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Pursuant to Rule 424(b)(3)
Registration No. 333-14853
PROSPECTUS
UNC INCORPORATED
Series B Senior Cumulative
Convertible Preferred Stock
Series C Senior Cumulative
Preferred Stock
Common Stock
This Prospectus relates to the resale of up to 250,000 shares of the
Series B Senior Cumulative Convertible Preferred Stock, par value $1.00 per
share (the "Series B Preferred Stock"), 250,000 shares of the Series C Senior
Cumulative Preferred Stock, par value $1.00 per share (the "Series C Preferred
Stock"), that may be paid from time to time as a dividend on such shares of
Series B Preferred Stock and 3,571,429 shares of the common stock, par value
$.20 per share (the "Common Stock"), issuable upon conversion of such shares of
Series B Preferred Stock of UNC Incorporated, a Delaware corporation ("UNC" or
the "Company"). The Company originally issued and sold 250,000 shares of the
Series B Preferred Stock pursuant to an Amended and Restated Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of May 30, 1996, by and
among the Company and the Purchasers signatory thereto, in a transaction exempt
from the registration requirements of the Securities Act of 1933 (the
"Securities Act") to persons reasonably believed by the Company to be
"accredited investors," as such term is defined by Rule 501(a) under the
Securities Act.
A share of the Series B Preferred Stock may be converted at the option
of the holder thereof into the number of fully paid and non-assessable shares of
Common Stock obtained by dividing $100 (the price per share at which the Series
B Preferred Stock was issued originally by the Company) by the initial
conversion price of $7.00. The conversion price of the Series B Preferred Stock
is subject to certain adjustments, including a one time five percent reduction
if the Company declares a PIK Dividend (as defined below) after the third
anniversary of the issuance of the Series B Preferred Stock. Holders of the
Series B Preferred Stock are entitled to receive cumulative dividends at an
annual rate of $8.50 per share to be paid pro rata to such holders, quarterly,
in arrears, subject to adjustment in the case of PIK Dividends paid after the
third anniversary of the date of issuance of the Series B Preferred Stock. If
the Company is not subject to any contractual restriction prohibiting the
payment of dividends in cash, dividends will be paid in cash. If any such
contractual restriction exists, dividends may be paid on the Series B Preferred
Stock by issuing fully paid and non-assessable shares of the Series C Preferred
Stock, which shall be valued at $100 per share (a "PIK Dividend"), for the
purpose of paying such dividend or in some combination of cash and a PIK
Dividend. Accordingly, up to 250,000 shares of the Series B Preferred Stock,
the shares of the Series C Preferred Stock that may be paid from time to time as
a PIK Dividend on the Series B Preferred Stock, and the shares of the Common
Stock issuable upon the conversion of the Series B Preferred Stock (the
"Conversion Shares") may be offered and sold from time to time by the holders
named herein or by their permitted transferees, pledgees, donees, or their
successors (the "Selling Holders") pursuant to this Prospectus.
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The Series B Preferred Stock, the Series C Preferred Stock and the
Conversion Shares may be sold by the Selling Holders from time to time directly
to purchasers. The Selling Holders will receive all of the net proceeds from
the sale of the Series B Preferred Stock, the Series C Preferred Stock and the
Conversion Shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the Series B Preferred Stock, the
Series C Preferred Stock and the Conversion Shares. The Company is responsible
for payment of all other expenses in connection with the performance by the
Company of its obligations under the terms and provisions of the Stock Purchase
Agreement.
The Selling Holders and any broker-dealers, agents or underwriters
that participate in the distribution of the Series B Preferred Stock, the Series
C Preferred Stock or the Conversion Shares may be deemed to be "underwriters,"
as such term is defined under Section 2(11) of the Securities Act, and any
commission or profit received by them in connection with the resale of the
Series B Preferred Stock, the Series C Preferred Stock or the Conversion Shares
may be deemed to be underwriting commissions or discounts under the Securities
Act.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS RELEVANT TO THE SERIES B PREFERRED STOCK, THE SERIES C PREFERRED
STOCK AND THE CONVERSION SHARES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this Prospectus is January 15, 1997.
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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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048, and copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov., that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission. Such reports, proxy statements and other information concerning the
Company also may be inspected at the offices of the New York Stock Exchange.
The Company has filed with the Commission a Registration Statement on
Form S-3 (hereinafter, together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities covered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the securities covered by this
Prospectus, reference is made to the Registration Statement that is on file at
the offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, may be examined without charge at the offices of
the Commission or may be obtained from the Commission's site on the World Wide
Web. Statements contained in this Prospectus as to the contents of any documents
referred to are not necessarily complete, and in each such instance, are
qualified in all respects by reference to the applicable documents filed with
the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
(c) the Company's Current Reports on Form 8-K dated February 7, 1996,
May 7, 1996, June 11, 1996 and August 12, 1996; and
(d) the Company's Registration Statement on the Form 8-A related to the
Common Stock filed with the Commission pursuant to Section 12 of the Exchange
Act, and any amendment or report filed for the purpose of updating such
descriptions.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of securities hereunder shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also is or
is deemed
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to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to each person
to whom a copy of this Prospectus is delivered, upon written or oral request
of such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to UNC Incorporated, 175 Admiral Cochrane Drive,
Annapolis, Maryland 21401-7394, Attention: Treasurer, telephone number:
(410) 266-7333.
THE COMPANY
The Company is a leading supplier of products and services to the aviation
industry. The Company's primary business is the provision of services to the
aviation aftermarket. These operations include the overhaul and repair of
aircraft engines and accessories, the repair and remanufacturing of engine
components, and the provision of training and maintenance services to the United
States and foreign military. Also, part of the Company's revenues are derived
from manufacturing engine and airframe parts for original equipment
manufacturers ("OEMs").
On May 30, 1996, the Company acquired (the "Acquisition") substantially all
of the assets and assumed certain liabilities of Garrett Aviation Services
("Garrett"), a leading provider of aviation services to the worldwide business
aviation aftermarket. Garrett provides a full range of overhaul services to
business aviation and regional airline customers, including complete engine and
airframe repair and overhaul capabilities, full interior and exterior
refurbishments, new aircraft completions, avionics installation and spare parts
distribution. Garrett specializes in providing aircraft, engine and avionics
aftermarket services to aircraft powered by AlliedSignal turbofan engines, which
are the leading engine type for the business jet aviation market.
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, the following information should be considered carefully by
potential purchasers in evaluating the Company and its business before making an
investment in the securities offered hereunder:
Absence of Public Market
No trading market exists for the Series B Preferred Stock or the Series C
Preferred Stock and there can be no assurance regarding the future development
of such a market for the Series B Preferred Stock or the Series C Preferred
Stock or the ability of holders of the Series B Preferred Stock or Series C
Preferred Stock to sell their Series B Preferred Stock or Series C Preferred
Stock or the price at which such holders may be able to sell their Series B
Preferred Stock or Series C Preferred Stock. If such a market were to develop,
future trading prices will depend on many factors, including, among other
things, the operating results of the Company and the market for similar
securities.
Certain Restrictions and Limitations on Transferability
The Stock Purchase Agreement generally restricts a holder of the Series B
Preferred Stock or Conversion Shares from participating in any "group," as such
term is defined in Section 13(d)(3) of the Exchange Act, or taking any action
designed to influence the policies or composition of the management or Board of
Directors of the Company. Further, the Stock Purchase Agreement contains a
volume limitation provision that restricts the transferability of the Series B
Preferred Stock and the Conversion Shares. However, these restrictions and
limitations on the transferability of the Series B Preferred Stock and the
Conversion Shares do not apply to any person or entity who acquires the Series B
Preferred Stock or Conversion Shares (i) at least three years from the date such
securities were issued, (ii) in an underwritten public offering or (iii) in
unsolicited broker's transactions effected in compliance with all the terms and
provisions of Rule 144 under the Securities Act. For a more complete description
of these restrictions and limitations on transferability, See "Description of
Capital Stock - Series B Preferred Stock - Certain Restrictions and Limitations
on Transferability."
Leverage
As of September 30, 1996, the Company's consolidated indebtedness was $385.4
million and its ratio of total debt to total capitalization was 74% and the
Company had the ability to borrow up to an additional $8.1 million under an
Amended and Restated Credit Agreement, dated as of May 22, 1996 (the "Revolving
Credit Facility"), among the Company, the financial institutions who are parties
thereto as lenders and First Union Commercial Corporation ("First Union") as
agent for the lenders and First Union National Bank of North Carolina as the
issuing bank for letters of credit issued thereunder. Subject to certain
restrictions contained in the Revolving Credit Facility and the Indenture
governing the Company's 11% Senior Subordinated Notes due June 1, 2006, the
Company and its subsidiaries may incur additional indebtedness in the future.
In addition, the
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Company anticipates a short-term need to access working capital relating to the
Acquisition, which may require the incurrence of additional indebtedness through
borrowings of available amounts under the Revolving Credit Facility. Although
the Acquisition is expected to increase and diversify the Company's cash flow
from operations, the aggregate amount of Company indebtedness has been increased
significantly as a result of the Acquisition. Increased leverage will, among
other things, require the dedication of additional portions of cash flow to make
interest and principal payments and may increase the Company's vulnerability in
the event that a downturn in its business were to occur.
