such Indemnifying Party shall have the right to compromise or otherwise settle any such action or claim only with the prior written consent of the relevant Indemnified Party, which shall not be unreasonably withheld. (iv) This Section 9.02 shall survive the Merger for a period of three (3) years from the Effective Time. ARTICLE X TERMINATION; AMENDMENT; WAIVER 10.01. Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (i) by mutual consent of the Board of Directors of the Company and the General Partner of the Partnerships, (ii) by action of the Board of Directors of the Company in the event of a failure of a condition to the obligations of the Company set forth in Article VIII of this Agreement, (iii) by action of the General Partners of the Partnerships in the event of a failure of a condition to the obligations of the Partnerships set forth in Article VIII of this Agreement, or (iv) by action of the Board of Directors of the Company or of the General Partners of the Partnerships in the event that the Merger is not consummated prior to June 30, 1998 or such later date as the parties shall mutually agree in writing. 10.02. Effect of Termination. If this Agreement is terminated pursuant to Section 10.01, subject to the provisions of Section 9.02, this Agreement shall become void and of no effect with no liability on the part of any party hereto. 10.03. Amendment. The parties hereto may, by written agreement, amend this Agreement at any time prior to the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, such amendment to be approved by the General Partner of each of the Partnerships agreeing to such amendment with the Company; provided that, after the approval of the Merger by the Existing Investors holding a majority of the Units of each Partnership or the shareholders of the Company, no amendment shall be made which alters or changes (i) the amount or kind of consideration which the Existing Investors of each Partnership are entitled to receive upon conversion of the Units of each Partnership, (ii) the Certificate of Incorporation of the Company, or (iii) the terms and conditions of this Agreement if such alteration or change would have an adverse effect on the Existing Investors of each Partnership or the shareholders of the Company; provided further, that after the execution of this Agreement the parties hereto may amend this Agreement without the necessity of approval of the Existing Investors to make it internally consistent or consistent with the terms set forth in the Prospectus/Consent Solicitation Statement. 10.04. Waiver. At any time prior to the Effective Time, any party to this Agreement may extend the time for the performance of any of the obligations or other acts of any other party hereto, or waive compliance with any of the agreements of any other party or with any condition to the obligations hereunder, in each case only to the extent that such obligations, agreements and conditions are intended for its benefit. 9 10 ARTICLE XI MISCELLANEOUS 11.01. Expenses. If the Merger becomes effective, and all of the Partnerships participate, all of the expenses incurred in connection with the Merger shall be paid as specified in the Prospectus/Consent Solicitation Statement. 11.02. Notices. All notices or other communications required or permitted under the terms of this Agreement by any party shall be made in writing and shall be delivered by first class mail or by personal delivery, postage or fees prepaid, to the other parties at the addresses listed below, or to such other address as any of the parties hereto may designate by notice to the others. AEROCENTURY CORP. 1440 Chapin Avenue, Ste. 310 Burlingame, California 94010 JETFLEET AIRCRAFT, L.P. 1440 Chapin Avenue, Ste. 310 Burlingame, California 94010 JETFLEET AIRCRAFT II, L.P. 1440 Chapin Avenue, Ste. 310 Burlingame, California 94010 11.03. Non-Assignability. This Agreement shall not be assignable by any of the parties to this Agreement. 11.04. Entire Agreement. This Agreement contains the parties' entire understanding and agreement with respect to its subject matter, and any and all conflicting or inconsistent discussions, agreements, promises, representations and statements, if any, between the parties or their representatives that are not incorporated in this Agreement shall be null and void and are merged into this Agreement. 11.05. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute a single agreement. 11.06. