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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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BANNER AEROSPACE, INC.
(NAME OF SUBJECT COMPANY)
BANNER AEROSPACE, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
066525106
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DONALD E. MILLER, ESQ.
45025 AVIATION DRIVE
SUITE 400
DULLES, VA 20166-7516
GENERAL COUNSEL
(703) 478-5790
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
JAMES J. CLARK, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NY 10005
(212) 701-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Banner Aerospace, Inc. a Delaware
corporation (the "Company"), and the address of its principal executive
offices is 45025 Aviation Drive, Suite 300, Dulles, VA 20166-7516. The title
of the class of equity securities to which this statement relates is the
Common Stock, par value $1.00 per share (the "Common Stock") of the Company.
ITEM 2. TENDER EXCHANGE OFFER OF THE BIDDER
This statement relates to the tender offer by The Fairchild Corporation, a
Delaware corporation ("Fairchild"), to exchange, for each properly tendered
share of Common Stock, a number of shares of Fairchild's Class A common stock,
par value $0.10 per share, equal to the quotient of $12.50 divided by $20.675,
up to a maximum of 4,000,000 shares of Common Stock, disclosed in a Tender Offer
Statement on Schedule 14D-1 filed by Purchaser on May 11, 1998 (the "Schedule
14D-1") and upon the terms and subject to the conditions set forth in the
Prospectus (the "Prospectus") that is contained in the Registration of Form S-4
(Registration Statement No. 333-47907 filed by Fairchild on March 13, 1998 and
the related Letter of Transmittal (which collectively constitute the "Exchange
Offer" and are contained within the Schedule 14D-1). The Schedule 14D-1 states
that the address of Fairchild's principal executive offices is 45025 Aviation
Drive, Suite 300, Dulles, VA 20166-7556.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
The Company is a subsidiary of Fairchild. Fairchild owns approximately 66%
of the outstanding Common Stock of the Company. Jeffrey J. Steiner, the
Chairman of the Board, Chief Executive Officer and President of the Company is
also the Chairman of the Board, Chief Executive Officer and President of
Fairchild. The Company is a party to several agreements with Fairchild.
Contracts and Arrangements between the Company, Fairchild and Jeffrey J.
Steiner.
The Company paid to Fairchild and its affiliates $1,246,000, $456,000 and
$276,000 during fiscal 1997, 1996 and 1995, respectively, for various expenses
such as rent, tax, legal and communication services. The Company paid to
Fairchild $231,000 during the nine-month period ended December 31, 1997 for
rent, tax and legal services. All services are and have been in the ordinary
course of business and were included in selling, general and administrative
expenses. The Company had sales of products to Fairchild of $122,000, $48,000
and $28,000, and purchases of products from Fairchild of $9,384,000,
$5,522,000 and $4,814,000, in fiscal 1997, 1996 and 1995, respectively, all in
the ordinary course of business. The Company had sales of products to
Fairchild of $95,000 and purchases of products from Fairchild of $15,560,000
for the nine months ended December 31, 1997.
The Company has an agreement with Fairchild to lease approximately 10,000
square feet of office space in the Fairchild building for an annual rate of
approximately $170,000 with a 3% escalation per year for a term of ten years
with an option to terminate the lease after five years.
The Company has a letter agreement with Fairchild in which Fairchild
provides tax preparation and consulting services to the Company. The annual
fee for the tax services rendered is approximately $103,000. In addition,
immediately prior to the 1990 public offering ("IPO"), Fairchild and the
Company entered into a Tax Indemnity Agreement whereby Fairchild agreed to
indemnify the Company from and against any federal, state, local and foreign
income, franchise, withholding and alternative minimum taxes (including
interest, additions to
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tax and penalties with respect thereto) for periods ending on or before the
closing of the IPO. The Company, in turn, agreed to pay Fairchild for any tax
savings it realized after the IPO as a result of adjustments to, or
utilization of net operating loss or tax credit carryforwards attributable to,
income tax returns for prior periods.
Pursuant to a letter agreement with Fairchild, the Company uses the services
of attorneys who are employed by Fairchild to provide certain legal services
to the Company. This agreement is on a month-to-month basis. The Company pays
Fairchild approximately $12,500 a month for such services.
As long as Fairchild owns 15% or more of the issued and outstanding shares
of the Common Stock, it has the unlimited right to require the Company to use
its best efforts pursuant to a registration rights agreement to register under
the agreement all shares of Common stock beneficially owned by Fairchild at
any time and from time to time, at Fairchild's expense. In addition, Fairchild
has piggyback registration rights that are subject to certain limitations.