Benefits from the Acquisition
Management expects to realize certain cost savings as a result of the
Acquisition. Additional cost savings and other business synergies are
anticipated to occur over the next three years. While the Company believes that
it can improve the profitability of the operations of Garrett and the Company on
a combined basis given the cost savings and operating synergies the Company
expects to achieve, there can be no assurance that the Company will be able to
realize the cost savings which the Company believes it can achieve or other
expected cost savings and operating synergies following the Acquisition.
Realization of such operating and economic efficiencies could also be affected
by a number of factors beyond the Company's control, such as general economic
conditions, increased operating costs, the response of competitors or customers,
regulatory developments and delays in implementation.
AlliedSignal Agreements
The Company has succeeded to all of Garrett's rights and obligations under
the terms of an operating agreement between Garrett and AlliedSignal Inc.
("AlliedSignal"). The Company believes that the operating agreement will
provide the Company with significant advantages. However, the AlliedSignal
operating agreement may be terminated by AlliedSignal, among other reasons,
following a material decrease in customer satisfaction relating to Garrett's
services which has a material adverse effect on AlliedSignal's aviation business
or following a significant loss in market share by Garrett which continues
beyond a specified level for four consecutive quarters. A significant change
in, or loss of, the operating agreement could have a material adverse effect on
the Company's results of operations.
AlliedSignal and the Company have entered into a separate agreement pursuant
to which AlliedSignal has agreed to provide the Company with $15.0 million in
annual orders for the repair of AlliedSignal parts and components through
December 31, 1997. The Agreement also provides that the parties will hold
business discussions concerning all elements of the relationship among the
Company, Garrett and AlliedSignal in the near future. While the Company has no
reason to believe that these discussions will not proceed favorably, there can
be no assurance that AlliedSignal's obligation to provide the Company with
orders for parts and component repairs will be extended beyond December 31, 1997
or that it will be extended on terms as favorable to the Company as those
presently in effect.
Commercial Airline Industry
The Company's manufacturing operations are driven in part by the demand for
new aircraft from the commercial airline industry. As a result, a portion of
the Company's business is directly dependent upon the conditions in that
industry which are highly cyclical and competitive. The commercial airline
industry in the United States is currently experiencing an economic turn around.
In the prior five years, the industry had suffered a severe down turn which had
resulted in record losses and the cancellation and delay of orders for new
aircraft, which impacted the Company's OEM manufacturing operations. The recent
up turn in the industry is causing increased demand for new aircraft to meet the
increasing demands for air travel. Due to the volatility of the airline
industry, there can be no assurance that the recent profitability of the airline
industry will continue or that the airlines will maintain or increase
expenditures for new aircraft. In addition, the airline industry is undergoing
a process of consolidation. Such consolidation could result in a reduction of
future aircraft orders as overlapping routes are eliminated and airlines seek
greater economies through higher aircraft utilization.
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Defense Spending Levels
Many of the Company's Aviation Services Division's contracts are funded by
the operations and maintenance ("O&M") budget of the United States Department of
Defense. The O&M budget has remained stable over the last four years and is
projected to remain relatively flat through the end of the decade, despite a
decline in the Department of Defense's overall budget. The Company believes
that more maintenance work under the O&M budget will be outsourced in the future
to lower cost, private sector suppliers, such as the Company, to meet ongoing
Department of Defense budget pressures in other budget areas, such as new or
modernized weapons assistance. There can be no assurance, however, that the
Department of Defense will outsource significant amounts of additional work to
entities such as the Company or that federal budgetary pressures will not
adversely affect the Company.
Litigation and Contingencies
The Company is involved in a variety of legal proceedings and environmental
matters. Although the Company presently believes that the resolution of these
matters will not have a material adverse impact on the operating results,
liquidity or financial condition of the Company, there can be no assurance as to
the final resolution of these matters.
Payment of Dividends and Redemption
The payment of cash dividends on the Company's Common Stock, the Series B
Preferred Stock and the Series C Preferred Stock as well as the redemption of
the Company's Common Stock, the Series B Preferred Stock and the Series C
Preferred Stock is limited by the terms and provisions of the indenture pursuant
to which the Company's 11% Senior Subordinated Notes Due 2006 were issued (the
"Senior Subordinated Indenture") and the indenture pursuant to which the
Company's 9-1/8% Senior Notes Due 2003 were issued (the "Senior Indenture" and,
together with the Senior Subordinated Indenture, the "Indentures") as well as
the Company's Revolving Credit Facility. While the Company is presently able to
pay cash dividends on the Series B Preferred Stock under the terms of those
Indentures, there can be no assurance that (i) the Company will continue to be
able to pay cash dividends on Series B Preferred Stock, (ii) the Company will be
able to pay cash dividends on any shares of Series C Preferred Stock it may
issue from time to time, or (iii) the Company will be able to redeem its shares
of Series B and Series C Preferred Stock in the future. Also, the Company does
not currently contemplate paying any dividends on its Common Stock in the
foreseeable future and, accordingly, purchasers of shares of the Company's
Common Stock should not expect to receive any dividends on such shares. See
"Description of Capital Stock--Agreements Limiting the Company's Ability to Pay
Dividends and to Redeem its Capital Stock."
USE OF PROCEEDS
The Selling Holders will receive all of the net proceeds from the resales of
the Series B Preferred Stock, the Series C Preferred Stock and the Conversion
Shares, and the Company will not receive any of the proceeds from such sales.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
For the fiscal years ended December 31, 1992, 1993 and 1995, the Company's
ratios of earnings to combined fixed charges and preferred dividends were 1.86,
1.46 and 1.11, respectively. For the quarter ended September 30, 1996, the
Company's ratio of earnings to combined fixed charges and preferred dividends
was 1.21. For the fiscal years ended December 31, 1991 and 1994, the Company's
earnings were insufficient to cover combined fixed charges and preferred
dividends by $26.6 million and $81.7 million, respectively.
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DESCRIPTION OF CAPITAL STOCK
The description of certain powers, preferences and rights of the Company's
Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock set forth below does not purport to be complete and is qualified
in its entirety by reference to the Company's Certificate of Incorporation,
including the Certificates of Designation of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock and the related Rights
Agreement and the Stock Purchase Agreement, each of which is incorporated by
reference in the Registration Statement of which this Prospectus is a part.
General
The Company's authorized capital consists of 50,000,000 shares of Common
Stock and 12,000,000 shares of preferred stock, par value $1.00 per share (the
"Preferred Stock"). The Company has designated and authorized 250,000 shares of
its Preferred Stock as Series B Preferred Stock and 250,000 shares of its
Preferred Stock as Series C Preferred Stock, which rank with respect to dividend
rights, liquidation rights, winding up and dissolution on parity with one
another and prior to any other equity securities of the Company, including any
other series of Preferred Stock, whether currently authorized or hereafter
created. The Company has also designated and authorized 250,000 shares of its
Preferred Stock as Series A Preferred Stock. Shares of the Company's Series A
Preferred Stock may be issued from time to time pursuant to rights which cover
the shares of the Company's Common Stock and Series B Preferred Stock as more
fully described below. See "Description of Capital Stock--Rights Agreement--
Series A Preferred Stock." As of September 30, 1996, there were issued and
outstanding 18,252,568 shares of Common Stock and 250,000 shares of the Series B
Preferred Stock.
Agreements Limiting the Company's Ability to Pay Dividends and to Redeem its
Capital Stock
The Senior Subordinated Indenture. Pursuant to the Senior Subordinated
Indenture, the Company will not, and will not permit any of its subsidiaries to,
directly or indirectly, among other things, declare or pay any dividend or make
any distribution on account of the Company's capital stock (including the Common
Stock, the Series B Preferred Stock and the Series C Preferred Stock) or make
certain other restricted payments (collectively, the "Restricted Payments"),
other than dividends or distributions payable in Equity Interests (as
hereinafter defined) of the Company, if at the time of such Restricted Payment:
(i) a Default or Event of Default (as defined) shall have occurred and be
continuing or shall occur as a consequence thereof; or (ii) the Company shall
not be able to incur at least $1.00 of additional indebtedness (as defined)
pursuant to limitations on additional indebtedness covenants set forth in the
Senior Subordinated Indenture; or (iii) such Restricted Payment, together with
the aggregate of all Restricted Payments made after May 30, 1996 exceeds the sum
of (x) 50% of the amount of the Consolidated Net Income (as defined) of the
Company for the period (taken as one accounting period) from the beginning of
the first fiscal quarter immediately after May 30, 1996 to the end of the
Company's most recently ended quarter at the time of such Restricted Payment
(or, if Consolidated Net Income for such period is negative, 100% of such
accumulated amount) plus (y) 100% of the aggregate net cash payments received by
the Company from the issue or sale after the date of the applicable Indenture of
capital stock of the Company (other than certain types of securities, including
the Series B Preferred Stock) or any Indebtedness (as defined) or other security
convertible into or exercisable for any such capital stock (other than certain
securities) that has been so converted or exercised, the sum of (x) and (y)
hereafter referred to as the "Earned Amount." "Equity Interests" means capital
stock, or other equity interests or warrants, options or other rights to
acquire, or that are measured in relation to, capital stock or other equity
interests (but excluding any debt security that is convertible into, or
exchangeable for, capital stock).
