Delaware
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94-3263974
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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Title
of each class
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Name of
each exchange on which registered
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Common Stock, par value $0.001 per share
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NYSE American Exchange
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Item 9.01
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Financial
Statements and Exhibits
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99.1
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Investment Term Sheet, dated July 9, 2021, between AeroCentury
Corp. and Yucheng Hu, as Lead Investor.
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In re AEROCENTURY CORP., et al.,
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Investment Term Sheet
August 9,
2021
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This term sheet (this “Term
Sheet”)
sets forth the principal terms of an investment by the Investors
into AeroCentury Corp. (“AeroCentury”),
which, together with JetFleet Holding Corp. and JetFleet Management
Corp., commenced voluntary cases under chapter 11 of title 11 of
the United Stated Code (the “Bankruptcy
Code”)
in the United Stated Bankruptcy Court in the District of Delaware
(the “Bankruptcy Court”) on March 29, 2021. The
transaction contemplated herein shall be implemented pursuant to
the Debtors’ Combined Disclosure Statement and Joint Chapter
11 Plan (the “Plan”).
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THIS TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS)
AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF
ACCEPTANCES OR REJECTIONS AS TO ANY PLAN OF REORGANIZATION, IT
BEING UNDERSTOOD THAT SUCH A SOLICITATION, IF ANY, SHALL BE MADE
ONLY IN COMPLIANCE WITH REGULATION S AND/OR SECTION 4(A)(2) OF THE
SECURITIES ACT OF 1933 AND APPLICABLE PROVISIONS OF SECURITIES,
BANKRUPTCY, AND/OR OTHER APPLICABLE STATUTES, RULES, AND
LAWS.
THIS TERM SHEET DOES NOT ADDRESS ALL MATERIAL TERMS THAT WOULD BE
REQUIRED IN CONNECTION WITH ANY POTENTIAL INVESTMENT AND ANY
AGREEMENT IS SUBJECT TO THE EXECUTION OF DEFINITIVE DOCUMENTATION
IN FORM AND SUBSTANCE CONSISTENT WITH THIS TERM SHEET AND OTHERWISE
REASONABLY ACCEPTABLE TO THE PARTIES (AS DEFINED HEREIN) AND THE
BANKRUPTCY COURT.
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Investment Amount:
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USD$11,000,000
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Ticker / Exchange For ACY Common Stock:
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“ACY” /
NYSE American Exchange
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Issuance Price of New ACY Common Stock:
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The
Reorganized Debtor shall issue to Investors newly issued ACY Common
Stock (“New ACY Shares”) at a purchase price
(“Purchase Price”) equal to the lower of:
● 80.0% of the 14
days trailing VWAP ending and including on the date of mutual
execution of a Term Sheet, subject to a “floor” of
USD$2.50 per share; and
● $3.85 per
share
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Voting Rights of New ACY Common Shares:
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All New
ACY Shares will be entitled to one vote per share and have equal
voting rights to common shares held by Legacy ACY
Shareholders.
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Capital Structure of the Reorganized Debtor:
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The
capital structure of the Reorganized Debtor upon the Plan Effective
Date shall consist of ACY Common Stock, together with certain
accrued expenses and accounts payable owed in the ordinary course
of business related to general and administrative operations of
AeroCentury and outstanding restructuring fees and costs. For the
avoidance of doubt, the Reorganized Debtor will not have any
outstanding funded indebtedness on the Plan Effective
Date.
After
giving effect to the purchase of the New ACY Shares, the pro forma
ownership percentages of the ACY Common Stock will be: (a)
65.0%-74.0% held by the Investors and (b) 26.0%-35.0% held by
Legacy ACY Shareholders1.
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Existing ACY Interests:
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On the
Plan Effective Date, each holder of ACY Common Stock will have
their Interest in ACY Common Stock reinstated, subject to dilution
from issuance of the New ACY Shares to the Investors.
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Use of Proceeds:
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Working
capital for the Reorganized Debtor, the Legacy ACY Cash Dividend
and purchase of the JHC Preferred Stock.
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Issuance of New ACY Common Shares:
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Investors agree to
purchase the New ACY Shares from Reorganized Debtor in a private
placement (the “Private Placement”) pursuant to
Regulation S and/or Section 4(a)(2) and Regulation D under the Act
and will be subject to Rule 144 of the Act, if
applicable.
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No Registration Rights:
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Reorganized Debtor
will NOT be required to file a registration statement under the Act
registering the issuance of the New ACY Shares or the resale of any
of the foregoing.
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Board of Directors:
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The
Reorganized Debtor will have a Board of Directors initially
consisting of five (5) members (the “New ACY Board”),
which will consist of (i) 3 directors appointed by the Lead
Investor and (ii) 2 directors to be mutually agreed upon by the
Lead Investor and the Board of Directors of AeroCentury in place
prior to the Plan Effective Date.
