As filed with the Securities and Exchange Commission on February 21, 1997
Registration No. 333-22239
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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AEROCENTURY FUND IV, INC.
A California Corporation
(Exact name of registrant as specified in its charter)
1440 Chapin Avenue, Suite 310
Burlingame, California 94010
(415) 696-3900
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Neal D. Crispin
1440 Chapin Avenue, Suite 310
Burlingame, California 94010
(415) 696-3900
(Address, including zip code, and telephone number,
including, area code, of agent for service)
Copy to:
Stephen C. Ryan, Esq.
Stephen C. Ryan & Associates
115 Sansome Street, Suite 310
San Francisco, California 94104
Approximate date of commencement of proposed sale to the public:
As soon as practical after the effective date of this Registration
Statement
If any of the securities being registered on this Form are to be
offered on a delayed or continuing basis pursuant to Rule 415
under the Securities Act of 1933 check the following box [ X ]
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The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION Dated April 10, 1997)
AEROCENTURY FUND IV, INC.
10% SECURED PROMISSORY NOTES
DUE APRIL 30, 2005
$10,000,000
AeroCentury Fund IV, Inc., a California corporation (the "Company") is hereby
offering up to $10,000,000 in 10% Secured Promissory Notes ("Notes"). Each Note
shall be issued at a price of $1,000 and will mature on April 30, 2005, unless
such maturity date is extended for up to six months at the option of the
Company. The Notes will bear simple interest at an annual rate of 10% per annum
(See "DESCRIPTION OF THE COMPANY'S SECURITIES--THE NOTES").
The Company's only business will be to acquire income producing assets ("Income
Producing Assets"). The Company anticipates that these assets will consist
mainly of aircraft, aircraft engines, aircraft parts or other aircraft equipment
(collectively "Equipment"). The Equipment will generally be leased to third
party lessees ("lessees") subject to operating or full payout leases ("Leases"),
and the Company will be assigned all rights as lessor, including the right to
receive rental payments, under those Leases. (See "BUSINESS OF THE COMPANY").
The Notes will be secured by a first priority security interest in the Income
Producing Assets purchased using the Note proceeds and any assets purchased
using resale proceeds or income received therefrom (collectively, the
"Collateral").
The offering will terminate on May 1, 1999, unless sooner terminated by the
Company, in its sole discretion (See "PLAN OF DISTRIBUTION"). However, if a
minimum of $500,000 in aggregate purchase price of the Notes has not been
subscribed for within twelve (12) months after the effective date of the
offering, the offering will be terminated and the escrowed funds, plus any
interest earned thereon, will promptly be returned to investors. The Notes
offered hereby will not be listed on any securities exchange and there can be no
assurance that there will be a secondary market for such securities.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY ENTAILS CERTAIN RISKS (SEE "RISK
FACTORS"). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
THE ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
BROKERS' COMMISSIONS(2) AND PROCEEDS TO
PRICE TO PUBLIC(1) OTHER OFFERING EXPENSES(3) COMPANY
<S> <C> <C> <C>
Per Note $ 1,000 $ 100 $ 900
Total Minimum $ 500,000 $ 50,000 $ 450,000
Total Maximum $10,000,000 $1,000,000 $9,000,000
(Footnotes on following page)
</TABLE>
THE DATE OF THIS PROSPECTUS IS APRIL 10, 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
(Footnotes from cover page)
(1) The Notes are issuable in denominations of $1,000 and integral multiples
thereof, subject to a minimum purchase by each investor of $5,000. However, for
Individual Retirement Accounts ("IRAs") the minimum purchase shall be $2,000.
Investor funds will be held in an interest-bearing escrow account with First
Security Bank, National Association, until a minimum of $500,000 in aggregate
purchase price of Notes are sold. On or before May 1, 1998 both (i) the minimum
amount of Notes must be subscribed, and (ii) an initial Income Producing Asset
for purchase must be specified, or the offering will be terminated, and the
escrowed funds, plus any interest earned thereon, will be promptly returned to
the investors by the escrow agent. Upon reaching the Minimum Offering Amount of
$500,000, the escrowed funds may be released to the Company. Any subsequent
sales proceeds from Notes will be immediately available for use by the Company;
however, the Company anticipates that it will accept subsequent subscriptions
and release from escrow proceeds from such subscriptions at monthly closings
until the Termination Date. All subscriptions are subject to the right of the
Company to reject any subscription in whole or in part.
(2) The Notes are being offered on a "best efforts" basis by Crispin Koehler
Securities ("CKS" or the "Sales Agent") and any other licensed broker-dealers
that may be engaged by the Company and that are members of the National
Association of Securities Dealers, Inc. A "best-efforts" offering means that the
licensed broker-dealers engaged by the Company will act as the Company's agent
to sell the Notes. There is no obligation on behalf of these licensed
broker-dealers to purchase any of the Notes being offered for the purpose of
resale to the public. The Company has agreed to pay soliciting broker-dealers,
in consideration for their services, a sales commission of 6.0%. The Company
will also pay to CKS an unallocated due diligence and marketing fee of 2.0% to
cover certain marketing and selling expenses, a portion of which may be
reallowed by CKS to certain participating broker-dealers. The Company has agreed
to indemnify CKS against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Consists of reimbursement of offering and other expenses ("Organization and
Offering Expense Reimbursement") equal to up to 2.0% payable by the Company to
its parent, JetFleet Management Corp. ("JMC") for miscellaneous costs and
expenses and allocated general administrative and overhead expenses relating to
the offering borne by JMC and for reimbursement of expenses borne by JMC in
connection with the offering and organization of the Company such as costs of
registration, legal, accounting, printing, trustee fees, marketing (including
advertising and assisting participating broker-dealers). Such Organization and
Offering Expense Reimbursement in excess of 2.0% will be paid to JMC in the form
of Common Stock of the Company, sold at a price of $1.00 per share. In no event
will the Organization and Offering Expense Reimbursement exceed $200,000.
The Company has filed a Form SB-2 Registration Statement under the Securities
Act of 1933, as amended, with the Securities and Exchange Commission (the
"Commission") with respect to the Notes offered pursuant to this Prospectus.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information included in the Registration Statement and the
exhibits thereto. For further information, reference is made to the Registration
Statement and amendments thereof and to the exhibits thereto, which are
available for inspection without charge via the Internet on the Commissions's
web site at http://www.sec.gov or at the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of which may be obtained from
the Commission at prescribed rates.
UNTIL APRIL 10, 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
THE INCOME PRODUCING The Company's only business will be to acquire
ASSETS - Page 2 income producing assets ("Income Producing
Assets"). The Company anticipates that these
assets will consist mainly of aircraft, aircraft
engines, aircraft parts or other transportation
industry equipment (collectively, "Equipment").
The equipment will generally be subject to
pre-existing operating or full payout leases
("Leases") with third parties (Lessees") and the
Company will be assigned all rights as lessor of
the Equipment, including the right to receive
rental revenue. The Company may also, however,
acquire indebtedness (for example, promissory
notes) secured by Equipment and/or leases
therefor, or income streams from Leases
(collectively referred to as "Financial Asset").
The Company has not at this time identified a
particular asset for acquisition guidelines set
forth in this Prospectus. The Company anticipates
that it, like JetFleet Aircraft, L.P.
("JetFleet I"), JetFleet Aircraft II, L.P.
("JetFleet II") and JetFleet III, prior equipment
syndication programs affiliated with the Company
(collectively, the "JetFleet Programs"), will
focus primarily on the acquisition of turbo-prop
aircraft, but the Company's acquisition policies
will not restrict the Company with respect to the
Income Producing Assets it may require (See
"BUSINESS OF THE COMPANY-ACQUISITION POLICIES").
OFFERING AMOUNT AND Up to $10,000,000 in aggregate purchase price of
ESCROW Notes. Investor funds will be held in an
interest-bearing account until subscriptions for
$500,000 of the Notes have been received (See
"PLAN OF DISTRIBUTION"). Any subsequent sales
proceeds from Notes will be immediately available
for use by the Company; however, the Company
anticipates that it will accept subsequent
subscriptions and release from escrow proceeds
from such subscriptions at monthly closings until
the Termination Date.
<PAGE>
DENOMINATIONS The Notes will be issued in fully registered form
in denominations of $1,000 and integral multiples
thereof, subject to a minimum purchase by each
investor of at least $5,000, or in the case of
Individual Retirement Accounts (IRAs) a minimum
purchase of $2,000.
DESCRIPTION OF THE NOTES - Page 3
General Each Note will accrue simple interest at a simple
interest rate of 10% per annum on the principal
amount. All principal and interest due under all
the Notes will be due on the same maturity date
(the "Maturity Date") which shall be April 30,
2005, unless extended for up to six months at the
sole discretion of the Company. (See
"DESCRIPTION OF THE COMPANY'S SECURITIES --
The Notes").
Interest Payment Interest will be calculated quarterly. Interest
is due and payable on the 1st day of each
February, May, August and November (or the next
Business Day following such date, if the 1st falls
on a day other than a Business Day) for interest
accrued in the prior calendar quarter.
<PAGE>
Principal and all accrued and unpaid interest will
be due on the Maturity Date. The record date for
each payment or compounding of interest on the
Notes is the close of business on the 15th of the
month prior to the calendar month in which such
payment date occurs for that payment.
Collateral Securing the The Company's obligations under the Notes will be
Notes recourse obligations of the Company secured by a
security interest in all of the Company's right,
title and interest in the Income Producing Assests
acquired by the Company using the net offering
proceeds of this Offering, and any proceeds of
such Income Producing Assets collectively, the
"Collateral").
Prepayment The Company, in its sole discretion, may prepay
all or any portion of the outstanding principal
under the Notes, beginning May 1, 2000.
Prepayments will be made on all notes to
noteholders on a pro rata basis, such that the
same percentage of indebtness is prepaid to all
Noteholders.
The Trust Indenture The Notes will be issued pursuant to a Trust
Indenture between the Company and First Security
Bank, National Association, as Indenture Trustee.
The Trust Indenture sets forth certain rights of
the Indenture Trustee against the Company for the
benefit of the Noteholders should the Company
default on its obligations under the Notes. In
addition, the Trust Indenture requires the
establishment of a sinking fund account from which
repayment of the outstanding principal of the
Notes will be partially funded. Upon an Event of
Default (as defined in the Trust Indenture) with
respect to the Notes, the Trustee has certain
remedies against the Company, including
acceleration of all Note indebtedness and/or
foreclosure upon and sale of the Collateral.
The Sinking Fund Account Beginning May 1, 2003, all net cash flow of the
Company with respect to the Collateral and all net
resale proceeds of the Collateral will be
transferred to a trust account controlled by the
Trustee (the Sinking Fund Account") and retained
by the Trustee for payment of a portion of the
principal outstanding under the Notes.
THE MANAGEMENT The Income Producing Asset portfolio and the
AGREEMENT leases for Equipment will be managed and
administered on the behalf of the Company under
the terms of a Management Agreement between the
Company and JetFleet Management Corp. ("JMC").
JMC is a California corporation formed in
January 1994, and whose principal offices are
located at 1440 Chapin Avenue, Suite 310,
Burlingame, California 94010. JMC is obligated
pursuant to the Management Agreement, subject to
the limitations set forth therein, to provide its
services with regard to managing the Company's
Income Producing Asset portfolio and administering
the Leases for Equipment on behalf of the Company.
Under the Management Agreement, so long as the
Company remains in existence, on the 1st day of
each calendar quarter, JMC shall receive a
<PAGE>
quarterly management fee equal to 0.5% of the
Aggregate Gross Offering Proceeds received by the
Company up through the last day of such calendar
quarter. In addition, JMC and/or its affiliates
will be reimbursed for certain accountable
expenses paid to unaffiliated third parties by JMC
in connection with the administration and
management of the Company (See "MANAGEMENT" and
TABLE OF COMPENSATION TO MANAGEMENT COMPANY AND
ITS AFFILIATES").
JMC is an integrated aircraft management,
marketing and financing business. In addition to
its activities in connection with the sponsoring
of investment entities such as the Company, JMC is
or will be engaged in the following activities:
(i) Asset Management-Asset management involves
several activities: remarketing owned aircraft,
lease origination, and buying and selling assets;
(ii) Aircraft Marketing-JMC supports the
acquisition and remarketing of its existing base
of assets managed and leased; and provides a
profitable remarketing and sales service to
unaffiliated owners, lessors, and lessees of
aircraft; and (iii) Aircraft Financing-JMC is
engaged in financing assets that are difficult to
finance utilizing conventional bank lending
techniques.