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to conflicts of law principles. 11.07. Headings. The various section headings are inserted for purposes of reference only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. 11.08. Gender; Number. All references to gender or number in this Agreement shall be deemed interchangeably to have a masculine, feminine, neuter, singular or plural meaning, as the sense of the context requires. 11.09. Severability. The provisions of this Agreement shall be severable, and any invalidity, unenforceability or illegality of any provision or provisions of this Agreement shall not affect any other provision or provisions of this Agreement, and each term and provision of this Agreement shall be construed to be valid and enforceable to the full extent permitted by law. 11.10. Authorization. The General Partner (a) shall be authorized, at such time in its full discretion as they deem appropriate, to execute, acknowledge, verify, deliver, file and record, for and in the name of the Partnerships and, to the extent necessary, the General Partners and the Existing Investors, any and all documents and instruments, and (b) shall do and perform any and all acts required by applicable law or which the General Partner deems necessary or advisable to effectuate the Merger. 10 11 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by an officer duly authorized to do so, all as of the day and year first above written. AEROCENTURY CORP. By: /s/ Neal D. Crispin -------------------------------- Neal D. Crispin, President JETFLEET AIRCRAFT, L. P. By: CMA Capital Group, Inc. Its: General Partner By: /s/ Neal D. Crispin ------------------------- Its: President ------------------------ JETFLEET AIRCRAFT II, L. P. By: CMA Capital Group, Inc. Its: General Partner By: /s/ Neal D. Crispin ------------------------- Its: President ------------------------ 11 12 SCHEDULE 3.0 Method of Calculation of Conversion Ratio EXCHANGE VALUE The Exchange Value for each Partnership is an amount equal to the sum of (i) the appraised market value of its assets as of February 4, 1997, (ii) the present value of rental income owed to the Partnership on a full payout finance lease for a DC-9 aircraft owned jointly by JetFleet I and JetFleet II and a second DC-9 owned 100% by JetFleet II (discounted at an annual interest rate of 10%) and (iii) projected cash and other assets as of November 1, 1997, less (x) projected total liabilities of each Partnership as of that date. The method of calculation is shown below. The General Partner reserves the right in its sole discretion, to make adjustments to the Exchange Value of a Partnership, when necessary to take into account the payment of cash to dissenting Investors of a Partnership.
Market Value Discounted Other Total Exchange No. of of Assets(1) DC-9 Rent(2) Assets(3) Liabilities(4) Value Shares(5) ------------ --------------- --------- -------------- -------- --------- JetFleet I $ 1,762,554 $ 29,876 $ 222,157 $ 651,080 $ 1,363,507 136,351 JetFleet II $13,927,446 $291,120 $1,062,362 $1,994,932 $13,285,996 1,328,600
- --------------- (1) Based upon the market value of the assets as set forth in the Appraisal of Aircraft Information Services, dated February 4, 1997, for each Partnership, attached as Appendix B. (2) JetFleet I and JetFleet II hold 50% and 50% interests, respectively, in a DC-9 aircraft, and JetFleet II holds a 100% interest in a second DC-9 aircraft, each on a full-payout finance lease to AeroCalifornia. The amount shown in this column represents the Partnership's portion of the present value of the rent payable to the Partnership, discounted at an annual rate of 10%. The 10% discount rate reflects the Company's assessment of the cost of funds which would be available to the Partnership for borrowing. (3) Consists mainly of projected cash holdings and miscellaneous receivables. (4) Consists primarily of deferred tax liabilities, accounts payable, accrued maintenance costs and security deposits and prepaid rents. (5) Exchange Value divided by $10. Allocation between General and Limited Partners of the Partnerships The following table shows how the allocation of each Partnerships' shares between the Corporate General Partner and the Investors was calculated. The Corporate General Partner's allocation is based upon the percentage of interest of the Corporate General Partner in the Partnership as set forth in the respective Partnership Agreements of the Partnerships.