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Employees:
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The
Reorganized Debtor would have no employees immediately following
the Plan Effective Date. After the Plan Effective Date, the
Reorganized Debtor would only employ individuals approved by the
New ACY Board. The Investors’ purchase of New ACY Shares
would not be conditioned upon any employees of the Reorganized
Debtor accepting offers of employment effective after the Plan
Effective Date.
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Charter and Bylaws:
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The
charter and bylaws of each of the Debtors shall be restated in a
manner reasonably satisfactory to the Lead Investor.
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Legacy ACY Cash Dividend:
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As
promptly as practicable following the Plan Effective Date, the
Reorganized Debtor will make a cash dividend distribution to Legacy
ACY Shareholders in the aggregate amount of
USD$1,000,000
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JHC Equity Interests Held By AeroCentury:
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The
Reorganized Debtor’s equity interest in JHC will be cancelled
and extinguished on the Plan Effective Date.
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JHC Equity Interests:
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On the
Plan Effective Date, JHC will issue 100,000 shares of its common
stock.
The
Investors will acquire 35,000 shares of common stock of JHC, and
the JHC Management Team will acquire 65,000 shares of common stock
of JHC. All shares of common stock of JHC will be purchased at a
price of USD$1 per share.
On the
Plan Effective Date, the Reorganized Debtor shall transfer to JHC
100% of the ownership interests of the Reorganized Debtor’s
aviation subsidiaries including the UK Entities.
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Right of First Refusal & Co-Sale Right
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Until
the Qualified IPO, each of the Investors and the JHC Management
Team shall have the right to participate on a Pro Rata basis in
transfers of any JHC common shares held by the JHC Management Team
or the Investors, respectively; and a secondary right of refusal on
such transfers, subordinate to JHC’s right of first refusal.
The right of first refusal and co-sale shall not apply to (a)
transfers to any spouse or member of the immediate family of any
member of the JHC Management Team or Investors, or in connection
with other estate planning transfers or (b) any sale to the public
pursuant to an effective registration statement filed with the U.S.
Securities and Exchange Commission. For purposes hereof,
Investor’s and a member of the JHC Management Team’s
“Pro Rata” share (a) for purposes of participating in a
transfer shall be determined by dividing the number of shares of
common stock then held by such Investor or such member of the JHC
Management Team by the number of shares of common stock held by the
transferring stockholder and all other Investors or members of the
JHC Management Team participating in such transfer, and (b) for
purposes of secondary right of refusal shall be determined by
dividing the number of shares of common stock then held by such
Investor or such member of the JHC Management Team by the number of
shares of common stock of JHC then outstanding.
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JHC Board of Directors:
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On the
Plan Effective Date, the JHC Management Team will have the
exclusive right, in their sole discretion, to designate the members
of the JHC Board of Directors. As long as the Lead Investor holds
5% or more of the common stock of JHC, the Lead Investor shall have
the right to appoint an observer to meetings of the JHC Board of
Directors.
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JHC Series A Preferred Stock:
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The
Reorganized Debtor will use USD$2,000,000 of the proceeds from the
sale of New ACY Shares to purchase shares of the JHC Preferred
Stock from JHC.
See
Schedule 2 for basic terms of JHC Series A Preferred
Stock.
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JHC Series B Preferred Stock
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On the
Plan Effective Date, JHC will issue a Series B Preferred Stock to
the ACY Legacy Shareholder Trust. The JHC Series B Preferred Stock
will have a liquidation preference of $1, non-convertible,
non-transferable, non-voting, will not pay a dividend,
and contains a mandatory, redeemable provision allowing for
repayment, in full, of the JHC Series B Preferred
Stock.
The JHC
Series B Preferred Stock is redeemable for an aggregate amount
equal to (i) $1,000,000, if the JHC Series B Preferred Stock is
redeemed after an Initial Profitable year, or (ii) $0.001 per
share, if the JHC Series B Preferred Stock is redeemed prior to an
Initial Profitable year.
The JHC
Series B Preferred Stock will be ranked junior to Series A
Preferred Stock.
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AeroCentury UK Subsidiaries:
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AeroCentury will,
or will cause the UK Entities, to remit any cash, including the
full amount of the tax refunds received by UK Entities prior to the
Plan Effective Date, to JHC.
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Good Faith Deposit:
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Upon
execution of this Term Sheet, the Investors will deposit
USD$1,650,000 million (“Deposit”) into an escrow
account to be identified and established by the
Debtors.
On the
Plan Effective Date, the Deposit will be released to the
Reorganized Debtor and will be applied toward Investor’s
purchase price for the New ACY Shares.