USE OF PROCEEDS Net proceeds of approximately $9,000,000
(assuming the maximum offering amount is received)
will be used for the purchased of Income Producing
Assets (See "ESTIMATED USE OF PROCEEDS").
PLAN OF DISTRIBUTION The Notes will be sold on a "best efforts" basis
Crispin Koehler Securities, and by other
participating broker-dealers that are required to
offer and sell the Notes in a particular state as
engaged by CKS and the Company and that are
members of the National Association of Securities
Dealers (See 'PLAN OF DISTRIBUTION').
LIQUIDATION OF NOTES There is no established trading market for the
Notes, and the Notes will not be listed on any
securities exchange. The Sales Agent has advised
the Company that they may from time to time
purchase and sell Notes on the secondary market,
as permitted by applicable laws and regulations,
and in accordance with Rile 15(c)(2)-11 under the
Exchange Act. The Company anticipates that other
members of the selling group may also engage in
such activities. Neither will be obligated,
however, to make any such purchases and sales and
each, in its sole discretion, may discontinue any
such purchases and sales any time without notice
to any party. There can be no assurance that
there
<PAGE>
RISK FACTORS - Page 6
AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK, AND, THEREFORE,
SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. NOTES SHOULD NOT BE PURCHASED BY
PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THE ENTIRE INVESTMENT.
IN CONSIDERING A PURCHASE OF THESE SECURITIES, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE RISKS INVOLVED, INCLUDING THE
FOLLOWING (NOT NECESSARILY PRESENTED IN THE ORDER OF MAGNITUDE OF RISK):
INVESTMENT RISKS
Risks arise because an investment in the Company is the purchase of a debt
security.
1. LACK OF DIVERSIFICATION. The maximum offering amount under this
offering is $10,000,000, but the minimum offering amount is $500,000. To the
extent that the Company sells less than all of the Notes, the number of
different Income Producing Assets in which it will invest will be reduced. This
reduction in diversification may increase the risks of an investment in the
Notes, since the payment of the Notes will be recourse only to Income Producing
Assets. If only the Minimum Offering is achieved, the Company may acquire only
a single item of Equipment or an interest in such (See "BUSINESS OF THE
COMPANY--Acquisition Policies" and "ESTIMATED USE OF
PROCEEDS").
2. NOTEHOLDERS' LIMITED RIGHTS. Noteholders will have no right to take
part in the management or control of the business of the Company, and have only
those rights as set forth in the Trust Indenture. Consequently, the purchasers
of Notes must be willing to entrust all aspects of management and control of the
Company to the officers and directors of the Company and to JMC, in its
capacity as the management company (See "THE TRUST INDENTURE" and "DESCRIPTION
OF THE COMPANY'S SECURITIES").
3. COMPENSATION TO THE MANAGEMENT COMPANY AND ITS AFFILIATES. The Manage-
ment Company and its Affiliates will receive fees and other compensation from
the Company, much of which will be payable regardless of the profitability of
the Company's operations. In addition, there will be certain fixed expenses paid
to third parties regardless of the gross offering amount sold (See "DESCRIPTION
OF THE COMPANY'S SECURITIES --THE NOTES -- Allowed Expenses"). In order to
enable the Company to make its required payments under the Notes, the Company
must generate revenues from operations and sales proceeds in excess of the sum
of (a) the Company's fixed and other expenses and the amount of the fees and
other compensation payable to the Management Company and its Affiliates as well
as (b) the amount of Purchase Price and other costs of the assets it acquires
(See "TABLE OF COMPENSATION TO MANAGEMENT COMPANY AND ITS AFFILIATES" and
"CONFLICTS OF INTEREST--Compensation Payable to JMC"). Certain fees, such as
Organizational and Offering Expense Reimbursement and the Management Fee
payable to the Management Company shall, in the aggregate, increase with the
amount of Notes sold. Other fees, such as brokerage fees will be payable on a
per-transaction basis, and though the Number of Units sold will likely increase
the number of aircraft acquisition transactions, such fees may not necessarily
increase proportionately as the amount of Notes sold increases.
4. LIQUIDITY OF NOTES--NO TRADING MARKET. There is no established trading
2market for the Notes and none is likely to develop, and the Notes will not be
listed on any securities exchange. The Sales Agent has advised the Company that
it may from time to time purchase and sell Notes in the secondary market, as
permitted by applicable laws and regulations, and in accordance with Rule
15(c)(2)-11 under the Exchange Act. The Company anticipates that other members
of the selling group may also engage in such activities. Neither will be
obligated, however, to make any such purchases and sales and each, in its sole
discretion, may discontinue any such purchases and sales any time without notice
to any party. Furthermore, resale of the Notes may be restricted under the
securities laws of certain states.
<PAGE>
5. SOLE SOURCE OF PAYMENT ON THE NOTES. The primary source of payment on
the Notes available shall be the rentals or other income received from the
leases or proceeds from the resale of the Collateral acquired by the Company.
Because the Notes are full recourse obligations of the Company, if those funds
are insufficient, then the Noteholders, upon a default may proceed against the
Company's other assets, if any. No other entity or person is guaranteeing the
obligation of the Company to pay the principal and interest due on the Notes.
(See "MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION OF THE
COMPANY--Liquidity and Capital Resources").
6. SALE OF ASSETS TO CURE PAYMENT DEFAULT. The Company and/or the
Indenture Trustee have certain authority to sell Income Producing Assets of the
Company in the event that the Company fails to make a required interest payment
within 90 days of its due date. Under certain circumstances, the Company is
authorized under the Trust Indenture to sell Income Producing Assets and apply
those proceeds toward the overdue interest payment (See "THE TRUST INDENTURE--
Events of Default"). Any sale of Income Producing Assets to cure a default in
payment of interest would decrease the amount of Income Producing Assets of the
Company that are available to generate income for repayment of the Notes and are
eventually liquidated by the Company to repay the Note principal. Thus, such
early sales may make it more difficult to meet its obligation to make future
interest payments and/or pay off the Note principal at the Maturity Date.
7. PREPAYMENT ON NOTE BY COMPANY. Though the Notes have an approximate
eight year term, the Company may, in its sole discretion, prepay principal due
under the Notes at any time beginning May 1, 2000 (See "DESCRIPTION OF THE
COMPANY'S SECURITIES--THE NOTES"). Thus, investors who are seeking interest
income may need to reinvest the prepaid principal in other investments after
such prepayment. There is no assurance that other investments with comparable
yields to the Notes will be available at the time of the Company's prepayment.
8. COLLECTIONS; RETURN ON LEASES; RESIDUAL VALUE OF EQUIPMENT. The
Company intends to meet its obligations on the Notes by acquiring Income
Producing Assets. The revenue from such assets and the resale proceeds of the
assets will be the source for repayment of the Notes. The current monthly yield
earned by JetFleet III, the most recently sponsored affiliated program, on its
portfolio of assets is 1.50% (See "THE MANAGEMENT COMPANY AND ITS AFFILIATES").
As an example, in order to repay the Notes in full at the Maturity, if the
Company has a monthly average yield of 1.50% on its Income Producing Assets over
the term of the Notes, the acquired Income Producing Assets would have to have a
residual value at the maturity of the Note equal to 75% of its original purchase
price. To the extent that the rental yield on Income Producing Assets is higher,
the residual value required to be attained on the Company's assets in order for
the Company to meet its obligations under the Notes will be lower than 75% and
vice versa.
As a consequence of the foregoing, the Company will endeavor to choose a
portfolio of Assets whose net rental payments and the resale proceeds, after
deduction of Allowed Expenses, would be sufficient to make the required payments
on the Notes. Nevertheless, the actual rental return rates for the Company's
Equipment over the term of the Notes are impossible to predict precisely. If
the initial lease rental is no collected as expected by the Company, or the
re-lease rental or resale proceeds are not consistent with anticipated values
for the Equipment, the Company's ability to make the required payments on the
Notes would be adversely affected.
9. SUFFICIENCY OF SINKING FUND. Beginning May 1, 2003, the Company will
transfer all Net Cash Flow and all Net Resale Proceeds from the Collateral to
the Sinking Fund Account. Such proceeds will be retained by the Trustee in the
Sinking Fund Account to partially fund repayment of the principal of the Notes
at maturity on November 1, 2003. The remainder of the repayment of the Note
principal amount is expected to be from the resale proceeds of the Equipment or
Financial Assets. Consequently, it is anticipated the Company will be unable to
repay principal owed under the Notes solely from the Sinking Fund Account at the
Maturity Date (See "DESCRIPTION OF THE COMPANY'S SECURITIES--THE NOTES--The
Sinking Fund Account").
<PAGE>
10. SUFFICIENCY OF COLLATERAL. If the Company defaults on the Notes, the
Trustee, on behalf of the Noteholders, will be entitled to foreclose on the
Collateral which secures the Notes. There is no assurance that the value of the
Collateral will be sufficient to satisfy any such claims of Noteholders, or that
the Collateral will not
<PAGE>
9. ABSENCE OF CENTRAL RECORDING SYSTEM FOR CERTAIN EQUIPMENT--POSSIBILITY
OF ADVERSE LIENS. Aircraft equipment other than airframes and aircraft engines
attached and leased with an airframe are not eligible for separate registration
with the FAA under the Aviation Act and therefore are not subject to the same
protection that the central recording system affords owners of aircraft
generally. However, liens against jet engines attached to aircraft but leased
separately may be recorded with the FAA. Accordingly, the Company intends to
record with the FAA a copy of each separate lease of aircraft engines included
in the Company's Equipment portfolio. In addition, the Company intends to file
notices under the Uniform Commercial Code with respect to any lease of
Equipment.
10. RISKS RELATING TO FINANCIAL ASSETS. Generally, an investment in
Financial Assets will not entail as many risks as a direct investment in
Equipment, but if the Payer defaults and the Company forecloses on the asset
securing the Financial Asset, the Company may assume ownership of the equipment
(See "BUSINESS OF THE COMPANY--ACQUISITION POLICIES--Financial Assets"). In
such a case, the ability of the Company to make its anticipated return on the
Financial Asset would be subject to the risks relating to ownership, leasing,
resale and remarketing of Equipment discussed herein with respect to Equipment
acquired by the Company.
TAX AND ERISA RISKS
1. TAX CHARACTERIZATION OF THE NOTES. The Notes should be characterized
as true indebtedness, as opposed to some form of equity, joint venture or
financing arrangement, for federal income tax purposes because (1) there is a
stated interest rate and a fixed maturity date, (2) the Notes contain no
provision for sharing of profits and losses, (3) the Notes are or will be
secured by the Collateral, (4) the Company's obligation to pay principal and
interest to Noteholders is senior to any obligation to make distributions to
shareholders, and (5) it is the intention of the parties, who are unrelated, to
create a debtor-creditor relationship. Such a characterization is a factual
matter, however, and there are certain other factors present, such as the amount
of Company equity relative to the amount of the Notes outstanding, which would
undermine the characterization of the Notes as debt. Accordingly, there can be
no assurance that the Service will not attempt to recharacterize the Notes in
whole or in part as some form of equity interest and that any such attempt will
not succeed. If the Notes are recharacterized in their entirety or in part as
equity, some or all of the interest paid on the Notes may not be deductible by
the Company and might be treated as unrelated business taxable income to the
Noteholders who are tax-exempt investors (See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS").
2. NO SHARE IN COMPANY TAX BENEFITS AND LIMITED SHARE OF REVENUES.
Noteholders will not receive any tax deductions from the Company's operations,
and, in general, all interest be taxable income to such Noteholders when
received by them in cash (See "DESCRIPTION OF COMPANY'S SECURITIES").
3. INVESTMENT BY TAX EXEMPT INVESTORS. In considering whether an invest-
ment in the Notes of a portion of the assets of a trust of a pension or profit-
sharing plan qualified under Section 401(a) of the Internal Revenue Code and
exempt from tax under Section 501(a) is appropriate, a fiduciary should consider
(i) whether the investment satisfies the diversification requirements of Section
404 of the Employee Retirement Income Security Act of 1974 ("ERISA"); (ii)
whether the investment is prudent, since there is likely to be only a thinly
traded market, if any, in which he can sell or otherwise dispose of the Notes;
and (iii) whether the Notes constitute "Plan Assets" under ERISA. If a Tax-
Exempt Investor borrows funds to purchase the Notes, this investment may not be
appropriate as it would likely give rise to unrelated business taxable income
(See "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS--Purchase of Notes by Exempt
Plans and Other Exempt
Organizations").
