Filed Pursuant to
Rule 424B1
(Registration No. 333-51479-01)
REOFFER PROSPECTUS
AVIATION SALES COMPANY
136,287 SHARES
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
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WHITEHALL CORPORATION
1992 INCENTIVE STOCK OPTION PLAN
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In connection with a merger (the "Merger") of a wholly-owned subsidiary
of Aviation Sales Company, a Delaware corporation (the "Company" or the
"Registrant") with and into Whitehall Corporation ("Whitehall"), the Registrant
assumed issued and outstanding options granted pursuant to the Whitehall
Corporation 1992 Incentive Stock Option Plan (the "1992 Plan") and the 1992
Non-Employee Director Stock Option Plan (the "Director Plan"), such that holders
of such options remained eligible to exercise their options under such
respective plans, except that such options would be exercisable for such number
of shares of the common stock, $.001 of the Registrant (the "Common Stock") as
adjusted as a result of the Merger and at an exercise price as adjusted as a
result of the Merger. This Prospectus is being used in connection with the
reoffering by certain persons named herein (the "Selling Stockholders") of the
Registrant of shares of Common Stock acquired by them pursuant to the exercise
of options under the 1992 Plan and the Director Plan.
All expenses of registration incurred in connection with this offering
are being borne by the Company, but all brokerage commissions, discounts and
other expenses incurred by individual Selling Stockholders will be borne by the
individual Selling Stockholder. The Company will not be entitled to any of the
proceeds from such sales, although the Company is entitled to receive the
exercise price of the options under which the shares of Common Stock are
acquired by the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "AVS." On November 2, 1998, the last reported sales price of
the Common Stock on the NYSE was $34 1/8 per share.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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No person has been authorized to give any information or to make any
representations, other than those in this Prospectus, in connection with the
offer contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any of the securities offered hereby in any
state to or from any person to whom it is unlawful to make or solicit such offer
in such state. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that there has
been no change in the information herein since the date hereof.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 10, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). These reports, proxy and information
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, Seven World Trade Center,
Room 1400, New York, New York 10048; and Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60604. Copies of
such material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and other information regarding
registrants that file electronically with the Commission. The Common Stock is
traded on the NYSE. Information filed by the Company with the NYSE may be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005.
Contemporaneously herewith, the Company has filed with the Commission a
Registration Statement on Form S-8 under the Securities Act with respect to the
Shares offered hereby (including all amendments and supplements thereto, the
"Registration Statement"). This Prospectus, which forms part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto can be inspected and copied at the public
reference facilities and regional offices of the Commission and at the offices
of the NYSE referred to above.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The documents listed in (i) through (x) below are incorporated herein
by reference; and all documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the date
of this Prospectus and prior to the termination of the offering made hereby,
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents:
(i) Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended;
(ii) Registrant's Current Report on Form 8-K, dated February 12,
1998;
(iii) Registrant's Current Report on Form 8-K, dated March 6, 1998;
(iv) Registrant's Current Report on Form 8-K, dated July 31, 1998;
(v) Registrant's Current Report on Form 8-K, dated August 3, 1998;
(vi) Registrant's Current Report on Form 8-K, dated September 22,
1998;
(vii) Registrant's Current Report on Form 8-K/A, dated July 31,
1998;
(viii) Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998, as amended;
(ix) Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998; and
(x) the description of the Registrant's Common Stock contained in
the Registrant's Registration Statement on Form 8-A12B dated
May 23, 1996.
The Company will furnish, without charge, to each person to whom a
Prospectus is delivered, upon written or oral request, a copy of any of the
foregoing documents, in each case other than exhibits thereto (unless such
exhibits are specifically incorporated by reference therein). Requests for any
such documents should be submitted in writing to Aviation Sales Company, 6905
N.W. 25th Street, Miami, Florida 33122, Attention: Corporate Secretary.
