UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
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or
Transition Report Pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934
For the transition period from to
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Commission file number: 0-16838
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JETSTREAM II, L.P.
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Exact name of registrant as specified in its charter
Delaware 84-1068932
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State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
Attn.: Andre Anderson,
3 World Financial Center, 29th Floor, New York, New York 10285
- -------------------------------------------------------- -----
Address of principal executive offices Zip code
Registrant's telephone number, including area code: (212) 526-3183
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP DEPOSITARY UNITS (the "Units")
LIMITED PARTNERSHIP INTERESTS (underlying the Units)
----------------------------------------------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: Not applicable
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus of the registrant dated November 10, 1987, as filed pursuant to rule
424(c) of the Securities Act of 1933, as amended, is incorporated by reference
in Parts I, II, III and IV of this Annual Report on Form 10-K.
Annual Report to Unitholders for the year ended December 31, 1999 (Portions of
Parts I, II, III & IV).
1
<PAGE>
PART I
Item 1. Business
General
- -------
JetStream II, L.P. (the "Partnership") is a limited partnership organized
under the laws of the State of Delaware on October 15, 1987. The general
partners of the Partnership (the "General Partners") are CIS Aircraft
Partners, Inc., the Managing General Partner ("CAP"), a Delaware corporation
that is an affiliate of Continental Information Systems Corporation, and Jet
Aircraft Leasing Inc., the Administrative General Partner, a Delaware
corporation that is an affiliate of Lehman Brothers Inc. ("Lehman") (See Item
10).
Although the Partnership was organized on October 15, 1987, the Partnership
conducted no activities and recognized no revenues, profits or losses prior to
January 14, 1988, at which time the Partnership commenced operations. During the
period between January 15, 1988 and February 25, 1988 the Partnership acquired
for cash nine used commercial aircraft (together, the "Aircraft"). As of
December 31, 1999, the Partnership had five of the nine original Aircraft
remaining in its portfolio. For a description of the investments in the
Aircraft, please refer to the Message to Investors and Note 4 to the Financial
Statements of the Partnership's Annual Report to Unitholders for the year ended
December 31, 1999, which is filed as an exhibit under Item 14 and incorporated
herein by reference.
On November 10, 1987, the Partnership commenced an offering (the "Offering") on
a "best efforts basis" of $96,750,000 of limited partnership depositary units
("Units"). The closing of the offering occurred on February 24, 1988, with a
total of 4,837,505 Units being sold at a price of $20.00 per Unit, for a total
of approximately $96,750,000. The net proceeds of the offering after payment of
offering and organization costs and acquisition fees aggregated $85,938,000.
Narrative Description of Business
- ---------------------------------
The Partnership is engaged in liquidating a portfolio of used commercial
aircraft subject to triple net operating leases with commercial air carriers.
The General Partners are implementing a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership pursuant to a Plan of
Liquidation and Dissolution dated November 20, 1999 (the "Liquidation Plan").
The Liquidation Plan consists of: (1) the sale of all of the Partnership's
assets and the dissolution of the Partnership pursuant to the proposed
Liquidation Plan; (2) the amendment of the Partnership Agreement to permit the
engagement of the General Partners to market and sell the assets of the
Partnership for a fee pursuant to the terms of the Joint Marketing Agreement,
dated July 13, 1999, among each of the General Partners and the Partnership; and
(3) the grant of authority to the General Partners to take any action necessary
or incidental and consistent with the Partnership Agreement, the Liquidation
Plan and the Joint Marketing Agreement to complete the foregoing. The
Liquidation Plan required the approval of more than 50% of the limited partner
units entitled to vote. A consent solicitation statement requesting such
approval was forwarded to investors on October 15, 1999. On November 19, 1999,
the Partnership received the required approval from the unitholders, and the
General Partners have begun to implement the Liquidation Plan by actively
marketing the aircraft for sale during the first quarter of 2000, on the terms
described in the consent solicitation statement. Once the Partnership's aircraft
are sold, the Partnership's liabilities will be paid, the sales proceeds will be
distributed to the unitholders and the Partnership will be terminated and will
cease to exist. If the unitholders had not approved the Liquidation Plan, then,
according to the Partnership's Limited Partnership Agreement dated November 10,
1987, the Partnership would be required to dissolve and distribute all of its
assets not later than December 31, 2027.
The following table describes the Partnership's portfolio of Aircraft as of
December 31, 1999. This table provides certain operational statistics and
estimated market values for the Aircraft in the portfolio. The estimated market
values of the Aircraft are affected by, and subject to, future changes in a
variety of factors, including, but not limited to, the Aircraft's usage, age and
lease rate, the credit worthiness of the lessee, government maintenance and
noise regulations and the supply and demand of aircraft in the market place with
similar lift capacity. See Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, of this Form 10-K and Item 8 -
Financial Statements and Supplementary Data (Note 4 to the Financial Statements)
for additional information on the lease terms for each Aircraft. Reference is
also made to the Message to Investors section of the Partnership's Annual Report
to Unitholders for the year ended December 31, 1999 for an overview of the
aircraft leasing industry.
2
<PAGE>
<TABLE>
<CAPTION>
Estimated Cumulative Cumulative
Aircraft Model Acquisition Net Book Market Lease Noise Flight Flight
Year Delivered Lessee Cost (1) Value (2) Value (3) Expiration (4) Compliance Cycles (5) Hours (5)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B-737-200 Delta $14,380,390 $ 503,314 $ 3,274,000 9/30/01 Stage 3 40,692 (a) 60,795 (a)
1979
DC-9-30 Northwest $ 7,230,460 $ 561,994 $ 2,125,000 (6) 1/31/07 Stage 3 78,953 (b) 77,410 (b)
1968
DC-9-30 Northwest $ 7,230,460 $ 561,994 $ 2,125,000 (6) 1/31/07 Stage 3 67,715 (b) 65,541 (b)
1970
DC-9-30 Northwest $ 7,230,461 $ 561,994 $ 2,165,000 (6) 1/31/07 Stage 3 63,514 (b) 68,779 (b)
1970
MD-80 Series Continental $27,313,020 $2,731,302 $13,646,000 9/15/00 Stage 3 19,496 (c) 39,796 (c)
1986 ----------- ---------- -----------
TOTALS $63,384,791 $4,920,598 $23,335,000
=========== ========== ===========
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
NOTES:
(1) Includes a 1.5% fee paid to the Managing General Partner at the acquisition
of the Aircraft. Totals do not include aircraft which have been sold.
(2) As of December 31, 1999.
(3) Estimated market values for the Aircraft are based upon annual independent
appraisals as of December 31, 1999, which are subject to a variety of
assumptions. Additionally, there can be no assurance that the Partnership
would receive an amount equal to the market value shown above upon the sale
of any of the Aircraft.
(4) Lease expiration dates do not include renewal options.
(5) Data as of (a) November 12, 1999
(b) November 16, 1999
(c) December 2, 1999
(6) Pursuant to the lease, Northwest is entitled to 50% of the sales proceeds.
</FN>
</TABLE>
The General Partners are currently implementing a plan to sell the Partnership's
remaining aircraft and subsequently terminate the Partnership. See Items 1 and 4
for a description of the Liquidation Plan.
Aging Aircraft Maintenance
- -------------------------- - The Federal Aviation Administration (the "FAA"),
acting on recommendations from industry trade groups, has adopted a series of
Airworthiness Directives ("AD's") for certain Boeing and McDonnell Douglas
aircraft models. AD's are mandates requiring the airline to perform a specific
maintenance task within a specified period of time. The FAA imposes strict
requirements governing aircraft inspection and certification, maintenance,
equipment requirements, corrosion control, noise levels and general operating
and flight rules. In addition to mandating more intensive inspections of certain
structural components, including the fuselage, wing and tail sections, certain
of these AD's mandate that structural modifications to certain aircraft be
completed within specified periods, generally not less than 48 months from the
effective date of the relevant AD. Aircraft are generally subject to these
structural modification requirements based on flight cycle, flight hour and
chronological age thresholds.
The Partnership's existing leases require the lessees to maintain the
Partnership's Aircraft in accordance with FAA approved maintenance programs
during the lease term. At the end of the leases, each lessee is required to
return the Aircraft in airworthy condition, including compliance with all AD's
for which action is mandated by the FAA during the lease term. Thus, certain of
the modifications required by the new AD's may not be effected by the
Partnership's lessees prior to the expiration of the current leases since, in
many cases, the relevant AD will not require action before the expiration of the
lease term.
3
<PAGE>
In negotiating the sale of the aircraft now owned by the Partnership, the
Partnership may be required to bear some or all of the costs of compliance with
future AD's or AD's that have been issued but which did not mandate action
during the previous lessee's lease term or in respect of which the previous
lessee failed to comply. The aggregate effect on the Partnership of compliance
with these standards is not determinable at this time and will depend upon a
variety of factors, including, but not limited to, the state of the commercial
aircraft market, the extent of the AD, the availability of capable repair
facilities and the effect, if any, that such compliance may have on the service
lives of the affected aircraft. As described above, the cost to the Partnership
of such compliance may be reduced to the extent that current or future lessees
of the Partnership's Aircraft effect such modifications under the terms of the
current or future operating leases.
