<PAGE> 1
As filed with the Securities and Exchange Commission on February 24, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BANNER AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2039311
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
----------------
300 WEST SERVICE ROAD
WASHINGTON DULLES INTERNATIONAL AIRPORT
WASHINGTON, D.C. 20041
(703) 478-5790
(Address and Telephone Number of Registrant's Principal Executive Offices)
----------------
THE CORPORATION TRUST COMPANY
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 777-0205
(Address and Telephone Number of Agent for Service)
----------------
COPIES TO:
Donald B. Brant, Jr. Warren D. Persavich
Milbank, Tweed, Hadley & McCloy 300 West Service Road
1 Chase Manhattan Plaza Washington Dulles International Airport
New York, New York 10005 Washington, D.C. 20041
(212) 530-5000 (703) 478-5790
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being offered on this Form are being offered
pursuant to a dividend or interest reinvestment plan, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Security to be Registered Registered(1) Offering Price per Aggregate Offering Registration
Unit(1)(2) Price(1)(2) Fee(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Convertible
Paid-in-Kind Preferred
Stock, par value $.01 7,521,088 $9.20 $69,194,009.60 $20,967.88
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value (3) N/A N/A N/A
=====================================================================================================================
</TABLE>
(1) Includes 2,316,341 shares of Series A Convertible Paid-in-Kind Preferred
Stock representing the maximum number of such shares that may be issued as
dividends on outstanding shares of such stock pursuant to its paid-in-kind
feature.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Such presently indeterminate number of shares of Common Stock as may be
issuable from time to time upon such conversion of the Preferred Stock being
registered hereunder.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION DATED FEBRUARY 24, 1997
PROSPECTUS
Rights to Subscribe for 5,204,747 Shares of
Series A Convertible Paid-in-Kind Preferred Stock
BANNER AEROSPACE, INC.
------------------------------
Banner Aerospace, Inc. (the "Company") is issuing to holders of shares of
its Common Stock, $1.00 par value ("Common Stock"), non-transferable rights
(the "Rights") to subscribe for shares of Series A Convertible Paid-in-Kind
Preferred Stock, par value $.01 per share (the "Preferred Stock"). The
Preferred Stock will pay semi-annual dividends at the rate of 7.5% per annum
of the liquidation value of $9.20 per share (the "Liquidation Value").
Fractional shares of Preferred Stock will not be issued, but a cash adjustment
will be paid in respect of such fractional interests based on the Liquidation
Value. The Preferred Stock is convertible into Common Stock as described in
"DESCRIPTION OF THE SECURITIES--Series A Convertible Paid-in-Kind Preferred
Stock". Each holder of Common Stock of record at 5:00 p.m., New York City
time, on [ ________], 1997 (the "Record Date") will receive for every 4.5 shares
of Common Stock held, one Right. No fractional Rights will be issued; however,
one Right will be issued in lieu of any fractional Right to which a holder
would otherwise be entitled. Such holders are entitled to purchase one share
of Preferred Stock for each Right held at a subscription price of $9.20 per
share of Preferred Stock (the "Subscription Price"). In the event all holders
of Common Stock (approximately 23 million shares outstanding) were to exercise
all the Rights in the Rights Offering, the Company would issue approximately
5 million shares of Preferred Stock, for an aggregate consideration of
approximately $48 million. The offering of Preferred Stock issuable upon
exercise of the Rights is referred to herein as the "Rights Offering", and
the period during which the Rights may be exercised is referred to herein
as the "Subscription Period". The Rights expire at 5:00 p.m., New York City
time, on __________, 1997 (the "Expiration Date"). Rights not duly exercised
by such time will lapse and will be void and without value. The Company
reserves the right to extend the Subscription Period and the Expiration Date,
subject to obtaining any required regulatory approvals. The Rights are
evidenced by non-transferable subscription certificates (the "Subscription
Certificates") that are being mailed together with this Prospectus to each
such holder of record on the Record Date. See "DESCRIPTION OF THE RIGHTS
OFFERING".
The principal stockholder of the Company, The Fairchild Corporation
("Fairchild"), which, at the date hereof, beneficially owns approximately 59%
of the outstanding Common Stock, has advised the Company that, subject to
certain qualifications as described herein, it will exercise all of the Rights
it receives pursuant to the Rights Offering. As a result, Fairchild is
expected to purchase approximately 3 million shares of Preferred Stock at an
aggregate price of approximately $28 million. See "PRINCIPAL STOCKHOLDER'S
COMMITMENT".
Prior to the Rights Offering, no shares of Preferred Stock have been issued
and there has been no market for the Preferred Stock. There is no current
intention to list the Preferred Stock on any United States securities exchange.
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "BAR". The last reported sales price of the Common Stock on February
21, 1997 was $8.75 per share. Application will be made to list the shares of
Common Stock to be issued upon any conversion of the shares of Preferred Stock
on the NYSE.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISKS
RELATED TO AN INVESTMENT IN THE PREFERRED STOCK.
------------------------------
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Subscription Price Commissions Proceeds to the
Company(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share of Preferred Stock $9.20 N/A $9.20
Total $47,883,672.40 N/A $47,883,672.40
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses of the Rights Offering, estimated at $500,000.
It is expected that certificates for the Preferred Stock subscribed for in
the Rights Offering will be available for delivery on or about the ______
business day following the Expiration Date.
_______________, 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the United States Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549-1004; and at the Commission's Regional Offices at 500
West Madison St., Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site (http://www.sec.gov) that
contains reports, proxy statements and other information regarding the Company.
Such reports and other information concerning the Company can also be inspected
at the offices of the New York Stock Exchange, 11 Wall Street, New York, New
York 10005, on which the Company's Common Stock is listed. Reference is hereby
made to the Registration Statement of which this Prospectus is a part (the
"Registration Statement") and to the exhibits thereto filed with the Commission
for further information with respect to the Company, the Common Stock, the
Rights and the Preferred Stock. Statements contained herein concerning
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the complete
document filed with the Commission. As permitted by the rules and regulations
of the Commission, this Prospectus omits certain information contained in the
Registration Statement.
------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
a) The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996;
b) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended June 30, 1996, September 30, 1996 and December 31, 1996;
c) The Company's Current Reports on Form 8-K filed February 27, 1996,
March 26, 1996 and January 24, 1997; and
d) The Company's Proxy Statement pursuant to Section 14(a) of the
Exchange Act, dated _________, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a report or 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 report or document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to each
person, including any beneficial owner of Common Stock to whom this Prospectus
is delivered, on written or oral request of such person, a copy (without
exhibits) of any or all documents incorporated by reference in this Prospectus.
Requests for such copies should be made to Eugene W. Juris, (703) 478-5790.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following is a summary only, the contents of which are necessarily
selective, and should be read in conjunction with the detailed information and
consolidated financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein.
THE COMPANY
The Company is a leading international supplier to the aerospace industry
as a distributor, providing a wide range of aircraft parts and related support
services. The Company's products are divided into three product groups:
hardware, rotables and engines. Hardware includes bearings, nuts, bolts,
screws, rivets and other types of fasteners. Rotables include flight data
recorders, radar and navigation systems, instruments, landing gear and
hydraulic and electrical components. Engines include jet engines and engine
parts for use on both narrow and wide body aircraft and smaller engines for
corporate and commuter aircraft. The Company provides a number of services
such as immediate shipment of parts in aircraft on ground situations. The
Company also provides products to original equipment manufacturers and
subcontractors ("OEMs") in the aerospace industry under just-in-time
and inventory management programs. The Company, through its subsidiaries,
sells its products in the United States and abroad to most of the world's
commercial airlines and to air cargo carriers, as well as many OEMs, other
distributors, fixed-based operations, corporate aircraft operators and other
aerospace and non-aerospace companies. The mailing address and telephone
number of the principal executive office of the Company are 300 West Service
Road, P.O. Box 20260, Washington, D.C. 20041, (703) 478-5790.
THE RIGHTS OFFERING
ISSUE OF RIGHTS: The Company is issuing non-transferable rights (the
"Rights") to subscribe for up to 5,204,727 shares of
Series A Convertible Paid-in-Kind Preferred Stock, par
value $.01 per share, of the Company (the "Preferred
Stock"). Each holder of the Company's common stock,
$1.00 par value (the "Common Stock"), of record on the
Record Date (as defined below) is entitled to receive,
for every 4.5 shares of Common Stock held, one Right.
No fractional Rights will be issued; however, one
Right will be issued in lieu of any fractional Right
to which a holder would be otherwise entitled. Such
holders are entitled to purchase one share of
Preferred Stock for each Right held. Fractional
shares of Preferred Stock will not be issued. In the
event all holders of Common Stock (approximately 23
million shares outstanding) were to exercise all the
Rights in the Rights Offering, the Company would issue
approximately 5 million shares of Preferred Stock, for
an aggregate consideration of approximately $48
million.
SUBSCRIPTION PRICE: $9.20 per share, payable by the Expiration Date (the
"Subscription Price"). See "DESCRIPTION OF THE RIGHTS
OFFERING".
RECORD DATE: 5:00 p.m., New York City time, on ______________, 1997
(the "Record Date").
EXPIRATION DATE: __________, 1997 at 5:00 p.m. New York City time (the
"Expiration Date"). Rights not duly exercised by such
time will lapse and will be void and without value.
The Company reserves the right to extend the period
during which the Rights may be exercised (the
"Subscription Period") and the Expiration Date,
subject to obtaining any required regulatory
approvals.
NON-TRANSFERABILITY
OF RIGHTS: The Rights are non-transferable.
3
<PAGE> 5
SUBSCRIPTION
PROCEDURES: The Rights are evidenced by non-transferable
subscription certificates (the "Subscription
Certificates") that are being mailed together with
this Prospectus to each qualified holder of record on
the Record Date. Rights may be exercised in whole or
in part by a qualified record holder of Common Stock
by filling in and signing the relevant forms on the
Subscription Certificate and mailing or delivering the
Subscription Certificate, together with payment in
full for the Rights subscribed for, to the
Subscription Agent (as defined below) at the address
set forth in the Subscription Certificate, provided
that record holders who hold shares of Common Stock
for the accounts of others must follow the
instructions of such beneficial owners with respect to
the Rights to which such beneficial owners are
entitled. See "DESCRIPTION OF THE RIGHTS OFFERING --
Rights of Beneficial Owners of Common Stock". A Right
will not be deemed exercised until the Subscription
Agent receives payment and a duly executed
Subscription Certificate by 5:00 p.m., New York City
time, on the Expiration Date. Payment may be made in
U.S. funds by certified check, bank draft or money
order payable at par to the order of Harris Trust and
Savings Bank, 77 Water Street, New York, New York
10005, Tel No. (212) 701-7624 (the "Subscription
Agent").
USE OF PROCEEDS: The net proceeds to the Company from the sale of
shares of Preferred Stock to be issued with respect to
the Rights, assuming all of the Rights were to be
exercised, are estimated to be approximately $47
million, after deducting expenses of the Rights
Offering estimated to be $500,000. Alternatively, the
net proceeds to the Company, assuming The Fairchild
Corporation ("Fairchild") is the only stockholder
which exercises its Rights, are estimated to be
approximately $28 million, after deducting expenses of
the Rights Offering. Such net proceeds will be used
to repay $22 million borrowed under a subordinated
loan agreement the Company entered into with RHI
Holdings, Inc., a wholly-owned subsidiary of Fairchild
("RHI"), on December 20, 1996. The remainder of any
net proceeds of the Rights Offering will be used to
repay up to approximately $25 million borrowed under
the revolving credit facility pursuant to the Credit
Agreement (as defined under "RISK FACTORS"). See "USE
OF PROCEEDS".
TERMS OF THE PREFERRED STOCK
DIVIDENDS: The Preferred Stock will pay semi-annual dividends at
the rate of 7.5% per annum of the Liquidation Value of
$9.20 per share. Fractional shares of Preferred Stock
will not be issued, but a cash adjustment will be paid
in respect of such fractional interests based on the
Liquidation Value.
OPTIONAL CONVERSION: The shares of Preferred Stock will be convertible into
shares of Common Stock at any time at the election of
the holder.
MANDATORY
CONVERSION: To the extent not previously converted, the Preferred
Stock will automatically be converted into Common
Stock on the fifth anniversary of the date of initial
issuance of the Preferred Stock.
ACCELERATED MANDATORY
CONVERSION: The Preferred Stock will automatically be converted
into Common Stock in the event there is an offer to
acquire all the outstanding shares of the Company's
Common Stock and such offer, if accepted, would result
in the consummation of a transaction whereby 90% of
the outstanding shares of Common Stock, on a fully
diluted basis, would become beneficially owned by one
person or group.
4
<PAGE> 6
CONVERSION PRICE: Each share of Preferred Stock converted into Common
Stock will have a value of $9.20 for the purposes of
such conversion. The conversion price per share of
Common Stock in the case of any optional or mandatory
conversion (the "Conversion Price") will be $9.20 (the
average closing sales prices of the Common Stock on
the 15 consecutive trading days next preceding the
fifth trading day prior to the date the Registration
Statement was initially filed with the Commission).
REDEMPTION: The Preferred Stock will not be redeemable for cash.
RISK FACTORS: An investment in the Preferred Stock is subject to
certain risks. Among the risk factors relating to the
Company are competition, potential conflicts of
interest with Fairchild, certain restrictions in a
Credit Agreement (as defined in "RISK FACTORS --
Certain Restrictions in Credit Agreement"), product
liability, ability to successfully implement
acquisitions, and the effect of shares of Common Stock
eligible for future sale. Risk factors related to the
Preferred Stock and the Rights are the lack of a
public market for the Preferred Stock and the
determination of the Subscription Price and terms of
the Preferred Stock. See "RISK FACTORS".
5
<PAGE> 7
RISK FACTORS
Prospective purchasers of the Preferred Stock should carefully
consider all the information contained herein, including the risk factors set
forth below.
The Prospectus contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by, and information currently available to, management. When used in this
document, the words "anticipate", "estimate", "project", "expect", "should" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated or projected. Among the key factors that have or could
have a direct bearing on the Company's results are those discussed below.
FACTORS RELATING TO THE COMPANY
Competition
As the airline industry continues to emphasize cost reduction to
improve profitability, suppliers of aerospace parts are being forced to become
more competitive. The Company's hardware products group competes with OEMs
such as The Boeing Company, which supports the fleet of Boeing-produced
aircraft, fastener manufacturers and independent distributors. The Company
believes it generally has a price advantage over manufacturers in the smaller
quantities in which it usually deals, and can generally provide more
expeditious service. In the rotables group, the major competitors are AAR
Corp., Air Ground Equipment Services ("AGES"), Aviation Sales Company, The
Memphis Group and other large and small companies in a very fragmented
industry. The major competitors for the Company's engine group are OEMs, such
as General Electric Company and Pratt & Whitney, as well as the engine/engine
parts divisions of AAR Corp. and AGES and many smaller companies. Certain of
these competitors are larger and have greater financial and other resources
than the Company.
Potential Conflicts of Interest with Fairchild
Fairchild is the largest stockholder of the Company and owns
approximately 59% of the Common Stock. Accordingly, Fairchild is in a position
to determine the election of the Company's directors and most other stockholder
actions. Jeffrey J. Steiner serves as Chairman of the Board and Chief
Executive Officer of both Fairchild and the Company. Mr. Steiner devotes such
time to the business and affairs of the Company as he deems appropriate;
however, he has duties and responsibilities to Fairchild which will require a
significant portion of his time and which may conflict with his duties to the
Company. See "RECENT DEVELOPMENTS".
The Company may be subject to various conflicts of interest arising
out of the relationships among it and Fairchild and their respective
affiliates. Although no specific measures to resolve such conflicts of
interest have been formulated, management of the Company has a fiduciary
obligation to deal fairly and in good faith with the Company, and will exercise
reasonable judgment in resolving any specific conflict of interest which may
occur.
Fairchild has advised the Company that, subject to the receipt and
approval of this Prospectus, it intends to exercise the Rights it receives
pursuant to the Rights Offering. See "PRINCIPAL STOCKHOLDER'S COMMITMENT".