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THE COMPANY
GENERAL
Aviation Sales Company ("the Company") is a leading provider of fully
integrated aviation inventory services and a recognized worldwide leader in the
redistribution of aircraft spare parts. The Company sells aircraft spare parts
and provides inventory and repair services to major commercial passenger
airlines, air cargo carriers, maintenance and repair facilities and other
redistributors throughout the world. Parts sold by the Company include rotable
and expendable airframe and engine components for commercial airplanes,
including Boeing, McDonnell Douglas, Lockheed and Airbus aircraft and Pratt &
Whitney, General Electric and Rolls Royce jet engines. Inventory management
services offered by the Company include purchasing services, repair management,
warehouse management, aircraft disassembly services, and consignment and leasing
of inventories of aircraft parts and engines. The Company also manufactures
certain aircraft parts for sale to original equipment manufacturers ("OEMs"),
including precision engine parts, and provides maintenance, repair and overhaul
services ("MR&O") at its Federal Aviation Administration ("FAA") licensed repair
facilities.
The Company's principal executive offices are located at 6905 N.W. 25th
Street, Miami, Florida 33122, and the telephone number is (305) 592-4055.
RECENT DEVELOPMENTS
ACQUISITION OF TIMCO. On September 22, 1998 the Company, through a
wholly-owned subsidiary, acquired Triad International Maintenance Corporation, a
Delaware corporation ("TIMCO"), pursuant to a stock purchase agreement (the
"TIMCO Purchase Agreement"). Pursuant to the TIMCO Purchase Agreement, the
Company purchased all of the outstanding common stock of TIMCO for a purchase
price of $70.0 million in cash. The acquisition was financed from the Company's
bank lines of credit (see below). Additionally, as part of the transaction, the
Company agreed to guaranty certain industrial revenue bond financing incurred in
connection with the development of TIMCO's Greensboro operating facilities, in
the approximate amount of $11.4 million. Further, at the closing, the seller was
obligated to remit approximately $8.0 million to TIMCO as a closing adjustment.
TIMCO, based in Greensboro, North Carolina, operates an FAA licensed aircraft
repair station specializing in the MR&O of narrowbody and widebody aircraft.
AMENDMENT TO CREDIT FACILITY. On September 18, 1998, the Company
entered into an agreement with several financial institutions amending its
existing credit facility pursuant to the terms of an Amendment No. 2 and Consent
to Third Amended and Restated Credit Facility dated as of October 17, 1997 (the
"Amendment to Credit Facility Agreement"). Under the terms of the Amendment to
Credit Facility Agreement, the Company's existing credit facility was amended to
provide the Company with a $200.0 million revolving loan and letter of credit
facility, subject to an availability calculation based on an eligible borrowing
base (the "Amended Credit Facility"). The eligible borrowing base includes
certain receivables and inventories of the Company, including the
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receivables and inventory of TIMCO. The letter of credit portion of the Amended
Credit Facility is subject to a $30.0 million sublimit.
The interest rate on the Amended Credit Facility is, at the option of
the Company, (a) prime plus a margin, or (b) LIBOR plus a margin, where the
respective margin determination is made upon the Company's financial performance
over a 12 month period (ranging from 0.0% to 1.0% in the event prime is
utilized, or 1.125% to 2.5% in the event LIBOR is utilized). The Amended Credit
Facility terminates on July 31, 2002. The Amended Credit Facility contains
financial and other covenants and mandatory prepayment events. The Amended
Credit Facility is secured by a lien on substantially all of the assets of the
Company, including the assets of TIMCO. At October 26, 1998, $141.9 million was
outstanding under the Amended Credit Facility.
ACQUISITION OF WHITEHALL. On July 31, 1998, the Company completed
its acquisition by merger of Whitehall Corporation, a Delaware corporation
("Whitehall") and its wholly-owned subsidiaries, for approximately $121 million
in Common Stock. In connection with the Merger, each outstanding share of
Whitehall common stock was exchanged for .5143 of a share of Common Stock. In
addition, upon the closing of the Merger, outstanding options to purchase shares
of Whitehall common stock (the "Whitehall Options") were converted into a right
to purchase that number of shares of Common Stock as the holder would have been
entitled to receive had they exercised such options prior to the Merger and
participated in the Merger. Accordingly, pursuant to the Merger, the Company
issued 2,844,079 shares of Common Stock in exchange for all the outstanding
common stock of Whitehall and will issue 257,150 shares of Common Stock upon the
exercise of the former Whitehall Options.