Aircraft Noise
- -------------- - Beginning in 1985, the FAA and various airport industry task
forces released reports suggesting various alternatives for reducing the number
of Stage 2 aircraft operating in the United States, including a proposed
requirement to bring all aircraft operating in the United States into compliance
with Stage 3 requirements in the 1990s or shortly thereafter. The FAA has
categorized aircraft types according to engine noise decibel levels. Stage 2
aircraft, which have the higher noise level, are no longer allowed to operate
from most civil airports in the United States as of December 31, 1999. Stage 3
aircraft meet current FAA requirements.
Effective November 6, 1990, Congress passed the Airport Noise and Capacity Act
of 1990 (the "Act") which required the development of a National Noise Policy.
On September 25, 1991, final regulations (the "Regulations") were announced and
became effective immediately. The Regulations provide, among other things,
phase-out and non-addition rules under which the number of Stage 2 aircraft
operated by domestic carriers were limited to 75% of 1990 base levels by the end
of 1994, with further reductions to 50% of 1990 base levels by the end of 1996,
25% of 1990 base levels by the end of 1998 and ultimately to 0% by December 31,
1999.
Several modification programs to hushkit or re-engine an aircraft to meet Stage
3 requirements have been announced, including programs for the B-727 series, the
B-737 and the DC-9 series. Hushkitting is a procedure for retrofitting existing
engines to comply with Stage 3 requirements. Re-engining is the replacement of
existing engines with technologically-advanced engines complying with Stage 3
requirements. The decision whether to hushkit or re-engine an aircraft will
depend upon a variety of factors, including, without limitation, the
differential effects of the two approaches on the operating costs of the
aircraft, the relative costs and feasibility of the two approaches and the
General Partners' assessment of the remaining useful life and fair market value
of the aircraft. Where available, hushkits currently can cost up to $3.0 million
per aircraft while the costs of re-engining programs are significantly higher.
No assurances are possible in respect to the actual cost which the Partnership
would be required to pay in order to effect a hushkit or re-engining
modification as now available or as may be developed in the future.
All of the aircraft currently owned by the Partnership are Stage 3 compliant.
Northwest has hushkitted all three of its DC-9-30s. Northwest has agreed to fund
the cost of the hushkitting and, in turn, will be entitled to 50% of the
proceeds from the eventual sale of the aircraft. Delta Airlines, pursuant to a
lease extension, hushkitted the 737-200 on lease to Delta.
Competition
- -----------
The aircraft leasing industry is competitive and the success of any lessor is
largely dependent upon the nature of the aircraft within its portfolio. The
Partnership competes with aircraft manufacturers, distributors, airlines,
leasing companies, financial institutions and other parties engaged in leasing,
managing, and marketing aircraft. Such competitors may lease or sell aircraft at
lower rates or prices than the Partnership and provide benefits, such as direct
maintenance crews, and support services which the Partnership cannot provide.
Competition may include certain affiliates of the General Partners.
The General Partners' ability to sell the Aircraft owned by the Partnership is
dependent upon among other factors: (a) general economic conditions and economic
conditions affecting the airline industry in particular; (b) the current
operating profile of the aircraft, encompassing the age of the aircraft and the
number of hours and cycles flown and compliance with all issued AD's as well as
the general maintenance conditions of the aircraft; (c) the current fleet plans
of the major end-users of the aircraft type; (d) any costs required to refurbish
aircraft and to reconfigure aircraft to comply with all issued AD's and to
conform with similar aircraft within a potential purchaser's fleet; (e) any cost
required to conform the aircraft to future Stage 3 noise restrictions; (f) the
availability to the purchasers of other similar aircraft from the Partnership's
competition; and (g) the ability of the Managing General Partner to effectively
market the aircraft.
4
<PAGE>
Employees
- ---------
The Partnership has no employees. The officers, directors and employees of the
General Partners and their affiliates perform services on behalf of the
Partnership. The General Partners are entitled to certain fees and reimbursement
of certain out-of-pocket expenses incurred in connection with the performance of
these management services. See Note 6 to the Financial Statements contained in
Item 8 - Financial Statements and Other Supplementary Data for a discussion of
the fees and reimbursable expenses paid to the General Partners and their
affiliates.
Item 2. Properties
Incorporated herein by reference to Item 1 - Business of this Annual Report on
Form 10-K, and Item 8 - Financial Statements and Supplementary Data (Note 4 to
the Financial Statements).
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the General Partners or
the Partnership is a party or to which its assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders
On October 15, 1999, the Partnership mailed a Notice of Consent Solicitation and
Consent Solicitation Statement to unitholders whereby the General Partners
proposed the liquidation of the Partnership. The liquidation consists of: (1)
the sale of all of the Partnership's assets and the dissolution of the
Partnership pursuant to the proposed Liquidation Plan; (2) the amendment of the
Partnership Agreement to permit the engagement of the General Partners to market
and sell the assets of the Partnership for a fee pursuant to the terms of the
Joint Marketing Agreement, dated July 13, 1999, among each of the General
Partners and the Partnership; and (3) the grant of authority to the General
Partners to take any action necessary or incidental and consistent with the
Partnership Agreement, the Liquidation Plan and the Joint Marketing Agreement to
complete the foregoing on the terms described in the Consent Solicitation
Statement. The Consent Solicitation terminated at 5:00 p.m. on November 19,
1999. The Partnership received the required approval from the limited partner
units entitled to vote. The result of the voting was as follows:
<TABLE>
<CAPTION>
Number of Units Percentage
--------------- ----------
<S> <C> <C>
For 2,858,211 59.08%
Against 106,195 2.20%
Abstain 29,530 .61%
</TABLE>
The remaining units of the Partnership did not vote on the Liquidation.
PART II
Item 5. Market for Partnership's Limited Partnership Interest and Related
Security Holder Matters
The Units represent the economic rights attributable to limited partnership
interests in the Partnership.
There is no established public trading market for the purchase and sale of
Units. As of December 31, 1999, the number of Unitholders was 6,816.
Per Unit cash distributions paid to the Limited Partners for the two years ended
December 31, 1999 are presented in the table below.
5
<PAGE>
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 $.210 $ .219 $.221 $ .222 $ .872
1999 $.339 $ .472* $.154 $ .155 $1.120
</TABLE>
* Represents cash distributions from operations totaling approximately $0.26 per
Unit and a return of capital from the sale of the aircraft formerly leased to
Boeing Capital Corporation of approximately $0.22 per Unit. See Item 7 for a
discussion of such Sale.
Future cash distributions will be determined on a quarterly basis after an
evaluation of the Partnership's current and expected financial position.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental Revenues $ 4,470,000 $ 4,920,000 $ 4,795,000 $ 4,770,000 $ 4,927,500
Total Expenses 3,621,938 3,740,075 3,720,073 4,594,089 5,688,047
Net Income 2,166,561 1,285,470 1,196,140 485,267 608,971
Net Income per Limited
Partnership Unit(1) .26 .26 .24 .10 .12
Total Assets 6,606,154 9,766,676 12,814,880 16,175,937 23,457,938
Partners' Capital 4,951,155 8,248,904 11,219,359 14,589,989 22,036,571
Net Cash Provided by
Operating Activities 4,101,087 4,255,925 4,444,031 5,293,635 4,560,125
Cash Distributions per Unit(1)(2) 1.12 .87 .93 1.63 .94
- -------------------------------------------------------------------------------------------------------
<FN>
(1) 4,837,505 units outstanding
(2) Distribution amounts are reflected in the year for which they are
declared. The Partnership's fourth quarter cash distribution is
usually paid in early February of the following year.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The General Partners developed a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership pursuant to a Plan of
Liquidation and Dissolution dated November 20, 2000 (the "Liquidation Plan"). On
November 19, 1999, the Partnership received the required approval from limited
partner units entitled to vote on the Liquidation Plan and the General Partners
have begun to implement the Plan by actively marketing the aircraft for sale
during the first quarter of 2000, in accordance with the terms approved by the
unitholders. See Item 4 for a description of the Liquidation.
As a result of the approval of the Liquidation Plan, the Partnership has
designated its aircraft as assets held for sale and has ceased to record
depreciation expense related to those assets as of the date of approval. In
accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed Of, all of the Partnership's
aircraft are reported at the lower of carrying amount or fair value less costs
to sell.
The General Partners received bids for several of the planes and recently signed
two letters of intent, one for the sale of the Partnership's 737-200 advanced
aircraft and another for the three DC-9-30 aircraft. Contracts are currently
being negotiated with the prospective purchasers and it is anticipated that
these four planes will be sold during the second quarter of 2000. However, there
can be no assurance that the sales will close within this timeframe, or that the
Partnership will receive the estimated market values for the remaining aircraft.