<PAGE>
4. CHANGES IN TAX LAW. Changes in the tax laws could affect any antici-
pated tax treatment associated with an investment in Notes. In recent years,
President Clinton has proposed budget legislation which would have treated
certain hybrid debt instruments as equity to the borrower while still
maintaining debt status to the holders of the instruments. While such proposals
have not been acted upon , and in their then proposed form would not have been
directly applicable to the Notes, any further extension of such concepts in
future legislation could result in all or part of the Notes being treated as
equity to the Company or, possibly the Noteholders. Also, there is no
assurance that adverse changes in the interpretation of applicable tax laws will
not be made by administrators or judges. Administrative or judicial changes may
or may not be retroactive with respect to transactions entered into prior to the
date on which such changes take effect. Periodic consultations with an
investor's professional advisor may be necessary given the possibility of such
changes.
ESTIMATED USE OF PROCEEDS
The following table sets forth information concerning the estimated uses of
proceeds from the sale of Notes assuming that the Company achieves,
alternatively, the Minimum or Maximum Offering. As indicated in the table,
approximately 90% of the Aggregate Gross Offering Proceeds is expected to be
available for the purchase of Income Producing Assets or interests therein and
operation of the Company, after deduction of all Organizational and Offering
Expenses, and fees and other amounts payable to third parties.
See "BUSINESS OF THE COMPANY--ACQUISITION POLICIES" for descriptions of the
types of assets to be identified for acquisition by the Company initially that
may be acquired by the Company.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
(500 Notes(1) (10,000 Notes)
<S> <C> <C> <C> <C>
Gross Offering Proceeds $500,000 100.00% $10,000,000 100.00%
Less Organization and Offering Expenses:
Sales Commissions (2) 40,000 8.00% 800,000 8.00%
Organization and Offering
Expense Reimbursement (3) 10,000 2.00% 200,000 2.00%
________ _____ ___________ ______
Net Offering Proceeds $450,000 90.00% $ 9,000,000 90.00%
======== ===== =========== ======
</TABLE>
- ---------------------------
(1) The amount of the Minimum Offering will not be less than $500,000.
(2) The Company will pay soliciting broker-dealers, in consideration for their
services, a sales commission of 6.0% and pay to CKS an unallocated due
diligence and marketing fee of 2.0% to cover certain marketing and selling
expense, a portion of which may be reallowed to certain soliciting broker-
dealers, in the discretion of CKS.
(3) The Organization and Offering Expense Reimbursement is payable to JMC in an
amount equal to 2.0% of Aggregate Gross Offering Proceeds (See "CONFLICTS OF
INTEREST--Compensation Payable to JMC And Its Affiliates" and "TABLE OF
COMPENSATION TO MANAGEMENT COMPANY AND ITS AFFILIATES"). To the extent JMC
incurs expenses in excess of the 2.0% limit, such excess expenses will be
repaid to JMC in the form of Common Stock issued at a price of $1.00 per
share. In no event will the Organization and Offering ExpenseReimbursement
exceed $200,000.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 15, 1997, and as adjusted.
<TABLE>
<CAPTION>
PRIOR TO OFFERING IF MINIMUM IF MAXIMUM
OFFERING SOLD OFFERING SOLD
Number Amount Number Amount Number Amount
<S> <C> <C> <C> <C> <C> <C>
Common Stock(1) 10,000 $10,000 210,000 $210,000 410,000 $ 410,000
(100,000 Shares Authorized)
Secured Notes 0 $ 0 500 $500,000 10,000 $10,000,000
</TABLE>
- -----------------------------------
(1) To the extent JMC incurs Organizational and Offering Expenses on behalf of
the Company in excess of 2.0% of the Aggregate Gross Offering Proceeds,
such unreimbursed expenses will be converted into Common Stock of the
Company, to be issued at the price of $1.00 per share. In no event will the
Organization and Offering Expense Reimbursement exceed $200,000. JMC, the
sole shareholder of the Company, will contribute additional equity capital
to the Company in the form of an additional investment in Common Stock, at a
price of $1.00 per share, upon each Closing equal to 4% of the subscription
proceeds accepted at such Closing.
<PAGE>
DESCRIPTION OF THE COMPANY'S SECURITIES - Page 17
THE NOTES
GENERAL. The Notes will be recourse obligations of the Company issued
pursuant to an Indenture of Trust, dated April 10, 1997 (the "Trust Indenture"),
between the Company and First Security Bank, National Association, as trustee
(the "Trustee"), a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
and the summary included under "THE TRUST INDENTURE" discuss the material
provisions of the Trust Indenture. The Company has not sought and is not
required by the Trust Indenture or any other document to obtain a rating of the
Notes by a rating agency.
ISSUANCE OF NOTES; TRANSFERS. The Notes will be issued in fully registered
form in denominations of $1,000 subject to the minimum amount of 5,000 or
($2,000 for IRAs). (Trust Indenture, Section 3.02.) The Trustee will charge a
fee of $10.00 for any transfer or exchange of a Note, and may require the
transferor to pay any governmental fees or charges in connection with the
transfer. (Trust Indenture, Section 3.05.) Each Note will have a maturity date
("Maturity Date") of April 30, 2005; provided that the Company, in its sole
discretion upon written notice to the Trustee, may extend such Maturity Date for
up to six months.
PAYMENTS OF PRINCIPAL AND INTEREST ON THE SECURED NOTES. ~The Notes will
earn fixed interest on the $1,000 Note principal amount, calculated quarterly,
from the date of issuance at the rate of 10% simple interest per annum.
PERIODIC INTEREST PAYMENTS. Interest will be calculated quarterly.
Interest is due and payable on the 1st day of each, February, May, August and
November (or the next following Business Day if the 1st is not a Business Day)
(each such date a "Payment Date") for interest accrued in the prior calendar
quarter. Principal and all accrued and unpaid interest will be due on the
Maturity Date. The record date for each payment on the Note ("Record Date") is
the close of business on the 15th of the calendar month prior to the month in
which such Payment Date occurs for that payment. The Company may not make any
prepayments of principal upon the Note until after April 30, 2005. Interest
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
PAYMENTS OF PRINCIPAL AND INTEREST GENERALLY. All payments will be made by
check mailed by the Trustee to Noteholders registered as of the close of
business on the fifteenth day of the month prior to the calendar month in which
the Payment Date occurs at their addresses appearing on the Register, except
that the payment of principal and final payment of interest on each Note will be
made only upon presentation and surrender of such Note on or after the Stated
Maturity at the office of the Trustee. (Trust Indenture, Section 5.1.). The
Company expects to use rental and resale proceeds of the Income Producing Assets
to make the required payments under the Note. If the Company is unable to make
all or any portion of an interest payment under the Note, the unpaid interest
shall accrue and become payable in full at the Maturity Date. Accrued but unpaid
interest shall not bear interest.
All principal and interest due under the Notes will be due on their
Maturity Date (the "Maturity Date") which shall be April 30, 2005, unless
extended to a date up to six months later at the sole discretion of the Company.
Upon an Event of Default (as defined in the Trust Indenture) with respect
to the Notes, the Trustee has certain remedies against the Company, including
acceleration of all Note indebtedness and/or foreclosure upon and sale of the
Collateral.
<PAGE>
SOURCE OF PAYMENT ON THE NOTES. The only source of payment of principal and
interest on the Notes shall be from the income generated by the Company's Income
Producing Assets and proceeds of the resale of such assets. The Company will
have no other assets nor is any other entity or person guaranteeing the
obligations of the Company to pay the principal and interest due on the Notes.
PREPAYMENT. The Company, in its sole discretion, may prepay all or any
portion of the outstanding principal under the Notes, beginning May 1, 2000.
Prepayments will be made on all notes to noteholders on a pro rata basis, such
that the same percentage of indebtedness is prepaid to all Noteholders.
SECURITY FOR THE NOTES. The Collateral securing the Notes will consist of
all of the Company's right, title and interest in Income Producing Assets
acquired by the Company using the proceeds of the Notes or the proceeds or
income from such acquired Income Producing Assets. The Company may, upon notice
to the Trustee, subordinate the lien of the Noteholders in an Income Producing
Asset acquired using third party acquisition financing to the lien of a third
party lender; provided, however, that no Note proceeds are used in the
acquisition of such Income Producing Asset.
THE SINKING FUND ACCOUNT. The Company shall establish prior to the initial
authentication and delivery of the Notes, in the name of the Trustee, a trust
account at a First Security Bank, National Association (the "Sinking Fund
Account"). The Sinking Fund Account will relate solely to the Notes. Funds in
the Sinking Fund Account will not be commingled with any other moneys of JMC or
the Company. All moneys deposited from time to time in the Sinking Fund Account
will be held by the Trustee as part of the Trust Estate. Withdrawals of any
funds from the Sinking Fund Account will be controlled by the Trustee. All
payments of amounts due and payable with respect to the Notes which are to be
made from amounts withdrawn from the Sinking Fund Account will be made on
behalf of the Company by the Trustee, and no amounts so withdrawn from the
Sinking Fund Account will be paid over to the Company. The funds in the Sinking
Fund Account will be employed by the Trustee to repay principal due under the
Notes on the Maturity Date or an earlier prepayment date.
All Net Resale Proceeds and all Net Cash Flow of the Company with respect
to the Collateral received beginning May 1, 2003, will no longer be available to
the Company for acquisition of additional assets and will be deposited into and
held, along with the income earned thereon, by the Trustee in the Sinking Fund
Account for repayment of the Notes. No schedule of minimum required payments
into the Sinking Fund will exist.
ALLOWED EXPENSES. Revenue from Income Producing Assets will be applied
first toward certain expenses of the Company, then toward required payments
under the Notes, then toward either reinvestment into additional Income
Producing Assets or deposits into the Sinking Fund or other Payment Accounts.
Listed below is a summary of such expenses.
<TABLE>
<CAPTION>
ALLOWED EXPENSES ESTIMATED AMOUNT
<S> <C>
Initial Trustee Fees $ 3,000
Annual Administration, Note Interest $ 8,500
Processing and Registrar Services
Annual Escrow Fee $10,000
Management Fee .50% of the Company's Aggregate
Gross Offering Proceeds (payable
quarterly in arrears for as long as
the Company is in existence)
Annual Legal and Accounting, General
and Administrative Expenses and
Reimbursements Payable to Third
Parties $50,000
Federal Income Taxes 15% - 39%
California Income Taxes 9.3%
</TABLE>
<PAGE>
THE TRUST INDENTURE - Page 20
The following summary together with the discussion of the Trust Indenture
contained in "DESCRIPTION OF
THE COMPANY'S SECURITIES" describes the material provisions of the Trust
Indenture. The Trust Indenture will not be qualified under the Trust Indenture
Act of 1939 (the "1939 Act"), pursuant to an exemption from qualification
provided for thereunder. Consequently, the provisions of the 1939 Act do not
apply to the Trust Indenture.
MODIFICATION OF TRUST INDENTURE. With the consent of the holders of at
least a majority of the aggregate principal amount of the outstanding Notes,
the Trustee and the Company may amend or supplement the Trust Indenture or the
Notes, except as provided below. Notice of any such amendment of the Trust
Indenture or the Notes will be mailed to all of the Noteholders by the
Company promptly after the effectiveness thereof.
The Company and the Trustee may also amend or supplement the Trust
Indenture or the Notes, without obtaining the consent of Noteholders, to cure
ambiguities or make minor corrections and, among other things, to make any
change that does not adversely affect the interests of the Noteholders
(Trust Indenture, Section 11.01).
EVENTS OF DEFAULT. An Event of Default with respect to the Notes is
defined in the Trust Indenture as being: (a) the failure of the Company to make
any interest payment on the Notes within ninety (90) days after its due date;
(b) the failure of the Company to repay all indebtedness under the Notes within
sixty (60) days after the Maturity Date; (c) effectiveness of the Trust
Indenture or of the security interest granted thereby, the improper amendment or
the breach or default in the performance of any covenant or agreement of the
Company in the Indenture or related security interest documents (other than
those covered in (a) and (b) above, and the continuance of any such default for
a period of thirty (30) days after notice to the Company by the Trustee or to
the Company and the Trustee by the Noteholders representing at least a 25% Vote
of the Outstanding Notes; (d) the breach in any material respect of a
representation or warranty of the Company in the Trust Indenture and the failure
to cure such circumstances or condition within thirty (30) days of notice
thereof to the Company by the Trustee or the Noteholders representing at least
a 25% Vote of the Outstanding Notes; or (e) certain events of bankruptcy of the
Company (Trust Indenture, Section 5.01).