Certain Restrictions in Credit Agreement
The Company is party to a second Amended and Restated Credit Agreement
dated as of December 12, 1996, among the Company, Burbank Aircraft Supply, Inc.
(a wholly-owned subsidiary of the Company), Citicorp USA, Inc., as
administrative agent, and the lenders from time to time party thereto (as
amended, the "Credit Agreement"). The Credit Agreement contains covenants
which restrict, among other things, the ability of the
6
<PAGE> 8
Company and each of its subsidiaries to pay cash dividends or other
distributions on their respective shares of capital stock. The Company may,
during any one fiscal year, pay dividends in an aggregate amount which is the
lesser of $150,000 or the amount of consolidated net income as such term is
defined in the Credit Agreement. The Credit Agreement does not restrict stock
dividends payable to holders of the capital stock of the Company or dividends
to the Company from its subsidiaries.
The Credit Agreement contains other covenants which may limit the
Company's operating flexibility including limitations on, among other things,
the incurrence of indebtedness, the making of investments, the sale of assets
and the acquisition of all or substantially all of the business, property,
assets or stock of any entity. Financial covenants in the Credit Agreement
require the Company to maintain on a consolidated basis a minimum net worth and
minimum ratios of interest coverage, fixed charge coverage and debt to earnings
before interest, taxes, depreciation and amortization, which are measured on a
quarterly basis. Events of default under the Credit Agreement include certain
events which result in a change of control of the Company. There can be no
assurance that such provisions will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other
business activities which may be in the interest of the Company.
Product Liability
The Company has product liability insurance policies in full force and
effect that provide coverage for product liability claims arising out of the
products that the Company sells. The Company has not been the subject of any
material product liability claims; however, there can be no assurance that the
Company's product liability insurance policies will be sufficient to cover any
such claims, or that such policies can be maintained in force at an acceptable
cost. Any liability of the Company which is not covered by such policies, or
is in excess of the limits of liability of such policies, could have a material
adverse effect on the financial condition of the Company.
Ability to Successfully Implement Acquisitions
The Company has recently completed the acquisition of PB Herndon
Company, a specialty fastener distributor to the aerospace industry, and is
in the process of implementing the Bellyloading Companies Acquisition (as
defined under "RECENT DEVELOPMENTS"), and may in the future capitalize on
additional selective acquisition opportunities. The integration of acquired
businesses may result in unforeseen difficulties that require a
disproportionate amount of management's attention and the Company's resources.
There can be no assurance that the Company will be able to achieve the
synergies it anticipates from recent and current acquisitions or that suitable
additional acquisitions, or adequate financing sources for such acquisitions,
will be available on terms acceptable to the Company.
Effect of Shares of Common Stock Eligible for Future Sale
Sales, or the possibility of sales, of substantial amounts of the
Common Stock in the public market could have an adverse effect on the market
price of the Common Stock. The Company has granted to Fairchild certain
registration rights with respect to all of the unregistered Common Stock held
by Fairchild so long as Fairchild holds at least 15% of the issued and
outstanding Common Stock of the Company. As of February 19, 1997, all of
Fairchild's approximately 14 million shares of the Common Stock were
unregistered.
FACTORS RELATING TO THE PREFERRED STOCK AND THE RIGHTS
Lack of Public Market for the Preferred Stock
The Preferred Stock is a new issue for which there is currently no
trading market, and there is no current intention to list the Preferred Stock
on any United States securities exchange. If any shares of the Preferred Stock
are traded after their initial issuance, they may trade at a discount or
premium from their initial offering price, depending upon prevailing interest
rates, the market for similar securities and other factors, including general
economic conditions and the financial condition, performance and prospects of
the Company. No assurance can be given that a trading market for the Preferred
Stock will develop or as to the liquidity of any such trading market.
7
<PAGE> 9
Determination of the Subscription Price and Terms of the Preferred Stock
The Subscription Price of the Rights offered hereby and the terms of
the Preferred Stock, including the conversion ratio of the Preferred Stock into
Common Stock, have been arbitrarily determined by the Board of Directors of the
Company and do not necessarily bear any relationship to the Company's net
worth, results of operations or any other generally accepted criterion of
value.
There can be no assurance that the market price of the Common Stock
will not decline after the Rights Offering to a level below its current trading
value, or that, following the completion of the Rights Offering and the
issuance of the Preferred Stock sold pursuant thereto, a holder of the
Preferred Stock will be able to sell shares of the Preferred Stock purchased in
the Rights Offering at a price equal to or greater than the Subscription Price.
Rights Not Transferable; No Market for the Rights
The Rights are non-transferable, and thus there will be no market or
other means for holders of the Rights to directly realize any value associated
with the Rights. Accordingly, holders of the Rights must exercise them and
acquire shares of the Preferred Stock in order to have an opportunity to
realize any such value.
THE COMPANY
The Company, a Delaware corporation, is a leading international
supplier to the aerospace industry as a distributor, providing a wide range of
aircraft parts and related support services. The Company's products are
divided into three product groups: hardware, rotables and engines. Hardware
includes bearings, nuts, bolts, screws, rivets and other types of fasteners.
Rotables include flight data recorders, radar and navigation systems,
instruments, landing gear and hydraulic and electrical components. Engines
include jet engines and engine parts for use on both narrow and wide body
aircraft and smaller engines for corporate and commuter aircraft. The Company
provides a number of services such as immediate shipment of parts in aircraft
on ground situations. The Company also provides products to original equipment
manufacturers and subcontractors in the aerospace industry including
just-in-time and inventory management programs. The Company, through its
subsidiaries, sells its products in the United States and abroad to most of the
world's commercial airlines, as well as to air cargo carriers, OEMs, other
distributors, fixed-base operations, corporate aircraft operators and other
aerospace and non-aerospace companies.
As of December 31, 1996, the Company had approximately 775 employees.
The Company's corporate office consists of 10,000 square feet and is located
near the Washington Dulles International Airport in Northern Virginia.
8
<PAGE> 10
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected consolidated financial data of
the Company and has been derived from, and should be read in conjunction with,
the audited consolidated financial statements of the Company, including the
notes thereto, as of and for the fiscal years ended March 31, 1996, 1995, 1994,
1993 and 1992, and the unaudited interim consolidated financial statements of
the Company, including notes thereto, for the nine months ended December 31,
1996 and 1995.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED DECEMBER 31, FOR THE FISCAL YEARS ENDED MARCH 31,
------------------- ------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)(UNAUDITED)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $275,369 $199,145 $287,880 $222,384 $212,391 $224,777 $225,943
-------- -------- -------- -------- -------- -------- --------
Cost of goods sold 198,262 142,464 209,609 153,261 144,245 159,728 148,374
Selling, general and administrative 60,194 45,822 64,704 52,389 50,815 59,791 57,331
Restructuring charges ---- --- --- 11,650 6,000 --- ---
-------- -------- -------- -------- -------- -------- --------
Operating income 16,913 10,859 13,567 5,084 11,331 5,258 20,238
Unusual item --- --- --- 5,750 --- --- ---
Interest expense, net (9,249) (8,343) (10,972) (9,809) (9,089) (7,510) (7,095)
-------- -------- -------- -------- -------- -------- --------
Income (Loss) from continuing operations
before taxes on income 7,664 2,516 2,595 1,025 2,242 (2,252) 13,143
Provision for taxes 3,070 1,010 1,040 550 940 40 5,030
-------- -------- -------- -------- -------- -------- --------
Income (Loss) from continuing operations 4,594 1,506 1,555 475 1,302 (2,292) 8,113
Discontinued operations, net of tax:
Loss from operations --- --- --- --- (1,905) (848) (2,061)
Loss on disposal --- --- --- --- (11,093) --- ---
-------- -------- -------- -------- -------- -------- --------
--- --- --- --- (12,998) (848) (2,061)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 4,594 $ 1,506 $ 1,555 $ 475 $(11,696) $ (3,140) $ 6,052
======== ======== ======== ======== ======== ======== ========
Earnings (Loss) per common share:
Continuing operations $ 0.20 $ 0.08 $ 0.09 $ 0.03 $ 0.07 $ (0.13) $ 0.45
Discontinued operations --- --- --- --- (0.72) (0.04) (0.11)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per share $ 0.20 $ 0.08 $ 0.09 $ 0.03 $ (0.65) $ (0.17) $ 0.34
======== ======== ======== ======== ======== ======== ========
Weighted average number of common shares 23,406 18,002 18,283 18,002 18,002 18,000 18,000
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital $243,129 $186,280 $209,022 $184,087 $214,806 $250,742 $194,558
Total assets 346,810 265,028 318,209 241,315 272,357 305,809 248,787
Long-term debt, less current maturities 139,549 115,200 111,900 102,800 134,017 157,927 98,299
Stockholders' equity 147,284 109,010 142,603 107,504 107,029 118,714 121,854
</TABLE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The table below sets forth as of December 31, 1996 the number of shares
and percentage of Common Stock beneficially owned by (i) each person known by
the Company to own beneficially more than 5% of any class of Common Stock,
together with such person's address; (ii) each director; (iii) the Company's
Chief Executive Officer ("CEO") and the Company's three most highly compensated
executive officers other than the CEO; and (iv) the directors and officers of
the Company as a group. Except as otherwise indicated in the footnotes to the
table, the persons named possess the sole voting power and investment power
with respect to all shares shown as beneficially owned by them.
9
<PAGE> 11
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF
NAME COMMON STOCK CLASS
------------------------------------------------------------- ------------------- -----------
<S> <C> <C>
Michael T. Alcox . . . . . . . . . . . . . . . . . . . . . . 45,000 (1) *
Frederick W. Bradley, Jr . . . . . . . . . . . . . . . . . . 15,000 (2) *
J.J. Cramer & Co. . . . . . . . . . . . . . . . . . . . . . . 1,766,200 (3) 7.5 %
100 Wall Street
8th Floor
New York, New York 10005
The Fairchild Corporation . . . . . . . . . . . . . . . . . . 13,886,477 (4) 59.3 %
Washington Dulles International Airport
300 West Service Road
Chantilly, Virginia 22021
Steven L. Gerard . . . . . . . . . . . . . . . . . . . . . . 15,000 (2) *
Charles M. Haar . . . . . . . . . . . . . . . . . . . . . . . 15,000 (2) *
Philippe Hercot . . . . . . . . . . . . . . . . . . . . . . . 15,000 (2) *
Eugene W. Juris . . . . . . . . . . . . . . . . . . . . . . . 95,500 (5) *
Samuel J. Krasney . . . . . . . . . . . . . . . . . . . . . . 96,000 (6) *
Warren D. Persavich . . . . . . . . . . . . . . . . . . . . . 148,000 (7) *
Dr. Eric I. Steiner . . . . . . . . . . . . . . . . . . . . . 17,500 (2)(8) *
Jeffrey J. Steiner . . . . . . . . . . . . . . . . . . . . . 14,302,589 (9)(10) 60.0 %
The Fairchild Corporation
Washington Dulles International Airport
300 West Service Road
Chantilly, Virginia 22021
Leonard Toboroff . . . . . . . . . . . . . . . . . . . . . . 15,000 (2) *
John C. Wertz . . . . . . . . . . . . . . . . . . . . . . . . 145,000 (11) *
All directors and officers of the Company as a group (14
persons) . . . . . . . . . . . . . . . . . . . . . . . . . . 14,970,589 (12) 61.3 %
</TABLE>
- ------------------
(1) Includes stock options for 12,000 shares.
(2) Includes stock options for 15,000 shares.
(3) The information above is of December 31, 1996. On February 20, 1997,
J.J. Cramer and Co. filed a Schedule 13d indicating that its stock
ownership in the Company increased to 2,199,000 shares of Common Stock
(9.4% of outstanding shares of Common Stock).
(4) Includes shares of Common Stock owned of record by Fairchild and its
subsidiaries, as follows: Fairchild Holding Corp., 5,386,477 shares;
RHI, 8,488,194 shares; Banner Aerospace Holding Company II, Inc.,
11,806 shares. 13,262,971 of such shares of Common Stock have been
pledged by Fairchild or its subsidiaries as collateral for a loan
facility with Citicorp N.A. and 611,700 shares have been pledged by
Fairchild or its subsidiaries as collateral under an escrow agreement
with BTR Dunlop Holdings, Inc., a wholly-owned subsidiary of BTR
plc. In connection with the Company's acquisition of Harco, Inc. from
Fairchild (the "Harco Transaction"), Fairchild (through its
subsidiaries) was issued 4,413,992 shares on March 12, 1996 and
972,485 shares on May 5, 1996. By virtue of the Harco Transaction,
Fairchild's beneficial ownership in the Company increased from
approximately 47% (as of May 31, 1995) to 59% (as of December 31,
1996). Upon the consummation of the Bellyloading Companies
Acquisition (as defined under "RECENT DEVELOPMENTS"), Fairchild's
beneficial ownership in the Company will increase from 59% (as of
February 14, 1997) to up to 62% of the outstanding shares of Common
Stock if the Maximum Number of Banner Shares (as defined under "RECENT
DEVELOPMENTS") is ultimately issued to RHI or its designee.
(5) Includes stock options for 81,500 shares.
(6) Includes stock options for 5,000 shares.
(7) Includes stock options for 126,000 shares.
(8) The shares are held by Dr. Steiner as guardian for his minor children,
and he disclaims any beneficial interest therein.
(9) Includes 105,000 shares of Common Stock owned of record by Mr. Steiner
and 3,612 shares owned by Mr. Steiner through the Company's Profit
Sharing/401(k) Plan. Also includes 13,886,477 shares owned directly
or indirectly by Fairchild; Mr. Steiner disclaims beneficial
ownership of such shares except to the extent of his pecuniary
interest therein. Also includes 2,500 shares held by Mr. Steiner's
spouse as custodian for minor children; Mr. Steiner disclaims any
beneficial ownership of such shares.
(10) Includes stock options for 305,000 shares.
(11) Includes stock options for 115,000 shares.
(12) Includes stock options for 780,500 shares.
* Less than 1%
10
<PAGE> 12
RECENT DEVELOPMENTS
ACQUISITION OF THE BELLYLOADING COMPANIES
On March __, 1997, the stockholders of the Company will be asked to approve
the acquisition by the Company from RHI, a wholly-owned subsidiary of
Fairchild, of Fairchild Scandinavian Bellyloading Company AB, a Swedish company
involved in the design and manufacture of patented cargo loading systems
("FSBC"), and Scandinavian Bellyloading International, Inc., a California
corporation engaged in sales and marketing of FSBC's cargo loading systems in
the United States ("SBIC", and together with FSBC, the "Bellyloading
Companies"), pursuant to the terms of a Stock Exchange Agreement dated as of
________ __, 1997, between the Company and RHI (the "Stock Exchange
Agreement"). Each of the Bellyloading Companies is a wholly-owned subsidiary
of RHI. Pursuant to the Stock Exchange Agreement, each of the Bellyloading
Companies will become a wholly-owned subsidiary of the Company in exchange for
issuance by the Company to RHI or its designee of 230,000 shares of Common
Stock initially, but subject to certain limitations and adjustments, all as
more fully described in the Proxy Statement incorporated by reference herein
(the "Bellyloading Companies Acquisition").
Upon the issuance of shares of Common Stock under the Stock Exchange
Agreement, the percentage of the Company's voting securities owned of record by
existing holders of shares of Common Stock (not including Fairchild or RHI)
will be reduced. At the date hereof, Fairchild is the beneficial owner of
approximately 13.9 million shares or approximately 59.3% of the outstanding
shares of Common Stock. Upon initial implementation, the Bellyloading
Companies Acquisition would reduce the interest of existing holders of
outstanding shares of Common Stock, other than Fairchild and RHI, to
approximately 40.3%, and increase Fairchild's beneficial ownership to
approximately 59.7% of the outstanding shares of Common Stock. Pursuant to the
Stock Exchange Agreement, the maximum number of shares which the Company will
issue to RHI or its designee is 1.5 million shares (the "Maximum Number of
Banner Shares"). Assuming the Maximum Number of Banner Shares is ultimately
issued to RHI or its designee, the interests of existing holders of outstanding
shares of Common Stock, other than Fairchild and RHI, would be reduced to
approximately 38% and Fairchild's beneficial ownership would be increased to
approximately 62% of the outstanding shares of Common Stock.