In addition, the General Partners continue to market the remaining aircraft.
Once the aircraft are sold, the Partnership's liabilities will be paid, the
sales proceeds will be distributed to the Limited Partners and the Partnership
will cease to exist. Winding up the Partnership can be a complex process which
may depend on a number of factors, and some of these factors may be beyond the
General Partners' control.
6
<PAGE>
As of December 31, 1999, all five of the Partnership's aircraft were on-lease.
Three aircraft were on-lease to Northwest Airlines, Inc. ("Northwest"), one
aircraft was on-lease to Delta Air Lines, Inc. ("Delta"), and one aircraft was
on-lease to Continental Airlines, Inc. ("Continental"). As discussed below, the
aircraft which was leased to Boeing Capital Corporation ("BCC") was sold on
April 30, 1999.
The leases for the Partnership's three DC-9-30 aircraft expire in January 2007.
Northwest pays the Partnership a monthly lease rate of $35,000 per aircraft. As
part of the August 1996 agreement to extend these leases, Northwest agreed to
hushkit each aircraft prior to December 31, 1999. In exchange for funding the
cost of the hushkits, Northwest will be entitled to 50% of the proceeds from the
eventual sale of the aircraft. The General Partners believe that the lease
extensions and hushkitting of the engines will, in all likelihood, increase the
value of the aircraft and will present the Partnership with more viable
opportunities for the aircraft in the future.
Commencing November 1, 1997, the Partnership's B-727-200 aircraft was re-leased
to BCC, which subleased the aircraft to SportHawk. BCC paid the Partnership a
monthly lease rate of $45,000. The primary term of the BCC lease was scheduled
to expire on October 31, 1999. Pursuant to the terms of the lease, on April 30,
1999 SportHawk exercised its option to purchase the aircraft for a selling price
of approximately $1,243,000 and the Partnership recognized a gain of $1,206,195.
The lease with Delta for the Partnership's 737-200 advanced aircraft called for
a monthly lease rate of $80,000, and expired in September 1999. During the
second quarter of 1999, Delta extended its lease through September 30, 2001.
This lease extension requires Delta to pay the Partnership a monthly lease rate
of $65,000 and to hushkit the plane, which was completed prior to year end 1999.
Continental makes monthly lease payments of $180,000 for the Partnership's MD-80
Series aircraft. The lease with Continental was originally scheduled to expire
in March 1998. Continental extended this lease through September 2000, with the
remaining terms of the lease unchanged.
At December 31, 1999, the Partnership had unrestricted cash and cash equivalents
of $1,333,331, compared to $1,781,869 at December 31, 1998. The decrease is due
to the payment of distributions and decreased rental revenue resulting from the
sale of one plane.
On August 31, 1999, the Partnership paid a distribution to Unitholders of
$2,300,164, or approximately $.48 per Unit. Of this amount, $.22 per Unit
represents a distribution of cash flow from operations and $.26 per Unit
represents a distribution of net sale proceeds from the sale of the aircraft. At
December 31, 1999 the Partnership had a distribution payable to Unitholders of
$755,580 or approximately $.16 per Unit, which was paid on March 1, 2000. Future
cash distributions will be determined on a quarterly basis after an evaluation
of the Partnership's current and expected financial position.
Market Risk
Interest rate risk comprises the Partnership's principal market risk exposure.
The Partnership has no long-term debt and its aircraft are unencumbered by debt.
Accordingly, the Partnership's interest risk exposure is primarily limited to
interest earned on the Partnership's cash and cash equivalents, which are
invested at short-term rates. Such risk is not considered material to the
Partnership's operations.
Results of Operations
1999 compared to 1998
- ---------------------
For the year ended December 31, 1999, the Partnership generated net income of
$2,166,561 compared to net income of $1,285,470 in 1998. Net income for the 1999
period includes a gain on sale of aircraft in the amount of $1,206,195.
Excluding this gain, Partnership operations resulted in income before gain on
sale of aircraft of $960,366 for the year ended December 31, 1999, compared with
$1,285,470 in 1998. The decrease in net income is primarily due to lower rental
income, higher general and administrative expense and lower depreciation
expense.
Rental income for the year ended December 31, 1999 was $4,470,000, compared to
rental income of $4,920,000 in 1998. The decrease is primarily attributable to
the sale of the aircraft to Sport Hawk on April 30, 1999.
7
<PAGE>
Interest income for the year ended December 31, 1999 was $106,314, compared to
$97,191 in 1998. The increase is primarily attributable to an increase in the
Partnership's average cash balances during the 1999 period resulting from the
cash received on the sale of the aircraft.
Depreciation expense totaled $2,669,210 for the year ended December 31, 1999
compared to $3,019,230 in fiscal 1998. The reduction is due to the fact that the
Partnership ceased recording depreciation on November 19, 1999, in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Management fees totaled $407,557 for the year ended December 31, 1999 compared
to $444,005 in 1998. The decrease is primarily attributable to the decrease in
rental income.
General and administrative expenses for the year ended December 31, 1999 totaled
$544,370, compared to $275,515 in 1998. The increase is primarily due to an
increase in legal and other fees related to the Liquidation Plan.
1998 compared to 1997
- ---------------------
For the twelve months ended December 31, 1998, the Partnership reported net
income of $1,285,470 compared to $1,196,140 in 1997. The increase is primarily
attributable to an increase in rental income, offset partly by a slight increase
in management fees and general and administrative expenses.
Rental income totaled $4,920,000 for the year ended December 31, 1998 compared
with $4,795,000 in 1997. The increase is primarily a result of a higher lease
rate paid for the 727-200 non-advanced aircraft in comparison to 1997.
Interest income totaled $97,191 for the year ended December 31, 1998, compared
with $111,683 for the year ended December 31, 1997. The decrease is primarily
attributable to a decrease in the Partnership's average cash balances during
1998.
Management fees totaled $444,005 for the year ended December 31, 1998 compared
to $432,958 in 1997. The increase primarily reflects an increase in release fees
and lease revenues upon which management fees are based.
General and administrative expenses totaled $275,515 for the year ended December
31, 1998, compared with $267,887 for the year ended December 31, 1997. The
slight increase is primarily attributable to higher administrative expenses
during 1998, which were partly offset by reductions in postage, legal and other
professional fees.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Incorporated herein by reference to the information presented under "Market
Risk" of Item 7 of this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31, 1999
included in Exhibit 13 to this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
8
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership
The Partnership has no officers or directors. The General Partners jointly
manage and control the affairs of the Partnership and have general
responsibility and authority in all matters affecting its business. Information
concerning the directors and executive officers of the General Partners are as
follows:
Jet Aircraft Leasing Inc.
-------------------------
Name Office
---- ------
Michael T. Marron Director, President and Chief Financial Officer
Rocco F. Andriola Director, Vice President
Certain officers and directors of Jet Aircraft Leasing, Inc. are now serving (or
in the past have served) as officers or directors of entities which act as
general partners of a number of limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. Those
partnerships sought the protection of the bankruptcy laws to protect the
partnerships' assets from loss through foreclosure.
Michael T. Marron, 36, is a Vice President of Lehman Brothers and has been a
member of the Diversified Asset Group since 1990 where he has actively
managed and restructured a diverse portfolio of syndicated limited
partnerships. Prior to joining Lehman Brothers, Mr. Marron was associated
with Peat Marwick Mitchell & Co. serving in both its audit and tax divisions
from 1985 to 1989. Mr. Marron received a B.S. degree from the State
University of New York at Albany and an M.B.A. degree from Columbia
University and is a Certified Public Accountant.
Rocco F. Andriola, 41, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996. Mr.
Andriola also serves as the Director of Global Corporate Services for
Lehman. Since joining Lehman in 1986, Mr. Andriola has been involved in a
wide range of restructuring and asset management activities involving real
estate and other direct investment transactions. From June 1991 through
September 1996, Mr. Andriola held the position of Senior Vice President in
Lehman's Diversified Asset Group. From June 1989 through May 1991, Mr.
Andriola held the position of First Vice President in Lehman's Capital
Preservation and Restructuring Group. From 1986 to 1989, Mr. Andriola served
as a Vice President in the Corporate Transactions Group of Shearson Lehman
Brothers' office of the general counsel. Prior to joining Lehman, Mr.
Andriola practiced corporate and securities law at Donovan Leisure Newton &
Irvine in New York. Mr. Andriola received a B.A. from Fordham University, a
J.D. from New York University School of Law, and an LL.M in Corporate Law
from New York University's Graduate School of Law.
CIS Aircraft Partners, Inc.
---------------------------
Name Office
---- ------
Michael L. Rosen President
Robin A. Konicek Vice President
In 1989, Continental Information Systems Corporation, and certain of its
subsidiaries, including CIS Corporation, filed voluntary petitions for
reorganization under Chapter 11 of the Federal Bankruptcy Code. As described
below, various directors and executive officers of CAP hold similar positions
for Continental Information Systems Corporation, CIS Corporation and such
subsidiaries.