As a result of the Merger, Whitehall and its subsidiaries are
wholly-owned subsidiaries of the Company. Whitehall, through its subsidiaries,
operates two FAA licensed repair stations specializing in the MR&O of narrowbody
aircraft and focuses primarily on established traditional commercial carriers
and new entrant low-cost air carriers.
MAINTENANCE, REPAIR AND OVERHAUL BUSINESS. Beginning in 1997, in
connection with its continuing efforts to position itself for the future, the
Company made a strategic decision to expand its services to include the MR&O of
aircraft. Through acquisitions, including its recent acquisitions of Whitehall
and TIMCO, the Company provides fully integrated MR&O services for commercial,
military and freighter aircraft, including the MR&O of airframe components,
hydraulic, pneumatic, electrical and electromagnetic aircraft components, and
interior cabin components. All of the Company's heavy maintenance and
modification operations are presently being consolidated under the TIMCO
umbrella to better service the Company's airline customers.
The Company believes that the total worldwide market for MR&O services
is approximately $27 billion annually and that $5.3 billion of that amount
represents commercial airframe heavy maintenance and modification services being
provided in North America. Approximately 65% of the North American services are
currently being performed by airlines themselves, with the remaining demand
being outsourced to independent providers such as the Company. As the commercial
airline industry continues to operate under intense competition and federal
budgetary constraints force
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reductions in military spending, the Company believes that both the private and
military sectors will increasingly view outsourcing as a logical and effective
way to reduce operating cost.
The principal commercial maintenance and repair services performed by
the Company's MR&O operations are scheduled "C" and "D" level maintenance
checks. Each involves a different degree of inspection and the services
performed at each level vary depending upon the individual aircraft operator's
FAA-certified maintenance program. "C" and "D" level checks are comprehensive
checks and usually take several weeks to complete, depending upon the scope of
the work to be performed.
The "C" level check is an intermediate level service inspection that
typically includes a thorough cleaning of the aircraft's exterior, testing and
lubrication of its operational systems, filter servicing and limited cleaning
and servicing of the interior. Trained mechanics perform a visual inspection of
the external structure and internal structure through access panels. The "D"
level check includes all of the work accomplished in the "C" level check but
places a more detailed emphasis on the integrity of the systems and structural
functions. In the "D" level check, the aircraft is disassembled to the point
where the entire structure can be inspected and evaluated. Once the evaluation
and repairs are completed, the aircraft and its systems are reassembled to the
detailed tolerances demanded in each system's specifications. Depending upon the
type of aircraft and the FAA-certified maintenance program being followed,
intervals between "C" level checks can range from 1,000 to 5,000 flight hours
and intervals between "D" level checks can range from 10,000 to 25,000 flight
hours. Structural inspections performed during "C" level and "D" level checks
provide personnel with detailed information about the condition of the aircraft
and the need to perform additional work or repairs not provided for in the
original work scope. Project coordinators and customer support personnel work
closely with the aircraft's customer service representative in evaluating the
scope of any additional work required and in the preparation of a detailed cost
estimate for the labor and materials required to complete the job.
Each aircraft certified by the FAA is constructed under a "Type
Certificate." Anything which is done subsequently to overhaul or modify the
aircraft from its original specifications requires the review, flight-testing
and approval of the FAA which is evidenced by the issuance of a Supplemental
Type Certificate ("STC") for that particular change. Typical modification
services include refurbishing and reconfiguring passenger seating, installing
passenger amenities such as telephones and video screens and converting
traditional passenger cabins into amenity filled "VIP" quarters.
The process of converting a passenger plane to freighter configuration
entails completely stripping the interior; strengthening the load-bearing
capacity of the flooring; installing the bulkhead or cargo net; cutting into the
fuselage for the installation of a cargo door; reinforcing the surrounding
structures for the new door; replacing windows with metal plugs; and fabricating
and installing the cargo door itself. The aircraft interior may also need to be
lined to protect cabin walls from pallet damage and the air conditioning system
may have to be modified. Conversion contracts also typically require "C" or "D"
level maintenance checks as these converted aircraft have often been out of
service for some time and maintenance is required for the aircraft to comply
with current FAA standards. Additional overhaul and modification services
performed include cockpit reconfiguration
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and the integration of Traffic Control and Avoidance Systems ("TCAS"), windshear
detection systems and navigational aids.