RIGHTS UPON EVENT OF DEFAULT. In case an Event of Default should occur and
be continuing, the Trustee may, or at the direction of the Noteholders
representing at least 25% of the outstanding principal amount of the Notes will,
declare the Notes due and payable. Upon such declaration, the Notes will
immediately become due and payable in an amount equal to their remaining
principal amount plus accrued interest at such time. Such a declaration may be
rescinded under certain circumstances by a vote of the Noteholders (Trust
Indenture, Section 5.02).
If, following an Event of Default, the Notes have been declared due and
payable, the Trustee may exercise one or more of its remedies including, in its
discretion, the right to retain the Trust Estate and apply all amounts received
with respect to the Trust Estate, first, to payment of its fees and expenses
and, then to the payment of the principal of and interest on the Notes (Trust
Indenture, Sections 5.04, 5.08 and 6.07). Alternatively, the Trustee may, in its
discretion, sell the Trust Estate and apply the proceeds, first, to payment of
its fees and expenses and, then, to the amounts due on the Notes (Trust
Indenture, Sections 5.04, 5.08 and 5.18).
The holders of a majority of the aggregate principal amount of the out-
standing Notes will have the right to direct the time, method, and place of
conducting any proceedings for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee may refuse, however, to
follow any such direction that conflicts with law or the Trust Indenture, that
is unduly prejudicial to the rights of Noteholders not joining in such
direction or that would involve the Trustee in personal liability (Trust
Indenture, Section 5.14). The holders of a majority of the aggregate amount
of the outstanding Notes may also waive any default, except a default
in respect of a covenant or provision of the Trust Indenture which cannot
be modified without the waiver or consent of each Noteholder affected
(Trust Indenture, Section 5.15).
<PAGE>
airlines operating within Europe and the U.S. with responsibility for operation,
market development and sales. He was involed in the development of several
turn-key, start-up operations in Berlin, Germany and the United States.
Mr.Duckstein attended the Tehcnical University of Berlin, majoring in Economics.
He will devote such time to the affairs of the Company as is necessary to carry
out his duties to the Company, which is expected to require at a minimum
approximately 75% of his work hours.
The Management Company. JMC, the holder of 100% of the Common Stock of the
Company, is the Mangement Company under the Management Agreement. The directors
and executive officers of JMC are also the directors and executive officers of
the Company. JMC was incorporated in January 1994 (See "THE MANAGEMENT COMPANY
AND ITS AFFILIATES").
Pursuant to the Management Agreement, the Management Company will be
responsible for the management and operation of the business of the Company. JMC
is responsible for most management decisisons and will have responsibility for
supervising the Company's day-to-day operations, including compliance with legal
and regulatory requirements, and will be responsible for cash management and
communications between the Company and the holders of Notes. The Management
Agreement authorizes JMC, in its sole disretion, to acquire, hold title to,
sell, lease, re-lease or otherwise dispose of the Income Producing Assets or any
interest therein on behalf of the Company when and upon such terms as JMC
determines to be in the best interests of the Company.
The Sales Agent. The Sales Agent is Crispin Koehler Securities, an NASD
broker-dealer. Pursuant to a Sales Agency Agreement, a copy of the form of which
is included as an exhibit to the Registration Statement for this offering (See
"AVAILABLE INFORMATION"), the Sales Agent has agreed to act as the managing
underwriter of this Offering. For a description of certain terms of that
agreement and the compensation to be received by the Sales Agent in connection
with the Offering. See "PLAN OF DISTRIBUTION."
The Trustee. First Security Bank, National Association, will serve as
Indenture Trustee for the Noteholders.
<PAGE>
BUSINESS OF THE COMPANY
ACQUISITION POLICIES
GENERAL. The Company intends to use the net proceeds from this Offering to
purchase Income Producing Assets. The Company anticipates that these assets will
be Equipment, consisting mainly of aircraft, aircraft engines, aircraft parts or
other transportation industry equipment subject to operating or full payout
leases with third parties. The Company may also, however, acquire certain
Financial Assets, such as indebtedness secured by Equipment and/or leases
therefor, or income streams from Equipment Leases.
JMC will select the Income Producing Assets, or interests therein, which
the Company will acquire and will negotiate the terms of acquisition. For these
services as well as others performed under the Management Agreement, for as long
as the Company is in existence, JMC will receive a quarterly Management Fee
calculated as 0.50% of the Aggregate Gross Offering Proceeds from this Offering
received up through the end of the calendar quarter for which the fee is earned.
JMC may engage one or more third parties, such as third-party brokers, to assist
it in identifying assets for acquisition, and their fees will be included in
the Adjusted Purchase Price to be paid by the Company. In such a case, however,
it will be the responsibility of JMC to select from the assets identified by
such a third party those specific assets which the Company will purchase.
In seeking assets for acquisition and potential lessees, JMC and/or its
agents will utilize pre-existing business contacts, other independent brokers,
and trade publication advertisements. JMC is a member of several industry trade
groups and may utilize its interaction with other industry participants in
seeking business opportunities.
The trade publication, Airfinance Annual 1994/95, listed approximately 300
aircraft leasing companies and approximately 200 banks and financing companies
engaged in aircraft industry financing distributed over 40 countries. In January
1997, the trade publication, Flight International, reported that the return of
confidence to the air transport industry gathered momentum during 1996, starting
with the operating lessors, and was encouraged by signed of increasing lease
rates. The Company intends to fill a niche within the aircraft finance industry.
The Company believes that many major banks have backed away from aircraft
finance even though the aircraft industry will continue to have substantial
capital equipment financing requirements, and that financing through the Company
will be one of the few sources for transactions in the range of $10,000,000 or
less. Based on JMC's experience with the JetFleet Programs, management believes
this market segment should provide the Company with a good selection of
desirable acquisition criteria such as strong credits, rent guarantees, and
residual value guarantees.
CERTAIN CRITERIA. Among the factors JMC expects to examine in selecting
Equipment are the history of the aircraft or aircraft engine model, the size and
characteristics of the user base, airworthiness directive and service bulletin
compliance, noise requirement compliance, and the age and maintenance history of
any particular aircraft or equipment. JMC will attempt to obtain, where
possible, from the seller of the Equipment acquired by the Company a residual
value guarantee whereunder JMC can require the seller to repurchase, at JMC's
option, the Equipment at a repurchase price, which when added to the lease
rentals received from the lessee of the Equipment would result in a return of
capital invested in the Equipment.
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS OF THE COMPANY. The sole director of the Company is
Mr. Neal D. Crispin.
Directors are elected by the sole Common Shareholder of the Company,
JetFleet Management Corp., at each annual meeting of the shareholders and serve
until their successors are elected and qualified at the next such meeting.
Directors, advisory board members, and officers of the Company will not receive
compensation of any kind for their services to the Company. In calendar year
1996, Neal Crispin, Marc Anderson and Frank Duckstein ill received an annual
salary from JMC of $47,500, $109,650 and $51,2000, respectively. JMC will pay
its advisory board members $1,000 for each meeting attended.
The officers of the Company are Mr. Neal D. Crispin, President, Mr. Marc J.
Anderson, Chief Operating Officer, and Mr. Frank Duckstein, Vice President.
Officers serve at the discretion of the board of directors of the Company.
MR. NEAL D. CRISPIN, PRESIDENT AND DIRECTOR, age 51, President and a
director of CMA Consolidated, Inc. ("CMA"); the Chief Executive Officer and a
director of its wholly-owned subsidiaries, Capital Management Associates founded
in 1983, and CMA Capital Management; and Chief Executive Officer, Chief
Financial Officer, Secretary and Chairman of the Board of Directors of CMA
Capital Corporation. He is also a general partner of JetFleet I and JetFleet II.
Mr. Crispin is also President and a Director of JMC. Mr. Crispin has extensive
experience in developing asset-based financing alternatives that provide
innovative solutions to the financial and tax needs of large corporations. In
the past four years CMA has participated in more than $1 billion of these
financings. Prior to forming CMA, Mr. Crispin was vice president-finance of an
oil and gas company. Previously, Mr. Crispin had been associated with Arthur
Young & Co., Certified Public Accountants, as a manager. Prior to joining Arthur
Young & Co., Mr. Crispin served as a management consultant, specializing in
financial consulting. Mr. Crispin is the husband of Toni M. Perazzo, a Director
and Officer of JMC. He received a Bachelors Degree in Economics from the
University of California at Santa Barbara and a Masters Degree in Business
Administration (specializing in Finance) from the University of California at
Berkeley. Mr. Crispin, a certified public accountant, is a member of the
American Institute of Certified Public Accountants and the California Society of
Certified Public Accountants. Mr. Crispin will devote such time to the affairs
of the Company as is necessary to carry out his duties to the Company, which
is expected to require at a minimum approximately 25% of his work hours.
MR. MARC J. ANDERSON, CHIEF OPERATING OFFICER, age 60. Mr. Anderson is in
charge of portfolio management and aircraft marketing and financing. Prior to
joining the Company, Mr. Anderson spent seven years as Senior Vice President
Marketing for PLM International, a transportation equipment leasing company
which is also the sponsor of syndicated investment programs. While at PLM, he
established the company's first aircraft marketing group, closing in excess of
150 aircraft transactions representing over $400 million. He was responsible
for the acquisition, modification, leasing and remarketing of all aircraft.
During his tenure, Mr. Anderson had an average aircraft on-lease record of 96%.
Previously, he was with two aircraft manufacturers where he was responsible for
customer contracting, negotiation and documentation of sales agreements and
leases and obtaining debt and lease financing. Prior to that, Mr. Anderson was
with several airlines in various roles of increasing responsibility. Mr.
Anderson is also a Senior Vice President of JMC. Mr. Anderson will devote such
time to the affairs of the Company as is necessary to carry out his duties to
the Company, which is expected to require at a minimum approximately 50% of his
work hours.
<PAGE>
THE MANAGEMENT COMPANY AND ITS AFFILIATES - Page 14
JMC is an Affiliate of the corporate general partner of JetFleet I and
JetFleet II, two publicly-offered limited partnership programs, and is the
parent corporation of JetFleet III, a California corporation. Each of these
syndicated entities is engaged in the same business as proposed to be conducted
by the Company, and collectively they have raised approximately $63 million in
aggregate syndication offering proceeds. JMC manages the assets of those
partnerships on behalf of their general partner. Affiliates of JMC, Capital
Management Associates and CMA Management Group, Inc. (collectively "CMA"), have
acted as sponsors or administrators or in various other capacities with respect
to 40 equipment leasing programs, consisting of 28 trust programs and 12 limited
partnership programs involving in the aggregate approximately $224 million of
computer and related equipment, virtually all of which was purchased by the
programs as used equipment (after the equipment had been placed in service by
lessors pursuant to then-existing leases). None of these programs has involved
aircraft. In the case of each of these programs, interests in the programs were
sold to investors pursuant to private offerings. With respect to the vast
majority of these offerings, the Sales Agent has acted as the dealer manager.
In addition, CMA has arranged and participated in separate equipment leasing
transactions with corporations, involving approximately $1 billion of equipment.
THE MANAGEMENT COMPANY
The holder of 100% of the Common Stock of the Company is JetFleet
Management Corp., a California corporation. JMC is also the management company
for the Company pursuant to the Management Agreement between JMC and the
Company.
JMC will have ultimate responsibility and authority for the selection of
Income Producing Assets to be acquired by the Company and the leasing, re-
leasing and/or subsequent sale of the Income Producing Assets. JMC will have
control over, among other things, the negotiation and execution of lease
agreements for the Equipment, payment of operating expenses, review of
compliance by the Payers with their obligations under the leases or loan
agreements, as applicable (including performance of maintenance, the payment of
insurance and taxes and compliance with all regulatory requirements), the
recovery of possession of Income Producing Assets in the event of a default,
foreclosure on collateral securing Financial Asset obligations of Payers and the
exercise of other appropriate remedies under the terms of the leases or loan
agreements, and all other matters relating to the purchase, lease, use and
ownership of the Income Producing Assets. JMC will also be responsible for
instituting and prosecuting legal proceedings in the name of the Company.
JMC has the right, under the Management Agreement, to employ such persons,
including under certain circumstances Affiliates of JMC, as it deems necessary
for the efficient operation of the Company.