In November 1994, the Bankruptcy Court for the Southern District of New York
confirmed the Trustee's Proposed Joint Plan of Reorganization. The approved Plan
became effective on December 21, 1994. As a result of the reorganization, the
Directors and Officers of CAP resigned from and took on various directorships
for Continental Information Systems Corporation, CIS Corporation and their
subsidiaries.
Michael L. Rosen, 41, is Director, President and Chief Executive Officer of
Continental Information Systems Corporation, the parent holding company of CIS
Aircraft Partners, Inc. Mr. Rosen is also the controlling stockholder and since
June 1996, the Chief Executive Officer of Oscar Gruss & Son Incorporated, a
member firm of the New York Stock Exchange, Inc. Prior to 1996, Mr. Rosen
operated a variety of real estate development projects and multi-family rental
properties in which he still has interests.
9
<PAGE>
Robin A. Konicek, 43, is a Vice President of CIS Aircraft Partners, Inc. and
is responsible for domestic and international aircraft marketing. She has
been active in the financing, trading and management of aircraft since 1982.
Prior to joining CIS in 1986, Ms. Konicek was a Vice President of Crocker
Bank Airlines and Aerospace Group, with major responsibility for developing
the U.S. market. She holds an A.B. from Stanford University and an M.B.A.
from the University of California, Los Angeles.
Item 11. Executive Compensation
No compensation was paid by the Partnership to the officers and directors of the
General Partners. See Item 13 below for a description of the compensation and
fees paid to the General Partners and their affiliates by the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
----------------------------------------------- As of the date hereof, no
person is known by the Partnership to be the beneficial owner of more than
five percent of the Units of the Partnership.
(b) Security ownership of management
-------------------------------- The Partnership has no directors or
officers, and neither of the General Partners of the Partnership owns any
Units. The Assignor Limited Partners for the Partnership, CIS Assignor
L.P.A., Inc. (an affiliate of CAP), owns 5 Units of the Partnership.
None of the directors or officers of the General Partners owned any Units
as of December 31, 1999.
(c) Changes in Control
------------------ Other than as described herein, the Partnership knows of
no arrangements, the operation of the terms of which may at a subsequent
date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partners and their affiliates received or will receive certain types
of compensation, fees, or other distributions in connection with the operation
of the Partnership. The fees and compensation were not determined by, and may
not necessarily reflect, arm's length negotiations. In addition, pursuant to the
Liquidation Plan and a Joint Marketing Agreement, dated July 13, 1999 among CIS
Aircraft Partners, Inc., Jet Aircraft Leasing, Inc. and the Partnership, the
Partnership Agreement has been amended to provide for the payment to the General
Partners of a marketing and sales fee not to exceed 3% of the sales price of the
aircraft sold in the liquidation. None of the officers and directors of the
General Partners received any compensation from the Partnership. During 1998 and
1997, certain administrative expenses incurred in servicing the Partnership,
which were voluntarily absorbed by affiliates of Jet Aircraft Leasing Inc. in
prior periods, were reimbursable to Jet Aircraft Leasing Inc. and its
affiliates. For additional information on fees paid to the General Partners and
affiliates, see Item 8 - Financial Statements and Supplementary Data (Note 6 of
the Notes to the Financial Statements).
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements:
Balance Sheets - December 31, 1999 and 1998 (1)
Statements of Partners' Capital (Deficit) - For the years
ended December 31, 1999, 1998 and 1997 (1)
Statements of Operations - For the years ended
December 31, 1999, 1998 and 1997 (1)
Statements of Cash Flows - For the years ended
December 31, 1999, 1998 and 1997 (1)
Notes to Financial Statements (1)
Report of Independent Public Accountants (1)
(1) Incorporated by reference from the Partnership's Annual Report to
Unitholders for the year ended December 31, 1999.
2. Financial Statement Schedules:
No schedules are presented because the information is not applicable
or is included in the Financial Statements or the notes thereto.
3. Exhibits:
(2) Plan of Liquidation and Dissolution of JetStream II, LP.
dated as of November 20, 1999.
(3a) Limited Partnership Agreement, dated November 10, 1987
(Incorporated by reference to the Partnership's Prospectus
filed with the Commission on April 17, 1987, as amended.)
(3b) Amendment No. 1 to the Limited Partnership Agreement, dated
November 20, 1999.
(4) Depositary Agreement (Incorporated by reference to Exhibit
4.5 to the Partnership's Registration Statement on Form S-1
filed with the Commission on April 17, 1987.)
(10a) Escrow Agreement (Incorporated by reference to Exhibit 10.12
to the Partnership's Registration Statement on Form S-1 filed
with the Commission on April 17, 1987.)
(10b) Joint Marketing Agreement, dated July 13, 1999 among CIS
Aircraft Partners, Inc., Jet Aircraft Leasing, Inc. and
JetStream II, L.P.
(13) Annual Report to Unitholders for the year ended
December 31, 1999.
(27) Financial Data Schedule
(b) The Partnership filed no current reports on Form 8-K during the fourth
quarter of the period covered on this Report.
On January 5, 2000, the Partnership filed a Current Report on Form 8-K
reporting the results of the Consent Solicitation to approve a Partnership
Liquidation Plan.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JETSTREAM II, L.P.
BY: Jet Aircraft Leasing Inc.
Administrative General Partner
Date: March 31, 2000 BY: /s/Michael T. Marron
--------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
BY: CIS Aircraft Partners, Inc.
Managing General Partner
Date: March 31, 2000 BY: /s/Michael L. Rosen
-------------------
Name: Michael L. Rosen
Title: Director and President
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
BY: CIS Aircraft Partners, Inc.
A General Partner
Date: March 31, 2000 BY: /s/Michael L. Rosen
-------------------
Name: Michael L. Rosen
Title: Director and President
Date: March 31, 2000 BY: /s/Robin A. Konicek
-------------------
Name: Robin A. Konicek
Title: Vice President
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
JET AIRCRAFT LEASING INC.
A General Partner
Date: March 31, 2000 BY: /s/Michael T. Marron
--------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
Date: March 31, 2000 BY: /s/Rocco F. Andriola
--------------------
Name: Rocco F. Andriola
Title: Director, Vice President
14
EXHIBIT 13
JetStream II, L.P.
1999 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
JETSTREAM II, L.P.
- --------------------------------------------------------------------------------
JetStream II, L.P. commenced operations in 1988 and was formed to acquire
used commercial aircraft subject to triple net operating leases with
commercial airlines. Since inception, limited partners have received cash
distributions totaling approximately $18.93 per $20.00 Unit. The following
table provides the quarterly cash distributions per Unit paid by the
Partnership for the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Quarter Declared 1999 1998
---------------------------------------
<S> <C> <C>
First Quarter $.339 $.210
Second Quarter .472 .219
Third Quarter .154 .221
Fourth Quarter .155 .222
------ -----
Total $1.120 $.872
=======================================
</TABLE>
Contents
1 Message to Investors
3 Financial Statements
6 Notes to the Financial Statements
13 Report of Independent Public Accountants
<PAGE>
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- --------------------------------------------------------------------------------
Presented for your review is the 1999 Annual Report for JetStream II, L.P. (the
"Partnership"). This report includes an update on the status of the
Partnership's aircraft portfolio, including efforts to market the Partnership's
remaining planes, and highlights of the Partnership's financial results. Also
included are the Partnership's audited financial statements for the year ended
December 31, 1999.
Sales Update
As discussed in prior reports, in November 1999, the Partnership received the
required approval of more that 50% of the outstanding limited partner units to
proceed with the plan of liquidation and dissolution, pursuant to which the
remaining aircraft will be sold and the Partnership terminated (the "Liquidation
Plan"). In accordance with the Liquidation Plan, we began actively marketing the
aircraft for sale in January 2000. Bids have been received for several of the
planes, and we are pleased to report that two letters of intent were recently
signed, one for the sale of the Partnership's 737-200 advanced aircraft and the
second for the three DC-9-30 aircraft. Contracts are currently being negotiated
with the prospective purchasers, and it is anticipated that the planes will be
sold during the second quarter of this year. However, there can be no assurance
that the sales will close within this time frame or that the Partnership will be
able to obtain the aircrafts' appraised values in a sale. In addition, we are
continuing to market the remaining aircraft. Once the planes are sold, the
Partnership's liabilities will be paid, the sales proceeds will be distributed
to the Limited Partners, and the Partnership will be terminated.
Portfolio Update
Following is an update on the status of the Partnership's remaining aircraft:
MD-80 Series Aircraft - Continental Airlines ("Continental") has exercised its
option to renew the lease for the Partnership's MD-80 Series aircraft through
September 2000. The lease requires Continental to make monthly lease payments of
$180,000.
737-200 Advanced Aircraft - The lease with Delta Air Lines ("Delta") for the
Partnership's 737-200 advanced aircraft has been extended through September
2001. The lease requires Delta to make monthly payments of $65,000. Delta was
also required to hushkit the plane, which was completed prior to year-end 1999.