RULE 144A DEBT OFFERING AND EXCHANGE OFFER. On February 17, 1998, the
Company sold $165 million of senior subordinated notes ("the Old Notes") due in
2008 with a coupon rate of 8.125% at a price of 99.395%. Proceeds were used to
repay senior debt and to fund the cash requirements relating to the Company's
acquisition of Caribe Aviation, Inc. and its subsidiary, Aircraft Interior
Design, Inc.
On August 3, 1998, the Company completed the exchange of $165.0 million
of its fully registered Senior Subordinated Notes due 2008 (the "New Notes") for
all of its previously outstanding $165.0 million of Old Notes. The terms of the
New Notes and the Old Notes are substantially identical in all material
respects, except for certain transfer restrictions and registration rights, and
except that the holders of the Old Notes were entitled to receive liquidated
damages under certain circumstances (and the holders of the New Notes are not
entitled to receive such damages).
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THE
PROSPECTUS, IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
This Prospectus contains certain forward-looking statements or
statements which may be deemed or construed to be forward-looking statements
within the meaning of the Federal Private Securities Litigation Reform Act of
1995 with respect to the financial condition, management's discussion and
analysis of financial condition and results of operations, business of the
Company and risk factors. The words "estimate," "project," "intend," "expect"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements involve and are subject to known and unknown
risks, uncertainties and other factors which could cause the Company's actual
results, performance (financial or operating) or achievements to differ from the
future results, performance (financial or operating), achievements expressed or
implied by such forward-looking statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
EFFECTS OF THE ECONOMY ON THE COMPANY'S BUSINESS
Since the Company's customers consist of airlines, maintenance and
repair facilities that service airlines and other aircraft spare parts
redistributors, as well as original equipment manufacturers, the Company's
business is impacted by the economic factors which affect the airline industry.
When such factors adversely affect the airline industry, they tend to reduce the
overall demand for aircraft spare parts, repair services and MR&O services,
causing downward pressure on pricing and increasing the credit risk associated
with doing business with airlines. Additionally, factors such as the price of
fuel affect the aircraft spare parts market, since older aircraft (into which
aircraft spare parts are most often placed) and for which MR&O services are most
often provided become less viable as the price of fuel increases. There can be
no assurance that economic and other factors which may affect the airline
industry will not have an adverse impact on the Company's business, financial
condition or results of operations.
SIGNIFICANT LEVERAGE
The Company has significant outstanding indebtedness and is
significantly leveraged. As of October 26, 1998, the Company had outstanding
indebtedness of approximately $330.1 million, of which approximately $141.9
million is indebtedness under its Amended Credit Facility and $164.0 million of
which are the New Notes (the "Notes") (aggregate principal amount issued of
$165.0 million). As of October 26, 1998, AVS had availability under the Amended
Credit Facility of approximately $42.9 million. The Amended Credit Facility is
secured by substantially all of the assets
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of the Company. Subject to certain limitations in the documents governing its
indebtedness, the Company will likely be able to incur significant additional
amounts of secured and unsecured indebtedness. The Company's ability to make
payments of principal and interest on, or to refinance its indebtedness
(including the Notes), depends on its future operating performance, which to a
certain extent is subject to economic, financial, competitive and other factors
beyond its control. The degree to which the Company is leveraged could have
important consequences to holders of the Common Stock, including (i) the
Company's vulnerability to adverse general economic and industry conditions,
(ii) the Company's ability to obtain additional financing for future working
capital expenditures, general corporate purposes or other purposes and (iii) the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal and interest on indebtedness, thereby reducing the
funds available for operations and future business opportunities. AVS's debt
service requirement for 1998 is approximately $20.0 million.
FUNDING REQUIREMENTS
During the fiscal years ended December 31, 1996 and 1997, and during
the nine months ended September 30, 1998, the Company has largely relied upon
significant borrowings under its Amended Credit Facility, and sales of its
securities, including the Notes, to satisfy its funding requirements relating to
the growth of its business.