In addition to sponsoring investment entities such as the Company, JMC also
engages or will be engaged in other business activities involving Equipment. JMC
intends to build a significant volume of aircraft assets managed and leased for
its affiliates and for its own account, growing from the current base of assets
owned by the JetFleet Programs, the Company and subsequent investment programs
to over $100 million of assets over the next two to three years. Asset
management involves several activities: remarketing owned aircraft, lease
origination, and buying and selling assets. In addition, JMC will be developing
an aircraft marketing business in two ways: first, by supporting the acquisition
and remarketing of its existing base of assets managed and leased; and second,
by providing a profitable remarketing and sales service to unaffiliated owners,
lessors, and lessees of aircraft. Finally, JMC intends to engage in Equipment
financing, focusing on financing assets that are difficult to finance utilizing
conventional techniques.
Set forth below is a table showing the beneficial ownership of directors,
officers and principal officers of JMC.
<PAGE>
TABLE OF BENEFICIAL OWNERSHIP
OF JETFLEET MANAGEMENT CORP.
<TABLE>
<CAPTION>
Class and No. of
Shares Owned Percent
Name of JMC Stockholder Beneficially and of Record of Class (1)
<S> <C> <C>
Neal D. Crispin, President & 205,400 76.23%
Chairman of the Board of JMC Common
Toni M. Perazzo, Vice President- 30,000 11.13%
Finance, Secretary and Director of Common
JMC
Marc J. Anderson, Chief Operating 5,000 1.86%
Officer of JMC (2) Common
All directors and officers of JMC 240,400 89.22%
Common
</TABLE>
- --------------------------------------------
(1) Based on 264,456 outstanding shares of Common Stock and an aggregate of
5,000 shares of Common Stock issuable under currently exercisable options (
or options exercisable within 60 days of the date of this Prospectus).
(2) Consists of 5,000 shares of Common Stock issuable under currently
exercisable options (or options exercisable within 60 days of the date of
this Prospectus).
FIDUCIARY DUTY. Under California law, JMC will be accountable to the
Company and its shareholders as a fiduciary, due to its status as a promoter and
as sole voting shareholder of the Company, and consequently must exercise good
faith and integrity in handling the affairs of the Company. Noteholders that
have questions concerning the duties of JMC, as a promoter and controlling
shareholder, should consult with their counsel.
In addition, the Management Agreement between JMC and the Company requires
that JMC devote such time as may be necessary for the proper performance of its
management duties and shall use its best efforts to carry out the purposes of
the Company and shall manage the affairs of the Company to the best of its
abilities.
JMC may not be liable to the Company or the Noteholders for errors in
judgment or other acts or omissions not amounting to willful misconduct or
gross negligence since provision has been made in the Management Agreement for
the exculpation of JMC. The Management Agreement also provides for
indemnification of JMC by the Company for liabilities incurred in dealings with
third parties on behalf of the Company. To the extent the indemnification
provisions purport to include indemnification for liabilities arising under the
Securities Act of 1933, in the opinion of the Securities and Exchange
Commission, such indemnification is contrary to public policy and therefore,
unenforceable.
The Noteholders' interests will also be protected by the provision of the
Trust Indenture under which the Notes will be issued, which provides the
Noteholders certain rights and contains certain covenants and prohibitions of
the Company for the benefit of the Noteholders which will be enforced by the
Indenture Trustee (See "THE TRUST INDENTURE").
<PAGE>
JMC COMPENSATION. For as long as the Company is in existence, JMC is
entitled under the Management Agreement to receive a quarterly fee (the
"Management Fee") of 0.50% of the Aggregate Gross Offering Proceeds received by
the Company in the Offering through the end of the quarter in which such fee
accrues (Management Agreement, Section 6). JMC and/or its affiliates may also
receive reimbursement for accountable general administrative expenses payable to
unaffiliated third parties incurred in connection with the administration and
management of the Company. Under the Trust Indenture, payment of the Management
Fee is subject to the prior payment of any amounts owing on the Notes or to the
Trustee. The Management Fee is intended to compensate and reimburse JMC for
management of the Company's Income Producing Assets and administering the
leases for such equipment. The Management Fee will also compensate JMC for
furnishing quarterly and annual statements to the Company and the Trustee with
respect to rental collections and resale proceeds, and generating information
necessary for the Company to prepare all federal and state income tax returns.
In addition, JMC will receive a Organization and Offering Expense Reimbursement
to cover expenses for registration, legal counsel, accounting services,
printing, trustee services, marketing (including advertising and assisting
participating brokers) and other miscellaneous costs and expenses and
allocated general administrative and overhead expenses relating to the
organization of the Company and the Offering borne by JMC. JMC and/or its
Affiliates may also receive a brokerage fee in connection with acquisition of
Income Producing Assets by the Company, and/or a remarketing fee in connection
with the sale of the Company's assets. In no event will any brokerage or
remarketing fee be greater than the usual and customary brokerage fee that would
have been paid to an unrelated third party broker (See "CONFLICTS OF INTEREST"
and "TABLE OF COMPENSATION TO MANAGEMENT COMPANY AND ITS AFFILIATES").
OFFICERS, DIRECTORS, AND KEY EMPLOYEES OF JMC. The directors of JMC are
Neal D. Crispin and Toni M. Perazzo.
The officers of JMC are Mr. Neal D. Crispin, President, Mr. Marc J.
Anderson, Chief Operating Officer, Ms. Toni M. Perazzo, Vice President -
Finance, Secretary and Director, and Mr. Frank Duckstein, Vice President.
Officers serve at the discretion of the board of directors.
MR. NEAL D. CRISPIN, PRESIDENT AND DIRECTOR. See "MANAGEMENT--Officers and
Directors of the Company," above.
MS. TONI M. PERAZZO, DIRECTOR, VICE PRESIDENT - FINANCE & SECRETARY, age
48, is CFO of CMA. Prior to joining CMA in 1990, she was Assistant Vice
President for a savings and loan, Controller of an oil and gas syndicator and a
senior auditor with Arthur Young & Co., Certified Public Accountants. Ms.
Perazzo is also the Vice President-Finance and Secretary of JMC. Ms. Perazzo is
the wife of Neal D. Crispin, a Director and Officer of the Company and JMC.
She received her Bachelor's Degree from the University of California at
Berkeley and her MBA from the University of Southern California. Ms. Perazzo, a
CPA, is a member of the California Society of CPAs and the AICPA. Ms. Perazzo
will devote such time to the affairs of the Company as is necessary to carry out
her duties to the Company, which is expected to require at a minimum
approximately 50% of her work hours.
MR. MARC J. ANDERSON, CHIEF OPERATING OFFICER. See "MANAGEMENT--Officers
and Directors of the Company," above.
MR. FRANK DUCKSTEIN, VICE PRESIDENT. See "MANAGEMENT--Officers and
Directors of the Company," above.
ADVISORY BOARD. Management of JMC has appointed an advisory board which
will consist of distinguished industry experts. The Advisory Board will serve at
the pleasure of the Chairman of the Board. Advisory Board responsibilities
will include:
<PAGE>
TABLE OF COMPENSATION TO MANAGEMENT COMPANY AND ITS AFFILIATES
This table sets forth the items of compensation payable to the Management
Company and its Affiliates and the estimated amount of such assuming the
Minimum and Maximum Offering amounts are raised.
OFFERING AND ORGANIZATION STAGE
<TABLE>
<CAPTION>
ESTIMATED AMOUNT ASSUMING
ENTITY RECEIVING MINIMUM MAXIMUM
COMPENSATION TYPE OF COMPENSATION OFFERING OFFERING
<S> <C> <C> <C>
JetFleet Management Corp. Organization and Offering Expense $10,000 $200,000
Reimbursement. Payable to JMC in an
amount up to 2.0% of Aggregate Gross
Offering Proceeds for registration,
legal accounting, printing, trustee,
marketing (including advertising and
assisting participating broker dealers)
related to the offering and the
organization of the Company borne by
JMC. Any excess of such costs over 2.0%
will be paid to JMC in the form of
Common Stock at price of $1.00 per
share.
</TABLE>
<PAGE>
JETFLEET(TM) PROGRAMS
JMC is an Affiliate of the corporate general partner of JetFleet I and
JetFleet II, two publicly-offered limited partnership programs, and corporate
parent of JetFleet III, each of which is in the same business as proposed to be
conducted by the Company. JMC manages the assets of JetFleet III, and those of
JetFleet I and II on behalf of their general partner. JETFLEET(TM) I.
Approximately $14.8 million was raised from the public offering of limited
partner interests in JetFleet(TM) I frOM June 1989 to June 1991. JetFleet(TM)
I has paID cash distributions to its investors at an average rate of 8.09% of
gross investor subscriptions per annum from inception through January 31, 1997.
JetFleet(TM) I's portfolio consists of A 95.9% and a 24.37% undivided
interest in two de Havilland Dash-7 airplanes and a 50% undivided interest in a
McDonnell Douglas DC-9. JetFleet(TM) I's original asset, a Boeing 727-200
purchased in 1989 for approximately $6 million was written down by $3.7 million
to estimated net realizable book value of $1.5 million in 1992. When the
aircraft came off lease in 1994, it was sold and a loss of approximately
$235,000 was recognized. All JetFleet(TM) I's assets are currently under lease.
JETFLEET(TM) II. Approximately $34.7 million was raised from the public
offering of limited partnership interests in JetFleet(TM) II from October 1991
through April 1994. JetFleet(TM) II has paid cash distributions TO its investors
at an average rate of 11.25% of gross investors' subscriptions per annum from
inception through January 31, 1997.
JetFleet(TM) II has purchased virtually all the remaining interests in
JetFleet(TM) I'S Dash-7 and DC-9 aircraft (referred to above), consisting of
4.00%, 75.53% and 50.00% interests in those aircraft. In addition, JetFleet II
has purchased 100% interests in two additional Dash-7 aircraft. In April 1995,
JetFleet II rescinded a previous transaction with the AGES Group, L.P. ("AGES")
for three Pratt & Whitney JT8D-217A engines on lease to AeroMexico because AGES
had not obtained certain consents regarding the transfer of ownership. A portion
of the rescission proceeds have been used to purchase a Fairchild Metro III
Aircraft, a Metro II, a Dash-6 aircraft and a second DC-9 aircraft. Management
is seeking investment opportunities for the remaining proceeds.
In addition, JetFleet II owns twenty-three Pratt & Whitney PT6 turboprop
Engines, two Pratt & Whitney PT6A-50 Engines and two Allison Corp. helicopter
engines.
All JetFleet(TM) II's assets are currently under lease.
JETFLEET(TM) III. Approximately $ 10 million was raised from the public
offering of units of a secured bond ($850) and Series A Preferred Stock ($150)
in JetFleet(TM) III frOM October 1995 through January 1997. JetFleet(TM) III is
current on all its obligations under the bonds issued as part of the unit
offering.
JetFleet(TM) III portfolio consists of one de Havilland Dash 8-100
aircraft, three de Havilland DHC-6 Twin Otters aircraft, one Shorts 3-60
aircraft, one Pratt and Whitney JT8D-9A aircraft engine and a 50% undivided
interest in a Fairchild Metro II aircraft. All of JetFleet III's assets are
currently under lease.
Prior Performance Tables showing the performance of JetFleet III are set
forth in Appendix A to this Prospectus. Investors desiring additional
information concerning JetFleet Programs may request from the Company the
prospectus and current periodic reports distributed to JetFleet
Program investors. There is no assurance that the financial performance of the
Company will be similar to that of JetFleet III, which is shown in the Prior
Performance Tables, or that of the other JetFleet Programs.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as the date of this Prospectus,
relating to the beneficial ownership of the classes of the Company's securities
by any person or "group," as that term is used in Section 13(d) (3) of the
Securities and Exchange Act of 1934 (the "Exchange Act"), known to the Company
to own beneficially 5% or more of the outstanding shares of a class of the
Company's stock, and known to the Company to be owned by each director of the
Company and by all officers and directors of the Company as a group. Each of
the persons named below is believed by the Company to possess sole voting and
investment power with respect to the shares of the class of stock beneficially
owned by such person.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
CLASS AND NO. SHARES
OWNED BENEFICIALLY BEFORE(1) AFTER(2)
AND OF RECORD OFFERING OFFERING
BENEFICIAL OWNERS
<S> <C> <C> <C>
JetFleet Management Corp. (1) 10,000 100% 100%
Common
All directors and officers 10,000 100% 100%
of the Company as a group (2) Common
</TABLE>
- --------------------------
(1) JMC will be the sole common shareholder of the Company.
(2) The sole director and President of the Company, Mr. Crispin, does not own
any shares in the Company. Shares reported here represent shares owned by
JMC, the sole common shareholder of the Company. Mr. Crispin is each a
director, executive officer and principal shareholder of JMC, holding 79%,
respectively, of the Common Stock of JMC. Toni M. Perazzo, spouse of Mr.