Investigation in France
Articles have appeared in the French press reporting an investigation
by a French magistrate into certain allegedly improper business transactions
involving Elf Acquitaine, its former chairman and various third parties. In
connection with this investigation, the magistrate has made inquiry into
allegedly improper transactions between Jeffrey J. Steiner and that petroleum
company. In response to the magistrate's request that Mr. Steiner appear in
France as a witness, Mr. Steiner submitted a written statement concerning the
transactions and has offered to appear in person if certain arrangements were
made. According to the French press, the magistrate also has requested
permission to investigate other allegedly improper transactions involving
another French petroleum company and, if granted, inquiry into transactions
between Mr. Steiner and such company could ensue. The Board of Directors of
the Company has formed a special committee of outside directors to advise it
with respect to these matters, and the special committee has retained counsel.
DESCRIPTION OF THE RIGHTS OFFERING
ISSUE OF RIGHTS
The Company is issuing to holders of its Common Stock non-transferable
Rights to subscribe for up to approximately 5 million shares of Preferred
Stock. Each holder of Common Stock of record at 5:00 p.m., New York City time,
on the Record Date is entitled to receive, for every 4.5 shares of Common Stock
held, one Right. No fractional Rights will be issued; however, one Right
will be issued in lieu of any fractional Right to which a holder would
otherwise be entitled. All such holders are entitled to purchase, at the
Subscription Price, one share of Preferred Stock for each Right held.
Fractional shares of Preferred Stock will not be issued. In the event all
holders of Common Stock (approximately 23 million shares outstanding) were
to exercise all the Rights in the Rights Offering, the Company would issue
approximately 5 million shares of Preferred Stock for an aggregate
consideration of approximately $48 million. No Rights are currently
outstanding. The Company will bear all the fees and costs of issuing the
Preferred Stock.
The Company has filed a Registration Statement, of which this Prospectus is
a part, with the Commission with respect to the Preferred Stock issuable upon
exercise of the Rights and the Common Stock issuable upon any conversion of the
Preferred Stock.
11
<PAGE> 13
SUBSCRIPTION CERTIFICATES
The Rights are evidenced by non-transferable Subscription Certificates,
evidencing the total number of Rights to which the holder is entitled. A
Subscription Certificate representing Rights to acquire shares of the Preferred
Stock will be sent to each record holder of Common Stock on the Record Date.
Possession of a Subscription Certificate does not constitute the holder
thereof to be a holder of the Preferred Stock to which such Subscription
Certificate relates unless and until such holder subscribes for and is issued
such Preferred Stock.
EXPIRATION DATE
This offering of Rights and the Rights evidenced by the Subscription
Certificates will expire on the Expiration Date at 5:00 p.m., New York City
time. The Company reserves the right to extend the Subscription Period,
subject to obtaining any required regulatory approvals. RIGHTS NOT EXERCISED
BY THE EXPIRATION DATE WILL LAPSE AND BE VOID AND WITHOUT VALUE.
SUBSCRIPTION AGENT
The Subscription Agent for the Rights Offering is Harris Trust and Savings
Bank, 77 Water Street, New York, New York 10005; Tel. (212) 701-7624.
INFORMATION AGENT
Investors who desire additional copies of this Prospectus or additional
information should contact Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey 07072-2586; Tel. (800) 932-8494.
SUBSCRIPTION FOR PREFERRED STOCK
Rights may be exercised in whole or in part by a record holder of Common
Stock by filling in and signing the relevant forms on the Subscription
Certificate and mailing or delivering the Subscription Certificate, together
with payment in full for the Rights subscribed for, to the Subscription Agent
at the address set forth in the Subscription Certificate. EXCEPT AS PROVIDED
BELOW, A RIGHT WILL NOT BE DEEMED EXERCISED UNTIL THE SUBSCRIPTION AGENT
RECEIVES BOTH PAYMENT OF THE SUBSCRIPTION PRICE AND A DULY EXECUTED
SUBSCRIPTION CERTIFICATE BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
Any exercise of Rights pursuant to the Rights Offering will be irrevocable
and will not be subject to withdrawal.
If the recipient of a Subscription Certificate wishes to exercise the
Rights represented thereby, but time will not permit the holder to deliver the
Subscription Certificate to the Subscription Agent prior to the Expiration
Date, the Rights may nevertheless be exercised if all the following conditions
are met:
1. The holder has caused payment in full of the Subscription Price for the
shares of Preferred Stock being subscribed for pursuant to the Rights to be
made (in the form prescribed below under "Payment of Subscription Price") to
the Subscription Agent prior to the Expiration Date.
2. The Subscription Agent receives, prior to the Expiration Date, a guarantee
notice (a "Notice of Guaranteed Delivery"), substantially in the form delivered
with the Subscription Certificate, from a financial institution having an
office or correspondent in the United States, or a member firm of any
registered United States national securities exchange or of the National
Association of Securities Dealers, Inc. (each an "Eligible Institution"),
stating the certificate number of the Subscription Certificate relating to the
Rights, the name and address of the exercising stockholder, the number of
Rights represented by the Subscription Certificate held by such exercising
stockholder, the number of shares of Preferred Stock being subscribed for
pursuant to the Rights and guaranteeing the delivery to the Subscription Agent
of the Subscription Certificate evidencing such Rights within
12
<PAGE> 14
three New York Stock Exchange ("NYSE") trading days following the date of the
Notice of Guaranteed Delivery.
3. The properly completed Subscription Certificate evidencing the Rights being
exercised, with signatures guaranteed if required, is received by the
Subscription Agent within three NYSE trading days following the date of the
Notice of Guaranteed Delivery relating thereto.
The Notice of Guaranteed Delivery must be delivered to the Subscription
Agent at the address set forth in the Subscription Certificate or may be
transmitted to the Subscription Agent by facsimile transmission (telecopy no.
(212) 701-7636). Additional copies of the Notices of Guaranteed Delivery are
available upon request from the Subscription Agent.
RIGHTS OF BENEFICIAL OWNERS OF COMMON STOCK
Record holders of Common Stock, such as brokers, trustees or securities
depositaries, who hold shares of Common Stock for the accounts of others should
notify such beneficial owners of the Rights Offering as soon as possible and
obtain instructions with respect to the Rights to which such beneficial owners
are entitled. Each such beneficial owner is entitled to exercise, for every
4.5 shares of Common Stock held, one Right. No fractional Rights will be
issued; however, one Right will be issued in lieu of any fractional Right
to which a holder would otherwise be entitled. If such a beneficial owner of
Rights so instructs, the record holder should complete the Subscription
Certificate, including the amount of Preferred Stock each beneficial owner
elects to purchase, and submit it to the Subscription Agent with the proper
payment, in accordance with the terms of the Rights Offering. In addition,
beneficial owners of Common Stock held through record holders should contact
such record holders and request that they effect transactions in accordance
with such beneficial owner's instructions.
Record holders who exercise the Rights on behalf of beneficial owners of
Common Stock will be required to certify to the Subscription Agent and the
Company, in connection with the exercise of the Rights, as to (i) the number of
shares of Common Stock owned by each such beneficial owner and (ii) the number
of shares of Preferred Stock to which such beneficial owner subscribes pursuant
to that person's exercise of the Rights.
THE METHOD OF DELIVERY TO THE SUBSCRIPTION AGENT OF A SUBSCRIPTION
CERTIFICATE AND PAYMENT OF THE SUBSCRIPTION PRICE IS AT THE ELECTION AND RISK
OF EACH STOCKHOLDER. SUBSCRIPTION CERTIFICATES, TOGETHER WITH PAYMENT OF THE
SUBSCRIPTION PRICE, SHOULD BE SENT WITH SUFFICIENT TIME TO ALLOW FOR DELIVERY
PRIOR TO THE EXPIRATION DATE. IF DELIVERY IS MADE BY REGULAR MAIL SERVICE, THE
USE OF REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
COMPLETED SUBSCRIPTION CERTIFICATES AND PAYMENTS SHOULD BE MAILED OR
DELIVERED TO THE SUBSCRIPTION AGENT AND NOT TO THE COMPANY. QUESTIONS SHOULD
BE DIRECTED TO THE INFORMATION AGENT.
PAYMENT OF SUBSCRIPTION PRICE
The total Subscription Price for the Preferred Stock subscribed for must be
paid to the Subscription Agent in U.S. funds by certified check, bank draft or
money order payable at par (without deduction for bank service charges or
otherwise) to the order of the Subscription Agent. All funds received in
payment of the Subscription Price under the Rights Offering will be promptly
remitted by the Subscription Agent to the Company.
DELIVERY OF STOCK CERTIFICATES
Certificates for shares of Preferred Stock duly subscribed and paid for
will be mailed to the subscriber by the Subscription Agent as soon as
practicable (which is anticipated to be the __th business day after the
Expiration Date) at the subscriber's registered address on the books of the
Company.
13
<PAGE> 15
SIGNATURES
Whenever any of the forms on a Subscription Certificate are signed, the
signature must correspond in every particular with the name of the holder as it
appears on the face of the Subscription Certificate. If the Subscription
Certificate is signed by a trustee, executor, administrator, guardian, attorney
or officer of a corporation or any person acting in a fiduciary or
representative capacity, the person so signing should give his full title in
such capacity and, on request, satisfactory evidence of authority to act must
be furnished.
Signatures on all Subscription Certificates must be guaranteed by an
Eligible Institution, unless such Subscription Certificate (i) provides that
the Preferred Stock to be issued pursuant to the exercise of Rights represented
thereby are to be registered in the name of and delivered to the registered
holder of such Rights or (ii) is submitted for the account of an Eligible
Institution.
DETERMINATION AS TO VALIDITY OF SUBSCRIPTIONS
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any subscription will be determined by the Company,
in its sole discretion, which determination will be final and binding. The
Company reserves the absolute right to reject any subscription if it is not in
proper form or if the acceptance thereof or the issuance of the Preferred Stock
pursuant thereto could be deemed unlawful. The Company also reserves the right
to waive any defect with regard to any particular subscription or request for
transfer. The Company and the Subscription Agent shall not be under any duty to
give notification of any defects or irregularities in subscriptions, nor will
either of them incur any liability for failure to give such notification.
Subscriptions will not be deemed to have been made until any such defects or
irregularities have been cured or waived within such time as the Company will
determine. Subscriptions with defects or irregularities which have not been
cured or waived will be returned by the Subscription Agent to the appropriate
holder of the Rights as soon as practicable.
PRINCIPAL STOCKHOLDER'S COMMITMENT
The principal stockholder of the Company, Fairchild, which, at the date
hereof, beneficially owns approximately 59% of the outstanding Common Stock,
has agreed that, subject to the receipt and approval of this Prospectus, it
will exercise all of the Rights it receives pursuant to the Rights Offering.
As a result, Fairchild is expected to purchase approximately 3 million shares
of Preferred Stock for an aggregate amount of approximately $28 million.
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Preferred Stock
to be issued with respect to the Rights, assuming all of the Rights are
exercised, are estimated to be approximately $47 million, after deducting
expenses of the Rights Offering estimated to be $500,000. Alternatively, the
net proceeds to the Company, assuming Fairchild is the only stockholder which
exercises its Rights, are estimated to be approximately $28 million, after
deducting expenses of the Rights Offering. Such net proceeds will be used to
repay $22 million borrowed under a subordinated loan agreement the Company
entered into with RHI on December 20, 1996. The loan from RHI bears interest
at an initial rate of 10% and will mature on the earlier of the completion of
the Rights Offering or November 15, 2003. The loan proceeds from RHI were used
to acquire PB Herndon Company. The remainder of any net proceeds of the Rights
Offering will be used to repay up to $25 million borrowed under the revolving
credit facility pursuant to the Credit Agreement. The six-year revolving
credit facility bears interest at the prime rate plus 1-1/4% or London
Interbank Offered Rate plus 2-1/2% and will mature on August 17, 2000. The
amounts borrowed under the revolving credit facility were used for working
capital purposes and acquisitions. The Company intends to borrow funds under
the revolving credit facility in the future for working capital purposes and
further acquisitions.
14
<PAGE> 16
DETERMINATION OF SUBSCRIPTION PRICE
The Subscription Price contained in the Rights for the Preferred Stock
offered hereby and the terms of the Preferred Stock, including the conversion
ratio of the Preferred Stock, have been arbitrarily determined by the Board of
Directors of the Company and do not necessarily bear any relationship to the
Company's net worth, results of operations or any other generally accepted
criterion of value. A special committee (the "Special Committee") of the Board
of Directors of the Company, comprised of three directors of the Company who
are neither officers nor employees of the Company or otherwise affiliated with
Fairchild, have approved the Subscription Price and the terms of the Preferred
Stock. As part of the process of determining the terms of the Rights Offering
and the Preferred Stock, the Special Committee and the Board considered, among
other things, the amount of proceeds desired by the Company, pricing and terms
of recent rights offerings, pricing and terms of recently issued preferred
stocks, the trading price of the Common Stock, and the business prospects of
the Company, and the advice of Houlihan Lokey Howard & Zukin, Inc. (the
"Financial Advisor"). The Financial Advisor has rendered its opinion to the
Special Committee in the form attached hereto as Annex A, to the effect that
the Rights Offering is fair to the stockholders of the Company, other than
Fairchild, from a financial point of view.
There can be no assurance that the market price of the Common Stock will
not decline after the Rights Offering to a level below its current trading
value, or that, following the completion of the Rights Offering and the
issuance of the Preferred Stock sold pursuant thereto, a holder of the
Preferred Stock will be able to sell shares of the Preferred Stock purchased in
the Rights Offering at a price equal to or greater than the Subscription Price.
The Board, the Special Committee and the Financial Advisor have expressed
no opinion nor have they made any recommendation as to whether the holders of
the Common Stock should exercise their Rights. Any investment in the Preferred
Stock of the Company must be made pursuant to each subscriber's evaluation of
the Rights Offering, including the factors discussed under "RISK FACTORS", in
the context of his or her best interest.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
December 31, 1996, (ii) as adjusted to give effect to the issuance and sale of
shares of Preferred Stock in the Rights Offering, assuming only Fairchild's
Rights are exercised in the Rights Offering and (iii) as adjusted to give
effect to the issuance and sale of shares of Preferred Stock, assuming all of
the Rights are exercised.
The capitalization table does not assume the issuance of 230,000 additional
shares of Common Stock for the acquisition of the Bellyloading Companies, if
approved by the stockholders. Based on the operating results of the
Bellyloading Companies, the Company will have the ability to either rescind
this acquisition or may be required to provide additional shares. The
capitalization table also does not include the $22 million borrowed under a
subordinated loan agreement the Company entered into with RHI as the funds were
borrowed subsequent to December 31, 1996 for the acquisition of PB Herndon and
additional working capital requirements.
<TABLE>
<CAPTION>
As of December 31, 1996
--------------------------------------------
As Adjusted
---------------------------
Actual Minimum(1) Maximum(2)
------ ------- -------
(In thousands)
<S> <C> <C> <C>
Long-term debt, less current maturities . . . . . . . . . . . . . . . . $139,549 $111,659 $ 92,169
Stockholders' Equity:
Preferred stock, par value $.01(3) . . . . . . . . . . . . . . . . . --- 31 52
Common stock, par value $1.00(4) . . . . . . . . . . . . . . . . . . 23,410 23,410 23,410
Paid-in capital(5) . . . . . . . . . . . . . . . . . . . . . . . . . 113,194 141,053 160,522
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 10,680 10,680 10,680
------- ------- -------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . 147,284 175,174 194,664
Total Capitalization(6) . . . . . . . . . . . . . . . . . . . . . . . . . $286,833 $286,833 $286,833
======= ======= =======
</TABLE>
- ---------------------------
(1) Assuming only Fairchild exercises its Rights.