RESTRICTIONS IMPOSED BY LENDERS
The instruments governing the indebtedness of the Company impose
significant operating and financial restrictions on the Company. Such
restrictions will affect, and in many respects, significantly limit or prohibit,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends, repay indebtedness prior to its stated maturity, sell assets or
engage in mergers or acquisitions. These restrictions could also limit the
ability of the Company to effect future financings, make needed capital
expenditures, withstand a future downturn in the business or the economy, or
otherwise conduct necessary corporate activities.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are affected by many factors, including
the timing of orders from large customers, the timing of expenditures to
purchase inventory in anticipation of future sales, the timing of bulk inventory
purchases, the number of airline customers seeking repair services at any time,
the Company's ability to fully utilize its hangar space from period to period,
the timeliness of customer aircraft in arriving for scheduled maintenance and
the mix of available aircraft spare parts contained, at any time, in the
Company's inventory. A large portion of the Company's operating expenses are
relatively fixed. Since the Company typically does not obtain long-term purchase
orders or commitments from its customers, it must anticipate the future volume
of orders based upon the historic requirements of its customers and upon its
discussions with its customers as to their future requirements. Cancellations,
reductions or delays in orders by a customer or group of customers could have a
material adverse effect on the Company's business, financial condition or
results of operations.
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RISKS REGARDING THE COMPANY'S SPARE PARTS INVENTORY
The Company's inventory consists principally of new, overhauled,
serviceable and repairable aircraft parts that are purchased from many sources.
Before parts may be installed in an aircraft, they must meet certain standards
of condition established by the FAA and/or the equivalent regulatory agencies in
other countries. Specific regulations vary from country to country, although
regulatory requirements in other countries generally coincide with FAA
requirements. Parts must also be traceable to sources deemed acceptable by such
agencies. Parts owned or acquired by the Company may not meet applicable
standards or standards may change in the future, causing parts which are already
contained in the Company's inventory to be scrapped or modified. Aircraft
manufacturers may also develop new parts to be used in lieu of parts already
contained in the Company's inventory. In all such cases, to the extent that the
Company has such parts in its inventory, their value may be reduced.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the
FAA and in other countries by similar agencies. While the Company's spare parts
business is not regulated, the aircraft spare parts which it sells to its
customers must be accompanied by documentation which enables the customer to
comply with applicable regulatory requirements. Additionally, the Company must
be certified by the FAA and, in some cases, by original equipment manufacturers,
in order to manufacture or repair aircraft components. Although the Company
believes that its newly acquired manufacturing and repair operations are in
material compliance with applicable regulations, there can be no assurance of
this fact. Further, there can be no assurance that new and more stringent
government regulations will not be adopted in the future or that any such new
regulations, if enacted, would not have a material adverse effect on the
Company's business, financial condition or results of operations.
GROWTH STRATEGY AND RISKS RELATING TO FUTURE ACQUISITIONS
A key element of the strategy of the Company involves growth through
the acquisition of additional inventories of aircraft spare parts and the
acquisition of other companies, assets or product lines that would complement or
expand the Company's existing business. The Company's ability to grow by
acquisition is dependent upon, and may be limited by, the availability of
suitable aircraft parts inventories, acquisition candidates and capital, and by
restrictions contained in the Company's credit agreements. In addition,
acquisitions involve risks that could adversely affect the Company's operating
results, including the assimilation of the operations and personnel of acquired
companies, the potential amortization of acquired intangible assets and the
potential loss of key employees of acquired companies. There can be no assurance
that the Company will be able to consummate acquisitions on satisfactory terms.
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RELIANCE ON EXECUTIVE OFFICERS AND KEY EMPLOYEES
The continued success of the Company is dependent to a significant
degree upon the services of its executive officers and upon the Company's
ability to attract and retain qualified personnel experienced in the various
phases of the Company's business. The Company has employment agreements with
certain of its executive officers. The employment agreements between the Company
and its executive officers are individually terminable by each executive officer
upon a change of control of the Company. The ability of the Company to operate
successfully could be jeopardized if one or more of its executive officers were
unavailable and capable successors were not found.