Total Shares Corporate No. of Shares No. of Shares Allocated to General Partners' Issued to Corporate Issued to Partnership Partnership(1) Partnership Interest(2) General Partner Limited Partners - ----------- -------------- ----------------------- ------------------- ---------------- JetFleet I 136,351 1.0% 1,364 134,987 JetFleet II 1,328,600 5.0%(3) 66,429 1,262,171
- -------------- (1) The number of Shares to be issued to each Participating Partnership upon consummation of the Consolidation will equal the Exchange Value of the Participating Partnership (second to last column of the previous table entitled "Exchange Value and Allocation of Shares") divided by $10, an arbitrary amount chosen for the sole purpose of allocating Shares and which is not intended to imply that the Shares will trade at a price of $10 per Share. (2) Represents the percentage interest of the Corporate General Partner in the Partnership's distributions, according to the applicable Partnership Agreement. (3) In addition to its 5% interest in any distributions made by JetFleet II, the Corporate General Partner of JetFleet II is also entitled to a subordinated disposition fee equal to one-half of the industry standard commission ordinarily paid in such transactions, up to a maximum of 3% of the gross sales price of any assets disposed by JetFleet II. The Corporate General Partner will waive this fee in connection with the Consolidation. Assuming 100% Partnership Participation, once the Consolidation is consummated the Corporate General Partner will hold 67,793 Shares or 4.2% of the total outstanding Shares and the Investors, as a group, will hold 1,397,158 shares or 86.5% of the total outstanding Shares of the Company. The Individual General Partners will not receive any Shares in the Consolidation. 12 EX-20.1 3 "THE CONSOLIDATION" SECTION OF FINAL PROSPECTUS 1 EXHIBIT 20.1 - -------------------------------------------------------------------------------- THE CONSOLIDATION - -------------------------------------------------------------------------------- The information contained in this Prospectus with respect to the Consolidation is qualified in its entirety by reference to the Agreement and Plan of Merger by and among the Company and the Participating Partnerships (the "Merger Agreement"), a copy of which is attached hereto as Appendix A and incorporated herein by reference. GENERAL The Consolidation is to be effected in accordance with the terms and conditions set forth in the Merger Agreement. The Merger Agreement provides that, in accordance with the Delaware GCL and the California Partnership Law, at the time of filing of a Certificate of Merger with the Delaware Secretary of State, or at such later time thereafter as may be specified in the Certificate of Merger (the "Effective Time"), each of the Participating Partnerships will be merged with and into the Company, their separate existences will cease and the Company will continue as the surviving entity. As of the Effective Time, each Unit of a Participating Partnership will automatically be converted into the right to receive Shares. Approval of the Consolidation by a Partnership constitutes consent to the merger of the Partnership with and into the Company pursuant to the terms of the Merger Agreement and to all actions necessary or appropriate to accomplish the Consolidation, including approval of the Amendments to the Partnership Agreements. Immediately after the Effective Time, the officers of the Company shall consist of the persons listed under "MANAGEMENT." The Board of Directors shall consist of the three current directors of the Company, and it is anticipated that two additional outside directors will be appointed immediately after the Consolidation. Consummation of the Consolidation is subject to certain conditions. See "THE CONSOLIDATION -- Conditions to the Consolidation." APPROVAL AND RECOMMENDATIONS OF THE GENERAL PARTNER Each general partner of the Partnerships has approved the Consolidation. The General Partner believes that an investment in the Company through the ownership of Common Stock will provide greater benefits to Investors than the benefits derived from an investment in an individual Partnership. See "BACKGROUND AND REASONS FOR THE CONSOLIDATION" and "FAIRNESS." Consequently, the General Partner recommends that the Investors of each Partnership consent to the Consolidation. However, Investors are urged to consider carefully the factors described under "RISK FACTORS" and the comparison of an investment in a limited partnership versus an investment in the Company set forth under "COMPARISON OF LIMITED PARTNERSHIP AND CORPORATE STRUCTURE." Investors are also urged to review the Supplement for their respective Partnership and to consult with their independent financial and tax advisors prior to consenting to the Consolidation. 26 2 VOTE REQUIRED FOR APPROVAL OF THE CONSOLIDATION Participation in the Consolidation by a Partnership requires the affirmative vote of holders of more than 50% of the outstanding Units of the Partnership. This Prospectus constitutes the solicitation of the approval of the Investors to the Consolidation, including all such actions required by the Partnerships to consummate the Consolidation. Because JetFleet II's anticipated net assets as of the anticipated consummation of the Consolidation would constitute over 88% of the aggregate value of the Partnerships' assets, at the discretion of the Company, the Consolidation will be consummated notwithstanding the nonparticipation of JetFleet I, provided that the Consolidation is approved by JetFleet II. In determining whether to proceed with a Consolidation with JetFleet II only, the Company will determine whether the number of dissenting Investors, the number of Participating Investors