(2) Assuming all of the Rights are exercised.
(3) No shares of Preferred Stock were authorized as of December 31, 1996.
Upon stockholder approval, 10,000,000 shares of Preferred Stock will
be authorized. See "DESCRIPTION OF SECURITIES".
(4) 30,000,000 shares of Common Stock were authorized and 23,410,000 were
issued and outstanding as of December 31, 1996. Upon stockholder
approval, 50,000,000 shares of Common Stock will be authorized. See
"Description of Securities". The Company reserved for issuance
2,193,867 shares of its Common Stock upon the exercise of options
granted and available for future grants under the Company's existing
stock option plans. At December 31, 1996, 1,037,200 stock options
were outstanding pursuant to the stock option plans at prices ranging
from $4.63 to $8.13 per share. During fiscal 1997 and 1996, 16,833
shares and 4,200 shares of stock options were exercised, respectively.
(5) After deducting estimated expenses of the Rights Offering of
approximately $500,000. In accordance with U.S. generally accepted
accounting principles, expenses of an offering are netted against the
portion of the proceeds of the offering which is reflected in the paid
in capital balance of stockholders' equity.
(6) Total capitalization equals the sum of long-term debt (less current
maturities) and total stockholders' equity.
16
<PAGE> 18
MARKET INFORMATION
MARKET FOR THE SECURITIES
The Rights are non-transferable, and thus there will be no market or
other means for holders of the Rights to directly realize any value associated
with the Rights. Accordingly, holders of the Rights must exercise them and
acquire shares of the Preferred Stock in order to realize any such value.
Prior to the Rights Offering, there has been no public market for the
Preferred Stock. It is not expected that the Preferred Stock will be listed on
any securities exchange. There can be no assurance that a public market for
the Preferred Stock will develop or will continue if developed.
The outstanding Common Stock is listed and trades on the NYSE and
application will be made to list the shares of Common Stock to be issued upon
any conversion of the Preferred Stock on the NYSE.
PRICE RANGE OF COMMON STOCK
The Common Stock is currently trading on the NYSE under the symbol
BAR. The following table sets forth, for the quarters indicated, the range of
high and low prices per share of Common Stock as reported on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDING MARCH 31, 1997:
QUARTERS ENDED:
June 30, 1996 . . . . . . . . . . . . . . $9 $5 3/8
September 30, 1996 . . . . . . . . . . . . 8 3/8 7 3/8
December 31, 1996 . . . . . . . . . . . . 8 5/8 7 3/4
March 31, 1997 (through February 21, 1997) 9 3/4 8 1/2
FISCAL YEAR ENDED MARCH 31, 1996:
QUARTERS ENDED:
June 30, 1995 . . . . . . . . . . . . . . $5 1/8 $3 1/2
September 30, 1995 . . . . . . . . . . . . 6 1/4 4 1/8
December 31, 1995 . . . . . . . . . . . . 6 3/8 4 3/4
March 31, 1996 . . . . . . . . . . . . . . 6 3/4 5 1/2
FISCAL YEAR ENDED MARCH 31, 1995:
QUARTERS ENDED
June 30, 1994 . . . . . . . . . . . . . . $5 3/4 $4 1/2
September 30, 1994 . . . . . . . . . . . . 6 4 5/8
December 31, 1994 . . . . . . . . . . . . 5 5/8 3 3/4
March 31, 1995 . . . . . . . . . . . . . . 4 3/8 3 3/4
</TABLE>
The closing price of the Common Stock as reported on the NYSE on
February 18, 1997 was $8.75 per share.
DIVIDENDS ON COMMON STOCK
It is the Company's current policy to retain earnings to support the
growth of its present operations and to reduce its outstanding debt. The
Credit Agreement contains covenants which restrict, among other things, the
ability of the Company and each of its subsidiaries to pay cash dividends or
other distributions on common stock. The Company may, during any one fiscal
year, pay dividends in an aggregate amount which is the lesser of $150,000 or
the amount of consolidated net income as such term is defined in the Credit
Agreement. Dividends for the Preferred Stock will be payment-in-kind, paid in
additional shares of Preferred Stock. Any future determination as to the
payment of dividends will be at the discretion of the Board of Directors and
will
17
<PAGE> 19
depend on the Company's financial condition, results of operations and capital
requirements, restrictive covenants in its credit agreement with its senior
lenders and such other factors as the Board of Directors deems relevant. No
dividends were declared in fiscal years 1996, 1995 or 1994.
HOLDERS OF RECORD OF COMMON STOCK
The Company had approximately 80 holders of record and 1,200
beneficial holders of the Common Stock at December 31, 1996.
DESCRIPTION OF SECURITIES
The Company's Restated Certificate of Incorporation authorizes the
issuance of 30,000,000 shares of capital stock. The Board of Directors has
adopted a resolution increasing the capital stock of the Company, to be
presented for shareholder approval at a meeting to be held on ____________,
1997. Fairchild will cause its shares of Common Stock to be voted in favor of
such resolution. Upon stockholder approval, the Certificate of Incorporation,
as amended and restated (the "Certificate of Incorporation"), will authorize
the issuance of 60,000,000 shares of capital stock. Such shares will be
divided into two classes. One class will be designated preferred stock and
will consist of 10,000,000 shares of par value $.01 per share, and the other
class will be designated common stock and will consist of 50,000,000 shares of
par value $1.00 per share. The Board of Directors of the Company has resolved
to reserve a sufficient number of shares of Common Stock to be issued upon the
conversion of Preferred Stock.
COMMON STOCK
General
Upon stockholder approval, the Company will be authorized by its
Certificate of Incorporation to issue 50,000,000 shares of Common Stock. As of
December 31, 1996, 23,409,610 shares were issued and outstanding.
Dividends
The holders of Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor. The Credit Agreement contains covenants which restrict the ability
of the Company to pay cash dividends or other distributions on common stock.
Liquidation
In the event of dissolution, liquidation or winding up of the Company,
holders of Common Stock are entitled to share ratably in any assets remaining
after the satisfaction in full of the prior rights of creditors and
distribution to the holders of Preferred Stock of amounts to which they may be
preferentially entitled.
Voting
The Company's common stockholders are entitled to one vote for each
share on all matters voted on by stockholders. Directors are elected annually.
Holders of shares of Common Stock have no cumulative voting rights.
No Other Rights
The holders of shares of Common Stock do not have any conversion,
redemption or preemptive rights.
Transfer Agent
The transfer agent for the Common Stock is Harris Trust and Savings
Bank, 311 West Monroe Street, P.O. Box A3504, Chicago, Illinois 60690-3504;
Tel. No. (312) 360-6001.
18
<PAGE> 20
Listing
Shares of the outstanding Common Stock are listed on the NYSE under
the symbol "BAR".
SERIES A CONVERTIBLE PAID-IN-KIND PREFERRED STOCK
General
Upon stockholder approval, the Company will be authorized by its
Certificate of Incorporation to issue 10,000,000 shares of Preferred Stock.
This description of the Preferred Stock is meant to be a summary. The
Company's Certificate of Designations, Preferences, Rights and Limitations of
Preferred Stock (the "Certificate of Designations") filed as Exhibit 4.3 to
the Registration Statement provides the full terms and conditions of the
Preferred Stock.
Dividends
The holders of outstanding shares of Preferred Stock will be entitled
to receive semi-annual dividends, as and when declared by the Board of
Directors out of funds legally available therefor. Each semi-annual dividend
will be paid at the rate of 7.5% per annum of the Liquidation Value of $9.20
per share, payable in additional shares of Preferred Stock. The number of
shares of Preferred Stock issued to pay dividends will be based on the
Preferred Stock's Liquidation Value. Each such dividend will be payable on or
about each April 30 and October 31 (each, a "Dividend Payment Date"), or if any
such date is not a business day, the dividends due on such Dividend Payment
Date will be paid on the next succeeding business day, beginning on October 31,
1997. Such dividends will be cumulative and will accrue on each share whether
or not earned. Dividends will cease to accrue on shares of Preferred Stock
following conversion into shares of Common Stock. Fractional shares of
Preferred Stock will not be delivered, but a cash adjustment will be paid in
respect of such fractional interests based on the Liquidation Value.
Unless all dividends on the outstanding shares of Preferred Stock that
have accrued and are payable as of any date shall have been paid or declared
and additional shares or funds, as appropriate, set apart for payment thereof,
no dividend or other distribution shall be paid to the holders of Common Stock
and no shares of Common Stock shall be purchased or redeemed by the Company.
Holders of shares of Preferred Stock shall not be entitled to any dividends in
excess of full cumulative dividends, as herein provided, on the Preferred
Stock. Any dividend that is not declared and paid (or set apart for payment)
on the requisite Dividend Payment Date shall accrue additional dividends at the
rate of 7.5% per annum compounded on a semi-annual basis and payable on
succeeding Dividend Payment Dates.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution
or other winding up of the affairs of the Company, subject to the prior
preferences and other rights of any capital stock senior to the Preferred Stock
as to liquidation preferences ("Senior Stock"), the holders of Preferred Stock
will be entitled to be paid out of the assets of the Company in cash or
property at its fair market value as determined, in good faith, by the Board of
Directors of the Company, the Liquidation Value per share plus an amount equal
to all accrued and unpaid dividends and distributions thereon (which to the
extent payable in Preferred Stock will be valued at the Liquidation Value
thereof) to the date of such payment prior to any payment to the holders of
Common Stock. After payment in full of the Liquidation Value per share of the
Preferred Stock and other preferential amounts, the holders of the Preferred
Stock as such will have no right or claim to any of the remaining assets of the
Company.
If, upon any such liquidation, dissolution or other winding up of the
affairs of the Company, the assets of the Company shall be insufficient to
permit the payment in full of the Liquidation Value per share of Preferred
Stock, then the assets of the Company remaining after the distributions to
holders of any Senior Stock of the full amounts to which they may be entitled
will be ratably distributed among the holders of Preferred Stock and any other
stock ranking on a parity with the Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up of the affairs of the
Company in proportion to the full amounts to which
19
<PAGE> 21
they would otherwise be respectively entitled if all amounts thereon were paid
in full. Neither the consolidation or merger of the Company into or with
another corporation or corporations nor the sale, lease, transfer or conveyance
of all or substantially all of the assets of the Company to another corporation
or any other entity shall be deemed a liquidation, dissolution or winding up of
the affairs of the Company.
Voting
The shares of Preferred Stock will have no voting rights except as
required by law.
Conversion
Each share of Preferred Stock will be convertible into Common Stock at
the Conversion Price. The Conversion Price per share of Common Stock in the
case of any optional or mandatory conversion will be $9.20 (the average closing
sales prices of the Common Stock on the 15 consecutive trading days next
preceding the fifth trading day prior to the date the Registration Statement is
filed with the Commission). For the purposes of any optional or mandatory
conversion, the value of any shares of Preferred Stock will be deemed to be the
Liquidation Value. Immediately following any such conversion, the rights of
the holders of any converted shares of Preferred Stock, including without
limitation the right to receive dividends on the next Dividend Payment Date,
will cease and the persons entitled to receive shares of Common Stock upon the
conversion of such shares of Preferred Stock will be treated for all purposes
as having become the owners of such shares of Common Stock. No payments or
adjustments will be made upon the conversion on account of accrued and unpaid
dividends and distributions on the shares of Preferred Stock subject to such
conversion.
Optional Conversion
At the option of the holder thereof, shares of Preferred Stock may at
any time be converted into fully paid and non-assessable shares of Common Stock
at the Conversion Price.
Mandatory Conversion
Unless previously converted, each outstanding share of Preferred Stock
will mandatorily convert into shares of fully paid and non-assessable Common
Stock on the fifth anniversary of the date of initial issuance of the Preferred
Stock at the Conversion Price.
Accelerated Mandatory Conversion
In the event there is an offer to acquire all the outstanding shares
of the Common Stock and such offer, if accepted, would result in the
consummation of a transaction whereby 90% or more of the outstanding shares of
Common Stock, on a fully diluted basis (including, without limitation, the
shares of Common Stock into which the Preferred Stock is convertible), would
become beneficially owned (within the meaning of Rule 13d-3 under the Exchange
Act) by one person or group (as such terms are used in Section 13(d)(3) of the
Exchange Act), each outstanding share of Preferred Stock will mandatorily
convert into shares of fully paid and non-assessable Common Stock at the
Conversion Price, immediately prior to the consummation of such transaction.
Fractional Interests
No fractional shares of Common Stock will be issued upon conversion of
the Preferred Stock. If any fraction of a share of Common Stock would, except
for these provisions, be issuable on the conversion of any shares of Preferred
Stock, the Company will make payment in cash in lieu thereof in an amount based
on the then current market price of the Common Stock.
Adjustment of Conversion Price
The Conversion Price per share of Common Stock issuable upon
conversion of the Preferred Stock will be subject to adjustment in certain
events, including, without limitation, (i) dividends or distributions in shares
of
20
<PAGE> 22
Common Stock on any class of capital stock of the Company; (ii) subdivisions,
combinations and reclassifications of shares of Common Stock; (iii) issuance of
rights or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
current market price per share and (iv) distributions by the Company or any
subsidiary of the Company to all holders of Common Stock of any of its assets,
evidences of indebtedness or securities other than Common Stock.
No Other Rights
The Preferred Stock will not be redeemable for cash. Except as may
otherwise be required by law, the shares of Preferred Stock will not have any
powers, preferences or relative, participating, optional or special rights,
other than those specifically set forth in the Certificate of Designations and
the Certificate of Incorporation.
Transfer Agent
The transfer agent for the Preferred Stock is Harris Trust and Savings
Bank, 311 West Monroe Street, P.O. Box A3504, Chicago, Illinois 60690-3504;
Tel. No. (312) 360-6001.
Reservation and Registration of Common Stock
The Company will at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the conversion
of the shares of Preferred Stock, free from preemptive rights, the maximum
number of shares of Common Stock as shall from time to time be issuable upon
conversion of all the shares of Preferred Stock then outstanding.
Listing
The Preferred Stock is a new issue for which there is currently no
trading market. There is no current intention to list the Preferred Stock on
any United States securities exchange.
TAXATION
The following discussion summarizes the material Federal income tax
considerations generally applicable to holders acquiring the Preferred Stock on
original issue but does not purport to be a complete analysis of all potential
consequences. The discussion is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury regulations, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are subject to
change at any time, possibly with retroactive effect.
The discussion assumes that the holders of the Preferred Stock will
hold the Preferred Stock as a "capital asset" within the meaning of Section
1221 of the Code. The discussion is not binding on the IRS or the courts. The
Company has not sought and will not seek any rulings from the IRS with respect
to the positions of the Company discussed herein, and there can be no assurance
that the IRS will not take a different position concerning the tax consequences
of the purchase, ownership or disposition of the Preferred Stock.
The tax treatment of a holder of the Preferred Stock may vary
depending on such holder's particular situation or status. Certain holders
(including S corporations, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, and taxpayers subject to alternative
minimum tax) may be subject to special rules not discussed below. The
following discussion is limited to the United States Federal income tax
consequences relevant to a holder of the Preferred Stock who is a citizen or
resident of the United States, or any state thereof, or a corporation or other
entity created or organized under the laws of the United States, or any
political subdivision thereof, or an estate or trust, the income of which is
subject to United States Federal income tax, regardless of source, or that is
otherwise subject to United States Federal income tax on a net income basis in
respect of the Preferred Stock. The following discussion does not consider all
aspects of United States Federal income tax that may be relevant to the
purchase, ownership, and disposition of the Preferred Stock by a holder in
21
<PAGE> 23
light of such holder's personal circumstances. In addition, the discussion
does not consider the effect of any applicable foreign, state, local, or other
tax laws or estate or gift tax considerations.
ISSUANCE OF RIGHTS
United States stockholders who receive Rights pursuant to the offering
should not recognize taxable income.