The Company is a party to several agreements with Fairchild which provide
for various methods of expense sharing related to combined sales and marketing
efforts to obtain customers in foreign countries. As of December 31, 1997, the
Company had contributed less than $125,000 under these agreements. Fairchild
and the Company will share commission income to the extent commissions exceed
expenses. No such commissions have been received to date. In addition, the
Company pays for a chartered aircraft to a company 51% owned by an immediate
family member of Mr. Jeffrey Steiner. Costs for such flights charged to the
Company are comparable to those charged in arm's length transactions between
unaffiliated third parties. Payments by the Company for the use of the
chartered aircraft for fiscal year ended March 31, 1997 were approximately
$137,000 and were approximately $36,000 for the nine months ended December 31,
1997.
Mr. Jeffrey J. Steiner has a three-year employment agreement with the
Company which became effective September 9, 1992; however, each year the
remainder of the term of Mr. Steiner's employment is extended for an
additional one-year period unless either party gives timely notice of its or
his intention not to extend further the term of the employment agreement. The
employment agreement provides for a base salary of not less than $250,000 per
annum and also provides for participation in the Company's bonus plan,
retirement plan, and other executive benefits.
Interests of Certain Persons and Stockholdings of Certain Officers and
Directors.
As a result of the composition of the Board of Directors and security
ownership of Purchaser discussed below and Purchaser is able to exert
substantial control over the Company which would be increased upon
consummation of the Exchange Offer.
Directors and Officers. Directors and officers of Fairchild comprise three
of the nine members of the Company's Board. Michael T. Alcox, a director of
the Company, is Vice President and a director of Fairchild; Eric I. Steiner,
Senior Vice President and a director of the Company, is Executive Vice
president, Chief Operating Officer and a director of Fairchild and is the son
of Jeffrey J. Steiner; and Jeffrey J. Steiner, Chairman, Chief Executive
Officer, President and a director of the Company, is Chairman, Chief Executive
Officer and President of Fairchild and a director of Fairchild and RHI and is
the father of Eric I. Steiner. Philippe Hercot, a director of the Company, is
the son-in-law of Jeffrey J. Steiner. Donald E. Miller is the General Counsel
of both the Company and Fairchild.
Security Ownership. Fairchild currently owns 14,180,610 shares of Common
Stock, representing approximately 66% of the outstanding Common Stock. In
addition, Fairchild owns 3,170,839 shares of Series A Convertible Paid-In-Kind
Preferred Stock of the Company (the "Preferred Stock") which is convertible
into Common Stock on a one for one basis.
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Other Actual or Potential Conflicts of Interest.
No Arms' Length Negotiation. The Exchange Offer price equal to the quotient of
$12.50 divided by 20.675 payable in shares of Fairchild's Class A common stock,
was established by Fairchild and is not the result of arms' length negotiations
between the Company and Fairchild. The Company has not retained any unaffiliated
person to represent stockholders. If an unaffiliated person had been engaged to
represent stockholders, the terms and Exchange Offer might have been different
and the unaffiliated person might have been able to negotiate a higher price to
be paid in the Exchange Offer.
(b) By reason of the relationships and other factors more fully discussed
above, the Company has conflicts of interest in considering the Exchange
Offer.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
As discussed in Item 3 above, the Company and its Board of Directors may
have conflicts of interest with respect to the Exchange Offer. For this
reason, the Company and its Board of Directors express no opinion and are not
making any recommendation as to whether stockholders should tender their
Common Stock in response to the Exchange Offer. STOCKHOLDERS SHOULD EXERCISE
THEIR OWN JUDGMENT, ON THE ADVICE OF THEIR OWN FINANCIAL ADVISORS AND LEGAL
COUNSEL, IN EVALUATING THE EXCHANGE OFFER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Neither the Company nor any person acting on its behalf has employed,
retained or compensated or intends to employ, retain or compensate any person
or class of persons to make solicitations or recommendations to stockholders
on its behalf concerning the Exchange Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) The Company has not effected any transactions in the shares of Common
Stock during the past 60 days, and is not aware of any other transactions in
Common Stock during the past 60 days by any of its executive officers,
directors, affiliates or subsidiaries.
(b) Certain officers and directors of Banner own Banner Shares and options
to purchase Banner Shares. Such officers and directors of Banner may on an
individual basis, decide to tender their Banner Shares or Banner Shares
exerciseable upon exercise of such options.