COMPETITION
The markets for the Company's products, repair services and MR&O
services are extremely competitive, and the Company faces competition from a
number of sources. These include aircraft and aircraft part manufacturers,
airline and aircraft service companies, other companies providing MR&O and
repair services, and aircraft spare parts redistributors. Certain competitors of
the Company have substantially greater financial and other resources than the
Company. There can be no assurance that competitive pressures will not
materially and adversely affect the Company's business, financial condition or
results of operations.
PRODUCT LIABILITY
The business of the Company exposes it to possible claims for personal
injury or death which may result from the failure of an aircraft spare part
sold, manufactured or repaired by it. While the Company maintains what it
believes to be adequate liability insurance to protect it from such claims, and
while no material claims have, to date, been made against the Company, no
assurance can be given that claims will not arise in the future or that such
insurance coverage will be adequate. Additionally, there can be no assurance
that insurance coverages can be maintained in the future at an acceptable cost.
Any such liability not covered by insurance could have a material adverse effect
on the Company's business, financial condition or results of operations.
POTENTIAL INFLUENCE BY CERTAIN STOCKHOLDERS
As of November 6, 1998, one of the Company's stockholders beneficially
owns approximately 19% of the outstanding Common Stock and the Company's
directors and executive officers, as a group, beneficially own an aggregate of
approximately 34% (including the 19% referred to above) of the outstanding
Common Stock. While each of these stockholders is an independent party, if these
parties were to act together as a group, they would have the ability to exercise
substantial influence on the election of all of the members of the Company's
Board of Directors and, therefore, to exercise substantial influence on the
business, policies and affairs of the Company.
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DIVIDEND POLICY
The Company does not anticipate paying dividends on its Common Stock in
the foreseeable future.
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors. From time to time in recent years, the securities markets have
experienced significant price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of particular
companies. These broad fluctuations may adversely affect the market price of the
Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain
provisions that may have the effect of discouraging certain transactions
involving an actual or threatened change of control of the Company. In addition,
the Board of Directors of the Company has the authority to issue up to 1,000,000
shares of preferred stock in one or more series and to fix the preferences,
rights and limitations of any such series without stockholder approval. The
ability to issue preferred stock could have the effect of discouraging
unsolicited acquisition proposals or making it more difficult for a third party
to gain control of the Company, or otherwise could adversely affect the market
price of the Common Stock.
POSSIBLE DEPRESSING EFFECT OF FUTURE SALES OF COMMON STOCK.
Future sales of the Common Stock, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock. There
can be no assurance as to when, and how many of, the shares of Common Stock will
be sold and the effect such sales may have on the market price of the Common
Stock. In addition, the Company may issue Common Stock in connection with
possible future acquisitions or in other transactions. Such securities may be
subject to resale restrictions in accordance with the Securities Act and the
regulations promulgated thereunder or by contract. As such restrictions lapse or
if such shares are registered for sale to the public, such securities may be
sold to the public. In the event of the issuance and subsequent resale of a
substantial number of shares of the Common Stock, or a perception that such
sales could occur, there could be a material adverse effect on the prevailing
market price of the Common Stock.
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DESCRIPTION OF PLANS
The purpose of the 1992 Plan was to provide employees of Whitehall with
proprietary interests in Whitehall in order to furnish an incentive to employees
to continue their services for Whitehall, as well as to attract new employees,
and the purpose of the Director Plan was to compensate Whitehall's directors for
their services. Pursuant to the Merger, each issued and outstanding option to
purchase one share of Whitehall common stock was converted to an option to
purchase .5143 shares of the Registrant's Common Stock and the exercise price of
such option was appropriately adjusted. At present, options to purchase an
aggregate of 257,150 shares of Common Stock at prices ranging from $11.31 to
$37.97 are outstanding under the Plans. As a result of the Merger, the 1992 Plan
and the Director Plan (collectively the "Plans") are now administered by the
Compensation Committee of the Company's Board of Directors.