DC-9-30 Aircraft - The leases for the Partnership's three DC-9-30 aircraft with
Northwest Airlines ("Northwest") expire in January 2007. Northwest pays $35,000
monthly per aircraft. As part of the agreement to extend these leases, Northwest
agreed to hushkit each aircraft prior to year-end 1999. In exchange for funding
the cost to hushkit, Northwest will be entitled to 50% of the proceeds from the
eventual sale of the aircraft. The three planes were hushkitted by Northwest
prior to the end of 1999.
Financial Highlights
Provided below is a review of Partnership operations for the twelve months
ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------------------
<S> <C> <C>
Rental income $4,470,000 $4,920,000
Total expenses 3,621,938 3,740,075
Net income 2,166,561 1,285,470
Net cash provided by operating activities 4,101,087 4,255,925
--------------------------------------------------------------------
</TABLE>
o The decrease in rental income is primarily attributable to the sale of the
Partnership's 727-200 aircraft in the second quarter of 1999.
o Total expenses decreased slightly due to the suspension of depreciation in
November 1999. However, general and administrative expenses increased
approximately $269,000 primarily due to an increase in legal and other
fees related to the Liquidation Plan.
1
<PAGE>
o Net income in 1999 includes the $1,206,195 gain on the sale of the 727-200
aircraft. Excluding this gain, the Partnership had net income of $960,366
in 1999. The lower net income in 1999 is primarily due to the decline in
rental income and the increase in general and administrative expenses.
Summary
We will update you on the status of our efforts to sell the Partnership's
aircraft in future correspondence. In the interim, questions regarding the
Partnership should be directed to your Financial Consultant or Partnership
Investor Services. All requests for a change of address should be submitted in
writing to the Partnership's administrative agent at P.O. Box 7090, Troy, MI
48007-7090. Partnership Investor Services can be reached at 617-342-4225, and
the Partnership's administrative agent can be reached at 248-637-7900.
Very truly yours,
Jet Aircraft Leasing Inc. CIS Aircraft Partners, Inc.
General Partner General Partner
Michael T. Marron Michael L. Rosen
President President
March 31, 2000
2
<PAGE>
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
BALANCE SHEETS
At December 31, At December 31,
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Aircraft, at cost $ -- $ 26,877,000
Less accumulated depreciation -- (18,937,193)
------------------------------
-- 7,939,807
Aircraft held for sale 5,270,597 --
Cash and cash equivalents 1,333,331 1,781,869
Accounts receivable 2,226 45,000
- -------------------------------------------------------------------------------------
Total Assets $ 6,606,154 $ 9,766,676
=====================================================================================
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses (Note 6) $ 753,586 $ 280,044
Distribution payable 755,580 1,084,395
Deferred revenue 145,833 153,333
------------------------------
Total Liabilities 1,654,999 1,517,772
------------------------------
Partners' Capital (Deficit):
General Partners (4,474) (868,684)
Limited Partners (4,837,505 units outstanding) 4,955,629 9,117,588
------------------------------
Total Partners' Capital 4,951,155 8,248,904
- -------------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $ 6,606,154 $ 9,766,676
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1999, 1998, and 1997
General Limited
Partners Partners Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1996 $(805,273) $15,395,262 $14,589,989
Net Income 11,961 1,184,179 1,196,140
Distributions (45,668) (4,521,102) (4,566,770)
- -------------------------------------------------------------------------------------
Balance at December 31, 1997 $(838,980) $12,058,339 $11,219,359
Net Income 12,855 1,272,615 1,285,470
Distributions (42,559) (4,213,366) (4,255,925)
- -------------------------------------------------------------------------------------
Balance at December 31, 1998 $(868,684) $ 9,117,588 $ 8,248,904
Net Income 910,670 1,255,891 2,166,561
Distributions (46,460) (5,417,850) (5,464,310)
- -------------------------------------------------------------------------------------
Balance at December 31, 1999 $ (4,474) $ 4,955,629 $ 4,951,155
=====================================================================================
</TABLE>
See accompanying notes to the financial statements. 3
<PAGE>
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the years ended December 31,
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Rental $4,470,000 $4,920,000 $4,795,000
Interest 106,314 97,191 111,683
Other 5,990 8,354 9,530
------------------------------------------
Total Income 4,582,304 5,025,545 4,916,213
- -------------------------------------------------------------------------------------
Expenses
Depreciation 2,669,210 3,019,230 3,019,228
Management fees (Note 6) 407,557 444,005 432,958
General and administrative 544,370 275,515 267,887
Operating 801 1,325 --
------------------------------------------
Total Expenses 3,621,938 3,740,075 3,720,073
Net income before gain on
sale of aircraft 960,366 1,285,470 1,196,140
Gain on sale of aircraft (Note 4) 1,206,195 -- --
- -------------------------------------------------------------------------------------
Net Income $2,166,561 $1,285,470 $1,196,140
=====================================================================================
Net Income Allocated:
To the General Partners $ 910,670 $ 12,855 $ 11,961
To the Limited Partners 1,255,891 1,272,615 1,184,179
- -------------------------------------------------------------------------------------
$2,166,561 $1,285,470 $1,196,140
=====================================================================================
Per limited partnership unit
(4,837,505 outstanding) $0.26 $0.26 $0.24
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements. 4
<PAGE>
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Income $ 2,166,561 $ 1,285,470 $ 1,196,140
Adjustments to reconcile net income to
net cash provided by operating activities:
Restricted cash -- -- 297,475
Gain on sale of aircraft (1,206,195) -- --
Depreciation 2,669,210 3,019,230 3,019,228
Increase (decrease) in cash arising
from changes in operating assets and
liabilities:
Accounts receivable 42,774 -- (45,000)
Interest receivable -- -- 368
Accounts payable and accrued expenses 436,237 (48,775) (24,180)
Deferred revenue (7,500) -- --
-------------------------------------------
Net cash provided by operating activities 4,101,087 4,255,925 4,444,031
- -------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Cash received from sale of aircraft 1,243,500 -- --
Loan receivable -- -- 108,403
-------------------------------------------
Net cash provided by investing activities 1,243,500 -- 108,403
- -------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions (5,793,125) (4,284,899) (4,533,017)
-------------------------------------------
Net cash used for financing activities (5,793,125) (4,284,899) (4,533,017)
- -------------------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (448,538) (28,974) 19,417
Cash and cash equivalents, beginning
of year 1,781,869 1,810,843 1,791,426
- -------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,333,331 $ 1,781,869 $ 1,810,843
=====================================================================================
Supplemental Disclosure of Noncash Operating Activities In connection with the
sale of the aircraft, accrued resale fees in the amount of $37,305 have
decreased the gain on the sale of the aircraft.
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements. 5
<PAGE>
JETSTREAM II, L.P.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
1. Organization
JetStream II, L.P. ("the Partnership"), a Delaware limited partnership, was
formed on October 15, 1987, for the purpose of acquiring and leasing used
commercial aircraft. The Managing General Partner of the Partnership is CIS
Aircraft Partners, Inc. ("CAP"), a third-tier, wholly owned subsidiary of
Continental Information Systems Corporation. The Administrative General
Partner is Jet Aircraft Leasing Inc. ("JAL"), formerly Hutton Aircraft
Leasing, Inc., an affiliate of Lehman Brothers Inc.
Upon formation of the Partnership, the General Partners each contributed $500
and the initial Limited Partner contributed $100 for five limited partner units.
An additional 4,837,500 limited partnership depositary units were then sold at a
price of $20.00 per unit. The Partnership had an interim closing on January 14,
1988 and a final closing on February 24, 1988 and received gross offering
proceeds of $96,750,000.
The General Partners are implementing, and the Limited Partners have approved, a
plan to sell the Partnership's remaining aircraft and subsequently terminate the
Partnership pursuant to a Plan of Liquidation and Dissolution dated as of
November 20, 1999 (the "Liquidation Plan"). The Liquidation Plan consists of:
(1) the sale of all of the Partnership's assets and the dissolution of the
Partnership pursuant to the proposed Plan of Liquidation and Dissolution; (2)
the amendment of the Partnership Agreement to permit the engagement of the
General Partners to market and sell the assets of the Partnership for a fee
pursuant to the terms of the Joint Marketing Agreement, dated July 13, 1999,
among each of the General Partners and the Partnership and (3) the grant of
authority to the General Partners to take any action necessary or incidental and
consistent with the Partnership Agreement, the Plan of Liquidation and
Dissolution and the Joint Marketing Agreement to complete the foregoing. The
Liquidation Plan required the approval of more than 50% of the limited partner
units entitled to vote. A consent solicitation statement requesting such
approval was forwarded to investors on October 15, 1999. On November 19, 1999,
the Partnership received the required approval from the unitholders. As a result
of this vote, the General Partners have begun to implement the Liquidation Plan
by actively marketing the aircraft for sale during the first quarter of 2000, on
the terms described in the consent solicitation statement. Once the aircraft are
sold and the Partnership's actual and contingent liabilities have been paid or
reserved for, the sales proceeds will be distributed to the Limited Partners and
the Partnership will be terminated. If the unitholders had not approved the
Liquidation Plan, according to the Partnership's Limited Partnership Agreement
dated November 10, 1987, the Partnership would be required to dissolve and
distribute all of its assets no later than December 31, 2027.