Notwithstanding the foregoing, the requirement that the Company be able to
incur at least $1.00 of additional Indebtedness pursuant to the limitation on
additional Indebtedness provisions in the Senior Subordinated Indenture will not
apply to the Company's ability to make Restricted Payments in the form of
dividends on the Series B Preferred Stock and the Series C Preferred Stock.
Moreover, notwithstanding anything to the contrary, the Senior Subordinated
Indenture does not prohibit the payment of cash dividends on the Series B
Preferred Stock or the Series C Preferred Stock in an aggregate amount not to
exceed $2,125,000
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in any fiscal year; provided, however, that such restrictions will become
applicable as of the end of the fiscal quarter during which the Earned Amount
first equals $10 million.
The Senior Indenture. The Senior Indenture contains a restricted payment
covenant that is substantially similar to the restricted payment covenant set
forth in the Senior Subordinated Indenture. The Senior Indenture includes the
express permission to pay up to $2,125,000 in dividends on the Series B
Preferred Stock and the Series C Preferred Stock in the aggregate during any
fiscal year until the Earned Amount first equals $10 million. Unlike the Senior
Subordinated Indenture, however, the Senior Indenture provides that (i) the
period (taken as one accounting period) in which the Company's Consolidated Net
Income (or if Consolidated Net Income for such period is negative, 100% of such
accumulated amount) and proceeds from the sale of certain types of capital stock
is to be measured for purposes of calculating the Earned Amount, commences July
15, 1993, and (ii) the proceeds realized from the Company's issuance of Series B
Preferred Stock are included for purposes of calculating the Earned Amount.
Further, unlike the provisions of the Senior Subordinated Indenture, the Senior
Indenture does require that, after the Earned Amount first equals $10 million,
the Company must be able to incur at least $1.00 of additional Indebtedness
pursuant to the limitation on additional Indebtedness in order to pay cash
dividends on Series B Preferred Stock and Series C Preferred Stock.
Because the express permission to pay up to $2,125,000 in dividends on the
Series B Preferred Stock or Series C Preferred Stock in the aggregate during any
fiscal year terminates at the end of the fiscal quarter during which the Earned
Amount first equals $10 million, the Company may be prohibited from paying cash
dividends on the Series B Preferred Stock and the Series C Preferred Stock
thereafter if it is unable to satisfy the conditions to declaring and paying
such dividends contained in the Indentures.
Revolving Credit Facility. The Company's Revolving Credit Facility contains
provisions which prohibit the Company from declaring or paying any cash
dividends upon any of its capital stock (including the Company's Common Stock,
Series B Preferred Stock and Series C Preferred Stock) or from redeeming or
otherwise acquiring any such shares of its capital stock. The Revolving Credit
Facility provides that as long as no defaults exist under the Revolving Credit
Facility, the Company may redeem or acquire its capital stock from its
shareholders provided that the aggregate amount paid by the Company in
connection with any such redemptions shall not exceed $500,000 in the aggregate
during the time that the Revolving Credit Facility is in effect. Further,
provided there are no defaults or events of default in existence under the
Revolving Credit Facility after giving effect to the payment of such dividends,
the Company may pay up to $2,125,000 in the aggregate in dividends on Series B
Preferred Stock and Series C Preferred Stock in any fiscal year.
The Revolving Credit Facility contains numerous covenants and agreements the
breach of which would constitute an event of default, including the financial
covenants summarized below. The Revolving Credit Facility provides that the
Company will not permit:
1. Tangible net worth at the end of any fiscal quarter to be less than
the following amounts during the following periods:
Minimum Tangible
Fiscal Period Net Worth
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09/30/96 to 12/30/96 $(58,000,000)
12/31/96 to 12/30/97 $(58,000,000)
12/31/97 to 12/30/98 $(38,500,000)
12/31/98 to 12/30/99 $ 12,500,000
12/31/99 and thereafter $ 50,000,000
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2. The ratio of Total Debt to Operating Cash Flow (for the four fiscal
quarter period then ending), measured at the end of each fiscal
quarter, to exceed the following amounts during the following periods:
Fiscal Period Ratio
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09/30/96 to 12/30/96 9.5 to 1
12/31/96 to 03/30/97 7.0 to 1
03/31/97 to 06/29/97 6.0 to 1
06/30/97 and thereafter 5.0 to 1
3. The ratio of (a) Operating Cash Flow less capital expenditures that are
not financed to (b) total debt service plus payments under capital
leases (measured at the end of the fiscal quarter and calculated on a
rolling four fiscal quarters basis) to be less than the following
amounts during the following periods:
Fiscal Period Ratio
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09/30/96 to 12/30/96 1.00 to 1
12/31/96 to 03/30/97 1.05 to 1
03/31/97 and thereafter 1.10 to 1
In the event the Company breaches any of the foregoing financial covenants or
otherwise is in default under the Revolving Credit Facility, the Company would
not be able to pay dividends (other than certain stock dividends) on any class
of equity securities, including the Series B Preferred Stock and the Series C
Preferred Stock.
If the Company is prevented from paying cash dividends on the Series B
Preferred Stock by reason of the provisions contained in the Indentures or the
Revolving Credit Facility, dividends on the Series B Preferred Stock would be
paid in shares of Series C Preferred Stock, as more fully described below.
Common Stock
All shares of Common Stock currently outstanding are, and the shares of
Common Stock offered hereby will be, fully paid and nonassessable, not subject
to redemption, and without pre-emptive or other right to subscribe for or
purchase any proportionate part of any new or additional issues of stock of any
class or of securities convertible into stock of any class other than with
respect to those rights arising from the Rights Agreement described below. The
holders of shares of Common Stock are entitled, subject to liquidation
preferences in favor of holders of the Series B Preferred Stock and the Series C
Preferred Stock and any person who hereafter may become the holder of any shares
of any other series of Preferred Stock, to share ratably in the assets of the
Company available for distribution in the event of liquidation. The shares of
Common Stock do not have cumulative voting rights. Subject to such rights to
vote as are granted by law and the Company's Certificate of Incorporation to the
holders of the Series B Preferred Stock and the holders of the Series C
Preferred Stock to vote as a class with respect to certain matters, holders of
shares of Common Stock have the exclusive right to vote on all matters submitted
to the shareholders for a vote, and in exercising such voting rights such
holders are entitled to one vote for each share held.
Subject to the payment of dividends on the Series B Preferred Stock,
the Series C Preferred Stock and on any other series of Preferred Stock having
preferred dividend rights, holders of shares of Common Stock are entitled to
share ratably in all dividends declared on the Common Stock by the Board of
Directors out of funds legally available therefor; provided, however, whenever
any share of the Series C Preferred Stock is issued and outstanding, the Company
may not (i) make or pay any cash dividends, distributions or other cash
payments of
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any type on or with respect to any Junior Security (as hereinafter defined) or
(ii) redeem for cash (in whole or in part) any Junior Security. Future
dividends necessarily will depend upon the Company's earnings, financial
condition and other factors, including compliance with the terms and conditions
of the Indentures, the Revolving Credit Facility and other credit agreements to
which the Company may be a party, and the payment of dividends on the
outstanding shares of Series B Preferred Stock and any Series C Preferred Stock
that may be issued. In the event that dividends on the shares of Series B
Preferred Stock or Series C Preferred Stock are in arrears, thereafter and until
all accrued but unpaid dividends on the shares of Series B Preferred Stock or
Series C Preferred Stock shall have been paid in full the Company may not
declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration, any shares of Common Stock. As
noted above, the Company does not currently contemplate paying any dividends on
its Common Stock in the foreseeable future and, accordingly, purchasers of
shares of the Company's Common Stock should not expect to receive any dividends
on such shares.
Series B Preferred Stock
Rank. The Series B Preferred Stock shall, with respect to dividends and the
distribution of assets on liquidation, rank (a) on a parity with the Series C
Preferred Stock, and (b) prior to the Common Stock, every other class of stock
of the Company hereafter created and any series of Preferred Stock other than
the Series C Preferred Stock. The Common Stock and each other class and series
of equity securities other than the Series B Preferred Stock and the Series C
Preferred Stock are hereinafter collectively referred to as the "Junior
Securities."
Dividends. Holders of the Series B Preferred Stock are entitled to receive,
when and as declared by the Board of Directors, out of funds legally available
therefor, cumulative dividends at an annual rate of $8.50 per share to be paid
pro rata to such holders, quarterly, in arrears, such payments to be made on the
last business day of each calendar quarter (each of such dates being a "Dividend
Payment Date"). Such dividends shall be paid to the holders of record at the
close of business on the date that is 10 business days before the Dividend
Payment Date. Each of such quarterly dividends (whether payable in cash or in
stock) shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the date of issuance.