EXERCISE OR LAPSE OF RIGHTS
A United States stockholder who exercises any Right will not recognize
any gain or loss for United States Federal income tax purposes upon the
exercise. The basis of each share of Preferred Stock acquired upon exercise of
a Right will equal the subscription price paid. The holding period for such
Preferred Stock begins upon the exercise of the Rights.
A United States stockholder will not recognize any loss if a Right
received expires without being exercised.
DIVIDENDS ON PREFERRED STOCK
Pursuant to Code section 301(c)(1), United States stockholders of
Preferred Stock will recognize ordinary income upon the receipt of a dividend
of additional shares of Preferred Stock ("Taxable Distribution Stock"), to the
extent of the Company's current or accumulated earnings and profits. The
amount of the distribution for purposes of Code section 301(c) will equal the
fair market value of the shares of Taxable Distribution Stock received. The
holding period of United States stockholders in shares of Taxable Distribution
Stock will commence on the date following the distribution date. Accordingly,
holders may recognize income and incur tax liability with respect to such
dividends without receiving the corresponding amount of cash.
Pursuant to Code section 301(c)(2) and (3), a distribution of shares
of Taxable Distribution Stock in an amount in excess of the Company's current
and accumulated earnings and profits will be a tax free return of capital to
the extent of a holder's tax basis in the shares of Preferred Stock, and
thereafter, capital gain. Any capital gain will be long-term if, as of the
date of payment, the United States stockholder held the shares of Preferred
Stock on which the distribution is made for more than one year, and will be
short-term if, as of the date of payment, the United States stockholder held
those shares of Preferred Stock for one year or less. Short-term capital gain
recognized by individuals is subject to a maximum marginal Federal income tax
rate of 39.6%. For individuals, long-term capital gain is currently subject to
a maximum marginal Federal income tax rate of 28%. The current maximum
long-term and short-term capital gain rate for corporations is 35%.
Pursuant to certain amendments to Section 305(c) of the Code, the IRS
has the authority to promulgate regulations which may treat unpaid cumulative
dividends on preferred stock as being constructively paid to the holder in
certain circumstances, such as when there is no intention for dividends to be
paid currently at the time of issuance of the preferred stock. The IRS has not
yet proposed any such regulations.
Dividends received by corporate holders generally will be eligible for
the 70% or 80% dividends-received deduction under Section 243 of the Code.
There are, however, many exceptions and restrictions relating to the
availability of such dividends-received deduction, including without limitation
restrictions relating to (i) the holding period of the stock on which the
dividends are sought to be deducted, (ii) debt-financed portfolio stock, (iii)
dividends treated as "extraordinary dividends" for purposes of Section 1059 of
the Code, and (iv) taxpayers who pay alternative minimum tax. Corporate
stockholders should consult their own tax advisors regarding the extent, if any
to which such exceptions and restrictions may apply to their particular factual
situations. In addition, tax legislative proposals made in 1996 by the Clinton
Administration would (i) reduce the 70% dividends-received deduction to 50%
and (ii) require a corporate holder to satisfy a separate forty-six day holding
period requirement with respect to each dividend to be eligible for such
dividends-received deduction. It is not possible to predict whether such
legislative proposals will ultimately be enacted into law and, if so, the form
or effective date of any such legislation.
22
<PAGE> 24
For United States Federal income tax purposes, a United States
stockholder of a share of Preferred Stock will recognize gain or loss on any
sale or exchange of a share of Preferred Stock measured by the difference
between the selling price and the Preferred Stock share's basis. If the United
States stockholder holds a share of Preferred Stock as a capital asset, the
gain or loss will be a long-term or short-term capital gain or loss depending
on the length of the stockholder's holding period for the share, as described
above.
CONVERSION OF PREFERRED STOCK
A United States stockholder will not recognize gain or loss upon the
optional or mandatory conversion of a share of Preferred Stock into one or more
shares of Common Stock ("Converted Common Stock"). However, if the conversion
takes place when there is a dividend arrearage on the Preferred Stock, it is
possible that a portion of the shares of Converted Common Stock received should
be treated like a share of Taxable Distribution Stock to the extent of such
dividend arrearage. Except for any shares of Converted Common Stock treated as
payment of a dividend arrearage, a United States stockholder's holding period
in a share of Preferred Stock will be added to the stockholder's holding period
in the shares of Converted Common Stock, and that holder's tax basis in each
share of Preferred Stock will be allocated to the shares of Converted Common
Stock according to their relative fair market value on the conversion date.
The receipt of cash in lieu of a fractional share upon conversion of the
Preferred Stock to Common Stock will generally be treated as a sale of such
fractional share of Common Stock in which the holder will recognize taxable
gain or loss equal to the difference between the amount of cash received and
the holder's tax basis in the fractional share redeemed. Such gain or loss
will be capital gain or loss and will be long-term or short-term depending on
the holder's holding period for the fractional share deemed redeemed.
ADJUSTMENTS TO CONVERSION PROVISIONS
Treasury regulations issued under Section 305 of the Code treat
certain adjustments to conversion provisions of stock such as the Preferred
Stock as constructive distributions of stock with respect to preferred stock.
Such constructive distributions of stock would be taxable to holders of
Preferred Stock as described above under the caption "Dividends on Preferred
Stock." Any adjustment increasing the number of shares of Common Stock into
which the Preferred Stock can be converted would constitute a constructive
distribution of stock to holders of Preferred Stock unless made pursuant to a
bona fide, reasonable adjustment formula that has the effect of preventing
dilution of the interest of the holders of Preferred Stock. Any adjustment in
the conversion price to compensate for taxable distributions of cash or
property on any of the outstanding Common Stock of the Company will be treated
as a constructive distribution of stock to holders of Preferred Stock. The
Company is unable to predict whether any such adjustment will be made.
BACKUP WITHHOLDING
A holder of Preferred Stock may be subject to backup withholding at a
rate of 31% with respect to dividends paid on, or the proceeds of a sale or
exchange of, the Preferred Stock, unless such holder (a) is a corporation or
comes within certain other exempt categories and when required, demonstrates
its exemption or (b) provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A
holder of the Preferred Stock who does not provide the Company with the
holder's correct taxpayer identification number may be subject to penalties
imposed by the IRS. Any amount paid as backup withholding would be creditable
against the holder's Federal income tax liability.
This summary is not intended to be, nor should it be, construed as
legal or tax advice to any holder of any Common Stock, Preferred Stock or
Right. Further, because the United States Federal income tax consequences of
the offering may vary depending upon the particular circumstances of each
holder and other facts and because this summary is not exhaustive of all
possible Federal income tax considerations (such as situations involving
taxpayers who are securities dealers or whose functional currency is not the
United States dollar), the Company's stockholders are urged to consult their own
tax advisors to determine the Federal income tax consequences to them of the
offering and their ownership of Common Stock, Preferred Stock and Rights. In
23
<PAGE> 25
addition, holders are urged to consult their own tax advisors in determining
the United States state and local tax consequences of the offering and
ownership of capital stock of the Company to them.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES NOT
CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR PROSPECTIVE PURCHASER'S
SITUATION OR STATUS. ACCORDINGLY, EACH PURCHASER OF THE PREFERRED STOCK SHOULD
CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT,
INCLUDING THOSE UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
LEGAL MATTERS
The validity of the Preferred Stock to be issued upon the exercise of
the Rights and the Common Stock to be issued upon any conversion of the
Preferred Stock will be passed upon by Milbank, Tweed, Hadley & McCloy, New
York, New York, counsel for the Company.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference in this Prospectus from the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996 have been audited by
Arthur Andersen LLP, independent auditors, as set forth in their report thereon
and incorporated herein by reference. Such consolidated financial statements
and schedules have been incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
24
<PAGE> 26
ANNEX A
, 1997
To the Special Committee of the Board of
Directors of Banner Aerospace, Inc.
To the Board of Directors of Banner Aerospace, Inc.
Committee Members and Directors:
We understand that Banner Aerospace, Inc. (the "Company") is
issuing to holders of shares of its Common Stock, $1.00 par value ("Common
Stock"), non-transferable rights (the "Rights") to subscribe for shares of
Series A Convertible Paid-in-Kind Preferred Stock, par value $.01 (the
"Preferred Stock"). The Preferred Stock will pay semi-annual dividends at the
rate of 7.5% per annum of the liquidation value of $9.20 per share (the
"Liquidation Value"). Dividends will be payable in additional shares of
Preferred Stock. Fractional shares of Preferred Stock will not be issued, but
a cash adjustment will be paid in respect of such fractional interests based on
the Liquidation Value. The Preferred Stock is convertible into Common Stock at
the option of the holder at any time on a one-for-one basis, and automatically
converts into Common Stock upon its maturity five years from the date of
issuance. Under certain circumstances the Preferred Stock will be mandatorily
converted into Common Stock prior to its maturity. Each holder of Common Stock
is entitled to receive, for every 4.5 shares of Common Stock held, one Right.
No fractional Rights will be issued; however, one Right will be issued in lieu
of any fractional Right to which a holder would otherwise be entitled. Such
holders are entitled to purchase one share of Preferred Stock for each Right
held at a subscription price of $9.20 per share of Preferred Stock (the
"Subscription Price"). In the event all holders of Common Stock (approximately
23 million shares outstanding) were to exercise all the Rights in the Rights
Offering, the Company would issue approximately 5 million shares of Preferred
Stock, for an aggregate consideration of approximately $48 million. The
offering of Preferred Stock issuable upon exercise of the Rights is referred to
herein as the "Rights Offering". The Rights Offering and other related
transactions disclosed to us are referred to collectively herein as the
"Transaction." The principal stockholder of the Company, The Fairchild
Corporation ("Fairchild"), which, at the date hereof, beneficially owns
approximately 59% of the outstanding Common Stock, has advised the Company
that, subject to certain qualifications as described herein, it will exercise
all of the Rights it receives pursuant to the Rights Offering. As a result,
Fairchild is expected to purchase approximately 3 million shares of Preferred
Stock for an aggregate amount of approximately $28 million. It is our
understanding that the Company's Board of Directors has formed a special
committee (the "Committee") to consider certain matters relating to the
Transaction.
You have requested our opinion (the "Opinion") as to whether the
Transaction is fair to the stockholders of the Company, other than Fairchild,
from a financial point of view. The Opinion does not address the Company's
underlying business decision to effect the Transaction. We also provided the
Committee with
A-1
<PAGE> 27
financial and valuation advice on the Transaction and assisted the Committee in
negotiations with respect to the Transaction.
In connection with this Opinion, we have made such reviews,
analyses and inquiries as we have deemed necessary and appropriate under the
circumstances. Among other things, we have:
1. reviewed the initial summary term sheet for the Rights Offering
and the Company's Registration Statement and related Prospectus,
both dated __, 1997;
2. reviewed internal financial projections through March 31, 2000
of Banner (dated November 14, 1996) reflecting the Rights
Offering;
3. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
4. reviewed the terms and characteristics of certain publicly
traded convertible preferred stock issues;
5. reviewed prospectuses of rights offerings that we deem
comparable to the Rights Offering; and
6. conducted such other studies, analyses and inquiries as we have
deemed appropriate.
We have relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to us have been
reasonably prepared and reflect the best currently available estimates of the
future financial results and condition of the Company, and that there has been
no material change in the assets, financial condition, business or prospects of
the Company since the date of the most recent financial statements made
available to us.
We have relied upon, without independent verification, the accuracy
and completeness of the information supplied to us with respect to the Company
and do not assume any responsibility with respect to it. We have not made any
physical inspection or independent appraisal of any of the properties or assets
of the Company. Our opinion is necessarily based on business, economic, market
and other conditions as they exist and can be evaluated by us at the date of
this letter.
Based upon the foregoing, and in reliance thereon, it is our
opinion that the Transaction is fair to the stockholders of the Company, other
than Fairchild, from a financial point of view.
HOULIHAN, LOKEY, HOWARD
& ZUKIN, INC.
A-2
<PAGE> 28
<TABLE>
<S> <C>
===================================================== =======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY RIGHTS TO SUBSCRIBE FOR
REPRESENTATION NOT CONTAINED OR INCORPORATED BY 5,204,747 SHARES OF SERIES
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, A CONVERTIBLE PAID-IN-KIND
SUCH INFORMATION OR REPRESENTATION MUST NOT BE PREFERRED STOCK
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH
OFFER IS NOT AUTHORIZED, OR IN WHICH THE PERSON BANNER AEROSPACE, INC.
MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE THEREUNDER SHALL UNDER ---------------------
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY PROSPECTUS
SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS ---------------------
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information . . . . . . . . . . . 2
Documents Incorporated by Reference . . . . 2
Prospectus Summary . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . 6
The Company . . . . . . . . . . . . . . . . 8
Recent Developments . . . . . . . . . . . . 11
Description of the Rights Offering . . . . 11
Principal Stockholder's Commitment . . . . 14
Use of Proceeds . . . . . . . . . . . . . . 14
Determination of Subscription Price . . . . 15
Capitalization . . . . . . . . . . . . . . 16
Market Information . . . . . . . . . . . . 17
Description of Securities . . . . . . . . . 18
Taxation . . . . . . . . . . . . . . . . . 21
Legal Matters . . . . . . . . . . . . . . . 24
Experts . . . . . . . . . . . . . . . . . 24
Annex A: Form of Fairness Opinion of
Houlihan Lokey Howard & Zukin . . . . . . . A-1 _________________, 1997
===================================================== =======================================================
</TABLE>
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the Rights Offering are as follows:
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,000
Printing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Accounting and Financial Advisor Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Registrar, Subscription Agent and Information Agent Fees
and Expenses (including counsel fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Stock Exchange Listing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,500
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article NINTH of the Company's Restated Certificate of Incorporation,
as amended, provides as follows:
To the fullest extent permitted by the General Corporation Law of the
State of Delaware, as may from time to time be in effect, directors of
the Corporation shall not be personally liable to the Corporation or
to the stockholders of the Corporation for breach of fiduciary duty as
a director.
Article VIII of the Company's Amended and Restated Bylaws provides as
follows:
Section 3. The Corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from
time to time, indemnify any and all persons which it shall have power
to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by
said section.
Section 145 of the Delaware General Corporation Law provides broadly
for indemnification of directors and officers against claims and
liabilities against them in their capacities as such.
ITEM 16. EXHIBITS.
* 3.1 Form of Articles of Incorporation of the
Company, as amended and restated
4.1 Specimen Common Stock Certificate is
incorporated herein by reference to
Exhibit 4(b) included in the Company's Registration
Statement No. 33-34775 on Form S-1
effective July 26, 1990
4.2 Specimen Series A Convertible Paid-in-Kind
Preferred Stock Certificate
4.3 Form of Certificate of Designations,
Preferences, Rights and Limitations of
Series A Convertible Paid-in-Kind
Preferred Stock
4.4 Form of Subscription Certificate
* 4.5 Form of Subscription Agent Agreement
* 4.6 Form of Information Agent Agreement
5.1 Form of Opinion of Milbank, Tweed, Hadley & McCloy
as to the legality of the Series A
Convertible Paid-in-Kind Preferred Stock
and Common Stock being registered
23.1 Consent of Arthur Andersen, LLP
II-1
<PAGE> 30
23.2 Consent of Milbank, Tweed, Hadley & McCloy
(included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature
page)
---------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on this 24th day of
February, 1997.
BANNER AEROSPACE, INC.
By /s/ WARREN D. PERSAVICH
---------------------------------
Name: Warren D. Persavich
Title: Senior Vice President and Chief
Financial Officer
POWER OF ATTORNEY
The undersigned directors and executive officers of Banner Aerospace, Inc.
hereby constitute and appoint Warren D. Persavich and Eugene W. Juris, and each
of them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with
full power to execute in our name and behalf in the capacities indicated below
any and all amendments (including post-effective amendments and amendments
thereto) to this Registration Statement and to file the same, with all exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission and hereby ratify and confirm all that such
attorneys-in-fact, or either of them, or their substitutes shall lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
Chairman and Chief Executive Officer
/s/ Jeffrey J. Steiner (Principal Executive Officer) February __, 1997
-----------------------------------------
Jeffrey J. Steiner
Senior Vice President and Chief
/s/ John C. Wertz Operating Officer February __, 1997
-----------------------------------------
John C. Wertz
Senior Vice President and Chief
/s/ Warren D. Persavich Financial Officer
----------------------------------------- (Principal Financial Officer) February __, 1997
Warren D. Persavich
Vice President -- Finance and Secretary
/s/ Eugene W. Juris (Principal Accounting Officer) February __, 1997
-----------------------------------------
Eugene W. Juris
/s/ Michael T. Alcox Director February __, 1997
-----------------------------------------
Michael T. Alcox
/s/ Frederick W. Bradley, Jr. Director February __, 1997
-----------------------------------------
Frederick W. Bradley, Jr.