and the asset base of JetFleet II alone will provide a sufficient basis for the Company to meet its objectives and satisfy all of the conditions for the Consolidation set forth in the Merger Agreement. Such a Consolidation between JetFleet II and the Company alone is subject to certain considerations summarized in the Supplement for JetFleet II. JetFleet II Investors are urged to carefully review the Supplement accompanying this Prospectus when considering the Consolidation. AMENDMENTS TO PARTNERSHIP AGREEMENTS The Partnership Agreements do not specifically address the merger of the Partnerships or the conversion of Partnership Units for equity securities. Therefore, the General Partner is requesting the consent of Investors to amend the Partnership Agreements to include specific provisions regarding the Consolidation. By voting "YES" in favor of the Consolidation, an Investor will also have approved the proposed amendments to his or her Partnership Agreement (the "Amendments"), which expressly authorize all actions necessary to successfully accomplish the Consolidation as described in this Prospectus. The amendments also provide for a uniform dissenters' rights procedures for both JetFleet I and JetFleet II Investors. See "VOTING PROCEDURES--Amendments to Partnership Agreements." A discussion of the substance of each of the amendments and the form of the Amendment to the Partnership Agreement is set forth in the Supplement for the respective Partnership. The Partnership Agreement provides that any person who votes "NO" on the Consolidation is entitled to dissenters' rights. To make the dissenters' rights provisions consistent with California law, dissenters' rights will be available to any Investor that does not vote "YES" on the Consolidation. CONDITIONS TO THE CONSOLIDATION Consummation of the Consolidation is conditioned upon each of the following, any or all of which other than (i), (ii) and (viii) may be waived by the Company and General Partner in whole or in part: (i) approval of the Consolidation by Investors holding a majority of the outstanding Units of the Partnerships; provided, however, that at the sole discretion of the General Partner and the Company, the merger of JetFleet II with the Company may be consummated notwithstanding the failure of Investors in JetFleet I to approve the Consolidation; (ii) approval of the listing of the Shares on the American Stock Exchange, subject to official notice of issuance; (iii) receipt of all necessary consents, waivers, approvals, authorizations or orders required to be obtained and the making of all filings required to be made by any of the parties for the authorization, execution and delivery of the Merger Agreement and the con-summation of the transactions contemplated thereby on or before (and remaining in effect at) the Effective Time; 27 3 (iv) there shall not have occurred or been threatened any material adverse change in the overall business or prospects of the Participating Partnerships or in the tax or other regulatory provisions applicable to the Participating Partnerships, or the Company, and the Company shall not have become aware of any facts that, in the sole judgment of the Company and General Partner, have or may have a material effect, whether adverse or otherwise, on the Participating Partnerships, taken as a whole, the Consolidation, or the value to the Company of the properties of the Participating Partnerships, taken as a whole; (v) receipt, on or prior to the Closing Date, by the Company of an opinion from Counsel confirming that in all material respects, as of the Closing Date, the discussion set forth under "FEDERAL INCOME TAX CONSIDERATIONS," including any opinions expressed therein, is accurate and complete; (vi) there having been no statute, rule, or regulation enacted or issued by the United States or any State, or by a court, which prohibits or challenges the consummation of the Consolidation; (vii) there having been no declaration of suspension of trading in, or limitation on prices for, securities generally on the American Stock Exchange, declaration of a banking moratorium by federal or state authorities or any suspension of payments by banks in the United States (whether mandatory or not) or of the extension of credit by lending institutions in the United States, or commencement of war, armed hostility, or other international or national calamity directly or indirectly involving the United States, which war, hostility or calamity, in the sole judgment of the Company and the General Partner, would have a material adverse effect on the business objectives of the Company, or, in the case of any of the foregoing existing on the date of this Prospectus, any material acceleration or worsening thereof; (viii) the Registration Statement having been declared effective and no stop order suspending the effectiveness of the Registration Statement having been issued or proceedings for such purpose having been instituted, and all necessary approvals under state securities or blue sky laws having been received; and (ix) if more than 10% of the Investors of either of the Partnerships shall have elected to exercise dissenters' rights available under the California Partnership Act, the Company shall have the option not to consummate the Consolidation with such Partnership. If any event shall occur or any matter shall be brought to the attention of the Company and the General Partner that, in their sole judgment, materially affects, whether adversely or otherwise, any of the Participating Partnerships or one or more of their properties, subject to the terms of the Merger Agreement, the Company and the General Partner reserve the right to modify or amend the terms of the Consolidation to take such event or matter into account, or to take