Crispin, and a director and officer of JMC, holds 12% of JMC. The remaining
9% of the shares of JMC are held by Richard D. Koehler, an affiliate of
the Sales Agent. See also "THE MANAGEMENT COMPANY AND ITS AFFILIATES -- THE
MANAGEMENT COMPANY -- Table of Beneficial Ownership".
<PAGE>
OPINION OF COUNSEL. The Company will obtain an opinion from Counsel which
states that the sections of the Prospectus which discuss the material tax risks
and the section of the Prospectus entitled "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS" accurately describe each of the material tax issues and reflect
Counsel's opinion regarding such matters referred to therein. The Notes are
intended to serve as an investment vehicle for investors seeking current income
and tax benefits are not a significant aspect of an investment in the Notes.
Although its conclusions are not free from doubt, Counsel has opined herein,
subject to certain conditions and based upon certain representations, that:
1. NOTES TREATED AS CORPORATE DEBT. The Notes will be treated as valid
indebtedness of the Company.
2. PORTFOLIO INCOME. The interest income from the Notes will be treated
as portfolio income.
3. UNRELATED BUSINESS TAXABLE INCOME. Interest income on the Notes will
not be treated as Unrelated Business Taxable Income for those tax exempt
investors that do not finance their acquisition of Notes.
Counsel's opinion is based upon the facts described in this Prospectus and
upon facts and assumptions as they have been represented by the Company to
Counsel or determined by them as of the date of the opinion. Counsel has not
independently audited or verified the facts represented to it by the Company.
The material assumptions and representations are summarized below:
(i) The Notes will be issued pursuant to an exemption under the Trust
Indenture Act of 1939, as amended.
(ii) The Notes will be governed by their constituent documents as described
in the Prospectus.
(iii) The Company will be operated as described in the Prospectus.
(iv) The Income Producing Assets will generate an annual yield sufficient
to service interest on the Notes and will maintain a sufficient
residual value so that, together with the excess funds generated from
the yield on the Income Producing Assets, the Company can repay the
principal balance of the Notes upon maturity.
Any alteration of the facts may adversely affect the opinion rendered.
Furthermore, the opinion of Counsel is based upon existing law and applicable
Regulations and Proposed Regulations, current published administrative positions
of the Service contained in Revenue Rulings and Revenue Procedures, and Judicial
decisions, which are subject to change either prospectively or retroactively.
Each Prospective Investor should note that the opinion described herein
represents only Counsel's best legal judgment and has no binding effect or
official status of any kind. Thus, in the absence of a ruling from the Service,
there can be no assurance that the Service will not challenge the conclusion or
propriety of any of Counsel's opinions and that such challenge would not be
upheld by the courts.
<PAGE>
PLAN OF DISTRIBUTION
The Company is offering up to $10,000,000 in Notes. The Notes will be sold
on a "best efforts" basis by Crispin Koehler Securities ("CKS") and any other
participating broker-dealers that are qualified to offer and sell the Notes in a
particular state as engaged by the Company and that are members of the National
Association of Securities Dealers, Inc. On or before May __, 1998, both (i) the
minimum amount of Notes must be subscribed, and (ii) an initial Income Producing
Asset for purchase must be specified, or the offering will be terminated, and
the escrowed funds, plus any interest earned thereon, will be promptly returned
to the investors by the escrow agent. Upon reaching the Minimum Offering Amount
of $500,000, the escrowed funds may be released to the Company. Any subsequent
sales proceeds from Notes will be immediately available for use by the Company;
however, the Company anticipates that it will accept subsequent subscriptions
and release from escrow proceeds from such subscriptions at monthly closings
until the Termination Date. All subscriptions are subject to the right of the
Company to reject any subscription in whole or in part.
The Company has agreed to pay soliciting broker-dealers, in consideration
for their services, a sales commission of 6.0% and pay to CKS an unallocated due
diligence and marketing fee of 2.0% to cover certain marketing and selling
expenses, a portion of which fee may be reallowed by CKS to certain soliciting
broker-dealers to cover the usual selling efforts undertaken by broker-dealers
in soliciting purchasers of the Notes and determining whether such prospective
purchasers are qualified for such investment. The Company will also pay JetFleet
Management Corp. ("JMC") the Organization and Offering Expense Reimbursement.
The Company has agreed to indemnify the broker-dealers against certain
liabilities, including liabilities under applicable securities laws.
The offering will terminate on May ___, 1999, unless sooner terminated by
the Company upon the failure to achieve the minimum subscription amount, upon
the sale of all of the Notes or if the Company believes that suitable assets
will not be available for acquisition by the Company or that additional selling
efforts will be unsuccessful. Although early termination of the offering may
result in the Company selling less than $10 million in aggregate subscriptions
for Notes and may expose prior purchasers of Notes to certain risks, the Company
does not believe an early termination will have a material adverse effect on any
prior purchasers of Notes (See "RISK FACTORS--INVESTMENT RISKS--Lack of
Diversification").
Investor funds will be held in a subscription escrow account with First
Security Bank, National Association, Salt Lake City, Utah, as escrow agent,
until the minimum offering amount of $500,000 in Note subscriptions are received
or the offering has been terminated by the Company. Subscribers' checks must be
made payable to "First Security Bank of Utah National Association/AeroCentury
Fund IV, Inc. Escrow Account." Broker-dealers must transmit subscription checks
directly to the Escrow Agent by noon of the next business day after receipt of
such check. On or before May __, 1998, both (i) an initial asset for acquisition
by the Company must be identified and an agreement for its purchase executed by
the Company, and (ii) the minimum amount of Notes must be subscribed, or the
offering will be terminated and the escrowed funds will be promptly returned to
the subscribing investors by the escrow agent. Upon the subscription of the
minimum amount of Notes, the escrowed funds will be released to the Company.
Any subsequent sales proceeds from the sale of additional Notes will be
immediately available for use by the Company and will not constitute a part of
the Trust Estate. All subscriptions are subject to the right of the Company to
reject any subscription in whole or in part.
The Escrow Agent will invest escrowed funds only in such accounts or
investments as the Company will specify, except that investments will be limited
to fully segregated and fully insured interest-bearing accounts, short-term
certificates of deposit issued by a bank or short-term securities issued or
guaranteed by the United States government. Funds may be released from escrow
when the Minimum Offering has been sold and may subsequently be released
thereafter at Additional Closings at the discretion of the Company, which are
anticipated to be executed on a monthly basis. At each such Closing, interest
earned on escrowed funds in excess of escrow fees will be paid to the Company,
except that the Company may direct the Escrow Agent to return all of such
interest to the investors. The Company will pay all escrow fees and costs up to
the amount of any such interest that the Company elects to use for that purpose,
and the Management Company will pay any escrow fees and costs in excess of the
amount of such interest (such fees and costs are includable in the Organization
and Offering Expense Reimbursement to the Management Company). To the extent
that there are funds in escrow upon the termination of the Offering which are
<PAGE>
insufficient to purchase an Income Producing Asset, all such funds will be
refunded to the subscribers promptly, together with interest earned thereon. In
the event that an investor's subscription is rejected, the Escrow Agent will
return the investor's funds, with interest earned thereon, if any, promptly.
The sole role of the Escrow Agent in this Offering is that of escrow
holder. The Escrow Agent has not reviewed this Prospectus or any other offering
materials and has not made any representations whatsoever as to the nature of
this Offering or its compliance, or lack thereof, with any applicable federal or
state laws, rules or regulations. The Escrow Agent does not represent the
interests of the Noteholders or potential investors. The Escrow Agent's duties
are limited as expressly set forth in the Escrow Agreement. Noteholders and
potential investors may request a copy of the Escrow Agreement from the Company.
Also a copy of the Escrow Agreement is on file as an exhibit to the Company's
Registration Statement with the Securities and Exchange Commission, and a copy
may be obtained from the Commission. See "AVAILABLE INFORMATION." The payment of
interest and the refund of funds deposited in escrow are provided for in the
Escrow Agreement and are not matters of discretion for the Escrow Agent.
Affiliates of the Company may purchase Notes, and such Notes will be
counted toward the Minimum Offering Amount. Such purchase will be made for
investment purposes only by such Affiliate, and not with a view toward
redistribution.
SALES MATERIAL
This Offering is made only by means of this Prospectus. In addition to this
Prospectus, the Company may use certain sales materials in connection with the
offering of the Notes. This material may include, among other things, fact
sheets to be used internally by broker-dealers, a sales promotion brochure,
prepared speeches for the public seminars, videotaped presentations, invitations
to attend public seminars, prospecting letters, mailing cards, "tombstone"
advertisements and program summaries. In certain jurisdictions, some or all of
the sales material may not be available. The Company has not authorized the use
of any other sales material. The information contained in any sales material
does not purport to be complete and should not be considered as a part of this
Prospectus or the Registration Statement of which this Prospectus is a part, or
as incorporated in this Prospectus or the Registration Statement by reference,
or as forming the basis of this Offering.
LIQUIDITY OF NOTES
Though the Notes will be registered under the Securities Act, and will be
freely tradeable under federal securities laws, there is no established trading
market for the Notes (collectively, the "Securities"), and none of the
Securities will be listed on any securities exchange. Furthermore, resale of the
Securities may be restricted under the securities laws of certain states. The
Sales Agent, Crispin Koehler Securities has advised the Company that it may
from time to time purchase and sell the Notes in the secondary market, as
permitted by applicable laws and regulations, and in accordance with Rule 15(c)
(2)-11 under the Exchange Act. The Company anticipates that other members of the
selling group may also engage in such activities. Neither will be obligated,
however, to make any such purchases and sales and each, in its sole discretion,
may discontinue any such purchases and sales any time without notice to any
party. There can be no assurance that there will be secondary market for the
Securities or liquidity in the secondary market if one develops.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Vocker Kristofferson & Company, independent certified public
accountants, to the extent set forth in their report appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
<PAGE>
COLLATERAL. The collateral securing the Company's obligations under the
Notes, namely all Income Producing Assets acquired by the Company using net
proceeds of the Offering and any proceeds of such assets.
COMMISSION. The Securities and Exchange Commission.
COMPANY. AeroCentury Fund IV, Inc., a California corporation.
EQUIPMENT. An aircraft, or aircraft engine separate from an aircraft, or
aircraft equipment or spare parts inventory identified or other mechanical
equipment related to the aircraft industry, or in the discretion of JMC, other
transportation industries, or any interest in any of the preceding and all
additions, improvements and accessions thereto.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ESCROW AGENT. First Security Bank, National Association, 79 South Main
Street, Salt Lake City, Utah 84111.
EVENT OF DEFAULT. A default in the Company's obligations under the Notes
which permits the Trustee pursuant to the Indenture to enforce certain remedies
against the Company.
EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
FAA. The Federal Aviation Administration.
FINAL CLOSING DATE. The date on which the last Closing takes place.
FINANCIAL ASSETS. Contractual rights or assignments relating to Equipment
acquired by the Company which generate revenue for the Company, such as
indebtedness secured by Equipment, participation interests in such indebtedness
assignments of lessor rights under leases for Equipment and Equipment lease
positions or rental streams.
FULL PAYOUT LEASE. A lease under which the noncancellable rental payments
due during the initial term of such lease are at least sufficient to recover the
Purchase Price of the Equipment.
INCOME PRODUCING ASSETS. The Equipment and/or Financial Assets acquired
by the Company.
IRAS. Individual retirement accounts qualifying under Section 408 of the
Code.
IRS. The United States Internal Revenue Service.
JETFLEET I. JetFleet Aircraft, L.P.
JETFLEET II. JetFleet Aircraft II, L.P.
JETFLEET III. JetFleet III, a California corporation.
JETFLEET PROGRAMS. JetFleet I, JetFleet II and JetFleet III, collectively.
JMC. JetFleet Management Corp., a California corporation or its successor.
LEASE. A lease for Equipment owned by the Company.
LESSEE. The lessee under a Lease for Equipment owned by the Company.
<PAGE>
REPORT OF VOCKER KRISTOFFERSON AND CO.,
INDEPENDENT AUDITORS
Tothe Board of Directors and Stockholders
of AeroCentury Fund IV, Inc.
We have audited the accompanying balance sheet of AeroCentury Fund IV, Inc., a
development stage California corporation, as of February 15, 1997. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AeroCentury Fund IV, Inc. at
February 15, 1997, in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
/s/ VOCKER KRISTOFFERSON AND CO.