/s/ Steven L. Gerard Director February __, 1997
-----------------------------------------
Steven L. Gerard
</TABLE>
II-3
<PAGE> 32
<TABLE>
<S> <C> <C>
/s/ Prof. Charles M. Haar Director February __, 1997
-----------------------------------------
Prof. Charles M. Haar
/s/ Philippe Hercot Director February __, 1997
-----------------------------------------
Philippe Hercot
/s/ Samuel J. Krasney Director February __, 1997
-----------------------------------------
Samuel J. Krasney
/s/ Dr. Eric J. Steiner Director February __, 1997
-----------------------------------------
Dr. Eric J. Steiner
/s/ Leonard Toboroff Director February __, 1997
-----------------------------------------
Leonard Toboroff
</TABLE>
II-4
<PAGE> 1
EXHIBIT 4.2
$.01 PAR VALUE SEE REVERSE FOR
INCORPORATED UNDER THE LAWS CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE
BANNER AEROSPACE, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES A CONVERTIBLE PAID-IN-KIND
PREFERRED STOCK OF Banner Aerospace, Inc. (hereinafter called the "Company")
transferable on the Books of the Company by the holder thereof in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of its
duly authorized officers.
Dated:
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
HARRIS TRUST AND SAVINGS BANK
By
AUTHORIZED SIGNATURE
<PAGE> 2
BANNER AEROSPACE, INC.
The Corporation will furnish without charge, to each
stockholder who so requests, a copy of the provisions setting forth the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof which the Corporation
is authorized to issue, and the qualifications, limitations or restrictions of
such preferences and/or rights. Any such request may be addressed to the
Secretary of the Corporation or to the Transfer Agent named on the face hereof.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian
---------------------
TEN ENT --as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN --as joint tenants with rights
of survivorship and not as Act.
tenants in common -------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
<TABLE>
<S> <C>
For value received hereby sell, assign and transfer unto
------------------------- -------------------------
Please insert social security or other
identifying number of assignee
--------------------------------------
-------------------------------------------------------------------------------------------
Please print or typewrite name and address of assignee
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
shares of the stock represented by the within Certificate and do hereby
-------------------------
irrevocably constitute and appoint
--------------------------------------------------------
Attorney to transfer said shares on the books of the within named Corporation, with full power
of substitution in the premises.
</TABLE>
Dated
----------------------------------
-----------------------------
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAMES, AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PAID-IN-KIND PREFERRED STOCK
OF
BANNER AEROSPACE, INC.
A DELAWARE CORPORATION,
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
BANNER AEROSPACE, INC., a Delaware corporation (the
"Company"), DOES HEREBY CERTIFY THAT:
FIRST: Pursuant to the authority contained in Article FOURTH
of its Certificate of Incorporation, as amended and restated (the "Certificate
of Incorporation") and in accordance with the provisions of Section 141(f) of
the Delaware General Corporation Law, the Board of Directors of the Corporation
at a meeting on January 10, 1997, adopted the following resolutions which
resolutions remain in full force and effect on the date hereof:
RESOLVED, that the Board of Directors hereby finds it to be advisable and in
the best interest of the Corporation that the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation") be
amended, subject to the receipt of stockholder approval, in the following
manner:
Article FOURTH shall be amended in its entirety to read as follows:
"FOURTH: The total number of shares of stock which the
corporation shall have the authority to issue is 60,000,000. Such
shares shall be divided into two classes. One such class shall be
designated Preferred Stock and shall consist of 10,000,000 shares of
par value $.01 per share, and the other class shall be designated
Common Stock and shall consist of 50,000,000 shares of par value $1.00
per share.
The Board of Directors is hereby authorized, subject to limitations
prescribed by law and the provisions of this article FOURTH, to issue
Preferred Stock in series with such voting powers, full or limited, or
no voting powers and such designations, preferences and relative,
participating, optional or other special rights, with such
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for
the issue of Preferred Stock adopted by the Board of Directors and in
a certificate filed pursuant to the applicable law of the State of
Delaware setting forth a copy of
<PAGE> 2
such resolution or resolutions and the number of shares of Preferred
Stock or any series thereof."
SECOND: This Certificate of Designations, Preferences, Rights
and Limitations of Series A Convertible Paid-in-Kind Preferred Stock (the
"Certificate of Designations") was duly adopted in accordance with the
provisions of Section 151 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by ____________________, its _____________________,
and attested to by __________________, its ________________, as of the ____ day
of _________, 1997.
----------------------------
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
2
<PAGE> 3
DESIGNATIONS, PREFERENCES, RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PAID-IN-KIND PREFERRED STOCK
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in
this Article I shall have, for all purposes of this resolution, the meanings
herein specified:
ACCELERATED CONVERSION DATE. The term "Accelerated Conversion
Date" shall have the meaning set forth in Section 5.1(c) hereof.
COMMON STOCK. The term "Common Stock" shall mean the common
stock, $1.00 par value per share, of the Company as the same exists on the date
of this resolution or as such stock may be reconstituted from time to time.
For purposes of calculating the number of shares of Common Stock outstanding,
shares of Common Stock held in the treasury of the Company shall not be
considered outstanding.
CONVERSION DATE. The term "Conversion Date" shall have the
meaning set forth in Section 5.2(a) hereof.
CONVERSION PRICE. The term "Conversion Price" shall mean,
initially, $9.20, the average closing sales prices of the Common Stock on the
15 consecutive days next preceding the fifth trading day prior to the date the
Registration Statement for the Series A Preferred Stock was initially filed
with the Securities and Exchange Commission, and thereafter, such price as
shall be adjusted pursuant to Section 5.4 hereof.
DIVIDEND PAYMENT DATE. The term "Dividend Payment Date" shall
have the meaning set forth in Section 2.1 hereof.
INITIAL ISSUE DATE. The term "Initial Issue Date" shall mean
the date the shares of Series A Preferred Stock are first issued by the
Company, which date shall not precede the date this Certificate is filed with
the Secretary of State of the State of Delaware.
JUNIOR STOCK. The term "Junior Stock" shall mean the Common
Stock and any class or series of stock the Company authorized after the Initial
Issue Date ranking junior to the Series A Preferred Stock in respect of the
right to receive dividends or in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of the
Company.
LIQUIDATION VALUE. The term "Liquidation Value" shall mean
$9.20 per share of Series A Preferred Stock.
3
<PAGE> 4
MANDATORY CONVERSION DATE. The term "Mandatory Conversion
Date" shall mean _________________, 2002.
PERSON. The term "Person" shall mean an individual,
partnership, joint venture, corporation, trust or unincorporated organization,
a government or any department, agency or political subdivision thereof or
other entity.
RECORD DATE. The term "Record Date" shall have the meaning
set forth in Section 2.1 hereof.
SENIOR STOCK. The term "Senior Stock" shall mean any class or
series of stock of the Company authorized after the Initial Issue Date ranking
senior to the Series A Preferred Stock in respect of the right to receive
dividends or in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Company.
SERIES A PREFERRED STOCK. The term "Series A Preferred Stock"
shall mean the Series A Convertible Paid-in-Kind Preferred Stock, par value
$.01 per share, of the Company as the same exists on the date of this
resolution or as such stock may be reconstituted from time to time. For
purposes of calculating the number of shares of Series A Preferred Stock
outstanding, shares of Series A Preferred Stock held in the treasury of the
Company shall not be considered outstanding.
TRANSFER AGENT. The term "Transfer Agent" shall mean Harris
Trust and Savings Bank, 311 West Monroe Street, P.O. Box A3504, Chicago,
Illinois 60690-3504; Tel. No. (312) 360-6001, and its successors and assigns.
4
<PAGE> 5
ARTICLE II
PAID-IN-KIND DIVIDENDS
2.1 GENERAL. The holders of record on the Record Date
(as defined below) of the outstanding Series A Preferred Stock shall be
entitled to receive semi-annual dividends, as and when declared by the Board of
Directors out of funds legally available therefor. Each semi-annual dividend
shall be paid at the rate of 7.5 per cent per annum of the Liquidation Value of
$9.20 per share, payable in additional shares of Series A Preferred Stock. The
number of shares of Series A Preferred Stock issued to pay dividends will be
based on the Series A Preferred Stock's Liquidation Value, which is $9.20 per
share. Each such dividend shall be payable on or about each April 30 and
October 31 (each, a "Dividend Payment Date"), or if any such date is not
a business day, the dividends due on such Dividend Payment Date shall be paid
on the next succeeding business day, beginning on October 31, 1997. Such
dividends shall be cumulative and shall accrue on each share whether or not
earned, from and after the Dividend Payment Date coincident with or next
preceding the issuance of such shares, provided, however, that dividends
payable on the first Dividend Payment Date shall so accrue from and after the
date immediately succeeding the Initial Issue Date and provided further that
dividends shall cease to accrue on shares of Series A Preferred Stock following
the Mandatory Conversion Date or on the date of their earlier conversion, as
the case may be. The dividends on the Series A Preferred Stock shall be
payable to holders of record as they appear on the stock register of the
Company on such record date, not less than 15 nor more than 60 days preceding
each Dividend Payment Date, as shall be fixed by the Board of Directors (each,
a "Record Date"). Dividends payable for any partial dividend period (including
the period from the Initial Issue Date to the first Dividend Payment Date)
shall be computed on the basis of the actual days elapsed in such period over a
year of 365 or 366 days. All calculations provided for in this Section 2.1
shall be rounded to the nearest share. Fractional shares of Series A Preferred
Stock will not be delivered, but a cash adjustment will be paid in respect of
such fractional interests based on the Liquidation Value. The number of full
shares of Series A Preferred Stock which shall be issued upon payment of
dividends shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock held by such holder. The Transfer Agent shall carry
forward any fractional shares such that payment for fractional shares to any
one holder shall not exceed the value of one share.
2.2 LIMITATIONS. Except as hereinafter provided in this
Section 2.2, unless all dividends on the outstanding shares of Series A
Preferred Stock that have accrued and are payable as of any date shall have
been paid, or declared and additional shares or funds, as appropriate, set
apart for payment thereof, no dividend or other distribution shall be paid to
the holders of Junior Stock and no shares of Junior Stock shall be purchased or
redeemed by the Company. Holders of shares of Series A Preferred Stock shall
not be entitled to any dividends in excess of full cumulative dividends, as
herein provided, on the Series A Preferred Stock. Any dividend that is not
declared and paid (or set apart for payment) on the requisite Dividend Payment
Date shall accrue additional dividends at the rate of 7.5 per cent per annum
compounded on a semi-annual basis and payable on succeeding Dividend Payment
Dates.
5
<PAGE> 6
ARTICLE III
DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP
3.1 PREFERENCE ON LIQUIDATION, ETC. In the event of any
voluntary or involuntary liquidation, dissolution or other winding up of the
affairs of the Company, subject to the prior preferences and other rights of
any Senior Stock as to liquidation preferences, the holders of Series A
Preferred Stock shall be entitled to be paid out of the assets of the Company
in cash or property at its fair market value as determined, in good faith, by
the Board of Directors of the Company, the Liquidation Value per share plus an
amount equal to all accrued and unpaid dividends and distributions thereon
(which to the extent payable in Series A Preferred Stock shall be valued at the
Liquidation Value thereof) to the date of such payment prior to any payment to
the holders of Junior Stock. After payment in full of the Liquidation Value
per share of the Series A Preferred Stock and other preferential amounts
provided for in this Section 3.1, the holders of the Series A Preferred Stock
as such shall have no right or claim to any of the remaining assets of the
Company. Except as provided in this Section 3.1, holders of Series A Preferred
Stock shall not be entitled to any distribution in the event of liquidation,
dissolution or winding up of the affairs of the Company.
3.2 LIQUIDATION PRO RATA IF ASSETS INADEQUATE. If, upon
any such liquidation, dissolution or other winding up of the affairs of the
Company, the assets of the Company shall be insufficient to permit the payment
in full of the Liquidation Value per share of Series A Preferred Stock, then
the assets of the Company remaining after the distributions to holders of any
Senior Stock of the full amounts to which they may be entitled shall be ratably
distributed among the holders of Series A Preferred Stock and any other stock
ranking on a parity with the Series A Preferred Stock with respect to
distributions upon liquidation, dissolution or winding up of the affairs of the
Company in proportion to the full amounts to which they would otherwise be
respectively entitled if all amounts thereon were paid in full. Neither the
consolidation or merger of the Company into or with another corporation or
corporations nor the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Company to another corporation or any
other entity shall be deemed a liquidation, dissolution or winding up of the
affairs of the Company within the meaning of this resolution.
ARTICLE IV
VOTING RIGHTS
4.1 VOTING RIGHTS OF HOLDERS OF PREFERRED STOCK. The
shares of Series A Preferred Stock shall have no voting rights except as
required by law.
6
<PAGE> 7
ARTICLE V
CONVERSION
5.1 CONVERSION.
(a) Optional Conversion. Subject to and upon compliance with
the provisions of this Article V, at the option of the holder thereof, shares
of Series A Preferred Stock may at any time be converted into fully paid and
non-assessable shares of Common Stock at the Conversion Price. For this
purpose, the value of any shares of Series A Preferred Stock shall be deemed to
be the Liquidation Value. Immediately following such conversion, the rights of
the holders of any converted shares of Series A Preferred Stock, including
without limitation, the right to receive dividends on the next Dividend Payment
Date, shall cease and the persons entitled to receive shares of Common Stock
upon the conversion of such shares of Series A Preferred Stock shall upon
compliance with the requirements of Section 5.2(a) hereof be treated for all
purposes as having become the owners of such shares of Common Stock. No
payments or adjustments will be made upon the Conversion Date on account of
accrued and unpaid dividends and distributions on the shares of Series A
Preferred Stock subject to such conversion.
(b) Mandatory Conversion. Unless previously converted at the
option of the holder in accordance with Section 5.1(a) hereof or pursuant to a
transaction in accordance with Section 5.1(c) hereof, on _______________, 2002
(the "Mandatory Conversion Date"), each outstanding share of Series A Preferred
Stock shall mandatorily convert into shares of fully paid and non-assessable
Common Stock at the Conversion Price. For this purpose, the value of any
shares of Series A Preferred Stock shall be deemed to be the Liquidation Value.
Immediately following such conversion, the rights of the holders of any
converted shares of Series A Preferred Stock, including without limitation, the
right to receive dividends on the next Dividend Payment Date, shall cease and
the persons entitled to receive shares of Common Stock upon the conversion of
such shares of Series A Preferred Stock shall be treated for all purposes as
having become the owners of such shares of Common Stock, subject to Section
5.2(b) hereof. No payments or adjustments will be made upon the Mandatory
Conversion Date on account of accrued and unpaid dividends and distributions on
the shares of Series A Preferred Stock subject to such conversion.