● In the event the
purchase of the New ACY Shares does not close as a result of the
Investors seeking to modify the terms subsequent to execution of
this Term Sheet term sheet or the Investors’ failure to
comply with the terms of the Plan Sponsor Agreement, the Deposit
will be forfeited to AeroCentury;
● In the event the
purchase of the New ACY Shares does not close as a result of
Debtors’ failure to comply with the terms of the Plan Sponsor
Agreement or the failure of the conditions precedent set forth in
the Plan Sponsor Agreement, the Deposit will be refunded to
Investors; or
● If Bankruptcy Court
or any regulatory authority having the authority to block the
consummation of the purchase of the New ACY Shares do not approve
of the purchase of the New ACY Shares on the terms set forth in
this Term Sheet, the Deposit will be refunded to
Investors.
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Break-Up Fee:
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If this
Term Sheet has been executed by the Debtors and Investors, and
subsequently the Bankruptcy Court accepts and approves an exit
financing transaction for AeroCentury with a party other than the
Investors (an “Alternative Transaction”) then
AeroCentury shall pay Investors, upon the closing of such
Alternative Transaction, in addition to the return of the Deposit,
a breakup fee equal to USD$1,000,000.
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Timeline:
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August
9, 2021: Deadline to file notice disclosing identity of the exit
plan sponsor and the treatment of existing equity holders under the
proposed Plan Sponsor Agreement
August
16, 2021: Deadline to file Plan Supplement (including the Plan
Sponsor Agreement)
August
31, 2021: Confirmation Hearing
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Conditions Precedent:
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1. The Bankruptcy
Court shall have entered an order approving the Plan of
Reorganization;
2. Plan Effective Date
is on or before September 30, 2021;
3. ACY Common Stock
has not been delisted from NYSE AMEX;
4. ACY Common Stock
are registered under Section is 12(b) of Exchange Act, and the
Reorganized Debtor has not taken any action designed to or likely
to have the effect of terminating the registration of ACY Common
Stock under the Exchange Act; and
5. Each document or
agreement constituting definitive documents shall have been
executed and/or effectuated and shall be in form and substance
consistent with this Term Sheet.
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Targeting Closing Date:
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September
30, 2021
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Exclusivity:
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For
the period ending 6 months after the Closing Date, save as the Lead
Investor has notified the Reorganized Debtor in writing that
Investors have decided not to invest additional amounts in the
Reorganized Debtor, the Reorganized Debtor shall not enter into any
transaction for the issuance new shares of the Reorganized Debtor
to any party other than Investors.
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Investment Amount:
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USD$2,000,000
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Purchase Price Per Share:
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USD$1.00
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Dividend Rate:
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7.50%
per annum
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Dividend Accrual:
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Will
accrue a quarterly dividend at the Dividend Rate commencing in the
first fiscal quarter following the first fiscal year for which JHC
reports positive EBITDA for the preceding 12 month
period (“Initial Profitable Year”),
which quarterly dividend will be declared and paid
currently.
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Conversion:
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Non-convertible
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Transferability:
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Non-transferable
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Voting:
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Shall
be entitle to 51% of the vote of all JHC voting securities, voting
as a single class and would be subject to a mutually agreed to
voting agreement between ACY and JHC Management.
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Redemption Date:
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Redeemable by
Reorganized Debtor after 7 years from the date of issuance.
Redeemable at any time by JHC, in part or in whole.
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Redemption Price:
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If redeemed prior to an Initial Profitable
year: Redeemable at a price equal to the (i) issue price of
the Preferred Stock; plus
(ii) any declared but unpaid dividends; plus (iii) an amount per quarter equal
to the issue price multiplied by the Dividend Rate and divided by
four for any quarterly period beginning on the issue date and
ending on the redemption date for which dividends were not
declared.
If redeemed after an Initial Profitable
year: Redeemable at a price equal to the (i) issue price of
the Preferred Stock; plus
(ii) any declared but unpaid dividends; plus (iii) an amount per quarter equal
to the issue price multiplied by the Dividend Rate and divided by
four for any quarterly period for which dividends were
not declared after the Initial Profitable Year.
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Liquidation Preference:
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Purchase Price Per
Share plus accrued and unpaid dividend, payable prior to and in
preference to payment to the holders of common stock
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Covenants:
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1. So long as the
Reorganized Debtor holds more than 51% of the voting rights of JHC,
JHC shall deliver to the Reorganized Debtor (a) within sixty (60)
days after the end of each fiscal year of the Company, the annual
audited financial statements of the JHC certified by a PCAOB
independent public accountants of recognized standing, and (b)
within thirty (30) days after the end of each quarter, JCH’s
unaudited but reviewed financial statements.
2. JHC Management Team
shall assist and cooperate with the Reorganized Debtor (not to
exceed 30 hours) in the preparation of the financial statements and
SEC reports for quarter ended September 30, 2021 and for the year
ended December 31, 2021 (the “SEC Reports”), and
provide all information to the Reorganized Debtor’s auditors
and counsel for the preparation of such SEC Reports in a timely
fashion.
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