As a result of the approval of the Liquidation Plan, the Partnership has
designated its aircraft as assets held-for-sale. In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and Assets to be Disposed Of, all of the Partnership's
aircraft are reported at the lower of carrying amount or fair value less costs
to sell. No charge was recorded as a result of the designation of the aircraft
as assets held-for-sale. In addition, the Partnership has ceased to record
depreciation expense related to those assets as of November 19, 1999.
Title to the aircraft owned by the Partnership is held by nonaffiliated trusts,
of which the Partnership is the beneficiary. The purpose of this method of
holding title is to satisfy certain registration requirements of the Federal
Aviation Administration.
2. Significant Accounting Policies
Basis of Accounting The accompanying financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles. Revenues are recognized as earned and expenses are recorded as
obligations are incurred.
6
<PAGE>
JETSTREAM II, L.P.
Aircraft and Depreciation The aircraft were recorded at cost, which includes
acquisition costs. Through December 31, 1993, depreciation to an estimated
salvage value of 10% was computed using the straight-line method over an
estimated average economic life of 12 years for all aircraft owned by the
Partnership. Beginning in 1994, depreciation was computed using the
straight-line method over an estimated remaining economic life of two to six
years for all aircraft owned by the Partnership.
Effective January 1, 1997, depreciation of the unamortized balance at December
31, 1996 for each Northwest aircraft will be depreciated on a straight line
basis over a 10-year period, due to the lease agreement signed in the third
quarter of 1996 extending the lease and the life of each aircraft for a term of
10 years. (See Note 4).
Improvements to aircraft required to comply with regulatory requirements will be
capitalized when incurred and depreciated over the useful life of the
improvement.
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and Assets to be Disposed Of, the Partnership has ceased to record
depreciation related to those assets as of November 19, 1999.
Accounting for Impairment It is the Partnership's policy to review the carrying
value of its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable. For long-lived assets used in operations, measurement of impairment
loss is based on undiscounted cash flows. For assets held for sale, measurement
of the impairment loss is based on the fair value of the asset. Generally fair
value will be determined through independent appraisals of such assets. No
impairment adjustments have been made as a result of this review process during
1999 and 1998.
Cash Equivalents Cash equivalents consist of short-term highly liquid
investments with original maturities of three months or less from the date of
issuance. The carrying amount approximates fair value because of the short
maturity of these instruments.
Concentration of Credit Risk Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash in
excess of the financial institutions' insurance limits. The Partnership invests
available cash with high credit quality financial institutions.
Operating Leases The aircraft leases are accounted for as operating leases.
Lease revenues are recognized over the terms of the related leases. Some of the
Partnership's operating leases require rental payments to be paid in advance.
Rental payments received in advance are deferred and then recognized as income
when earned.
Income Taxes No provision for income taxes has been made in the financial
statements since such taxes are the responsibility of the individual partners
rather than that of the Partnership.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
7
<PAGE>
JETSTREAM II, L.P.
3. Partnership Allocations
The Limited Partnership Agreement ("Agreement") substantially provides for the
following:
Cash Distributions Cash flow from operations as defined in the Agreement, at
the discretion of the General Partners, will be distributed on a quarterly
basis, with 99% to the Limited Partners and 1% to the General Partners.
Distributable proceeds from sales of aircraft in liquidation of the Partnership
will be distributed in accordance with the partners' capital accounts after all
allocations of income and losses.
Allocation of Income and Losses Generally, income and losses for any year are
allocated 99% to the Limited Partners and 1% to the General Partners. Gains on
sales of aircraft shall first be allocated to the General Partners until they
have been allocated an amount of gain equal to the lesser of their respective
deficit account balances or 1.01% of all capital contributions by Limited
Partners. Any additional gain recognized by the Partnership upon the sale of
aircraft shall be allocated 99% to the Limited Partners and 1% to the General
Partners.
Dissolution of Partnership If, upon dissolution of the Partnership, the General
Partners have a negative capital account, they shall contribute capital equal to
the lesser of their respective capital deficit account balances or 1.01% of all
capital contributed by the Limited Partners.
4. Aircraft under Operating Leases
Certain of the Partnerships' aircraft leases are triple net operating leases,
requiring the lessees to pay substantially all expenses associated with the
aircraft during the term of the leases, as described below:
727-200 Non-Advanced Aircraft On January 15, 1988, the Partnership acquired
three Boeing 727-200 non-advanced aircraft for a total purchase price of
$16,353,693. These aircraft were subject to operating leases with Trans World
Airlines, Inc. ("TWA"). The leases expired on October 31, 1994, December 19,
1994 (these two aircraft were sold in 1995) and October 30, 1997 (this aircraft
was leased to Boeing Capital Corporation, as discussed below.)
On November 1, 1997, the Partnership entered into an operating lease agreement
with Boeing Capital Corporation ("BCC") to lease one of the aircraft formerly
leased to TWA. BCC subleased the aircraft to SportHawk International, Inc. BCC
paid the Partnership a monthly lease rate of $45,000 through the primary term of
the lease, which was to expire on October 31, 1999. Pursuant to the terms of the
lease, on April 30, 1999 SportHawk exercised its option to purchase the aircraft
for a selling price of approximately $1,243,500 and the Partnership recognized a
gain of $1,206,195.
DC-9-30 Aircraft During 1988, the Partnership acquired three McDonnell Douglas
DC-9-30 aircraft for a total purchase price of $21,691,381. These aircraft are
subject to operating leases with Northwest Airlines, Inc. ("Northwest"). Lease
extensions were executed with Northwest in December 1993 for these aircraft.
Under the lease extensions, which were scheduled to expire in January 1995 for
two aircraft and April 1995 for the third, Northwest made monthly lease payments
to the Partnership of $35,000 per aircraft. These leases were subsequently
extended twice at the same monthly lease rate. Each extension was for one
additional year from the previous expiration dates, with the remaining terms of
the lease unchanged.
During the third quarter of 1996, the Partnership signed new lease agreements
with Northwest extending the leases through January 2007. Northwest will
continue to pay the Partnership a monthly lease rate of $35,000 per aircraft. In
accordance with the lease extensions, each of the aircraft was hushkitted, which
entails upgrading the current engines to comply with Stage 3 noise requirements.
This enabled the aircraft to continue to fly in the United States beyond
December 31, 1999, the phase-out date for all Stage 2 commercial aircraft.
Northwest funded the cost of the hushkitting and, in turn, will be entitled to
fifty percent (50%) of the proceeds from the eventual sale of the aircraft.
8
<PAGE>
JETSTREAM II, L.P.
737-200 Advanced Aircraft On February 25, 1988, the Partnership acquired a
Boeing 737-200 advanced aircraft for a total purchase price of $14,380,390. This
aircraft is subject to an operating lease with Delta Air Lines, Inc. ("Delta").
In September 1992, the General Partners and Delta agreed to amend the original
lease. The amendment provided for rent of $95,000 per month through the
expiration date in December 1994. In May 1994, Delta exercised its option to
extend the lease for a term of two years from the previous expiration date. The
remaining terms of the lease were unchanged. In November 1995, an agreement was
reached with Delta to amend and extend the current lease until September 1999 at
a monthly lease rate of $80,000. In September 1999, the lease was extended until
September 2001 at a monthly lease rate of $65,000. In accordance with the lease
extension, Delta hushkitted the aircraft, which entailed upgrading the current
engines to comply with Stage 3 noise requirements.
MD-80 Series Aircraft On January 26, 1988, the Partnership acquired a McDonnell
Douglas MD-80 Series aircraft for a total purchase price of $27,313,020. This
aircraft was subject to an operating lease with Continental Airlines, Inc.
("Continental"), the term of which expired on April 28, 1993. Subsequent to this
expiration date, Continental returned the aircraft to the Partnership. On
February 9, 1994, the Partnership entered into a new lease agreement with
Continental. The agreement provided for Continental to lease the plane for a
term of four years and pay $180,000 per month in advance effective March 15,
1994. The Partnership agreed to provide up to $600,000 of financing to
Continental to perform modification work on the aircraft, including advanced
avionics, interior furnishings and exterior paint.
The modification financing was repayable over the life of the lease at an
interest rate of 8% per annum for advances made before February 1, 1996. On June
7, 1994, the Partnership made its only advance to Continental in the amount of
$302,525. The notes were prepaid in full in September 1997. Having made all of
the modifications permitted under the Participation Agreements, Continental no
longer can borrow any funds and the Partnership has been released from its
obligation to lend.
The lease with Continental Airlines for the Partnership's MD-80 Series aircraft
was previously scheduled to expire in March 1998. Continental extended its lease
to March 1999 and, in October 1998, exercised its second option to renew this
lease through September 2000, with the remaining terms of the lease unchanged.