(c) Accelerated Mandatory Conversion. In the event there is
an offer to acquire all the outstanding shares of the Common Stock and such
offer, if accepted, would result in the consummation of a transaction whereby
90 per cent of the outstanding shares of Common Stock, on a fully diluted basis
(including, without limitation, the shares of Common Stock into which the
Series A Preferred Stock is convertible), would become beneficially owned
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) by one person or group (as such terms are used in
Section 13(d)(3) of the Exchange Act), each outstanding share of Series A
Preferred Stock shall mandatorily convert into shares of fully paid and
non-assessable Common Stock at the Conversion Price, immediately prior to the
consummation of such transaction (the "Accelerated Conversion Date"). For this
purpose, the value of any shares of Series A Preferred Stock shall be deemed to
be the Liquidation Value. Immediately following such conversion, the rights of
the holders of any converted shares of Series A Preferred Stock,
7
<PAGE> 8
including without limitation, the right to receive dividends on the next
Dividend Payment Date, shall cease and the persons entitled to receive shares
of Common Stock upon the conversion of such shares of Series A Preferred Stock
shall be treated for all purposes as having become the owners of such shares of
Common Stock, subject to Section 5.2(b) hereof. No payments or adjustments
will be made upon the Accelerated Conversion Date on account of accrued and
unpaid dividends and distributions on the shares of Series A Preferred Stock
subject to such conversion.
5.2 PROCEDURES.
(a) Procedures for Optional Conversion. To receive
certificates evidencing Common Stock issuable on conversion of Series A
Preferred Stock pursuant to Section 5.1(a) hereof, a holder must (i) surrender
the certificate or certificates evidencing the shares of Series A Preferred
Stock to be converted, duly endorsed in a form reasonably satisfactory to the
Company, at the office of the Company or transfer agent for the Series A
Preferred Stock, (ii) state in writing the name or names in which he or she
wishes the certificate or certificates for shares of Common Stock to be issued,
and (iii) pay any transfer or similar tax if required. The date on which the
holder satisfies all those requirements is the "Conversion Date". The Person
in whose name the Common Stock certificate is registered shall be treated as
the stockholder of record on and after the Conversion Date. As soon as
practicable, but in any event within 10 business days after the Conversion
Date, the Company shall deliver, through the Transfer Agent, a certificate for
the number of full shares of Common Stock issuable upon the conversion and a
check for any fractional share. The number of full shares of Common Stock
issuable to any holder of Series A Preferred Stock upon conversion shall be
based on the total number of shares of Series A Preferred Stock surrendered for
conversion by such holder.
(b) Procedures for Mandatory Conversion and Accelerated
Mandatory Conversion. Upon conversion of Series A Preferred Stock pursuant to
Sections 5.1(b) and (c) hereof, the Company shall make such arrangements as it
deems appropriate for (i) the issuance of certificates representing shares of
Common Stock and (ii) payment of cash in lieu of any fractional shares of
Common Stock in exchange for and contingent upon surrender of certificates
representing shares of Series A Preferred Stock. The Company may defer the
payment of dividends on such shares of Common Stock until, and make such
payment and voting contingent upon, the surrender of certificates representing
the shares of Series A Preferred Stock; provided, that the Company shall give
the holders of shares of Series A Preferred Stock such notice of any such
actions as the Company deems appropriate and, upon such surrender of their
certificates representing the Series A Preferred Stock, such holders shall be
entitled to receive dividends declared and paid, if any, on such shares of
Common Stock subsequent to the Mandatory Conversion Date or the Accelerated
Conversion Date, as the case may be.
5.3 FRACTIONAL INTERESTS. No fractions of shares or
scrip representing fractions of shares of Common Stock shall be issued upon
conversion of the Series A Preferred Stock. If any fraction of a share of
Common Stock would, except for the provisions of this Section 5.3, be issuable
on the conversion of any shares of Series A Preferred Stock, the Company shall
make payment in lieu thereof in an amount of United
8
<PAGE> 9
States dollars equal to the value of such fraction computed on the basis of the
last sale price of the Common Stock as reported on the Composite Tape for New
York Exchange Listed Stocks (or if not listed or admitted to trading on such
Exchange, then on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or, if not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotation/National Market System (the
"NASDAQ/NMS") or a similar organization if NASDAQ/NMS is no longer reporting
information) on the last trading day prior to the Conversion Date or if no such
sale takes place on such day, the last sale price for such day shall be the
average of the closing bid and asked prices regular way on the New York Stock
Exchange (or if not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, the average of the highest bid and lowest asked prices on
NASDAQ/NMS or a similar organization if NASDAQ/NMS is no longer reporting
information) for such day (any such last sale price being hereinafter referred
to as the "Last Sale Price"). If on such trading day the Common Stock is not
quoted by any such organization, the fair value of such Common Stock on such
day, as determined by the Board of Directors, shall be used. The number of
full shares of Common Stock which shall be issued upon conversion of Series A
Preferred Stock shall be computed on the basis of the aggregate number of
shares of Series A Preferred Stock held by such holder. The Transfer Agent
shall carry forward any fractional share such that payment for fractional
shares to any one holder shall not exceed the value of one share of Common
Stock.
5.4 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price
per share of Common Stock issuable upon conversion of the Series A Preferred
Stock pursuant to Section 5.1 hereof shall be subject to adjustment from time
to time from and after the date of this resolution as follows:
(a) In case the Company shall (i) pay a dividend or make
a distribution in shares of Common Stock on any class of capital stock
of the Company, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares or (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such action shall be adjusted so
that the holder of any shares of Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which he or she would have owned immediately
following such action had such shares of Series A Preferred Stock been
converted immediately prior thereto. An adjustment made pursuant to
this subsection (a) shall become effective immediately, except as
provided in subsection (f) below, after the record date in the case of
a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the current
market price per share (as determined pursuant to subsection (d)
below) of the Common Stock on the record date mentioned below, the
Conversion Price shall be adjusted to a
9
<PAGE> 10
price, computed to the nearest cent, so that the same shall equal the
price determined by multiplying:
(i) the Conversion Price in effect immediately
prior to the date of issuance of such rights
or warrants by a fraction, of which
(ii) the numerator shall be (A) the number of
shares of Common Stock outstanding on the
date of issuance of such rights or warrants,
immediately prior to such issuance, plus (B)
the number of shares which the aggregate
offering price of the total number of shares
so offered for subscription or purchase would
purchase at such current market price
(determined by multiplying such total number
of shares by the exercise price of such
rights or warrants and dividing the product
so obtained by such current market price),
and of which
(iii) the denominator shall be (A) the number of
shares of Common Stock outstanding on the
date of issuance of such rights or warrants,
immediately prior to such issuance, plus (B)
the number of additional shares of Common
Stock which are so offered for subscription
or purchase.
Such adjustment shall become effective immediately, except as
provided in subsection (f) below after the record date for the
determination of holders entitled to receive such rights or warrants.
(c) In case the Company or any subsidiary of the Company
shall distribute to all holders of Common Stock any of its
assets, evidences of indebtedness or securities other than Common
Stock (other than (x) ordinary dividends in cash or other property
whether or not paid out of retained earnings of the Company or (y) any
dividend or distribution referred to in subsection (a) or (b) above),
then in each such case the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in subsection (d)
below) of the Common Stock immediately prior to the record date
mentioned below less the then fair market value (as determined by the
Board of Directors, whose determination shall, if made in good faith,
be conclusive evidence of such fair market value) of the portion of
the assets so distributed or of such evidences of indebtedness debt or
other securities applicable to one share of Common Stock, and of which
the denominator shall be such current market price per share of the
Common Stock. Such adjustment shall become effective immediately,
except as provided in subsection (f) below, after the record date for
the determination of stockholders entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the
fair market value of the assets, evidences of indebtedness or other
securities so distributed applicable to one share of Common Stock
equals or exceeds such current market price per share of Common Stock
or such current market price exceeds such fair market value by less
than $1.00 per share, the Conversion
10
<PAGE> 11
Price shall not be adjusted pursuant to this subsection (c) until such
time as the cumulative amount of all such distributions exceeds $1.00
per share.
(d) For the purpose of any computation under subsections (b)
and (c) above, the current market price per share of Common Stock on
any date shall be deemed to be the average of the Last Sale Prices of
a share of Common Stock for the five consecutive trading days selected
by the Company commencing not more than 15 trading days before, and
ending not later than, the earlier of the date in question and the
date before the "'ex' date" with respect to the issuance, distribution
or offer requiring such computation. If on any such trading day the
Common Stock is not quoted by any organization referred to in the
definition of Last Sale Price in Section 5.3 hereof, the fair value of
the Common Stock on such day, as determined by the Board of Directors,
shall be used. For purposes of this paragraph, the term "'ex' date",
when used with respect to any issuance, distribution or payments with
respect to an offer, means the first date on which the Common Stock
trades on the principal national securities exchange on which the
Common Stock trades or on which the Common Stock is listed or admitted
to trading without the right to receive such issuance, distribution or
offer.
(e) In addition to the foregoing adjustments in subsections
(a), (b) and (c) above, the Company will be permitted to make such
reductions in the Conversion Price as it considers to be advisable in
order that any event treated for Federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders
of the shares of Common Stock.
(f) In any case in which this Section 5.4 shall require that
adjustment (including by reason of the last sentence of subsection (a)
or (c) above) be made immediately following a record date, the Company
may elect to defer the effectiveness of such adjustment (but in no
event until a date later than the effective time of the event giving
rise to such adjustment), in which case the Company shall, with
respect to any shares of Series A Preferred Stock converted after such
record date pursuant to Section 5.1 hereof and on and before such
adjustment shall have become effective, (i) defer paying any cash
payment pursuant to Section 5.3 hereof or issuing to the holder of
such shares the number of shares of Common Stock and other capital
stock of the Company (or other assets or securities) issuable upon
such conversion in excess of the number of shares of Common Stock and
other capital stock of the Company issuable thereupon only on the
basis of the Conversion Price prior to adjustment, and (ii) not later
than five business days after such adjustment shall have become
effective, pay to such holder the appropriate cash payment pursuant to
Section 5.3 hereof and issue to such holder the additional shares of
Common Stock and other capital stock of the Company issuable on such
conversion.
(g) Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par value, if
any, of Common Stock, the Company will take all corporate action which
may, in the opinion of counsel, be necessary in order that the Company
may validly and legally
11
<PAGE> 12
issue fully paid and non-assessable shares of Common Stock at such
adjusted Conversion Price.
5.5 RESERVATION AND REGISTRATION OF COMMON STOCK.
(a) The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for issuance
upon the conversion of the shares of Series A Preferred Stock, as
herein provided, free from preemptive rights, such maximum number of
shares of Common Stock as shall from time to time be issuable upon the
Optional Conversion, Mandatory Conversion or Accelerated Mandatory
Conversion of all the shares of Series A Preferred Stock then
outstanding.
(b) If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Series A Preferred Stock hereunder
require registration with or approval of any governmental authority
under any Federal or state law before such shares may be validly
issued or delivered upon conversion, then the Company covenants that
it will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be, provided,
however, that nothing in this Section 5.5 shall be deemed to affect in
any way the obligations of the Company to convert Series A Preferred
Stock into Common Stock as provided in this Article V.
ARTICLE VI
MISCELLANEOUS
6.1 EXCLUSION OF OTHER RIGHTS. Except as may otherwise be
required by law, the shares of Series A Preferred Stock shall not have any
powers, preferences or relative, participating, optional or special rights,
other than those specifically set forth in this Certificate and in the
Certificate of Incorporation.
6.2 HEADINGS OF SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
6.3 SEVERABILITY OF PROVISION. If any voting powers,
preferences, and relative, participating, optional or other special rights of
the Series A Preferred Stock and qualifications, limitations, and restrictions
thereof set forth in this resolution are invalid, unlawful or incapable of
being enforced by reason of any rule of law or public policy, all other voting
powers, preferences and relative, participating, optional and other special
rights of the Series A Preferred Stock and qualifications, limitations and
restrictions thereof set forth in this resolution (as so amended) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
the Series A Preferred Stock and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of the Series A
12
<PAGE> 13
Preferred Stock and qualifications, limitations and restrictions thereof herein
set forth shall be deemed dependent upon any other special rights of the Series
A Preferred Stock and qualifications, limitations and restrictions thereof
unless so expressed herein.
13
<PAGE> 1
EXHIBIT 4.4
BANNER AEROSPACE, INC.
[ADDRESS LABEL]
EXPIRATION DATE: SUBSCRIPTION PRICE:
, 1997 $9.20 PER SHARE OF SERIES A CONVERTIBLE
- ------------ PAID-IN-KIND PREFERRED STOCK
This non-transferable Subscription Certificate evidences
rights (the "Rights") issued by Banner Aerospace, Inc. (the "Company") to
holders of record of its common stock, $1.00 par value ("Common Stock"), at
5:00 p.m., New York City time on __, 1997 (the "Record Date") to subscribe for
shares of Series A Convertible Paid-in-Kind Preferred Stock, $.01 par value
per share (the "Preferred Stock") of the Company at the price (the
"Subscription Price") stated above. No fractional Rights will be issued;
however, one Right will be issued in lieu of any fractional Right to which
a holder would otherwise be entitled. One (1) Right and the Subscription Price
are required to subscribe for one (1) share of Preferred Stock upon the terms
and conditions stated in the Company's prospectus dated ___________, 1997 (the
"Prospectus"). Full instructions appear on the back of this Subscription
Certificate.
Set forth on the label above is the registered holder's name
and address as it appears on the books of the Company's transfer agent and two
numbers: the upper number is the number of shares of Common Stock held by such
holder on the Record Date and the lower number is the number of shares of
Preferred Stock to which such holder is entitled to subscribe pursuant to this
rights offering (the "Rights Offering").
THE SUBSCRIPTION ORDER FORM MUST BE RECEIVED BY HARRIS TRUST
COMPANY OF NEW YORK, 77 WATER STREET, NEW YORK, NEW YORK 10005; TEL. (212)
701-7624 (THE "SUBSCRIPTION AGENT"), WITH PAYMENT IN FULL BY 5:00 PM, NEW
YORK CITY TIME, ON _____________, 1997, UNLESS EXTENDED IN THE SOLE DISCRETION
OF THE COMPANY (AS IT MAY BE EXTENDED, THE "EXPIRATION DATE"). ANY RIGHTS NOT
EXERCISED PRIOR TO THE EXPIRATION DATE WILL LAPSE AND WILL BE VOID. ANY
SUBSCRIPTION FOR SHARES OF PREFERRED STOCK IN THE RIGHTS OFFERING MADE HEREBY
IS IRREVOCABLE.
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF
THE RIGHTS OFFERING, PLEASE REFER TO THE PROSPECTUS, WHICH IS INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM
CORPORATE INVESTOR COMMUNICATIONS, INC. (THE "INFORMATION AGENT") AT 111
COMMERCE ROAD, CARLSTADT, NEW JERSEY 07072-2586; TEL. (800) 932-8494.
IMPORTANT: COMPLETE APPROPRIATE FORM(S) ON REVERSE.
<TABLE>
<S> <C> <C> <C> <C>
Dated: BANNER AEROSPACE, INC.
Countersigned: By:
Subscription Agent [CORPORATE SEAL] [Chief Executive Officer]
By: By:
Authorized Signature [Chief Financial Officer]
</TABLE>
<PAGE> 2
BANNER AEROSPACE, INC.
RETURN TO SUBSCRIPTION AGENT
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Wall Street Station 77 Water Street, 4th Floor Receive Window
P.O. Box 1010 New York, New York 10005 77 Water Street, 5th Floor
New York, New York 10268-1010 New York, New York
</TABLE>
INFORMATION TO BE COMPLETED BY HOLDER
TO SUBSCRIBE. Complete Part I and mail or deliver this certificate to the
Subscription Agent at the address listed above, together with the total
Subscription Price in U.S. funds by certified check, bank draft or money order
payable at par (without deduction for bank service charges or otherwise) to the
order of HARRIS TRUST COMPANY OF NEW YORK, as Subscription Agent. The duly
executed Subscription Certificate and payment of the total Subscription Price
must be received by the Subscription Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
If the exercising Rights holder is subscribing for shares of
Preferred Stock on behalf of beneficial owners of Common Stock, attach a
schedule to this certificate listing (i) the name of each beneficial owner
directing the exercise of Rights, (ii) the number of shares of Common Stock
owned by each such beneficial owner, and (iii) the number of shares of Preferred
Stock to which each beneficial owner subscribes pursuant to that person's
exercise of the Rights.