Fairchild does not intend to tender any shares of Common Stock it owns in
the Exchange Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) No negotiation is being undertaken or is underway by the Company in
response to the Exchange Offer which relates to or would result in:
(1) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
(4) any material change in the present capitalization or dividend policy
of the Company.
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(b) There is no transaction, board resolution, agreement in principle or a
signed contract in response to the Exchange Offer which relates to or would
result in one or more of the matters referred to in Item 7(a)(1), (2), (3) or
(4).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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EXHIBIT DESCRIPTION
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99.1 Letter, dated May 11, 1998 from the Company to its stockholders.
99.2 Tax Service Agreement between The Fairchild Corporation and the
Company, dated December 15, 1997.
99.3 Attorney Service Agreement between The Fairchild Corporation and the
Company, dated July 18, 1997.
99.4 Lease between Banner Aerospace, Inc. as tenant, and RHI Holdings, Inc.
as landlord, dated April 1, 1996. (Incorporated by reference from
Exhibit 10.1(r) to the Company's Annual Report on Form 10-K for the
year ended March 31, 1997).
99.5 Stock Issuance and Expense Sharing Agreement by and among Banner
Aerospace, Inc., RHI Holdings, Inc. and Aero International, Inc.,
dated October 31, 1996. (Incorporated by reference from Exhibit 10.4
to the Company's Quarterly Report on Form 10-Q, dated February, 1997).
99.6 Tri-Fast Partnership Agreement between Banner Aerospace, Inc. RHI
Holdings, Inc. and Edwards Lock management Corporation dated November
19, 1996. (Incorporated by reference from Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q, dated February, 1997).
99.7 Employment Agreement between the Company and Jeffrey J. Steiner.
(Incorporated by reference from Exhibit 10(iii)(g) to the Company's
Annual Report on Form 10-K dated June 28, 1993).
99.8 Registration Rights Agreement, as amended, between Banner Aerospace,
Inc. and Banner Aerospace Holding Company II, Inc., dated March 12,
1996.
99.9 Tax Indemnity Agreement between The Fairchild Corporation, Banner
Aerospace Holding Company I, Inc. and Banner Aerospace, Inc.
(Incorporated by reference from Exhibit 10(i)(d) included in the
Company's Annual Report on Form 10-K dated June 28, 1991.)
99.10 Registration Rights Agreement between Banner Aerospace Holding Company
II. Inc. and Banner Aerospace, Inc. (Incorporated by reference from
Exhibit 10(i)(e) included in the Company's Annual Report on Form 10-K
dated June 28, 1991.)
99.11 Transitional Agreement between The Fairchild Corporation and Banner
Aerospace, Inc. (Incorporated by reference from Exhibit 10(i)(f)
included in the Company's Annual Report on Form 10-K dated June 28,
1991.)
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 4, 1998
BANNER AEROSPACE, INC.
/s/ Donald E. Miller
By:__________________________________
Name: Donald E. Miller
Title: General Counsel
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EXHIBIT 99.1
[Letterhead of Banner Aerospace, Inc.]
May 11, 1998
Dear Stockholder:
As you are by now aware, The Fairchild Corporation, a Delaware
corporation ("Fairchild") has made an offer (the "Exchange Offer") to exchange,
for each properly tendered share (the "Shares") of common stock, par value $1.00
per share of Banner Aerospace, Inc., a Delaware corporation (the "Company"), a
number of shares of Fairchild's Class A common stock, par value $0.10 per share,
equal to the quotient of $12.50 divided by $20.675, up to a maximum of 4,000,000
Shares. Enclosed is a copy of the Company's Statement on Schedule 14D-9 which
was filed with the Securities and Exchange Commission and sets forth the
Company's response to the Exchange Offer.
Fairchild currently beneficially owns approximately 66% of the
outstanding Common Stock of the Company and three of the nine directors of the
Company are affiliated with Fairchild. In addition, the Company is a party to
certain agreements with Fairchild relating to the operations of the Company
described in the enclosed Schedule 14D-9. Due to the affiliation between
Fairchild and the Company, among other things, the Company and its Board of
Directors is subject to certain conflicts of interest with respect to the
Exchange Offer.
As a result of the existing and potential conflicts of interest, which
conflicts of interest are more fully described in the enclosed Schedule 14D-9,
neither the Company nor the Board of Directors expresses any opinion or makes
any recommendation as to whether stockholders should tender their Common Stock
in response to the Exchange Offer.