such other actions as may be appropriate, including, without limitation, canceling the Consolidation. Any determination of the Company concerning the events and matters set forth above will be final and binding on all parties. All of the foregoing conditions, except for the conditions set forth in (i), (ii) and (viii), are for the sole benefit of the Company and the General Partner and may be waived by the Company and the General Partner in whole or in part. Certain of the conditions to the consummation of the Consolidation are beyond the control of the Company, the General Partner and the Partnerships; consequently, there can be no assurance that the Consolidation will occur. EXCHANGE VALUE AND ALLOCATION OF SHARES General. The Exchange Values were determined based on appraisals of the Partnerships' assets as of February 4, 1997 and projected cash and liabilities as of November 1, 1997, and have been 28 4 assigned to each of the Partnerships solely to establish a consistent method of allocating Shares for purposes of the Consolidation. The Exchange Values of the Partnerships do not indicate the aggregate price at which Shares may be sold after the Consolidation, nor does the number of Shares to be issued indicate the actual or potential trading price of the Company's Common Stock. See "RISK FACTORS." The number of Shares to be issued to each Participating Partnership upon consummation of the Consolidation will equal the Exchange Value of the Participating Partnership divided by $10, an arbitrary amount chosen for the sole purpose of determining the number of Shares of Common Stock to be issued to each Partnership. No fractional Shares will be issued by the Company with respect to the Consolidation. See "-- Conversion Ratio; No Fractional Shares." There has been no prior market for the Common Stock, and it is possible that the Common Stock will trade at a price substantially below the Exchange Value or the book value of the assets of the Company. There is no assurance that a market for the Company's Common Stock will develop as a result of the Consolidation. The Exchange Value for each Partnership is an amount equal to the sum of (i) the appraised market value of its assets as of February 4, 1997, (ii) the present value of rental income owed to the Partnership on a full payout finance lease for a DC-9 aircraft owned jointly by JetFleet I and JetFleet II and a second DC-9 owned 100% by JetFleet II (discounted at an annual interest rate of 10%) and (iii) projected cash and other assets as of July 1, 1997, less (x) projected total liabilities of each Partnership as of July 1, 1997. In determining the value of each asset held by the Partnership, the Appraiser used the "current market value approach." Current market value is based upon the value reflective of real market conditions at the time of the appraisal of an asset, and takes into account the status of the economy in which the equipment is used, the status of supply and demand for the particular item of equipment, the value of recent transactions and the opinions of informed buyers and sellers. The current market value approach assumes that there is no short term time constraint to buy or sell the asset. See "REPORTS, OPINIONS AND APPRAISALS." As of the date of this Prospectus, the General Partner does not know of any material change in the financial performance of any of the Partnerships which will materially affect the Exchange Value. Adjustments to Exchange Value and Allocation of Shares. All determinations of the Exchange Value for purposes of allocating the Shares among the Partnerships, other than the final computation of the expenses of the Consolidation, were determined in the manner described below. Each Partnership will operate and make distributions prior to the Closing Date such that, to the extent possible, its Exchange Value relative to the Exchange Value of the other parties to the Consolidation remains the same, excluding, for these purposes only, the estimated expenses of the Consolidation allocated to each of the Partnerships. In the event it is discovered prior to the Effective Time that cash positions or anticipated liabilities differ from those used to calculate the Exchange Values as described below, an adjustment may be made to the Exchange Value of that Partnership. If the required adjustment is in excess of 5% of the Exchange Value for the Partnership, the Partnership's Exchange Value will be redetermined and its allocation of Shares changed and such adjustment shall be submitted for approval of the Investors of the affected Partnership who will be offered the opportunity to change their vote on the Consolidation. If such Investor does not timely indicate an objection to the adjustment, his or her vote will be counted as originally submitted. In the event the amount of the discovered liability is less than the foregoing amount, no adjustment to the Partnership's Exchange Value will be made, as the General Partner deems such adjustment de minimis. The Exchange Value for each Partnership is an amount equal to the sum of (i) the appraised market value of its assets as of February 4, 1997, (ii) the present value of rental income owed to the Partnership on a full payout finance lease for a DC-9 aircraft owned jointly by JetFleet I and JetFleet II and a second DC-9 owned 100% by JetFleet II (discounted at an annual interest rate of 10%) and 29 5 (iii) projected cash and other assets as of November 1, 1997, less (x) projected total liabilities of each Partnership as of that date. The method of calculation is shown below. The General Partner reserves the right in its sole discretion, to make adjustments to the Exchange Value of a Partnership, when necessary to take into account the payment of cash to dissenting Investors of a Partnership.