Dividends may be paid in cash or shares of the Series C Preferred Stock or
both, at the option of the Company, except that if the Company is not a party to
a Restrictive Agreement (i.e., an agreement which by its terms restricts the
payment of dividends in cash) dividends will be paid in cash. If dividends are
paid by issuing shares of the Series C Preferred Stock, such shares shall be
valued at $100.00 per share for the purpose of paying such dividend. If the
Company pays a PIK Dividend at any time after the third anniversary of the
issuance of the Series B Preferred Stock, the annual dividend rate will
increase, in the case of PIK Dividends, to $9.50 per share. If the Company pays
a PIK Dividend at any time after the fourth anniversary of the date of issuance,
the annual dividend rate will increase, in the case of PIK Dividends, to $10.50
per share. If the Company pays a PIK Dividend at any time after the fifth
anniversary of the date of issuance, the annual dividend rate will increase, in
the case of PIK Dividends, to $11.00 per share. Notwithstanding the foregoing,
dividend payments, or any portion thereof, paid in cash will be at the annual
rate of $8.50 per share.
No full cash dividends shall be declared or paid or set apart for payment on
the Series C Preferred Stock for any period unless full cumulative cash
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the Series
B Preferred Stock for all dividend payment periods terminating on or prior to
the date of payment of such dividends. If any cash dividends are not paid in
full, as aforesaid, upon the shares of Series B Preferred Stock and the Series C
Preferred Stock, all cash dividends declared upon shares of the Series B
Preferred Stock and the Series C Preferred Stock shall be declared pro rata so
that the amount of cash dividends declared per share on the Series B Preferred
Stock and the Series C Preferred Stock shall in all cases bear to each other the
same ratio that accrued cash dividends per share on the Series B Preferred Stock
and the Series C Preferred Stock bear to each other. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
or payments on the Series B Preferred Stock which may be in arrears.
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As noted above, the Company is currently a party to various Indentures and a
Revolving Credit Facility which contain provisions limiting substantially the
Company's ability to pay dividends on Series B Preferred Stock. Accordingly,
there can be no assurance that the Company will be able to pay cash dividends on
its outstanding shares of Series B Preferred Stock in the future.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, the
holders of the Series B Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to its
shareholders an amount in cash equal to $100.00 for each share outstanding, plus
an amount in cash equal to all accrued but unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding up, before any payment shall be
made or any assets distributed to the holders of any Junior Securities. If the
assets of the Company are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of the Series B Preferred Stock and
the Series C Preferred Stock, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount which would
be payable on such distribution if the amounts to which the holders of
outstanding shares of the Series B Preferred Stock and the Series C Preferred
Stock are entitled were paid in full.
Neither the voluntary sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property or assets of the Company or the consolidation or
merger of the Company with one or more other corporations shall be deemed to be
a liquidation, dissolution or winding up, voluntary or involuntary, unless such
voluntary sale, conveyance, lease, exchange or transfer shall be in connection
with a dissolution or winding up of the business of the Company.
Redemption. Commencing after the Effective Date (as defined below), the
Company at its option may redeem, to the extent funds are legally available
therefor, the Series B Preferred Stock, at any time in whole or from time to
time in part, at the per share redemption price equal to $100.00 plus all
accrued and unpaid dividends thereon to the date fixed for redemption, without
interest (the "Redemption Price"). "Effective Date" shall mean, the last day of
any 90 consecutive calendar day period that occurs after the fourth anniversary
of the Date of Issuance in which the last reported sales price regular way for
the Common Stock of the Company on the New York Stock Exchange (or any other
national securities exchange or NASDAQ on which the Common Stock is listed or
quoted) on all trading days in that period is at least equal to 200% of the
Conversion Price. The Company may not optionally redeem the Series B Preferred
Stock, in whole or in part, without first redeeming all outstanding shares of
the Series C Preferred Stock.
Unless the Company is prohibited by the terms of any restrictive agreement
from redeeming any shares of the Series B Preferred Stock, in the event of any
Change in Control (as defined below) with respect to the Company, each holder of
the Series B Preferred Stock may, from time to time, require the Company to, and
the Company shall, redeem any number of the shares of the Series B Preferred
Stock held by it for the Redemption Price upon 30 days prior written notice.
"Change in Control" means (A) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
which will result in the Company's shareholders immediately prior to such
transaction not holding (by virtue of such shares or securities issued solely
with respect thereto) at least 50% of the voting power of the surviving or
continuing entity, (B) a sale of all or substantially all of the assets of the
Company, unless the Company's shareholders immediately prior to such sale will,
as a result of such sale, hold (by virtue of securities issued as consideration
for the Company's sale) at least 50% of the voting power of the purchasing
entity, or (C) during any period of two consecutive years, individuals who at
the beginning of such period constitute the entire Board of Directors of the
Company shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's shareholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
Notwithstanding the foregoing, unless the full cumulative dividends on all
outstanding shares of the Series B Preferred Stock shall have been paid or
contemporaneously are declared and paid for all past dividend periods, none of
the shares of the Series B Preferred Stock may be redeemed unless all
outstanding shares of
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the Series B Preferred Stock are simultaneously redeemed, and the Company shall
not purchase or otherwise acquire (except pursuant to the procedure for
redemption as discussed below) any shares of Series B Preferred Stock; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of the Series B Preferred Stock pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of the Series B
Preferred Stock.
As noted above, the Company is currently a party to various Indentures and a
Revolving Credit Facility which contain provisions limiting the Company's
ability to redeem Series B Preferred Stock. Accordingly, there can be no
assurance that the Company will be able to redeem its outstanding shares of
Series B Preferred Stock in the future.
Procedure for Redemption. In the event that fewer than all the outstanding
shares of the Series B Preferred Stock are to be redeemed, the number of shares
to be redeemed shall be determined by the Board of Directors and the shares to
be redeemed shall be determined by lot or pro rata as may be determined by the
Board of Directors.
In the event the Company shall redeem shares of the Series B Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the date of
redemption (the "Redemption Date"), to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Company; provided, however, that no failure to mail such notice or any
defect therein shall affect the validity of the proceeding for the redemption of
any shares of the Series B Preferred Stock to be redeemed except as to the
holder to whom the Company has failed to mail said notice or except as to the
holder whose notice was defective. Each such notice shall state: (i) the
Redemption Date; (ii) the number of shares of the Series B Preferred Stock to be
redeemed and, if less than all the shares held by such holder are to be redeemed
from such holder, the number of shares to be redeemed from such holder; (iii)
the Redemption Price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such Redemption
Date.
Upon proper notice of redemption, from and after the Redemption Date (unless
default shall be made by the Company in providing money for the payment of the
Redemption Price of the shares called for redemption) dividends on the shares of
the Series B Preferred Stock so called for redemption shall cease to accrue, and
said shares will no longer be deemed to be outstanding and shall have the status
of authorized but unissued shares of Preferred Stock, unclassified as to series,
and shall not be reissued as shares of the Series B Preferred Stock, and all
rights of the holders thereof as shareholders of the Company with respect to
said shares (except the right to receive from the Company the Redemption Price)
will cease. Upon surrender in accordance with such notice of the certificates
for any shares so redeemed (properly indorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice shall so
state), such shares shall be redeemed by the Company at the Redemption Price.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate will be issued representing the unredeemed shares
without cost to the holder thereof.
Conversion. Unless previously redeemed by the Company, the holders of the
shares of the Series B Preferred Stock will have the right, at such holders'
option, at any time and from time to time, to convert such shares into fully
paid and non-assessable shares of Common Stock of the Company. The number of
shares of the Common Stock issuable upon conversion of each share of the Series
B Preferred Stock shall be equal to $100.00 divided by the Conversion Price (as
hereinafter defined) in effect at the time of conversion. The price at which
shares of Common Stock shall be delivered upon conversion (the "Conversion
Price") is currently $7.00, subject to certain adjustments. The right to
convert shares called for redemption will terminate at the close of business on
the date fixed for such redemption unless the Company defaults in making payment
of the amount payable upon such redemption.
The holders of shares of the Series B Preferred Stock at the close of
business on a dividend payment record date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend
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<PAGE>
Payment Date notwithstanding the conversion thereof or the Company's default in
payment of the dividend due on such Dividend Payment Date. However, shares of
Series B Preferred Stock surrendered for conversion during the period between
the close of business on any dividend payment record date and the opening of
business on the corresponding Dividend Payment Date must be accompanied by
payment of an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series B Preferred Stock on a
dividend payment record date who (or whose transferee) surrenders any of such
shares for conversion into shares of the Common Stock on a Dividend Payment Date
will receive the dividend payable by the Company on such shares of the Series B
Preferred Stock on such date, and the converting holder need not include payment
in the amount of such dividend upon surrender of shares of the Series B
Preferred Stock for conversion. Except as provided above, the Company shall
make no payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of the Common Stock issued upon
such conversion.
In order to exercise the conversion privilege, the holders of each share of
the Series B Preferred Stock to be converted must surrender the certificate
representing such share at the office of the transfer agent for the Series B
Preferred Stock, appointed for such purpose by the Company, with the notice of
election to convert on the back of said certificate completed and signed.
Unless the shares of the Common Stock issuable on conversion are to be issued in
the same name in which such share of the Series B Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder or
such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax. As promptly as practicable after the surrender of the
certificates for shares of the Series B Preferred Stock, the Company shall issue
and shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of the Conversion
Shares.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of the
Series B Preferred Stock shall have been surrendered and such notice is received
by the Company, and the person or persons in whose name or names any certificate
or certificates for shares of the Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
shares represented thereby at such time on such date, unless the stock transfer
books of the Company shall be closed on that date, in which event such person or
persons shall be deemed to have become such holder or holders of record at the
close of business on the next succeeding day on which such stock transfer books
are open, and such notice is received by the Company. All shares of the Common
Stock delivered upon conversion of the Series B Preferred Stock will upon
delivery be duly and validly issued and fully paid and non-assessable, free of
all liens and charges and not subject to any preemptive rights.
