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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 purchase up to 4,000,000 shares (the
"Shares") of the outstanding Common Stock at a purchase price of $12.50 per
Share, net to the seller, in shares of Class A Common Stock, par value $0.10
per share of Fairchild as 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 of $12.50 per Share
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
EXHIBIT DESCRIPTION
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99.1 Letter, dated May 11, 1998 from the Company to its stockholders.
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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: May 11, 1998
BANNER AEROSPACE, INC.
/s/ Donald E. Miller
By:__________________________________
Name: Donald E. Miller
Title: General Counsel
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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99.1 Letter, dated May 11, 1998 from the Company to its stockholders.