Market Value Discounted Other Total Exchange No of. of Assets(1) DC-9 Rent(2) Assets(3) Liabilities(4) Value Shares(5) ---------- --------- ------ ----------- ----- ------ JetFleet I $ 1,762,554 $ 29,876 $ 222,157 $ 651,080 $ 1,363,507 136,351 JetFleet II $13,927,446 $ 291,120 $1,062,362 $1,994,932 $ 13,285,996 1,328,600
- -------------------- (1) Based upon the market value of the assets as set forth in the Appraisal of Aircraft Information Services, dated February 4, 1997, for each Partnership, attached as Appendix B. (2) JetFleet I and JetFleet II hold 50% and 50% interests, respectively, in a DC-9 aircraft, and JetFleet II holds a 100% interest in a second DC-9 aircraft, each on a full-payout finance lease to AeroCalifornia. The amount shown in this column represents the Partnership's portion of the present value of the rent payable to the Partnership, discounted at an annual rate of 10%. The 10% discount rate reflects the Company's assessment of the cost of funds which would be available to the Partnership for borrowing. (3) Consists mainly of projected cash holdings and miscellaneous receivables. (4) Consists primarily of deferred tax liabilities, accounts payable, accrued maintenance costs and security deposits and prepaid rents. (5) Exchange Value divided by $10. ALLOCATION OF SHARES BETWEEN CORPORATE GENERAL PARTNER AND LIMITED PARTNERS The following table shows how the allocation of each Partnerships' shares between the Corporate General Partner and the Investors was calculated. The Corporate General Partner's allocation is based upon the percentage interest of the Corporate General Partner in the Partnership as set forth in the respective Partnership Agreements of the Partnerships.
Total Shares Corporate No. of Shares No. of Shares Allocated to General Partners' Issued to Corporate Issued to Partnership Partnership(1) Partnership Interest(2) General Partner Limited Partners - ----------- -------------- ----------------------- --------------- ----------------- JetFleet I 136,351 1.0% 1,364 134,987 JetFleet II 1,328,600 5.0%(3) 66,429 1,262,171
- -------------------- (1) The number of Shares to be issued to each Participating Partnership upon consummation of the Consolidation will equal the Exchange Value of the Participating Partnership (second to last column of the previous table entitled "Exchange Value and Allocation of Shares") divided by $10, an arbitrary amount chosen for the sole purpose of allocating Shares and which is not intended to imply that the Shares will trade at a price of $10 per Share. (2) Represents the percentage interest of the Corporate General Partner in the Partnership's distributions, according to the applicable Partnership Agreement. (3) In addition to its 5% interest in any distributions made by JetFleet II, the Corporate General Partner of JetFleet II is also entitled to a subordinated disposition fee equal to one-half of the industry standard commission ordinarily paid in such transactions, up to a maximum of 3% of the gross sales price of any assets disposed by JetFleet II. The Corporate General Partner will waive this fee in connection with the Consolidation. Assuming 100% Partnership Participation, once the Consolidation is consummated the Corporate General Partner will hold 67,793 Shares or 4.2% of the total outstanding Shares and the Investors, as a group, will hold 1,397,158 Shares or 86.5% of the total outstanding Shares of the Company. 30 6 The Individual General Partners will not receive any Shares in the Consolidation. ACCOUNTING TREATMENT In accordance with generally accepted accounting principles, the Consolidation will be accounted for as a reorganization of entities under common control at historical cost in a manner similar to a "pooling-of- interests." Under this accounting method, the assets and liabilities of the combining entities will be carried forward at their recorded historical book values. For a discussion of the accounting adjustments necessary to give effect to the Consolidation, see "PRO FORMA FINANCIAL INFORMATION" and "SELECTED FINANCIAL INFORMATION OF THE PARTNERSHIPS." CONVERSION RATIO; NO FRACTIONAL SHARES At the consummation of the Consolidation, each Participating Investor's Units will be automatically converted into the right to receive that number of Shares of Common Stock of the Company equal to the number of Units held by the Investor multiplied by the Conversion Ratio, rounded up to the nearest whole Share. The Conversion Ratio shall equal the quotient obtained by dividing (a) the number of Shares allocated to be issued to the Investors of the Partnership; by (b) the total number of Units of limited partnership outstanding for the Partnership. The Company will