The Conversion Price in effect at any time and the number and kind of
securities issuable upon the conversion of each share of Series B Preferred
Stock shall be subject to adjustment from time to time upon the happening of
certain events or actions taken by the Company, as follows: (i) upon the
Company's payment of a PIK Dividend after the third anniversary of the date of
issuance of the Series B Preferred Stock, the Conversion Price will be reduced
by 5%, provided that such a reduction in the Conversion Price may be made only
once; (ii) the Company's payment of a dividend distribution on its Common Stock
in shares of its Common Stock, subdivision of its outstanding Common Stock,
combination of its outstanding Common Stock into a smaller number of shares, or
issuance of any shares by reclassification of its Common Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation); (iii) the Company's issuance of rights
or warrants to all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock (or securities convertible into Common Stock)
at a price per share (or having a conversion price per share) less than the
Conversion Price in effect on the record date with respect to such issuance;
(iv) the Company's distribution to all holders of its Common Stock shares of
stock other than Common Stock or evidences of its indebtedness or assets
(excluding cash dividends or distributions out of retained earnings and
dividends or distributions referred to in paragraph (ii) above); (v) with
certain exceptions, the Company's issuance of shares of its Common Stock for a
consideration per share of Common Stock less than the Conversion Price in effect
on the date the Company fixes or has fixed the offering, conversion, exchange or
exercise price of such additional shares; (vi) the Company's issuance of any
securities convertible into or exchangeable for its Common Stock for a
consideration per share of Common Stock initially
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<PAGE>
deliverable upon conversion or exchange of such securities less than the
Conversion Price in effect on the issuance date of such securities; or (vii) the
Company's participation in a consolidation, merger or combination with another
corporation (other than with a wholly-owned subsidiary of the Company and other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock) or in case of any sale or transfer
of all or substantially all of the assets of the Company, as a result of which
holders of the Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, or any share exchange whereby the Common Stock is converted
into other securities or property of the Company, then as a condition to the
consummation of such transaction, lawful and adequate provision will be made so
that the holder of each share of the Series B Preferred Stock then outstanding
shall have the right, with respect to such shares of Series B Preferred Stock,
to receive stock, other securities or property or assets (including cash) or any
combination thereof, having a value equal to the value of the stock, other
securities, property and assets (including cash) which such holder would have
been entitled to receive upon such consolidation, merger, combination, sale or
transfer, or exchange, if such holder had held the Common Stock issuable upon
the conversion of such shares of Series B Preferred Stock immediately prior to
such consolidation, merger, combination, sale or transfer, or exchange.
No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least $.10 in such price,
provided, however, that any adjustments not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
Voting. There are no voting rights granted to holders of the Series B
Preferred Stock other than those expressly required by law and as described
below. Whenever dividends are in arrears and remain unpaid for six or more
dividend payment dates, the holders of the Series B Preferred Stock will have
the exclusive right to appoint one additional director to the board of directors
of the Company to serve until all accrued but unpaid dividends have been paid in
full. In addition, and whether or not dividends are in arrears, the affirmative
vote of the holders of a majority of the Series B Preferred Stock, voting as a
class, are required in order for the Company to (i) create, authorize or issue
any shares of any class of senior or parity dividend or liquidation stock or
having class voting rights except as required by the General Corporation Law of
the State of Delaware or voting rights in excess of one vote per share, (ii)
amend, alter or repeal any provision of the Certificate of Incorporation of the
Company if such amendment, alteration or repeal has a material adverse affect on
the rights of the Series B Preferred Stock, or (iii) declare any reverse stock
dividend with regard to the Series B Preferred Stock or otherwise reduce the
number of outstanding shares of the Series B Preferred Stock except as permitted
by the Certificate of Incorporation of the Company; provided that the
affirmative vote of the holders of two-thirds of the shares of the Series B
Preferred Stock is required to amend, alter or repeal any provision of the
Certificate of Incorporation of the Company that would adversely affect the
rights of the Series B Preferred Stock holders with respect to dividends,
liquidation, conversion or voting. In all cases where the holders of the
Series B Preferred Stock exercise a right to vote, each share thereof is
entitled to one vote.
A special meeting of holders of the Series B Preferred Stock (or a request
for a vote by written consent without a meeting) to approve or disapprove any
action of the Company on which the holders of the Series B Preferred Stock are
entitled to vote as a separate class may be called by the Secretary of the
Company or by the holder(s) of 25% or more of the outstanding shares of the
Series B Preferred Stock on written notice to the address of each holder thereof
as it appears on the records of the Company deposited in the U.S. mail, all
charges prepaid, at least 10 but no more than 60 days prior to the applicable
vote. The record date for determination of the holders of the Series B
Preferred Stock entitled to vote by written consent or at a meeting shall be set
by the Company's Board of Directors, and only holders who are holding of record
on the stock register of the Company on that date will be entitled to
participate in such vote. At any time at which any share of the Series B
Preferred Stock has been issued and is outstanding, no proposal for the Company
to take any action described above shall be adopted, nor shall the Company be
authorized to take any such action, unless the holders of at least two-thirds of
the outstanding shares of the Series B Preferred Stock voting as a separate
class vote in favor of such proposal.
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Copies of all notices sent to the holders of Common Stock will be
simultaneously sent to each holder of the Series B Preferred Stock. No consent
of the holders of the Series B Preferred Stock, except to the extent such
holders are entitled to vote together with the holders of the Preferred Stock or
Common Stock, shall be required for (i) the creation, authorization or issuance
of any indebtedness of any kind of the Company, (ii) the creation, authorization
or issuance of any other class of stock of the Company subordinate as to
dividends and upon liquidation to the Series B Preferred Stock, (iii) any
increase or decrease in the amount of authorized Common Stock or Preferred Stock
or any increase, decrease or change in the par value thereof, or (iv) any
increase in the amount of the Series C Preferred Stock for the purpose of paying
dividends in shares of Series C Preferred Stock as provided herein, and none of
the foregoing shall be deemed to affect adversely the powers, special rights or
preferences of holders of the Series B Preferred Stock.
Board Representation. Pursuant to the terms of the Stock Purchase
Agreement, the Company is obligated to take all action necessary to cause one
person nominated by the Purchasers holding a majority of the Series B Preferred
Stock to be nominated for election to the Board of Directors of the Company and
to recommend the Purchasers' nominee in the same manner as all other nominees of
the Company, provided that the Company shall have the right to reject certain
nominees of the Purchasers. The foregoing obligation of the Company will be in
effect only for so long as the original Purchasers of the Series B Preferred
Stock hold shares of the Series B Preferred Stock or Conversion Shares
representing 10% of the shares of the Company's Common Stock issued and
outstanding after giving effect to the pro forma conversion of all outstanding
Series B Preferred Stock.
Series C Preferred Stock
Rank. The Series C Preferred Stock shall, with respect to dividends and the
distribution of assets on liquidation, rank (a) on a parity with the Series B
Preferred Stock, and (b) prior to the Junior Securities.
Dividends. The holders of the shares of Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends, cumulative dividends at
the annual rate of $8.50 per share in equal quarterly payments on the last
business day of each calendar quarter (each of such dates being a "Dividend
Payment Date"), commencing with the last day of the calendar quarter in which
the shares of Series C Preferred Stock are issued, in preference to dividends on
the Junior Securities (as defined). Such dividends shall be paid to the holders
of record at the close of business on the date which is 10 business days prior
to the Dividend Payment Date. Each of such quarterly dividends shall be fully
cumulative and shall accrue (whether or not declared), without interest, from
the Date of Issuance. Any dividend payments due with respect to the Series C
Preferred Stock on any Dividend Payment Date shall be made in cash. All such
dividends paid with regard to shares of Series C Preferred Stock shall be paid
pro rata to the holders entitled thereto.
No full cash dividends shall be declared or paid or set apart for payment on
the Series B Preferred Stock for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series C
Preferred Stock for all dividend payment periods terminating on or prior to the
date of payment of such dividends. If any cash dividends are not paid in full
upon the shares of the Series C Preferred Stock and the Series B Preferred
Stock, all cash dividends declared upon shares of the Series C Preferred Stock
and the Series B Preferred Stock shall be declared pro rata so that the amount
of cash dividends declared per share on the Series C Preferred Stock and the
Series B Preferred Stock shall in all cases bear to each other the same ratio
that accrued dividends per share on the Series C Preferred Stock and Series B
Preferred Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series C Preferred Stock which may be in arrears.
Whenever dividends or distributions payable on the Series C Preferred Stock
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series C Preferred Stock
outstanding shall have been paid in full, the Company shall not (A) declare or
pay dividends,
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or make any other distributions, on any Junior Securities (either as to
dividends or upon liquidation, dissolution or winding up); or (B) redeem or
purchase or otherwise acquire for consideration shares of any Junior Securities
(either as to dividends or upon liquidation, dissolution or winding up),
provided that the Company may at any time redeem, purchase or otherwise acquire
shares of any such Junior Securities in exchange for shares of any other Junior
Securities. Subject to the foregoing, the Board of Directors of the Company may
declare, and the Company may pay or set apart for payment, dividends and other
distributions on any of the Junior Securities, and may purchase or otherwise
redeem any of the Junior Securities or any warrants, rights or options
exercisable for or convertible into any of the Junior Securities, and the
holders of the shares of Series C Preferred Stock shall not be entitled to share
therein.