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SELLING STOCKHOLDERS
The shares of Common Stock being offered pursuant to this Prospectus
were or will be purchased by the Selling Stockholders upon their exercise of
stock options under the Plans. The following table shows the names of the
Selling Stockholders and positions with the Company, the number of shares of
Common Stock beneficially owned by each of the Selling Stockholders as of
November 6, 1998 solely as a result of the Merger, the number of shares of
Common Stock covered by this Prospectus and the number and percentage of Common
Stock (including shares subject to options exercisable within 60 days) to be
beneficially owned by each of the Selling Stockholders after the completion of
the Offering:
<TABLE>
<CAPTION>
% OF
COMMON
NUMBER OF NUMBER OF NUMBER OF STOCK
SHARES SHARES SHARES BENEFICIALLY
BENEFICIALLY COVERED BY BENEFICIALLY OWNED
POSITION WITH OWNED PRIOR TO THIS OWNED AFTER AFTER
SELLING STOCKHOLDER THE COMPANY OFFERING PROSPECTUS OFFERING(1) OFFERING(2)
- -------------------------------------- ------------------------ -------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
George F. Baker, III................ Director 1,045,776(3) 72,002 973,774 8.7%
Jeffrey N. Greenblatt............... Director 20,572(4) 20,572 0 0%
Mark A. Owen........................ None 16,457(5) 16,457 0 0%
Bruce C. Conway..................... None 10,285(5) 10,285 0 0%
Arthur H. Hutton.................... None 5,143(5) 5,143 0 0%
John J. McAtee, Jr.................. None 5,657(5) 5,143 514 *
Jack S. Parker...................... None 7,200(5) 5,143 2,057 *
Lewis S. White...................... None 1,542(5) 1,542 0 0%
</TABLE>
- ----------
* Less than one percent.
(1) Assumes that all shares offered hereby are sold
(2) Based on shares of Common Stock outstanding at the close of business on
November 6, 1998.
(3) For purposes of determining beneficial ownership pursuant to Rule 13d-3
of the Exchange Act, Mr. Baker may be deemed to indirectly own 675,995
shares of Common Stock directly owned by Cambridge Capital Fund, L.P.
of which Mr. Baker is a managing general partner and 297,779 shares of
Common Stock directly owned by Baker Nye, L.P. of which Mr. Baker is
also a managing general partner. Mr. Baker disclaims beneficial
ownership of such shares for other purposes. Mr. Baker also owns
directly options to purchase 72,002 shares of Common Stock which are
being offered hereby.
(4) Comprises options to purchase 20,572 shares of Common Stock directly
owned by Mr. Greenblatt.
(5) Includes Common Stock previously acquired upon the exercise of stock
options under the Plans. Such shares of Common Stock were issued as
"restricted stock."
- 14 -
<PAGE>
There can be no assurance that any of the Selling Stockholders will
sell any or all of the shares of Common Stock registered hereunder.
PLAN OF DISTRIBUTION
The shares of Common Stock are being registered for reoffers and
resales by the Selling Stockholders for their own accounts. The Selling
Stockholders or pledgees may sell or distribute some or all of the shares of
Common Stock offered hereby from time to time through underwriters or dealers or
brokers or other agents or directly to one or more purchases, including
pledgees, in transactions (which may involve crosses and block transactions) on
the NYSE, privately negotiated transactions (including sales pursuant to
pledges), in the over-the-counter market, or in transactions in which the shares
of Common Stock offered hereby may be delivered in connection with the issuance
of securities by issuers other than the Company that are exchangeable for
(whether optional or mandatory), or payable in such shares (whether such
securities are listed on a national securities exchanges or otherwise) or
pursuant to which such shares may be distributed (which securities issued by
others will, to the extent required by applicable law, be registered under the
Securities Act), or in a combination of such transactions. Such transactions may
be effected by the Selling Stockholders at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. Brokers, dealers, agents or
underwriters participating in such transactions as agent may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholder (and if they act as agent for the purchaser of such shares,
from such purchaser). Such discounts, concessions or commissions as to a
particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved. This Prospectus may be used, with
the Company's prior written consent, by donees of the Selling Stockholders, or
by other persons acquiring Shares and who wish to offer and sell such shares of
Common Stock offered hereby under circumstances requiring or making desirable
its use.