February 18, 1997
<PAGE>
THE FOLLOWING INFORMATION RELATES TO THE FINANCIAL PERFORMANCE OF JETFLEET III,
A PRIOR PROGRAM SPONSORED BY THE MANAGEMENT COMPANY, AND A SEPARATE COMPANY FROM
AEROCENTURY FUND IV, INC. ("ACF"). THERE IS NO ASSURANCE THAT THE FUTURE
PERFORMANCE OF ACF WILL BE SIMILAR TO JETFLEET III'S.
JETFLEET III
TABLE I: EXPERIENCE IN RAISING AND INVESTING FUNDS
Table I sets forth information through September 30, 1996 concerning the
experience of the Management Company and its Affiliates in raising and investing
in JetFleet III:
<TABLE>
<CAPTION>
<S> <C> <C>
Dollar Amount Offered $ 20,000,000
Dollar Amount Raised 8,321,000 100.00%
Offering Expenses
Selling Commissions Paid to
Underwriter (1) 499,260 6.00%
Investment Banking Fees
Paid to Underwriter 166,420 2.00%
Legal, Professional and Organizational 166,420 2.00%
Available for Investment 7,488,900 90.00%
Acquisition Costs:
Purchase Price 6,935,567 83.35%
Acquisition Fees paid to Management Company 543,674 6.53%
Total Proceeds Used for Acquisitions 7,479,241 89.88%
Leverage (mortgage financing
divided by acquisition costs None 0.00
Date Offering Begun Sept. 27, 1995
Length of Offering (in months) (2) 12
Months to invest 90% of amounts 12
available for investment
(Measured from beginning of offering)
- --------
(1) Approximately $325,200 was reallowed to third parties.
(2) The offering is ongoing.
TABLE II: Compensation to Management Company By Prior Public
Program
Table II sets forth information concerning payments to the
Management Company and its Affiliates by JetFleet III for the
period from the inception of JetFleet III through September 30,
1996.
Date Offering Commenced September 27, 1995
Dollar Amount Raised $ 8,321,000
Amount Paid to Underwriter from
Proceeds of Offering
Sales Commissions (1) 499,260
Investment Banking Fee 166,420
Amount Paid to Management Company
from Proceeds of Offering
Organizational and Offering
Expense Allowed (1) 166,420
Amount Paid to Management Company
from Operations
Management Fee 76,763
Reimbursements 0
Re-lease Fees 0
Dollar Amount of Aircraft Sales and
Refinancings before Deducting Payments to
Management Company 0
Amount Paid to Management Company from
Aircraft Sales and Refinancings 0
</TABLE>
- --------
(1) Substantially all this amount was reallowed or repaid
to third parties.
(2) The investment banking fee includes due diligence costs.
A-3
<PAGE>
THE FOLLOWING INFORMATION RELATES TO THE FINANCIAL PERFORMANCE OF JETFLEET III,
A PRIOR PROGRAM SPONSORED BY THE MANAGEMENT COMPANY, AND A SEPARATE COMPANY FROM
AEROCENTURY FUND IV, INC. ("ACF"). THERE IS NO ASSURANCE THAT THE FUTURE
PERFORMANCE OF ACF WILL BE SIMILAR TO JETFLEET III'S.
TABLE III: Operating Results of Prior Public Program
<TABLE>
<CAPTION>
8/23/94 Nine Months
(inception) Year Ended Ended
to 12/31/94 12/31/95 9/30/96
----------- -------- -------
<S> <C> <C> <C>
Revenues:
Rent Income, net of
finance charges $ -- $11,286 $435,427
Interest Income 379 1,200 52,133
--- ------ -------
379 12,486 487,560
Expenses:
Interest Expense -- 9,757 381,743
Professional Fees 500 17,080 19,499
Management Fees -- 5,848 70,909
General and
Administrative 45 1,569 9,401
--- ------ -------
545 34,260 481,552
--- ------ -------
Net Income (Loss) before
Depreciation and
Amortization (166) (21,774) 6,008
---- ------- -----
Depreciation Expense -- 47,090 439,808
Amortization Expense -- 4,881 75,216
---- ------- -----
Net Loss $ (166) $ (73,745) $ (509,016)
========= =========== ==========
Net Loss per
Common Share $ 0.01 $ (0.31) $ (1.02)
========== ============ =========
</TABLE>
TABLE IV: Operating Results of Completed Program
JetFleet III has not completed operations.
TABLE V: Sales or Dispositions of Equipment By Prior Public
Program
JetFleet III has not sold or disposed of any aircraft or interest
therein.
A-4
<PAGE>
THE FOLLOWING INFORMATION RELATES TO THE FINANCIAL PERFORMANCE OF JETFLEET III,
A PRIOR PROGRAM SPONSORED BY THE MANAGEMENT COMPANY, AND A SEPARATE COMPANY FROM
AEROCENTURY FUND IV, INC. ("ACF"). THERE IS NO ASSURANCE THAT THE FUTURE
PERFORMANCE OF ACF WILL BE SIMILAR TO JETFLEET III'S.
TABLE VI: Acquisitions of Properties By Prior Public Program
<TABLE>
<CAPTION>
Financing Contract Total
Date at Cash Price Plus Acquisi-
of Name and Type Date of Down Acquisi- tion
Purchase of Property Purchase Payment tion Fee Cost
<S> <C> <C> <C> <C> <C>
11/30/95 de Havilland
DHC-8-102
#13 Aircraft
(18.81% 0 855,325 855,325 855,325
12/29/95 de Havilland
DHC-8-102
#13 Aircraft
(12.10% 0 549,558 549,558 549,558
2/2/96 de Havilland
DHC-8-102
#13 Aircraft
(11.86% 0 539,117 539,117 539,117
3/4/96 de Havilland
DHC-8-102
#13 Aircraft
(15.62% 0 710,100 710,100 710,100
4/2/96 de Havilland
DHC-8-102
#13 Aircraft
(14.28%) 0 644,400 644,400 644,400
5/2/96 de Havilland
DHC-8-102
#13 Aircraft
(17.69%) 798,300 798,300 798,300
6/4/96 de Havilland
DHC-8-102
#13 Aircraft
(9.64%) 0 435,600 435,600 435,600
6/4/96 Fairchild
SA226-TC
aircraft
(50%) 0 362,105 362,105 362,105
7/2/96 de Havilland
DHC-6 #540
Aircraft 0 863,651 863,651 863,651
8/2/96 de Havilland
DHC-6 #751
Aircraft 0 842,755 842,755 842,755
9/16/96 de Havilland
DHC-6 #696
Aircraft 0 878,33 878,330 878,330
-- ---------- ---------- ----------
Total through 9/30/96) (1) $0 $7,479,241 $7,479,241 $7,479,241
</TABLE>
_____________________________________________
* Consists of $6,935,567 for purchase prices and $534,674 for
chargeable acquisition expenses.
A-5
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
On February 15, 1997 in connection with the
incorporation of the Registrant, the Registrant issued a total of 10,000
shares of Common Stock at a price of $1.00 per share to JetFleet Management
Corp., a California corporation ("JMC"), its 100% parent corporation and
sole offeree of the stock, in a transaction not involving a public offering,
in reliance upon an exemption from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"). No
commissions or discounts were given in connection with the sale.
Item 27. Exhibits.
See Exhibits Index immediately following the
signature page of this Registration Statement.
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement.
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represents a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
Reference is hereby made to the information set forth under
Item 24. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any election, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by or against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Pre-Effective
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, in the City of Burlingame, State of California on April 10, 1997.
AEROCENTURY FUND IV, INC.
A California Corporation
By: /s/ Neal D. Crispin
Neal D. Crispin, President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Neal D. Crispin President, Director April 10, 1997
- --------------------------------------------
Neal D. Crispin
/s/ Marc J. Anderson Chief Operating Officer April 10, 1997
- --------------------------------------------
Marc J. Anderson
/s/ Frank Duckstein Vice President April 10, 1997
- --------------------------------------------
Frank Duckstein
</TABLE>
SELECTED DEALER AGREEMENT
Crispin Koehler Securities
301 East Main Street, Suite 1140
Lexington, Kentucky 40504
Dear Sirs:
The undersigned understands that AeroCentury Fund IV, Inc., a
California corporation (the "Company"), proposed to make a public offering and
sale of up to $10,000,000 of 10% Secured Promissory Notes ("Notes"), each Note
with a principal face amount of $1,000, on a best efforts basis through Crispin
Koehler Securities (the "Sales Agent") and certain additional broker dealers
(the "Selected Dealers") who are members of the National Association of
Securities Dealers, Inc. (the "NASD"). The Sales Agent has advised the
undersigned that in connection therewith, the Company has filed with the
Securities and Exchange Commission (the "SEC"), a registration statement on Form
SB-2 and has filed or expects to file one or more amendments thereto. As used
herein, "Registration Statement" refers to Registration Statement No.333-22239
as declared effective by the SEC on _____, and "Prospectus" refers to the final
prospectus constituting Part I of such Registration Statement, and in the event
of any supplement or amendment to such Registration Statement or Prospectus
after the Registration Statement has become effective, the terms "Registration
Statement" and "Prospectus" shall mean such Registration Statement or Prospectus
as so supplemented or amended. Certain terms used herein which begin with
initial capital letters are defined in the Prospectus and shall have the same
meanings given therein. Upon the terms and conditions set forth herein, the
undersigned agrees to use its best efforts to solicit and obtain subscriptions
to purchase Notes at a price of $1,000 per Note in accordance with the following
terms and conditions.
The undersigned hereby makes the following agreements, representations,
and warranties to the Company and the Sales Agent which agreements,
representations and warranties are made by the undersigned severally and not
jointly with the other Selected Dealers:
1. REPRESENTATION AND WARRANTIES. The undersigned represents and
warrants that (i) it is a member in good standing of the NASD, (ii) it is
registered as a broker-dealer under the Securities and Exchange Act of 1934,
(iii) it is licensed as a broker-dealer under the law of the state(s) listed
below the undersigned's signature hereunder, (iv) neither the undersigned nor
any of its executive officers and directors are currently subject to any
administrative order or judgment in any state which prohibits the use of any
exemption from registration in connection with the purchase or sale of
securities, (v) neither the undersigned nor any of its executive officers and
directors are subject to any order, judgment or decree of any court of competent
jurisdiction temporarily or preliminarily restraining or enjoining, or subject
to any order, judgment or decree of any court of competent jurisdiction entered
within the last five years permanently restraining or enjoining such person from
engaging in or continuing any conduct or practice in connection with the
purchase or sale of any security or commodity or involving the making of any
false filing with any state and (vi) neither the undersigned nor any of its
executive officers and directors has been convicted of a felony involving the
purchase or sale of a security within five years prior to the commencement of
the Offering.
<PAGE>
2. DUTIES. The undersigned agrees that its duties under this
Agreement include the following:
(a) To use its best efforts to procure purchase(s) for Notes
at a price of $1,000 per Note in accordance with the terms of the Offering as
set forth in the Prospectus. The minimum investment in Notes is set forth in the
Prospectus. The undersigned shall not be entitled to solicit the services of
other broker-dealers or pass through or reallow any portion of the compensation
set forth in Section 3 in connection with performing the undersigned's service
hereunder;
(b) To at all times comply with all applicable provisions of
the Securities Act of 1933, as amended (the "Act"), the Securities Exchange Act
of 1934 and the rules and regulations of the Commission thereunder, state blue
sky securities laws and the rules of the NASD, including, without limitation,
Sections 2730, 2740, 2420 and 2750 of the NASD Conduct Rules, all prospectus
delivery requirements, and the prohibition against the direct or indirect
payment or awarding of any finder's fees, commissions, or other compensation to
any person engaged by a potential investor for investment advice as an
inducement to such advisor to advise the purchase of interests in a particular
program; provided, however, that the payment of the normal sales commissions
payable to a registered broker-dealer or other properly licensed person for
selling Notes shall not be prohibited;
(c) To sell Notes only in state(s) and jurisdiction(s) in
which the undersigned is licensed as a broker-dealer, and only in state(s) and
jurisdiction(s) and in such amounts for which Blue Sky clearance has been
obtained as indicated to the undersigned by the Sales Agent;
(d) To take such actions as may be required by law or which it
may deem reasonably necessary in order to ascertain that a purchase of the Notes
is suitable for a prospective purchaser, and maintain a record thereof for a
period of at least six years, or such other period as required by law;
(e) To confirm through diligent inquiry that each prospective
purchaser is a citizen of the United States in the manner described in the
Prospectus prior to submitting his subscription payment and related
documentation to the Escrow Agents, and maintain a record of the basis upon
which such determination was made;
(f) To supply the Sales Agent and the Company with such
written reports of the undersigned's activities relating to the offering of
Notes as the Sale Agent or the Company may from time to time reasonably request;
(g) To deliver a current copy of the Prospectus and any
amendments or supplements thereto, to each prospective purchaser prior to
accepting a subscription from such purchaser;
(h) To obtain each of the following in connection with the
sale of the Notes and to transmit the same to the Escrow Agents, within the time
periods specified below:
(i) A fully completed Subscription Agreement,
executed by the prospective purchaser, if required by applicable state law or
otherwise requested by the Company; and
(ii) Appropriate payment by the purchaser for
the number of Notes subscribed for, either in the form of a check payable to
"First Security Bank/AeroCentury Fund IV Escrow Account" or by wire
transfer of funds from the account of the purchaser into the
above-referenced escrow account (the account number will be provided upon
request of the Company).