As noted above, the Company is currently a party to various Indentures and a
Revolving Credit Facility which contain provisions limiting substantially the
Company's ability to pay dividends on Series C Preferred Stock. Accordingly,
there can be no assurance that the Company will be able to pay cash dividends on
any shares of Series C Preferred Stock it may issue from time to time in the
future.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, the
holders of shares of the Series C Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution
to its shareholders an amount in cash equal to $100.00 for each share
outstanding, plus an amount in cash equal to all accrued but unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding up, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities. If the assets of the Company are not sufficient to pay in
full the liquidation payments payable to the holders of outstanding shares of
the Series C Preferred Stock and the Series B Preferred Stock, then the holders
of all such shares shall share ratably in such distribution of assets in
accordance with the amount which would be payable on such distribution if the
amounts to which the holders of outstanding shares of the Series C Preferred
Stock and the Series B Preferred Stock are entitled were paid in full. The
liquidation payment with respect to each fractional share of the Series C
Preferred Stock outstanding or accrued but unpaid shall be equal to a ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of the Series C Preferred Stock.
For the purposes of the liquidation preferences, neither the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Company or the consolidation or merger of the Company with one or more other
corporations shall be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, unless such voluntary sale, conveyance, lease,
exchange or transfer shall be in connection with a dissolution or winding up of
the business of the Company.
Redemption. The Company at its option may redeem, to the extent funds are
legally available therefor, the Series C Preferred Stock, at any time in whole
or from time to time in part, at the per share redemption price equal to $100.00
plus all accrued and unpaid dividends thereon to the date fixed for redemption,
without interest (the "Redemption Price"). The Company may not optionally
redeem the Series B Preferred Stock, in whole or in part, without first
redeeming all outstanding shares of the Series C Preferred Stock at the
Redemption Price.
Unless the Company is prohibited by the terms of any restrictive agreement
from redeeming any shares of the Series C Preferred Stock, in the event of any
Change in Control (as defined) with respect to the Company, each holder of the
Series C Preferred Stock may, from time to time, require the Company to, and the
Company shall, redeem any number of the shares of Series C Preferred Stock held
by it for the Redemption Price upon 30 days prior written notice.
Notwithstanding the foregoing, unless the full cumulative dividends on all
outstanding shares of the Series C Preferred Stock shall have been paid or
contemporaneously are declared and paid for all past dividend periods, none of
the shares of the Series C Preferred Stock shall be redeemed unless all
outstanding shares of the Series C Preferred Stock are simultaneously redeemed,
and the Company shall not purchase or otherwise
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acquire (except as provided in the Certificate of Incorporation of the Company)
any shares of the Series C Preferred Stock; provided, however, that the
foregoing shall not prevent the purchase or acquisition of shares of the Series
C Preferred Stock pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of the Series C Preferred Stock.
As noted above, the Company is currently a party to various Indentures and a
Revolving Credit Facility which contain provisions limiting the Company's
ability to pay dividends on Series C Preferred Stock. Accordingly, there can be
no assurance that the Company will be able continue to pay cash dividends on any
shares of Series C Preferred Stock it may issue from time to time in the future.
Procedure for Redemption. In the event that fewer than all the outstanding
shares of the Series C Preferred Stock are to be redeemed, the number of shares
to be redeemed shall be determined by the Board of Directors of the Company and
the shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors.
In the event the Company shall redeem shares of the Series C Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the date of
redemption (the "Redemption Date"), to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Company; provided, however, that no failure to mail such notice or any
defect therein shall affect the validity of the proceeding for the redemption of
any shares of the Series C Preferred Stock to be redeemed except as to the
holder to whom the Company has failed to mail said notice or except as to the
holder whose notice was defective. Each such notice shall state: (i) the
Redemption Date; (ii) the number of shares of the Series C Preferred Stock to be
redeemed and, if less than all the shares held by such holder are to be redeemed
from such holder, the number of shares to be redeemed from such holder; (iii)
the Redemption Price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such Redemption
Date.
Upon proper notice duly given, from and after the Redemption Date (unless
default shall be made by the Company in providing money for the payment of the
Redemption Price of the shares called for redemption) dividends on the shares of
the Series C Preferred Stock so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding and shall have the
status of authorized but unissued shares of Preferred Stock, unclassified as to
series, and shall not be reissued as shares of the Series C Preferred Stock
(unless reissued as a stock dividend on the Series C Preferred Stock or Series B
Preferred Stock), and all rights of the holders thereof as shareholders of the
Company with respect to said shares (except the right to receive from the
Company the Redemption Price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Company shall so require
and the notice shall so state), such shares shall be redeemed by the Company at
the Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
Voting Rights. The holders of record of shares of Series C Preferred Stock
are not entitled to any voting rights except as provided in the Certificate of
Incorporation of the Company or except as expressly required by applicable law.
So long as any shares of the Series C Preferred Stock are outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of the Series C Preferred Stock,
voting as a class (i) create, authorize or issue any shares of any other class
of senior or parity dividend stock or senior or parity liquidation stock or
having class voting rights except as required by the General Corporation Law of
the State of Delaware or voting rights in excess of one vote per share, (ii)
amend, alter or repeal, whether by merger, consolidation or otherwise, the
Company's Certificate of Incorporation if the amendment, alteration or repeal
materially and adversely affects the powers, preferences or special rights of
the Series C Preferred Stock, or (iii) declare any reverse stock dividend with
respect to the Series C Preferred Stock or otherwise reduce the number of
outstanding shares of the Series C Preferred Stock other than in accordance with
the Certificate of Incorporation of the Company; provided, however, that the
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<PAGE>
approval of not less than two-thirds of the outstanding shares of the Series C
Preferred Stock, voting as a class, shall be required to amend, alter, or repeal
any of the provisions of the Certificate of Incorporation of the Company that
would adversely affect the dividend provisions, liquidation rights, conversion
terms, or voting rights of the Series C Preferred Stock or the holders thereof.
A special meeting of holders of the Series C Preferred Stock (or a request
for a vote by written consent without a meeting) to approve or disapprove any
action of the Company on which the holders of the Series C Preferred Stock are
entitled to vote as a separate class by law or pursuant to the Certificate of
Incorporation of the Company may be called by the Secretary of the Corporation
or by the holders of 25% or more of the outstanding shares of the Series C
Preferred Stock on written notice to the address of each holder thereof as it
appears on the records of the Company deposited in the U.S. mail, all charges
prepaid, at least 10 but no more than 60 days prior to the applicable vote. The
record date for determination of the holders of the Series C Preferred Stock
entitled to vote by written consent or at a meeting shall be set by the
Company's Board of Directors, and only holders who are holding of record on the
stock register of the Company on that date will be entitled to participate in
such vote. At any time at which any share of Series C Preferred Stock has been
issued and is outstanding, no proposal for the Company to take any action as
described herein shall be adopted, nor shall the Company be authorized to take
any such action, unless the holders of at least two-thirds of the outstanding
shares of the Series C Preferred Stock voting as a separate class vote in favor
of such proposal.
Copies of all notices sent to the holders of the Common Stock shall be
simultaneously sent to each holder of the Series C Preferred Stock. In
exercising the voting rights, each share of Series C Preferred Stock shall have
one vote per share.
The Certificate of Designation relating to the Series C Preferred Stock
provides that no consent of the holders of the Series C Preferred Stock, except
to the extent such holders are entitled to vote together with the holders of the
Series B Preferred Stock or Common Stock, shall be required for (i) the
creation, authorization or issuance of any indebtedness of any kind of the
Company, (ii) the creation, authorization or issuance of any other class of
stock of the Corporation subordinate as to dividends and upon liquidation to the
Series C Preferred Stock, or (iii) any increase or decrease in the amount of
authorized Common Stock or Series B Preferred Stock or any increase, decrease or
change in the par value thereof, and none of the foregoing shall be deemed to
affect adversely the powers, special rights or preferences of holders of the
Series C Preferred Stock.
Business Combinations. In case the Company is a participant in a
consolidation, merger or combination with another corporation (other than with a
wholly-owned subsidiary of the Company and other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of the
Common Stock) or in case of any sale or transfer of all or substantially all of
the assets of the Company, as a result of which holders of the Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or any
share exchange whereby the Common Stock is converted into other securities or
property of the Company, then as a condition to the consummation of such
transaction, lawful and adequate provision shall be made so that the holder of
each share of Series C Preferred Stock then outstanding shall have the right to
receive stock, other securities or property or assets (including cash) or any
combination thereof, having a value equal to the product of (a) the quotient
obtained by dividing (x) $100 plus all accrued and unpaid dividends, whether or
not declared, on the Series C Preferred Stock by (y) the then existing
Conversion Price for the Series B Preferred Stock (as adjusted to give effect to
such transaction), and (b) the value of the stock, other securities, property
and assets (including cash) which each holder of one share of Common Stock is
entitled to receive upon such consolidation, merger, combination, sale or
transfer, or exchange.