not issue fractional Shares in connection with the Consolidation. The number of Shares issuable to an Investor will equal the number of Units held by the Investor multiplied by the Conversion Ratio, rounded up or down to the nearest whole share. EFFECT OF THE CONSOLIDATION ON DISSENTING INVESTORS An Investor of a Participating Partnership who dissents or abstains from voting with respect to the Consolidation will have statutory rights to elect to be paid the appraised value of his or her interest in the Partnership. See "DISSENTERS' RIGHTS," for a summary of statutory dissenters' appraisal rights available to Investors who do not vote in favor of the Consolidation. EFFECTIVE TIME The Effective Time of the Consolidation will be the time when the Certificate of Merger with respect to the merger of the Participating Partnerships are filed with the Secretary of State of Delaware, or at such later time as may be specified in the Certificate of Merger. It is anticipated that such filings will be made as promptly as practicable after the requisite approval of the Investors has been obtained and the other conditions to the Consolidation have been satisfied or waived, if permitted under the Merger Agreement, as the case may be. The General Partner intends that such approvals will be obtained on or about December 15, 1997. CORPORATE HEADQUARTERS The Company's principal place of business will be 1440 Chapin Avenue, Suite 310, Burlingame, California 94010. LEGAL PROCEEDINGS There is no material litigation currently pending or threatened against any of the Partnerships, their properties or the General Partner. 31 7 AMENDMENT, TERMINATION AND WAIVER Subject to applicable law, the Merger Agreement may be amended by the Company and the Participating Partnerships at any time prior to the filing of the Certificate of Merger with the Delaware Secretary of State, provided that, after approval by Investors holding a majority of the outstanding Units of a Partnership, without the further approval of the Investors of such Partnership and the stockholders of the Company, no amendment may be made which alters or changes (i) the amount or kind of consideration which an Investor of such Partnership shall be entitled to receive for Units in such Partnership, (ii) the Certificate of Incorporation of the Company, or (iii) the terms and conditions of the Merger Agreement if such alteration or change would materially and adversely affect the Participating Investors or the stockholders of the Company. The Merger Agreement may be terminated at any time prior to the filing of the Certificate of Merger with the Delaware Secretary of State by mutual consent of the Board of Directors of the Company and the General Partner. At any time prior to the filing of the Certificate of Merger with the Delaware Secretary of State, any party to the Merger Agreement may extend the time for the performance of any of the obligations or other acts of any other party thereto, or waive compliance with any of the agreements of any other party or with any conditions to its own obligations, in each case only to the extent that such obligations, agreements and conditions are intended for its benefit. CONSOLIDATION EXPENSES General. Assuming 100% Partnership Participation, expenses of the Consolidation are estimated to be as follows: SOLICITATION/COMMUNICATION EXPENSES Communication Expenses $ 30,000 Other $ 20,000 Sub Total $ 50,000 TRANSACTION COSTS Investment Banking Fee $ 125,000 Legal Fees $ 100,000 Appraisals and Valuation $ 3,000 Registration, Listing and Filing Fees $ 20,000 Management Consulting Fees $ 19,000 Accounting and Other Fees $ 10,000 Printing $ 48,000 Sub Total $ 325,000 --------- Total Costs $ 375,000 =========
Solicitation/Communication Expenses. The Solicitation/Communication Expenses related to the Consolidation will be allocated among the Partnerships, the General Partner and the Company depending upon whether the Consolidation is consummated, as described below. For purposes of the Consolidation, the term "Solicitation/Communication Expenses" includes expenses such as telephone calls, broker-dealer fact sheets, legal and other fees related to the solicitation of consents, as well as reimbursement of expenses incurred by brokers and banks in forwarding the Prospectus to Investors. 