The Selling Stockholders and any such underwriters, brokers, dealers or
agents or underwriters that participate with the Selling Stockholders in the
distribution of the shares of Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such underwriters, brokers, dealers
or agents might be deemed to be underwriting commissions or discounts under the
Securities Act. Neither the Company nor the Selling Stockholders can presently
estimate the amount of such compensation. The Company knows of no existing
arrangements between any Selling Stockholder and any other Selling Stockholder,
underwriter, broker, dealer or other agent relating to the sale or distribution
of the shares of Common Stock offered hereby.
- 15 -
<PAGE>
Persons engaged in the distribution of the shares of Common Stock
offered hereby are restricted from engaging in certain market-making activities
with respect to the Common Stock for the period specified by Regulation M of the
Exchange Act.
The Company has agreed to pay all fees and expenses incident to the
registration of the shares of Common Stock offered hereby, except commissions
and discounts of underwriters, brokers, dealers or agents and fees and expenses
of counsel or any other professionals or other advisors, if any, to the Selling
Stockholders. Each Selling Stockholder may indemnify any broker, dealer, agent
or underwriter that participates in transactions involving sales of the shares
of Common Stock offered hereby against certain liabilities, including
liabilities arising under the Securities Act.
If the shares of Common Stock offered hereby are sold in an
underwritten offering, such shares may be acquired by the underwriters for their
own account and may be further resold from time to time in one or more
transactions, including negotiated transactions, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices, or at fixed prices. The names of the underwriters with
respect to any such offering and the terms of the transactions, including any
underwriting discounts, concessions or commissions and other items constituting
compensation of the underwriters and broker-dealers, if any, will be set forth
in a supplement to this Prospectus relating to such offering. Any public
offering price and any discounts, concessions or commissions allowed or
reallowed or paid to broker-dealers may be changed from time to time.
In order to comply with the securities laws of certain states, if
applicable, the shares of Common Stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states, the shares of Common Stock offered hereby may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with by the Company and the Selling Stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the provisions of Section 145(a) of the Delaware General
Corporation Law, the Company has the power to indemnify anyone made or
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Company) because such person is
or was a director or officer of the Company against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in the defense or settlement of such action, suit, or
proceeding, provided that (i) such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interest and
(ii) in the case of a criminal proceeding such person had no reasonable cause to
believe his conduct was unlawful.
- 16 -
<PAGE>
With respect to an action or suit by or in the right of the Company to
procure a judgment in its favor, Section 145(b) of the Delaware General
Corporation Law provides that the Company shall have the power to indemnify
anyone who was, is, or is threatened to be made a party to a threatened,
pending, or completed action or suit brought by or in the right of the Company
to procure a judgment in its favor because such person is or was a director or
officer of the Company against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interests,
except that no indemnification shall be made in a case in which such person
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall have determined upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of a
quorum of directors who were not parties to such proceeding, (b) independent
legal counsel in a written opinion if such quorum cannot be obtained or if a
quorum of disinterested directors so directs, or (c) the stockholders of the
Company.
Section 145(g) of the Delaware General Corporation Law permits the
purchase and maintenance of insurance to indemnify directors and officers
against any liability asserted against or incurred by them in any such capacity,
whether or not the Company itself would have the power to indemnify any such
director or officer against such liability. The Company has obtained such
insurance and premiums are paid by the Company.
The Certificate of Incorporation of the Company provides for the
indemnification of directors and officers of the Company to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as the same
may be amended or supplemented. The Certificate of Incorporation further
provides that the indemnification provided for therein shall not be exclusive of
any rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise.
The Certificate of Incorporation also contains a provision that
eliminates the personal liability of the Company's directors to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director. The provision does not limit a director's liability for (i) breaches
of duty of loyalty to the Company or its stockholders, (ii) acts or omissions
not in good faith, involving intentional misconduct or involving knowing
violations of law, (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions under Section 174 of the Delaware General Corporation
Law, or (iv) transactions in which the director received an improper personal
benefit. Depending on judicial interpretation, the provision may not affect
liability for violations of the federal securities laws.
- 17 -
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act 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
(the "Commission") such indemnification is against public policy as expressed in
the Securities 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 action, 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 it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
- 18 -