Certain Restrictions and Limitations on Transferability.
The following restrictions and limitations on the transferability of the
Series B Preferred Stock and the Conversion Shares apply to any person or entity
who acquires the Series B Preferred Stock or Conversion Shares unless such
Series B Preferred Stock or Conversion Shares were acquired (i) at least three
years from the date such securities were issues, (ii) in an underwritten public
offering or (iii) in unsolicited broker's transactions effected in compliance
with all the terms and provisions of Rule 144 under the Securities Act.
Standstill. A holder of Series B Preferred Stock and/or Conversion Shares
will not (i) acquire, or make any offer to acquire or announce any intention to
acquire, additional ownership (including beneficial ownership) of any shares of
the voting securities of the Company, or other securities of the Company
convertible into voting securities, or the right or option to acquire any such
securities, except of the Series B Preferred Stock, the Series C Preferred Stock
and the Conversion Shares, (ii) participate in any "group," as such term is
defined in Section 13(d)(3) of the Exchange Act, with respect to the voting
securities of the Company, other than any group comprised of the Purchasers and
their respective affiliates, (iii) make or in any way participate, directly or
indirectly, in any material respect in any solicitation of proxies, whether
before or after the formal commencement of any such solicitation, or any
solicitation of shareholder written consents, in opposition to, or designed to
influence the management of the Company, (iv) execute any written consent or
initiate any shareholder proposal for action by shareholders, (v) except as
provided in the Certificates of Designation seek to place more than one
representative on the Board of Directors of the Company, seek the removal of any
member of the Board of Directors of the Company, or seek to have called any
meeting of the shareholders of the Company, (iv) otherwise act, alone or
in concert with others, to seek to control or influence in any material respect
the management, Board of Directors or policies of the Company or any of its
subsidiaries, (vii) request the Company (or its directors, officers, employees
or agents) to amend or waive any provision of Section 10.1(a) of the Stock
Purchase Agreement, which contains the restrictions discussed herein, (viii)
knowingly and intentionally sell or otherwise transfer Series B Preferred Stock
or Conversion Shares representing in the aggregate beneficial ownership of 5% or
more of the then outstanding Common Stock to any person, entity or "group," as
such term is defined in Section 13(d)(3) of the Exchange Act, (ix) knowingly and
intentionally sell or otherwise transfer any Series B Preferred Stock or
Conversion Shares to any person, entity or "group," as such term is defined in
Section 13(d)(3) of the Exchange Act, as to which person, entity or group such
holder has received notice from the Company of such person, entity or group's
intention to seek to take, assist or participate in any of the actions set forth
in clauses (iii) through (vi) above, and (x) assist, participate in, encourage
or solicit in any material respect any effort of attempt by any other person or
group to do or seek to do any of the foregoing. Notwithstanding the foregoing,
holders have the right to (i) make or effect open-market sales of any Series B
Preferred Stock or Conversion Shares (in the absence of actual knowledge that
the purchaser of Series B Preferred Stock or Conversion Shares in the open
market from the holders is a person, entity or group of the type specified in
clause (ix) above) and (ii) make or effect transfers to their affiliates, other
persons with respect to whom such holder has investment authority with respect
to any Series B Preferred Stock or Conversion Shares to be transferred to any
such person or any person under common investment management with such holder
and other holders. Further, the restrictions discussed herein will not apply to
any holder who acquires the Series B Preferred Stock or Conversion Shares (i) at
least three years from the date such securities were issued, (ii) in an
underwritten public offering or (iii) in unsolicited broker's transactions
effected in compliance with all the terms and provisions of Rule 144 under the
Securities Act.
Limited Transferability. During the period in which the Series B Preferred
Stock and/or Conversion Shares represent, in the aggregate, five percent of the
Common Stock issued and outstanding after giving effect to the pro forma
conversion of all outstanding shares of the Series B Preferred Stock into
Conversion Shares and ending on the date on which a Change in Control occurs, no
holder of the Series B Preferred Stock and/or Conversion Shares may sell,
transfer or dispose, in any three month period, in the aggregate, any Series B
Preferred Stock or Conversion Shares which, when aggregated with any sale,
transfer or disposal of the Series B Preferred Stock or Conversion Shares of
any other holder during any such three month period, represent beneficial
ownership of more than the greater of (i) 1,000,000 shares of the Common Stock
then issued and outstanding, or (ii) the volume of the Series D Preferred Stock
and Conversion Shares saleable under Rule 144(e) of the Securities Act;
provided, however, that this limitation does not apply to any holder who
acquires the Series B Preferred Stock or Conversion Shares (i) at least three
years from the date such securities are issued, (ii) in an underwritten public
offering or (iii) in unsolicited broker's transactions effected in compliance
with all the terms and provisions of Rule 144 under the Securities Act.
Furthermore, sales made by persons who acquire shares in one of the transactions
set forth in clause (i), (ii), or (iii) of the preceding sentence will not be
aggregated with sales of other holders for purposes of calculating and
determining whether the volume limitations have been exceeded in the case of
sales by other holders.
Rights Agreement--Series A Preferred Stock
The Company has a Rights Agreement pursuant to which, under certain
conditions, each shareholder has share purchase rights for each outstanding
share of Common Stock of the Company. The Company has reserved
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<PAGE>
250,000 shares of Series A Preferred Stock for possible issuance upon exercise
of the rights. The purpose of the Rights Agreement is to deter coercive or
unfair takeover tactics and to prevent a potential purchaser from gaining
control of the Company without offering a fair price to all of the Company's
shareholders.
Under the Rights Agreement, each outstanding share of the Company's Common
Stock includes a preferred share purchase right (a "Right") expiring on October
19, 1997. Each share of Series B Preferred Stock also includes that number of
Rights to which it would be entitled upon conversion into shares of Common
Stock. Each Right entitles the registered holder to purchase a unit consisting
of one one-hundredth of a share of Series A Preferred Stock for $50 per unit,
which price is subject to adjustment. The Rights cannot be exercised unless
certain events occur that might lead to a concentration in ownership of Common
Stock. At that time, the Rights may be exercised for the number of shares of
Common Stock having a market value of twice the exercise price of the Right.
Under certain conditions, the Rights also become exercisable into that number of
shares of common stock of a purchaser having a market value of twice the
exercise price of the Right. The Rights are not exercisable until such time as
they are no longer redeemable by the Company. The Company will generally be
entitled to redeem the Rights, at $.01 per right, any time before a 20% position
in the outstanding shares of the Common Stock of the Company is acquired, or the
right to obtain such position in the Company is acquired.
SELLING SECURITY HOLDERS
The Series B Preferred Stock was originally issued by the Company in
transactions exempt from the registration requirements of the Securities Act.
The Selling Holders, which term includes their transferees, pledgees, donees or
their successors, may from time to time offer and sell pursuant to this
Prospectus any or all of the Series B Preferred Stock, the Series C Preferred
Stock or the Conversion Shares.
The following table sets forth, as of October 25, 1996, with respect to the
Selling Holders, the respective amounts of the Series B Preferred Stock
beneficially owned by each Selling Holder that may be offered pursuant to this
Prospectus and the number of Conversion Shares that are issuable upon conversion
of the Series B Preferred Stock held by such Selling Holder. Such information
has been obtained from the Selling Holders. None of the Selling Holders has, or
within the past three years had, any position, office or other material
relationship with the Company or any of its predecessors or affiliates, except
as noted below. Because the Selling Holders may offer all or some of the Series
B Preferred Stock and the Series C Preferred Stock or some or all of the
Conversion Shares pursuant to this Prospectus, no estimate can be given as to
the amount of the Series B Preferred Stock, Series C Preferred Stock or the
Conversion Shares that will be held by the Selling Holders upon the termination
of any such sales. In addition, the Selling Holders identified below may have
sold, transferred or otherwise disposed of all or a portion of their Series B
Preferred Stock, Series C Preferred Stock or Conversion Shares since October 25,
1996 in transactions exempt from the registration requirements of the Securities
Act.
Mr. John W. Gildea currently serves on the Board of Directors of the
Company. As noted above, the Company is obligated pursuant to the terms and
provisions of the Stock Purchase Agreement to cause one person nominated by the
Purchasers holding a majority of the Series B Preferred Stock to be nominated
for election to the Board of Directors of the Company and to recommend the
Purchasers' nominee in the same manner as all other nominees of the Company.
Mr. Gildea was nominated to the Board of Directors of the Company in accordance
with the foregoing.
Bridge Partners, L.P. is a Delaware limited partnership ("Bridge Partners"),
the sole general partner of which is Carson Street Partners, Inc., a Delaware
corporation ("Carson Street Partners"). Mr. Gildea is the Chairman of the Board
of Directors, Chief Executive Officer, President and the majority stockholder of
Carson Street Partners. Mr. Gildea is also a limited partner in Bridge
Partners. Network Fund III, Ltd. ("Network Fund III") is a Cayman Islands
exempt company. Mr. Gildea is a director and Chairman of the Board of Directors
of Network Fund III. Mr. Gildea is the Chairman of the Board of Directors, Chief
Executive Officer, President and the majority stockholder of Gildea Management
Company, a Delaware corporation ("GMC"), which corporation has investment
authority respecting the investments made by Network
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<PAGE>
Fund III by virtue of an Investment Advisory Agreement, dated February 26, 1996,
between GMC and Network Fund III.