Revenues from each of the airlines as a percentage of the Partnership's total
rental revenues are as follows:
<TABLE>
<CAPTION>
Percent of Rental Revenues
Airline 1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Northwest 28.2% 25.6% 26.3%
Delta 20.5 19.5 20.0
Continental 48.3 43.9 45.0
Boeing Capital 3.0 11.0 1.9
TWA -- -- 6.8
</TABLE>
The following is a schedule, by year, of future minimum rental income under the
leases as of December 31, 1999.
<TABLE>
<CAPTION>
Year Amount
--------------------------------------------------
<S> <C>
2000 $ 3,660,000
2001 1,845,000
2002 1,260,000
2003 1,260,000
2004 1,260,000
Thereafter 2,730,000
--------------------------------------------------
Total $12,015,000
==================================================
</TABLE>
9
<PAGE>
JETSTREAM II, L.P.
The above schedule of future minimum rental income is based on the existing
terms of the leases and does not include the rental income that may result from
the renewal of existing leases or the re-leasing of the aircraft, if any.
5. Distributions
Distributions declared aggregated $5,464,310 (approximately $1.12 per Unit),
$4,255,925 (approximately $0.87 per Unit) and $4,566,770 (approximately $0.94
per Unit) for the years ended December 31, 1999, 1998 and 1997, respectively. As
of December 31, 1999, the Partnership had declared a distribution of $755,580,
of which $748,024 (approximately $.16 per Unit) was paid to the Limited Partners
and $7,556 was paid to the General Partners on March 1, 2000.
6. Transactions with Affiliates
Base Management Fee The General Partners receive a quarterly fee, subordinated
to the Limited Partners receiving their Preferred Return, as defined in the
Agreement, in an amount generally equal to 1.5% of gross aircraft rentals. Of
this amount, 1.0% is payable to CAP and .5% is payable to JAL.
Incentive Management Fee CAP receives a quarterly fee of 4.5% of quarterly cash
flow, subordinated to the Limited Partners receiving their Preferred Return.
Re-lease Fee The General Partners receive a quarterly fee, subordinated to the
Limited Partners receiving their Preferred Return, for re-leasing aircraft or
renewing a lease in an amount equal to 3.5% of the gross rentals from such
re-lease or renewal for each quarter for which such payment is made. Of this
amount, 2.5% is payable to CAP and 1.0% is payable to JAL.
Resale Fee CAP receives a subordinated fee with respect to each aircraft sold
by the Partnership in an amount equal to the lesser of (i) 3% of the contract
sales price of the aircraft or (ii) an amount that is competitive with fees
charged by nonaffiliates rendering comparable services. Such fee will be reduced
(but not below zero) for any resale fees or commissions payable to third
parties. The resale fee is subordinate to the Limited Partners receiving a
priority return equal to their original capital contribution plus their
preferred return. No resale fees were paid during 1997, 1998 or 1999.
Non-Subordinated Aircraft Marketing and Sale Fee Pursuant to the Liquidation
Plan, an Amendment to the Agreement and the Joint Marketing Agreement, CAP will
receive a fee of 2% and JAL will receive a fee of 1% on the contract sales price
of each aircraft.
During 1999, the unitholders did not receive their preferred returns. Therefore,
these management fees have not been paid. The following is a summary of amounts
earned by the General Partners and their affiliates during the years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Unpaid at Earned
December 31, ------------------------------
1999 1999 1998 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Base Management Fee $ 83,050 $ 65,246 $ 71,217 $ 68,756
Incentive Management Fee 233,937 184,549 200,588 197,952
Re-lease Fee 200,813 157,762 172,200 166,250
Resale fee 99,735 37,305 -- --
----------------------------------------------------------------------
$617,535 $444,862 $444,005 $432,958
=========================================
</TABLE>
10
<PAGE>
JETSTREAM II, L.P.
7. Reconciliation of Difference between Net Income in the Financial Statements
(Accrual Basis--Generally Accepted Accounting Principles) and Net Income in
the Partnership's Tax Return
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as reported $ 2,166,561 $ 1,285,470 $ 1,196,140
Adjustments--
Depreciation differential between the
Modified Accelerated Cost Recovery
System and depreciation for
financial reporting purposes 2,669,210 3,019,230 2,115,533
Deferred revenue (7,500) -- --
Excess of tax gain over book gain 37,305 -- --
-------------------------------------------
Net income, per the Partnership's tax
return $ 4,865,576 $ 4,304,700 $ 3,311,673
- -------------------------------------------------------------------------------------
The net income determined on the income tax basis is allocated to the partners
as follows:
Limited partners (4,837,505 units) $ 3,997,005 $ 4,261,653 $ 3,278,556
General partners 868,571 43,047 33,117
-------------------------------------------
$ 4,865,576 $ 4,304,700 $ 3,311,673
Taxable income (loss) per limited
partner unit $ 0.83 $ 0.88 $ 0.68
- -------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1999, the tax basis of total assets and total liabilities was
$12,146,304 and $1,424,430, respectively.
8. Contingencies
There may be costs associated with the process of marketing and selling the
remaining aircraft owned by the Partnership and winding up the Partnership. In
negotiating the sale of the aircraft now owned by the Partnership, the
Partnership may be required to bear some or all of the costs of compliance with
future Airworthiness Directives ("AD's") or AD's that have been issued but which
did not mandate action during the previous lessee's lease term, or in respect of
which the previous lessee failed to comply. AD's are Federal Aviation
Administration mandates requiring the airline to perform a specific maintenance
task within a specified period of time. The aggregate effect on the Partnership
of compliance with these standards is not determinable at this time and will
depend upon a variety of factors, including, but not limited to, the state of
the commercial aircraft market, the extent of the AD, the availability of
capable repair facilities and the effect, if any, that such compliance may have
on the service lives of the affected aircraft. As described above, the cost to
the Partnership of such compliance may be reduced to the extent that current or
future lessees of the Partnership's aircraft effect such modifications under the
terms of the current or future operating leases.
Also, as part of the August 1996 agreement with Northwest to extend certain
leases as described in Note 4, the lessee agreed to hushkit each aircraft. In
exchange for this agreement, the lessee will be entitled to 50% of the proceeds
from the eventual sale of the associated aircraft. These amounts have not been
recognized as a liability in the accompanying financial statements as of
December 31, 1999 but are estimated to be approximately $3.2 million, based on
independent appraisals as of December 31, 1999.
11
<PAGE>
JETSTREAM II, L.P.
9. Subsequent Event
In accordance with the Partnership's Liquidation Plan, the General Partners
began marketing the aircraft for sale during the first quarter of 2000. Bids
were received for several of the planes and on February 28, 2000, the Managing
General Partner signed two letters of intent, one for the sale of the
Partnership's 737-200 advanced aircraft and another for the three DC-9-30
aircraft. Contracts are currently being negotiated with the prospective
purchasers and it is anticipated that these four planes will be sold during the
second quarter of this year. However, there can be no assurance that the sales
will close within this timeframe. In addition, the General Partners continue to
market the remaining aircraft. Once the aircraft are sold and the Partnership's
actual and contingent liabilities have been paid or reserved for, the sales
proceeds will be distributed to the Limited Partners and the Partnership will be
terminated.
12
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of JetStream II, L.P.:
We have audited the accompanying balance sheets of JetStream II, L.P. (a
Delaware limited partnership) as of December 31, 1999 and 1998 and the related
statements of income, partners' capital (deficit) and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As described in Note 1 to the
financial statements, a qualifying majority of the limited partner units have
voted to approve a plan to liquidate the Partnership. As a result, the General
Partners commenced implementation of the plan to sell the Partnership's
remaining aircraft and subsequently terminate the Partnership.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of JetStream II, L.P. as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 2000, except with respect
to the matters discussed in Note 9, as
to which the date is February 28, 2000
13
EXHIBIT 2
Plan of Liquidation and Dissolution
of
JetStream II, L.P.
<PAGE>
PLAN OF LIQUIDATION AND DISSOLUTION
of
JETSTREAM II, L.P.
This Plan of Liquidation and Dissolution (the "Plan") dated as of
November 20, 1999 of JetStream II, L.P. (the "Partnership"), a limited
partnership organized and existing under the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act"), is for the purpose of effecting the
complete liquidation and dissolution of the Partnership in accordance with the
laws of the State of Delaware.
1. Intention of the General Partners. CIS Aircraft Partners, Inc.,
as the Managing General Partner, and Jet Aircraft Leasing, Inc., as the
Administrative General Partner (collectively, the "General Partners"), believe
that the liquidation and dissolution (the "Liquidation") of the Partnership at
this time is in the best interest of the Partnership and the unitholders, as the
beneficial owners of the limited partnership interests of the Partnership (the
"Unitholders"). Therefore, the General Partners have submitted this Plan to the
Unitholders for their consent to liquidate and dissolve the Partnership in
accordance with Section 8.1.(a)(v) of the Limited Partnership Agreement of the
Partnership dated November 10, 1987 (the "Partnership Agreement").