PART I - SUBSCRIPTION FOR SHARES OF PREFERRED STOCK
The undersigned hereby irrevocably subscribes for the number of shares
of Preferred Stock indicated below, on the terms and subject to the conditions
specified herein and in the Prospectus, receipt of which is hereby
acknowledged.
Number of shares of Preferred Stock subscribed for pursuant to the Rights
Offering at $9.20 per share:
------------------
Total price: $
----------
If the aggregate Subscription Price paid by an exercising Rights
holder is insufficient to cover the amount necessary to purchase the number
of shares of Preferred Stock that such holder indicates are being subscribed
for, or if any exercising Rights holder does not specify the number of shares
of Preferred Stock to be purchased, then such Rights holder will be deemed to
have exercised such holder's Rights to the full extent of the payment tendered,
subject to the limits set forth in the Prospectus.
If the aggregate Subscription Price paid by a Rights holder exceeds
the amount necessary to purchase the number of shares of Preferred Stock for
which the Rights holder has indicated an intent to subscribe, the Rights holder
will receive promptly by mail a refund equal to the excess payment without
interest or deduction.
PART II - SPECIAL ISSUANCE OR DELIVERY INSTRUCTIONS FOR RIGHTS HOLDERS
Unless otherwise indicated below, the Subscription Agent is hereby
authorized to issue and deliver certificates for Preferred Stock to Rights
holders at the address on the label above.
(a) To be completed ONLY if the certificate representing the Preferred
Stock is to be issued in a name other than the registered holder shown above.
<PAGE> 3
COMPLETE THE GUARANTEE OF SIGNATURE(S) SECTION BELOW. (Please Print).
Name(s) in which stock is to be registered: .
----------------------
Street Address:
--------------------------------------
City: State: Zip Code:
-------------------- ------- -------------
Social Security or Tax ID#:
--------------------
(b) To be completed ONLY if the certificate representing the Preferred
Stock is to be sent to an address other than that shown above.
COMPLETE THE GUARANTEE OF SIGNATURE(S) SECTION BELOW. (Please Print).
Mail and Deliver to:
Name(s): .
----------------------
Street Address:
--------------------------------------
City: State: Zip Code:
-------------------- -------- -------------
Social Security or Tax ID#:
--------------------
ACKNOWLEDGMENT
THE SUBSCRIPTION ORDER FORM IS NOT VALID UNLESS YOU SIGN BELOW.
I/We acknowledge receipt of the Prospectus and understand that after
delivery to the Company, I/we may not modify or revoke this Subscription
Certificate. Under penalties of perjury, I/we certify that the information
contained herein, including the social security number or taxpayer
identification number given above and the schedule of beneficial owners, if
applicable, is correct. If Part II Special Issuance Instructions are completed,
I/we certify that although the certificate representing the Preferred Stock is
to be issued in a name other than the registered holder, beneficial ownership
of the Preferred Stock will not change.
The signature below must correspond with the name of the registered
holder exactly as it appears on the books of the Company's transfer agent
without any alteration or change whatsoever.
SIGN HERE
---------------------------------
Signature(s) of Registered Holder
Date: , 1997
---------------
If signature is by trustee(s), executor(s), administrator(s),
guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation of
another acting in a fiduciary or representative capacity, please provide the
following information. (Please print).
Name(s):
-------------------------------
Capacity (Full Title):
-------------------------
Address (Including Zip Code):
-------------------------------------
Daytime Phone:
-----------------------
Evening Phone:
-----------------------
Taxpayer Identification or Social Security Number:
------------------
<PAGE> 4
GUARANTEE OF SIGNATURE(S)
All Rights holders who specify special issuance or delivery
instructions pursuant to Part II of this Subscription Order form must have
their signatures guaranteed by an Eligible Institution. An "Eligible
Institution" for this purpose is a financial institution having an office or
correspondent office in the United States, or a member firm of any registered
United States national securities exchange or of the National Association of
Securities Dealers, Inc.
Authorized Signature:
------------------------
Name:
---------------------
Title:
---------------------
Dated:
---------------------
Name of Firm:
---------------------
Address:
-----------------------
Area Code and Telephone Number:
----------------------------
, 1997
- -------------
<PAGE> 5
INSTRUCTIONS AS TO THE USE OF
BANNER AEROSPACE, INC. SUBSCRIPTION CERTIFICATES
-------------------
CONSULT THE INFORMATION AGENT, YOUR BANK OR BROKER AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by Banner Aerospace, Inc (the "Company"), to the holders of shares
of its common stock, par value $1.00 (the "Common Stock"), as described in the
Company's Prospectus dated ___________, 1997, (the "Prospectus"). Each holder
of Common Stock of record at 5:00 p.m., New York City time, on ___________,
1997 (the "Record Date") is entitled to receive, for every 4.5 shares of Common
Stock held, one non-transferable right (the "Rights"). No fractional Rights
will be issued; however, one Right will be issued in lieu of any fractional
Right to which a holder would otherwise be entitled. Such holders are entitled
to purchase one (1) share of Series A Convertible Paid-in-Kind Preferred Stock,
par value $.01 (the "Preferred Stock") for every Right held at a subscription
price of $9.20 per share of Preferred Stock (the "Subscription Price"). No
fractional shares of Preferred Stock will be issued, and no cash in lieu
thereof will be paid. In the event all holders of Common Stock (approximately
23 million shares outstanding) were to exercise all the Rights in the Rights
Offering, the Company would issue approximately 5 million shares of Preferred
Stock, for an aggregate consideration of approximately $48 million. See "THE
RIGHTS OFFERING" in the Prospectus.
The period during which the Rights may be exercised is referred to
herein as the "Subscription Period". The Rights expire at 5:00 p.m., New York
City time, on __________, 1997 (the "Expiration Date"). Rights not duly
exercised by such time will lapse and will be void and without value. The
Company reserves the right to extend the Subscription Period and the Expiration
Date, subject to obtaining any required regulatory approvals.
The number of Rights to which you are entitled and the number of
shares purchasable thereunder are printed on the face of your Subscription
Certificate. You should indicate your wishes with regard to the exercise of
your Rights by completing the Subscription Certificate and returning it to the
Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATES MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION
CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE, MUST
BE RECEIVED BY THE SUBSCRIPTION AGENT, ON OR BEFORE 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE. YOU MAY NOT REVOKE ANY EXERCISE OF A RIGHT.
SUBSCRIPTION PRIVILEGES
To exercise Rights, send your properly completed and executed
Subscription Certificate, together with payment in full of the Subscription
Price for each share of Preferred Stock subscribed for pursuant to the Rights
Offering, to the Subscription Agent. Payment of the Subscription Price must be
made in U.S. dollars for the full number of shares of Preferred Stock being
subscribed for by certified check or bank draft drawn upon a U.S. bank or
postal, telegraphic or express money order payable at par (without deduction
for bank service charges or otherwise) to the order of HARRIS TRUST COMPANY OF
NEW YORK, as Subscription Agent. Alternatively, you may cause a written
guarantee substantially in the form delivered with these instructions (the
"Notice of Guaranteed Delivery") from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution"), to be received by the Subscription Agent at or prior to the
Expiration Date together with payment in full of the applicable Subscription
Price. Such Notice of Guaranteed Delivery must state your
<PAGE> 6
name, the number of Rights represented by your Subscription Certificate and the
number of shares of Preferred Stock being purchased pursuant to the Rights
Offering, and will guarantee the delivery to the Subscription Agent of your
properly completed and executed Subscription Certificate within three New York
Stock Exchange ("NYSE") trading days following the date of the Notice of
Guaranteed Delivery. If this procedure is followed, your Subscription
Certificate must be received by the Subscription Agent within three NYSE
trading days of the Notice of Guaranteed Delivery. Additional copies of the
Notice of Guaranteed Delivery may be obtained upon request from the
Subscription Agent at the address, or by calling the telephone number,
indicated below.
BANKS, BROKERS AND OTHER NOMINEE HOLDERS OF RIGHTS WHO EXERCISE RIGHTS
ON BEHALF OF BENEFICIAL OWNERS OF RIGHTS WILL BE REQUIRED TO CERTIFY TO THE
SUBSCRIPTION AGENT AND THE COMPANY AS TO (i) THE NUMBER OF SHARES OF COMMON
STOCK OWNED BY EACH BENEFICIAL OWNER ON WHOSE BEHALF SUCH NOMINEE HOLDER ACTS
AND (ii) THE NUMBER OF SHARES OF PREFERRED STOCK TO WHICH EACH BENEFICIAL OWNER
ON WHOSE BEHALF SUCH NOMINEE HOLDER ACTS SUBSCRIBES PURSUANT TO THAT PERSON'S
EXERCISE OF THE RIGHTS.
The address and telecopier number of the Subscription Agent are as
follows:
Harris Trust Company of New York
77 Water Street
New York, New York 10005
Tel: (212) 701-7624
Fax: (212) 701-7636/7
If you have not indicated the number of Rights being exercised, or if
you have not forwarded full payment of the Subscription Price for the number of
Rights that you have indicated are being exercised, you will be deemed to have
exercised your Rights with respect to the maximum number of whole Rights which
may be exercised for the Subscription Price payment delivered by you.
DELIVERY OF SHARES OF PREFERRED STOCK
Certificates for shares of Preferred Stock duly subscribed and paid for
will be mailed to the subscriber by the Subscription Agent as soon as
practicable (which is anticipated to be the _____ business day after the
Expiration Date) at the subscriber's registered address on the books of the
Company. See "Description of the Rights Offering" in the Prospectus.
EXECUTION
(a) Execution by Registered Holder. The signature on the
Subscription Certificate must correspond with the name of the registered holder
exactly as it appears on the face of the Subscription Certificate without any
alteration or change whatsoever. Persons who sign the Subscription Certificate
in a representative or other fiduciary capacity must indicate their capacity
when signing and, unless waived by the Subscription Agent in its sole and
absolute discretion, must present to the Subscription Agent satisfactory
evidence of their authority to so act.
(b) Execution by Person Other than Registered Holder. If the
Subscription Certificate is executed by a person other than the holder named on
the face of the Subscription Certificate, proper evidence of authority of the
person executing the Subscription Certificate must accompany the same unless,
for good cause, the Subscription Agent dispenses with proof of authority.
<PAGE> 7
(c) Signature Guarantees. Signatures must be guaranteed by an
Eligible Institution if (i) the subscriber specifies special payment or
delivery instructions pursuant to Part II of the Subscription Certificate or
(ii) the subscription is submitted for the account of an Eligible Institution.
METHOD OF DELIVERY
The method of delivery to the Subscription Agent of a Subscription
Certificate and payment of the Subscription Price is at the election and risk
of each stockholder. Subscription Certificates, together with payment of the
Subscription Price, should be sent with sufficient time to allow for delivery
prior to the Expiration Date. If delivery is made by regular mail service, the
use of registered or certified mail, return receipt requested, properly
insured, is recommended.
SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS
THROUGH THE DEPOSITORY TRUST COMPANY
In the case of holders of Rights that are held of record through The
Depository Trust Company ("DTC"), exercises of the Rights may be effected by
instructing DTC to transfer Rights (such Rights being "DTC Exercised Rights")
from the DTC account of such holder to the DTC account of the Subscription
Agent, together with payment of the Subscription Price for each share of
Preferred Stock subscribed for pursuant to the Rights Offering.
SUBSTITUTE FORM W-9
Each Rights holder who elects to exercise Rights should provide the
Subscription Agent with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is included as Exhibit A hereto. Additional copies
of Substitute Form W-9 may be obtained upon request from the Subscription Agent
or the Information Agent indicated above. Failure to provide the information
on the form may subject such holder to 31% Federal income tax withholding with
respect to dividends or other distributions that may be paid by the Company on
shares of Preferred Stock purchased upon the exercise of Rights.
DETERMINATIONS AS TO VALIDITY OF SUBSCRIPTIONS
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any subscription will be determined by the Company,
in its sole discretion, which determination shall be final and binding. The
Company reserves the absolute right to reject any subscription if it is not in
proper form or if the acceptance thereof or the issuance of the Preferred Stock
pursuant thereto could be deemed unlawful. The Company also reserves the right
to waive any defect with regard to any particular subscription or request for
transfer. The Company and the Subscription Agent shall not be under any duty to
give notification of any defects or irregularities in subscriptions, nor shall
either of them incur any liability for failure to give such notification.
Subscriptions will not be deemed to have been made until any such defects or
irregularities have been cured or waived within such time as the Company shall
determine. Subscriptions with defects or irregularities which have not been
cured or waived will be returned by the Subscription Agent to the appropriate
holder of the Rights as soon as practicable.
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Milbank, Tweed, Hadley & McCloy]
___, 1997
Banner Aerospace, Inc.
300 West Services Road
Washington, D.C. 20041
Re: Registration Statement on Form S-3
Issuance of Shares of Series A Convertible
Paid-in-Kind Preferred Stock,
par value $.01 per share
Ladies and Gentlemen:
We have acted as counsel to Banner Aerospace, Inc., a Delaware
corporation (the "Company"), in connection with a Registration Statement on
Form S-3 (the "Registration Statement"), filed with the Securities and Exchange
Commission (the "Commission") today for the purpose of registering under the
Securities Act of 1933, as amended, a maximum of 7,521,088 shares of Series A
Convertible Paid-in-Kind Preferred Stock, par value $.01 per share, of the
Company (the "Preferred Stock"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth or incorporated in
the Registration Statement.
The Preferred Stock will be issued to the holders of non-transferable
Rights to subscribe to shares of Preferred Stock who elect to exercise such
Rights by the Expiration Date as provided in the Registration Statement. Such
Rights will be distributed to the holders of record of common stock, par value
$1.00 per share (the "Common Stock"), of the Company on the designated Record
Date.
In rendering the opinions expressed below, we have examined originals,
or copies certified to our satisfaction, of such documents, corporate records
of the Company and such other documents as we have deemed necessary as a basis
for the opinions hereinafter expressed, including the following: (a) the
Company's Restated Certificate of Incorporation, as amended, and Amended and
Restated By-laws; (b) certain resolutions adopted by the Board of Directors of
the Company concerning the Registration Statement and the capital stock of the
Company; (c) a proposed resolution to be adopted by the Company's shareholders
amending the Restated Certificate of Incorporation to authorize the Company to
issue 50,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock (the "Shareholders' Resolution"); and (d) the Registration Statement. In
such examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity with
the original documents of all documents submitted to us as copies and the
authenticity of the originals of such latter documents. As to various
questions of fact material to such opinions, we have relied upon
representations and warranties as to
<PAGE> 2
-2-
factual matters made in or pursuant to the Registration Agreement by the
parties thereto, and certificates of public officials and officers or other
appropriate representatives of the Company.
Based upon and subject to the foregoing and subject also to
the qualification set forth below, and having regard to legal considerations
which we deem necessary as a basis for the opinions expressed below, we are of
the opinion that upon the approval of the Shareholders' Resolution by the
shareholders of the Company and the filing of each of (a) the related amendment
to the Company's Restated Certificate of Incorporation and (b) the Certificate
of Designations, Preferences, Rights and Limitations of the Preferred Stock
with the Delaware Secretary of State, the Preferred Stock issued upon exercise
of the Rights, in accordance with the terms thereof, and the Common Stock
issued upon conversion of the Preferred Stock, in accordance with the terms
thereof, will have been legally and validly issued and will be fully paid and
nonassessable.
The foregoing opinions are limited to matters involving the
Federal laws of the United States of America, the general corporate law of the
State of Delaware and the laws of the State of New York, and we do not express
any opinion as to the laws of any other jurisdiction.
This opinion is addressed to you solely in connection with the
matters referred to herein and is not to be relied upon by any other person,
except the New York Stock Exchange and the Commission, or for any other
purpose.
We hereby consent to the use of this opinion as an Exhibit to
the Registration Statement and further consent to the use of our name wherever
it appears in the Registration Statement and any amendment thereto, and the
Prospectus relating thereto.
Very truly yours,
Milbank, Tweed, Hadley & McCloy
DBB/[ ]
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
February 19, 1997