32 8 If the Consolidation is consummated with both JetFleet I and JetFleet II, all of the Solicitation/Communication Expenses will be payable by the Company. If the Consolidation is consummated only with JetFleet II, all of the Solicitation/Communication Expenses will be paid by the Company or JetFleet II. The Solicitation Communication Expenses of JetFleet I, if it does not participate, will be payable by the Company. If the Consolidation is not consummated, all of the Solicitation/Communications Expenses will be payable by the Company. Transaction Costs. The Transaction Costs for the Consolidation will be allocated among the Partnerships and/or the Company depending upon the votes received with respect to the Consolidation and whether the Consolidation is consummated. The term "Transaction Costs" means, for purposes of the Consolidation, the costs of mailing and printing this Prospectus, any supplements thereto or other documents related to the Consolidation, legal fees not related to the solicitation of consents, financial advisory fees, investment banking fees, appraisal fees, accounting fees, independent committee expenses, travel expenses and all other fees related to the preparatory work of the Consolidation, but not including Solicitation/Communication Expenses or costs that would have otherwise been incurred by the Partnerships in the ordinary course of business. If the Consolidation is consummated with both JetFleet I and JetFleet II, all of the Transaction Costs will be payable by the Company. If the Consolidation is consummated with just JetFleet II, all Transaction Costs (including those of JetFleet I) will be payable by the Company. If the Consolidation is not consummated, Transaction Costs will be allocated between the Partnerships in proportion to their respective Exchange Value, and be payable by the Company and each Partnership in such proportion corresponding to the votes to reject the Consolidation and the votes to approve the Consolidation cast by limited partners of such Partnership. REPORTS, OPINIONS AND APPRAISALS The General Partner has engaged Aircraft Information Services, Inc., an independent appraisal firm, to appraise the value of the aircraft equipment assets of the Partnerships. The Exchange Value of each of the Partnerships was determined primarily based on these appraised values. The allocation of Shares among the Participating Partnerships was determined primarily based on these appraised values as of February 4, 1997. See "THE CONSOLIDATION--Exchange Value and Allocation of Shares." See "REPORTS, OPINIONS AND APPRAISALS" regarding the parties providing the appraisals, valuations, and any material relationships with these parties and compensation received or expected to be received by them, the determination of the consideration to be received by Investors and summaries of the appraisals and valuations. EFFECT OF CONSOLIDATION ON NONPARTICIPATING PARTNERSHIPS A Nonparticipating Partnership will continue to operate as a separate legal entity with its own assets and liabilities. There will be no change in its investment objectives, policies or restrictions and the Nonparticipating Partnership will remain subject to the terms of its Partnership Agreement. The General Partner anticipates that it will not take any steps to increase liquidity to the Partnerships in the near term, and will re-evaluate the market conditions periodically to determine if liquidation of the Partnerships prior to the termination date of the Partnership set forth in the Partnership Agreement would be advantageous to the Partnerships' Investors. DEALER MANAGER The Company has engaged Hoefer & Arnett Incorporated ("Dealer Manager"), and N.A.S.D. - registered broker-dealer to participate in the Consolidation by providing investment banking and consulting services to the Company with respect thereto. In connection with such services, the Dealer Manager shall receive a fee of $125,000, which shall be payable whether or not the Consolidation is consummated. FURTHER DISTRIBUTION OF SHARES It is anticipated that the Shares issued to the Corporate General Partner for its general partner interest in the Partnership will be distributed to its parent, CMA Capital Corporation, in a dissolution of the Corporate General Partner to occur shortly after the Consolidation. Subsequent to the dissolution of the Corporate General Partner, such Shares received by CMA Capital Corporation will be distributed to creditors of CMA Capital Corporation. 33 9 Corporation will be distributed to creditors of CMA Capital Corporation, upon dissolution of CMA Capital Corporation. This Registration Statement is intended to cover the subsequent transfers of the Shares issued to Corporate General Partner described above. A copy of the Prospectus will be given to each proposed recipient of Shares and if consent is required from the recipient to approve transactions necessary to distribute such stock, the proposed recipient will receive the Prospectus prior to the time such recipient would be requested to give such consent. 34 -----END PRIVACY-ENHANCED MESSAGE-----