2. Effectiveness. The Plan shall be effective upon the approval
hereof by the affirmative vote of Unitholders owning more than 50% of the
outstanding units of the Partnership as required by the Partnership Agreement.
Until such time as the Unitholders approve this Plan, the General Partners shall
not take and shall not cause the Partnership to take, any of the actions, and
shall not do or cause the Partnership to do, any of the things provided herein.
3. Dissolution. Upon the execution of this Plan by CIS Assignor
L.P.A., Inc., as Assignor Limited Partner of the Partnership on behalf of the
Unitholders, the Partnership is and shall be dissolved, without any further
action by or on behalf of the Partnership, the Unitholders or the General
Partners.
4. Winding Up. Upon the dissolution of the Partnership, the General
Partners, as liquidators for the Partnership, shall sell all of the assets of
the Partnership pursuant to the Joint Marketing Agreement, dated as of July 13,
1999, by and among each of the General Partners and the Partnership and shall
apply the funds of the Partnership (including the proceeds of the sale of any
other assets of the Partnership) to (i) the payment of the expenses of the sale
of the assets of the Partnership, and the winding up, liquidation and
termination of the Partnership; (ii) the expenses of preparation, filing and
distribution of financial statements, tax returns, reports required under the
Securities Exchange Act of 1934 (the "Exchange Act") and reports to Unitholders,
including fees and expenses of accountants and lawyers; (iii) the payment of all
income, sales, use, franchise, gross receipts, ad valorem, personal property and
other taxes, imports, duties and governmental charges payable by the Partnership
with respect to its income or operations through the time of its termination
("Taxes"), including Taxes with respect to the sale of the Partnership's assets;
and (iv) the creation of reserves for any of the foregoing.
<PAGE>
5. Liquidation. All assets and funds of the Partnership remaining
after the payments provided for by paragraph 4, and any amounts reserved by the
General Partners pursuant to clause (i) of paragraph 4 and determined by the
General Partners to be in excess of the amounts required therefor, shall be
distributed by the General Partners as follows: (i) to pay or make provision to
pay all creditors of the Partnership, including Limited Partners and Unitholders
in their capacity as creditors of the Partnership, if applicable; (ii) pay or
make provision to pay the General Partners for any loans or advances made by
either of them to the Partnership; (iii) pay the Unitholders the amount of their
respective capital accounts on the date of distribution (the "Liquidating
Distributions"); (iv) pay the General Partners the amounts of their respective
adjusted capital accounts; and (v) pay the General Partners any accrued but
unpaid fees, all in accordance with Section 8.2 of the Partnership Agreement.
6. Cancellation of Interests in the Partnership. Liquidating
Distributions shall be made in complete cancellation of all of the
Unitholders' interests in the Partnership.
7. Reports and Filings. In connection with the Liquidation and
winding up of the Partnership, the General Partners shall cause to be executed
and timely filed (i) with the office of the Secretary of State of Delaware, a
Certificate of Cancellation canceling the Partnership's Certificate of Limited
Partnership; (ii) with the Internal Revenue Service, all returns, reports,
documents, certificates and other information required under the Internal
Revenue Code of 1986, as amended, or applicable Treasury Department rules or
regulations; (iii) with the appropriate authorities in any other tax
jurisdiction, all returns, reports, documents, certificates and other
information required under the laws of such jurisdictions; (iv) with the
Securities Exchange Commission, any reports required under the Exchange Act,
including a Form 15 terminating the registration of the Partnership under the
Exchange Act; and (v) all reports required to be delivered to the Unitholders in
accordance with Article IX of the Partnership Agreement.
8. Other Acts. The General Partners shall take, or cause the
Partnership to take, such other acts and deeds and shall do, or cause the
Partnership to do, such other things, as are necessary or appropriate in
connection with the dissolution, winding up and Liquidation of the Partnership,
the termination of the responsibilities and liabilities of the Partnership under
applicable law, and the termination of the existence of the Partnership.
9. Counterparts. This plan may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and executed this
Plan as of the date first written above.
CIS AIRCRAFT PARTNERS, INC.
as Managing General Partner
of JetStream, L.P.
/s/ Michael Rosen
-------------------------------------------------
By: Michael Rosen
Title: President
JET AIRCRAFT LEASING, INC.
as Administrative General Partner
of JetStream, L.P.
/s/ Michael Marron
-------------------------------------------------
By: Michael Marron
Title: President
CIS ASSIGNOR L.P.A., INC.
as Assignor Limited Partner of
JetStream, L.P. on behalf of the Unitholders
/s/ Michael Rosen
-------------------------------------------------
By: Michael Rosen
Title: President
EXHIBIT 3(b)
Amendment
To The
Limited Partnership Agreement
of
JetStream II, L.P.
<PAGE>
AMENDMENT
TO THE
LIMITED PARTNERSHIP AGREEMENT
OF
JETSTREAM II, L.P.
THIS AMENDMENT TO THE Limited Partnership Agreement, dated November 10,
1987 (the "Partnership Agreement'), of JETSTREAM II, L.P. (the "Partnership"),
is dated as of November 20, 1999, is entered into by and among CIS Aircraft
Partners, Inc., a Delaware corporation, as Managing General Partner, Jet
Aircraft Leasing, Inc., a Delaware corporation, as Administrative General
Partner (and together with the Managing General Partner, the "General
Partners"), and each of the General Partners as attorneys-in-fact for any
Limited Partners (other than the Assignor Limited Partner), and CIS Assignor
L.P.A., Inc., a Delaware corporation, as Assignor Limited Partner and as
attorney in-fact for Unitholders of the Partnership. Terms not defined herein
shall have the meanings ascribed to them in the Partnership Agreement.
WHEREAS, the General Partners have received the requisite consent of the
Limited Partners and Unitholders of the Partnership for (1) the sale of all of
the Partnership's assets and the dissolution of the Partnership pursuant to the
Plan of Liquidation and Dissolution, dated November 20, 1999; (2) the amendment
of the Partnership Agreement to permit the engagement of the General Partners to
market and sell the assets of the Partnership for a fee pursuant to the terms of
the Joint Marketing Agreement, dated July 13, 1999, among each of the General
Partners and the Partnership; and (3) the grant of authority to the General
Partners to take any action necessary or incidental and consistent with the
Partnership Agreement, the Plan of Liquidation and Dissolution and the Joint
Marketing Agreement to complete the foregoing on the terms described in the
consent solicitation statement dated October 15, 1999;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree to amend the Partnership Agreement as
follows:
Item 1.
------ Section 5.9(e) of the Partnership Agreement is hereby amended and
restated to read in its entirety as follows:
(e) The Managing General Partner and the Administrative General
Partner shall receive a non-subordinated aircraft marketing and
sales fee in connection with the liquidation of the Partnership
as set forth in the Joint Marketing Agreement, dated July 13,
1999, among the Managing General Partner, the Administrative
General Partner and the Partnership.
Item 2.
------ The amendment herein will take effect as of the date of this
Amendment.
<PAGE>
IN WITNESS WHEREOF, CIS Aircraft Partners, Inc., as the Managing General
Partner, and Jet Aircraft Leasing, Inc., as the Administrative General
Partner, and as attorney-in-fact for each and all of the Limited Partners
(excluding the Assignor Limited Partner), and CIS Assignor L.P.A., Inc., as
the Assignor Limited Partner and as attorney-in-fact for each of the
Unitholders, have executed this Amendment as of the date first above written.
MANAGING GENERAL PARTNER,
CIS Aircraft Partners, Inc.
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
ADMINISTRATIVE GENERAL PARTNER,
Jet Aircraft Leasing, Inc.
By: /s/ Michael Marron
-----------------------------------------
Michael Marron, President
ASSIGNOR LIMITED PARTNER,
CIS Assignor L.P.A., Inc.
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
LIMITED PARTNERS (other than the Assignor
Limited Partner)
By: CIS AIRCRAFT PARTNERS, INC., as
attorney-in-fact for the Limited Partners
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
By: JET AIRCRAFT LEASING INC., as
attorney-in-fact for the Limited Partners
By: /s/ Michael Marron
-----------------------------------------
Michael Marron, President
UNITHOLDERS
By: CIS Assignor L.P.A., Inc.
as attorney-in-fact for the Unitholders
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Dec-31-1999
<CASH> 1,333,331
<SECURITIES> 000
<RECEIVABLES> 2,226
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 5,270,597
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 6,606,154
<CURRENT-LIABILITIES> 1,654,999
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 4,951,155
<TOTAL-LIABILITY-AND-EQUITY> 6,606,154
<SALES> 000
<TOTAL-REVENUES> 5,788,499
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,621,938
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 2,166,561
<INCOME-TAX> 000
<INCOME-CONTINUING> 2,166,561
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 2,166,561
<EPS-BASIC> .26
<EPS-DILUTED> .26
</TABLE>