Mr. William P. O'Donnell is an officer, director and a minority stockholder
of Carson Street Partners. Mr. O'Donnell is an officer and director of GMC.
Mr. O'Donnell is also a limited partner in Bridge Partners.
Pursuant to an Amended and Restated Agreement of Limited Partnership of
Bridge Partners, Carson Street Partners is generally entitled to receive 11% of
all net realized gains on Bridge Partners' investments, which investments
include the Series B Preferred Stock held by Bridge Partners and the Conversion
Shares.
Pursuant to a Consultant Agreement dated May 16, 1996 between the General
Chemical Group Inc. Master Pension Trust (the "GCG Pension Trust") and
Iron City Capital LLC, a Delaware limited liability company of which Mr. Gildea
is a director, officer and the controlling member and Mr. O'Donnell is an
officer, director and the remaining minority member ("Iron City LLC"), Iron City
LLC and the GCG Pension Trust have agreed that Iron City LLC may, but shall not
be obligated to, provide investment consultant services to the GCG Pension Trust
in connection with the shares of Series B Preferred Stock held by the GCG
Pension Trust (the "GCG Pension Trust Shares"). The GCG Pension Trust
Consultant Agreement provides, among other things, that the GCG Pension Trust
shall pay to Iron City LLC a percentage of the pre-tax net gain on the sale of
the GCG Pension Trust Shares.
Pursuant to a Consultant Agreement dated May 15, 1996 between EURISTECH
S.A., a French corporation ("EURISTECH"), and Iron City LLC, Iron City LLC and
EURISTECH have agreed that Iron City LLC may, but shall not be obligated to,
provide investment consultant services to EURISTECH in connection with the
shares of Series B Preferred Stock held by EURISTECH (the "EURISTECH Shares").
The EURISTECH Consultant Agreement provides, among other things, the EURISTECH
shall pay to Iron City LLC a percentage of the pre-tax net gain on the sale of
the EURISTECH Shares as well as an annual fee on the EURISTECH Shares.
<TABLE>
<CAPTION>
Number of Series B
Selling Holder/(1)/ Preferred Stock Conversion Shares/(2)/
- ------------------- ------------------ ----------------------
<S> <C> <C>
Bridge Partners, L.P. 141,000 2,014,286
Network Fund III, Ltd. 59,000 842,857
John W. Gildea 10,000 142,857
William P. O'Donnell 1,000 14,286
Pequod Investments, L.P. 4,000 57,143
EURISTECH S.A. 15,000 214,286
Mellon Bank, N.A., as Trustee for 20,000 285,714
the General Chemical Group Inc. ------- ---------
Master Pension Trust
Total: 250,000 3,571,429
------- ---------
</TABLE>
/(1)/ As of November 22, 1996, none of the Selling Holders beneficially owns any
Series C Preferred Stock.
/(2)/ Estimated based upon the current exercise price. Upon conversion, the
Selling Holder will receive cash from the Company in lieu of any fractional
interest of the Common Stock.
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<PAGE>
PLAN OF DISTRIBUTION
The Series B Preferred Stock, the Series C Preferred Stock and the
Conversion Shares may be sold from time to time to purchasers directly by the
Selling Holders. Alternatively, the Selling Holders may from time to time offer
the Series B Preferred Stock, the Series C Preferred Stock and the Conversion
Shares to or through underwriters, broker-dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of the Series B Preferred Stock, the
Series C Preferred Stock or the Conversion Shares for whom they may act as
agents. The Selling Holders and any underwriters, broker-dealers or agents that
participate in the distribution of the Series B Preferred Stock, the Series C
Preferred Stock or the Conversion Shares may be deemed to be "underwriters," as
such term is defined in Section 2(11) of the Securities Act and any profit on
the sale of the Series B Preferred Stock, the Series C Preferred Stock or the
Conversion Shares by them and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker-dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Series B Preferred Stock, the Series C Preferred Stock and the
Conversion Shares may be sold by the Selling Holders from time to time, in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
Such prices will be determined by the Selling Holders. The sale of the Series B
Preferred Stock, the Series C Preferred Stock and the Conversion Shares may be
effected in transactions (i) on any national securities exchange or quotation
service on which the Series B Preferred Stock, the Series C Preferred Stock or
the Conversion Shares may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of the Series B Preferred Stock, the Series C
Preferred Stock or the Conversion Shares is made, if required, a prospectus
supplement will be distributed that will set forth the names of the Selling
Holders, the aggregate number of the Series B Preferred Stock, the Series C
Preferred Stock and the Conversion Shares, the number of such securities owned
prior to and after the completion of any such offering, and, to the extent
required, the terms of the offering, including the name or names of any
underwriters, broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Series B Preferred Stock, Series C Preferred Stock and the Conversion Shares
will be offered or sold in such jurisdictions only through registered or
licensed broker-dealers. In addition, in certain jurisdictions, the Series B
Preferred Stock, Series C Preferred Stock and the Conversion Shares may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Series B Preferred Stock, Series C Preferred
Stock and the Conversion Shares may be limited in its ability to engage in
market activities with respect to such Series B Preferred Stock, Series C
Preferred Stock and Conversion Shares. In addition, without limitation on the
foregoing, each Selling Holder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales by the Selling Holders of any of the
Series B Preferred Stock, Series C Preferred Stock and the Conversion Shares.
All of the foregoing may affect the marketability of the Series B Preferred
Stock, Series C Preferred Stock and the Conversion Shares.
All expenses of the registration of the Series B Preferred Stock, Series C
Preferred Stock and the Conversion Shares will be paid by the Company,
including, without limitation, Commission filing fees and expenses of compliance
with state securities laws; provided, however, that the Selling Holders will pay
all underwriting discounts and selling commissions, if any. The Selling Holders
will be indemnified by the Company against certain liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution
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<PAGE>
in connection therewith. The Company will be indemnified by the Selling Holders
against certain liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Series B Preferred Stock, the Series C Preferred Stock
and the Conversion Shares will be passed upon for the Company by Miles &
Stockbridge, a Professional Corporation, 10 Light Street, Baltimore, Maryland
21202.
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1995 and 1994, and the consolidated statements of earnings, cash
flows, and changes in shareholders' equity for each of the two years in the
periods ended December 31, 1995 and 1994 and the statements of earnings and cash
flows of certain of the hangar facilities of AlliedSignal Engines-Hangar
Operations, a division of AlliedSignal, for the six month period ended June 30,
1994 and the year ended December 31, 1993, have been incorporated by reference
herein in reliance on the reports of Coopers & Lybrand L.L.P., independent
public accountants, given on the authority of that firm as experts in accounting
and auditing.
The consolidated statements of earnings, changes in stockholders' equity and
cash flows of the Company and its subsidiaries for the year ended December 31,
1993 have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, upon the
authority of said firm as experts in accounting and auditing. Following
discussions between KPMG Peat Marwick LLP and representatives of the Company,
the parties determined that KPMG Peat Marwick LLP would cease to serve as the
Company's auditors effective February 22, 1994. The Company's audit committee
was advised of these discussions and approved of this action. In connection with
the audit of the Company's consolidated financial statements for each of the
fiscal years ended December 31, 1993 and 1992 and in the subsequent interim
period through February 22, 1994, there were no disagreements between the
Company and KPMG Peat Marwick LLP on any matter of accounting principles or
practices, financial statement disclosures or auditing scope or procedures,
which disagreements, if not resolved to KPMG Peat Marwick's satisfaction, would
have caused them to make reference in connection with their opinion to the
subject matter of the disagreement. The audit report of KPMG Peat Marwick LLP
on the consolidated financial statements of the Company and its subsidiaries as
of and for the years ended December 31, 1993 and 1992 did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principles, except that, as required
with respect to changes in accounting principles, the 1993 audit report made
reference to the Company's adoption in 1993 of the provisions of the Financial
Accounting Standards Board's Statement on Financial Accounting Standards
No. 109, Accounting for Income Taxes.
The consolidated financial statements of Garrett Aviation Services and its
subsidiary as of December 31, 1995 and 1994, and for the year ended December 31,
1995 and the period July 1, 1994 to December 31, 1994 incorporated by reference
herein have been audited by Ernst & Young LLP, independent auditors. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE>
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any of its agents. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date as of
which information is given in this Prospectus. This Prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such solicitation.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ......................... 3
THE COMPANY ............................................................... 4
RISK FACTORS .............................................................. 4
USE OF PROCEEDS ........................................................... 6
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS .................................. 6
DESCRIPTION OF CAPITAL STOCK .............................................. 7
SELLING SECURITY HOLDERS .................................................. 19
PLAN OF DISTRIBUTION ...................................................... 21
LEGAL MATTERS ............................................................. 22
EXPERTS ................................................................... 22
</TABLE>
[LOGO OF UNC APPEARS HERE]
UNC INCORPORATED
SERIES B SENIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK
SERIES C SENIOR
CUMULATIVE PREFERRED STOCK
COMMON STOCK
------------------
PROSPECTUS
------------------
Dated January 15, 1997