Stockholders are advised to carefully read the enclosed Schedule 14D-9
and consult with their own legal counsel and financial advisors.
BANNER AEROSPACE, INC.
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EXHIBIT 99.2
[LOGO] FAIRCHILD
MEMORANDUM
TO: W. Persavich
FROM: J. L. Flynn
DATE: December 15, 1997
SUBJECT: Tax Service Agreement for Banner Aerospace, Inc. and Subsidiaries -
FY 1998 Fees
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This confirms the fees to be charged to Banner Aerospace, Inc. by The Fairchild
Corporation for tax services to be rendered for the period October 1, 1997,
through September 30, 1998.
The annual fee for this period will be $103,221 (payable quarterly in arrears),
plus out-of-pocket expenses. All other provisions of the Agreement in effect
for the prior year, including specific services to be rendered, will remain in
force.
Please indicate your agreement with the arrangement and return one copy to me.
AGREED:
/s/ Warren D. Persavich /s/ John L. Flynn
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Warren D. Persavich John L. Flynn
Senior Vice President, CFO Senior Vice President, Tax
Banner Aerospace, Inc. The Fairchild Corporation
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EXHIBIT 99.3
[LOGO] BANNER AEROSPACE
MEMORANDUM
TO: Distribution DATE: July 18, 1997
FROM: Brad Lough
SUBJECT: Fairchild Legal Fees REF NO.
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Please note that effective April 1, 1997, Banner Aerospace, Inc. will pay The
Fairchild Corp. $150,000 per annum for legal services. This fee will be paid
quarterly ($37,500).
Please contact me should you have questions.
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EXHIBIT 99.8
Amendment Number One, dated as of March 12, 1996 ("Amendment") to the
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Registration Rights Agreement dated as of August 2, 1990 and as amended hereby
(the "Agreement"), between Banner Aerospace, Inc., a Delaware corporation
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(the "Company") and Banner Aerospace Holding Company II, Inc., a Delaware
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corporation ("Banner"). Capitalized terms used and not otherwise defined
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herein shall have the meanings assigned to them in the Agreement.
WHEREAS, The Fairchild Corporation, a Delaware corporation
("Fairchild"), as a Permitted Transferee and assignee of Banner has been
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assigned Banner's registration rights pursuant to the Agreement with respect to
shares of Common Stock of the Company currently owned by Fairchild;
WHEREAS, Fairchild has assigned and delivered all of the issued and
outstanding capital stock of its indirect wholly-owned subsidiary, Harco Inc.,
to the Company solely in exchange for additional shares of the Common Stock of
the Company in accordance with the Stock Exchange Agreement, dated February 22,
1996, by and between Fairchild and the Company (the "Stock Exchange Agreement");
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and
WHEREAS, in order to induce Fairchild to enter into the Stock Exchange
Agreement, and as a condition precedent to closing of the transactions
thereunder, the Stock Exchange Agreement requires that the Company enter into
this Amendment; and
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
(a) Section 1.1 shall be further amended as follows:
"Holder" shall be amended by deleting the definition thereof and
replacing it with the following:
"Holder" shall mean Fairchild and
any subsidiary of Fairchild or any Permitted
Transferee."
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(b) Section 1.2 shall be amended by deleting the text thereof in its
entirety and replacing it with the following:
"1:2 Permitted Transferees. The rights of the Holder of
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Registrable Securities hereunder may be assigned to a transferee or assignee
(a "Permitted Transferee") in connection with any transfer or assignment of
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Registrable Common Stock by Holder thereof, provided that: (a) the Company
is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned
under and (b) the transferee acquires a number of Registrable Common Stock
not less than 20% of the then outstanding Common Stock; provided, however,
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that in any event, Fairchild may assign its rights hereunder to a subsidiary
of Fairchild. Subject to the foregoing, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns."
(c) Section 1.3 shall be amended by deleting the text thereof in its
entirety and replacing it with the following:
"1.3 Registrable Common Stock. "Registrable Common Stock" means
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all Common Stock of the Company owned by the Holder including, without
limitation, the Common Stock received by the Holder pursuant to the Stock
Exchange Agreement until such time as the Common Stock ceases to be
registrable as provided in Section 2.2 of this Agreement."
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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
THE FAIRCHILD CORPORATION
By: /s/ John Flynn
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Name: John Flynn
Title:
BANNER AEROSPACE, INC.
By: /s/ Warren Persavich
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Name: Warren Persavich
Title: Sr. Vice President