3. COMPENSATION. The undersigned shall receive from the Escrow Agent
(through the Sales Agent) as compensation Selling Commissions of 6.0% of the
sales price of any Notes sold by it to the public in accordance herewith. In
addition, in the Sales Agent's sole discretion, up to 2.0% of the sales price
for any Notes may be reallowed by the Sales Agent to the undersigned for due
diligence and selling efforts. Notwithstanding the above, no Sales Commissions
and no expense allowance or reimbursement shall be paid with respect to any
Notes sold hereunder until the occurrence of a Closing Date following the sale
of such Notes. Subject to the previous sentence, all Selling Commissions and
other compensation is being paid to the undersigned in consideration of its
efforts to conduct the due diligence determined by the undersigned to be
reasonably necessary and that the undersigned will be solely responsible for
such diligence; the Sales Agent will have no responsibility or liability
pertaining thereto (although the Sales Agent may, in its discretion, reallow a
portion of its due diligence cost reimbursement to the undersigned in connection
therewith). Notwithstanding the foregoing, the undersigned will not be entitled
to receive compensation pursuant to this Section 3 in the event that (i) the
Sales Agent or the Company determines that any offer, sale or solicitation by
the undersigned was made in violation of the Act, or any of the regulations
thereunder, of the securities or "blue sky" laws of any jurisdiction or the
NASD, or of any covenant or representation made hereunder, (ii) if the Sales
Agent shall not have previously received from the undersigned a confirmed copy
of this Agreement, or (iii) with respect to certain subscriptions, the Company
or the Sales Agent, in their sole discretion do not accept (in whole or in part)
such subscriptions to purchase Notes obtained by the undersigned for any reason,
or any Subscription Documents for such subscriptions, if any, fully completed
and duly executed, are received by the Sales Agent after the final Closing Date.
4. SALES INCENTIVE PROGRAMS. No sales incentive bonuses shall be
paid directly or indirectly in connection with the offer and sale of the
Notes.
5. Terms and Termination. The undersigned's obligation under this
Agreement shall commence as of the date of this Agreement or the effective
date of the Registration Statement,
EXHIBIT 10.3
Form of Selected Dealer Agreement between
Registrant, Sales Agent and Selected Dealers
<PAGE>
SELECTED DEALER AGREEMENT
Crispin Koehler Securities
301 East Main Street, Suite 1140
Lexington, Kentucky 40504
Dear Sirs:
The undersigned understands that AeroCentury Fund IV,
Inc., a California corporation (the "Company"), proposed to make
a public offering and sale of up to $10,000,000 of 10% Secured
Promissory Notes ("Notes"), each Note with a principal face
amount of $1,000, on a best efforts basis through Crispin Koehler
Securities (the "Sales Agent") and certain additional broker
dealers (the "Selected Dealers") who are members of the National
Association of Securities Dealers, Inc. (the "NASD"). The Sales
Agent has advised the undersigned that in connection therewith,
the Company has filed with the Securities and Exchange Commission
(the "SEC"), a registration statement on Form SB-2 and has filed
or expects to file one or more amendments thereto. As used
herein, "Registration Statement" refers to Registration Statement
No. 333-22239 as declared effective by the SEC on _____,
and "Prospectus" refers to the final prospectus constituting Part
I of such Registration Statement, and in the event of any
supplement or amendment to such Registration Statement or
Prospectus after the Registration Statement has become effective,
the terms "Registration Statement" and "Prospectus" shall mean
such Registration Statement or Prospectus as so supplemented or
amended. Certain terms used herein which begin with initial
capital letters are defined in the Prospectus and shall have the
same meanings given therein. Upon the terms and conditions set
forth herein, the undersigned agrees to use its best efforts to
solicit and obtain subscriptions to purchase Notes at a price of
$1,000 per Note in accordance with the following terms and
conditions.
The undersigned hereby makes the following agreements,
representations, and warranties to the Company and the Sales
Agent which agreements, representations and warranties are made
by the undersigned severally and not jointly with the other
Selected Dealers:
1. Representation and Warranties. The undersigned
represents and warrants that (i) it is a member in good standing
of the NASD, (ii) it is registered as a broker-dealer under the
Securities and Exchange Act of 1934, (iii) it is licensed as a
broker-dealer under the law of the state(s) listed below the
undersigned's signature hereunder, (iv) neither the undersigned
nor any of its executive officers and directors are currently
subject to any administrative order or judgment in any state
which prohibits the use of any exemption from registration in
connection with the purchase or sale of securities, (v) neither
the undersigned nor any of its executive officers and directors
are subject to any order, judgment or decree of any court of
competent jurisdiction temporarily or preliminarily restraining
or enjoining, or subject to any order, judgment or decree of any
court of competent jurisdiction entered within the last five
years permanently restraining or enjoining such person from
engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security or commodity or
involving the making of any false filing with any state and (vi)
neither the undersigned nor any of its executive officers and
directors has been convicted of a felony involving the purchase
or sale of a security within five years prior to the commencement
of the Offering.
2. Duties. The undersigned agrees that its duties
under this Agreement include the following:
<PAGE>
(a) To use its best efforts to procure purchase(s)
for Notes at a price of $1,000 per Note in accordance with the
terms of the Offering as set forth in the Prospectus. The minimum
investment in Notes is set forth in the Prospectus. The
undersigned shall not be entitled to solicit the services of
other broker-dealers or pass through or reallow any portion of
the compensation set forth in Section 3 in connection with
performing the undersigned's service hereunder;
(b) To at all times comply with all applicable
provisions of the Securities Act of 1933, as amended (the "Act"),
the Securities Exchange Act of 1934 and the rules and regulations
of the Commission thereunder, state blue sky securities laws and
the rules of the NASD, including, without limitation, Sections
2730, 2740, 2420 and 2750 of the NASD Conduct Rules, all
prospectus delivery requirements, and the prohibition against the
direct or indirect payment or awarding of any finder's fees,
commissions, or other compensation to any person engaged by a
potential investor for investment advice as an inducement to such
advisor to advise the purchase of interests in a particular
program; provided, however, that the payment of the normal sales
commissions payable to a registered broker-dealer or other
properly licensed person for selling Notes shall not be
prohibited;
(c) To sell Notes only in state(s) and
jurisdiction(s) in which the undersigned is licensed as a
broker-dealer, and only in state(s) and jurisdiction(s) and in
such amounts for which Blue Sky clearance has been obtained as
indicated to the undersigned by the Sales Agent;
(d) To take such actions as may be required by law
or which it may deem reasonably necessary in order to ascertain
that a purchase of the Notes is suitable for a prospective
purchaser, and maintain a record thereof for a period of at least
six years, or such other period as required by law;
(e) To confirm through diligent inquiry that each
prospective purchaser is a citizen of the United States in the
manner described in the Prospectus prior to submitting his
subscription payment and related documentation to the Escrow
Agents, and maintain a record of the basis upon which such
determination was made;
(f) To supply the Sales Agent and the Company with
such written reports of the undersigned's activities relating to
the offering of Notes as the Sale Agent or the Company may from
time to time reasonably request;
(g) To deliver a current copy of the Prospectus
and any amendments or supplements thereto, to each prospective
purchaser prior to accepting a subscription from such purchaser;
(h) To obtain each of the following in connection
with the sale of the Notes and to transmit the same to the Escrow
Agents, within the time periods specified below:
(i) A fully completed Subscription
Agreement, executed by the prospective purchaser, if required by
applicable state law or otherwise requested by the Company; and
(ii) Appropriate payment by the purchaser
for the number of Notes subscribed for, either in the form of a
check payable to "First Security Bank/AeroCentury Fund IV
Escrow Account" or by wire transfer of funds from the account of
the purchaser into the above-referenced escrow account (the
account number will be provided upon request of the Company).
<PAGE>
(n) To promptly inform the Sales Agent and the
Company if the undersigned shall have knowledge of any material
misstatement or omission to state a material fact in any
Subscription Agreement; and
(o) Promptly upon the written request of the Sales
Agent, (i) account to the Sales Agent for each copy of the
Prospectus delivered to the undersigned hereunder and to return
to the Sales Agent all copies of the Prospectus then in the
undersigned's possession, and (ii) at the Sales Agent's request,
deliver to the Sales Agent a certificate from the undersigned
dated as of the date requested by the Sales Agent to the effect
that the undersigned's representations and warranties in this
agreement are true and correct, as if made on and as of the date
of such certificate; and that the undersigned complied with all
the agreements and covenants and satisfied all conditions on its
part to be performed or satisfied at or prior to the date of such
certificate and further representing that the undersigned has
made offers to sell Notes to, or solicit offers to buy Notes
from, or otherwise negotiated in respect thereof with, only
persons who (i) the undersigned reasonably believed were able to
satisfy the investor suitability standards set forth in the
Prospectus and (ii) either (a) have an account with the
undersigned in which there has been at least one securities
transaction effected by the undersigned during the preceding
three years, or (b) with respect to whom the initial contact with
the undersigned occurred prior to the date on which the
undersigned was first aware of the Offering and with respect to
whom (based on information with such person, the nature of our
contacts with such person, and other information available to the
undersigned) the undersigned has a reasonable basis for knowing
such person's net worth, investment objectives, investment
experience and sophistication.
3. Compensation. The undersigned shall receive from the
Escrow Agent (through the Sales Agent) as compensation Selling
Commissions of 6.0% of the sales price of any Notes sold by it to
the public in accordance herewith. In addition, in the Sales
Agent's sole discretion, up to 2.0% of the sales price for any
Notes may be reallowed by the Sales Agent to the undersigned for
due diligence and selling efforts. Notwithstanding the above, no
Sales Commissions and no expense allowance or reimbursement shall
be paid with respect to any Notes sold hereunder until the
occurrence of a Closing Date following the sale of such Notes.
Subject to the previous sentence, all Selling Commissions and
other compensation is being paid to the undersigned in
consideration of its efforts to conduct the due diligence
determined by the undersigned to be reasonably necessary and that
the undersigned will be solely responsible for such diligence;
the Sales Agent will have no responsibility or liability
pertaining thereto (although the Sales Agent may, in its
discretion, reallow a portion of its due diligence cost
reimbursement to the undersigned in connection therewith).
Notwithstanding the foregoing, the undersigned will not be
entitled to receive compensation pursuant to this Section 3 in
the event that (i) the Sales Agent or the Company determines that
any offer, sale or solicitation by the undersigned was made in
violation of the Act, or any of the regulations thereunder, of
the securities or "blue sky" laws of any jurisdiction or the
NASD, or of any covenant or representation made hereunder, (ii)
if the Sales Agent shall not have previously received from the
undersigned a confirmed copy of this Agreement, or (iii) with
respect to certain subscriptions, the Company or the Sales Agent,
in their sole discretion do not accept (in whole or in part) such
subscriptions to purchase Notes obtained by the undersigned for
any reason, or any Subscription Documents for such subscriptions,
if any, fully completed and duly executed, are received by the
Sales Agent after the final Closing Date.
4. Sales Incentive Programs. No sales incentive
bonuses shall be paid directly or indirectly in connection with
the offer and sale of the Notes.
5. Terms and Termination. The undersigned's obligation
under this Agreement shall commence as of the date of this
Agreement or the effective date of the Registration Statement,
<PAGE>
CONSENT OF VOCKER KRISTOFFERSON & CO.
We hereby consent to the use of our report, dated February 18, 1997, with
respect to the balance sheet of AeroCentury Fund IV, Inc. in the Prospectus and
Registration Statement filed on Form SB-2 for AeroCentury Fund IV, Inc. We also
consent to the reference to our firm under the caption "EXPERTS" in the
Prospectus.
/S/ VOCKER KRISTOFFERSON & CO.
--------------------------------------------
VOCKER KRISTOFFERSON & CO.
April 10, 1997
