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SCHEDULE 14A INFORMATION
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The Fairchild Corporation
(Name of Registrant as Specified In Its Charter)
The Fairchild Corporation
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[LOGO OF FAIRCHILD CORPORATION]
THE FAIRCHILD CORPORATION
45025 Aviation Drive
Suite 400
Dulles, VA 20166-7516
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
Date:
Monday, November 20, 2000
Time:
10:00 a.m.
Place:
Dulles Airport Marriott
45020 Aviation Drive
Dulles, Virginia
Matters to be voted on:
1. Election of ten directors.
2. Approval of the issuance of 52,500 stock options to non-employee
directors.
3. Approval of performance goals and incentive compensation for the Senior
Vice President, Tax.
4. Approval of performance goals and incentive compensation for the Chief
Financial Officer.
5. Approval of performance goals and incentive compensation for the
Executive Vice President.
6. Approval of performance goals and incentive compensation for the
President.
7. Approval of performance goals and incentive compensation for the Chief
Executive Officer.
8. Any other matters properly brought before the shareholders at the
meeting.
By Order of the Board of Directors
/s/ Donald E. Miller
Donald E. Miller
Executive Vice President & Secretary
October 10, 2000
CONTENTS
Page
General Information About Voting 1
Proposal No. 1: Election of directors 2
General Information About the Nominees 2
Information As to Executive Officers 6
Section 16(a) Beneficial Ownership Reporting Compliance 7
Executive Compensation 8
Table: Summary Compensation 8
Table: Options Granted 10
Table: Option Exercises and Year-End Value 10
Employment Agreements and Change of Control Arrangements 11
Pension and Retirement Benefits 14
Report of the Compensation Committee 16
Report of the Audit Committee 19
Stock Performance Graphs 20
Stock Ownership 23
Certain Transactions 25
Proposal No. 2: Approval of the issuance of 52,500 stock options to
Non-Employee Directors (pursuant to the 2000 NED Plan) 27
Proposal No. 3: Performance Goals and Incentive Compensation for the
Senior Vice President, Tax 30
Proposal No. 4: Performance Goals and Incentive Compensation for the
Chief Financial Officer 31
Proposal No. 5: Performance Goals and Incentive Compensation for the
Executive Vice President 32
Proposal No. 6: Performance Goals and Incentive Compensation for the
President 33
Proposal No. 7: Performance Goals and Incentive Compensation for the
Chief Executive Officer 35
Relationship with Independent Accountants 37
Shareholder Proposals 37
Annual Report 37
Appendix 1: Charter of the Audit Committee A-1
Appendix 2: 2000 Non-Employee Directors Stock Option Plan B-1
i
PROXY STATEMENT
Your vote at the annual meeting is important to us. Please vote your shares
of common stock by completing the enclosed proxy card and returning it to us in
the enclosed envelope. This proxy statement has information about the annual
meeting and was prepared by the Company's management for the board of
directors. This proxy statement was first mailed to shareholders on October 10,
2000.
GENERAL INFORMATION ABOUT VOTING
Who can vote?
Only shareholders of record holding Class A common stock or Class B common
stock as of the close of business on September 29, 2000, will be entitled to
receive notice of the annual meeting and to vote at the meeting.
On September 29, 2000, there were 22,482,688 shares of Class A common stock
and 2,621,652 shares of Class B common stock outstanding and eligible to vote.
Shares of common stock owned by the Company or any subsidiary are not entitled
to vote, and are not included in the number of outstanding shares.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each proposal
to be considered at the annual meeting. Sign and date the proxy card and mail
it back to us in the enclosed envelope. The proxyholders named on the proxy
card will vote your shares as you instruct. If you sign and return the proxy
card but do not vote on a proposal, the proxyholders will vote for you on that
proposal. Unless you instruct otherwise, the proxyholders will vote for each of
the ten director nominees and for each of the other proposals to be considered
at the meeting.
What if other matters come up at the annual meeting?
The matters described in this proxy statement are the only matters we know
will be voted on at the annual meeting. If other matters are properly presented
at the meeting, the proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving the Company's secretary a written notice revoking your proxy
card or by signing, dating, and returning to us a new proxy card. We will honor
the proxy card with the latest date.
Can I vote in person at the annual meeting rather than by completing the proxy
card?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you may attend the annual meeting and vote your
shares in person.
What do I do if my shares are held in "street name"?
If your shares are held in the name of your broker, a bank, or other nominee,
that party should give you instructions for voting your shares.
How are votes counted?
We will hold the annual meeting if holders of a majority of the shares of
Class A common stock and Class B common stock entitled to vote either sign and
return their proxy cards or attend the meeting. If you sign and return your
proxy card, your shares will be counted to determine whether we have a quorum
even if you abstain or fail to vote on any of the proposals listed in the proxy
card.
If your shares are held in the name of a nominee, and you do not tell the
nominee by November 17, 2000 how to vote your shares (so-called "broker
nonvotes"), the nominee can vote them as it sees fit only on matters that the
New York Stock Exchange determines to be routine, and not on any other
proposal. Broker nonvotes will be counted as present to determine if a quorum
exists but will not be counted as present and entitled to vote on any
nonroutine proposal.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, some of our employees may
contact you by phone, by mail, or in person. None of these employees will
receive any extra compensation for doing this. The Company will also reimburse
brokerage houses and others forwarding proxy materials to beneficial owners of
stock.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
An entire board of directors, consisting of ten members, will be elected at
the annual meeting. The directors elected will hold office until their
successors are elected, which should occur at the next annual meeting. We
recommend a vote "FOR" the nominees presented below.
Vote Required. The ten nominees receiving the highest number of votes will
be elected. Votes withheld for a nominee will not be counted.
Nominations. At the annual meeting, we will nominate the persons named in
this proxy statement as directors. Although we do not know of any reason why
one of these nominees might not be able to serve, the board of directors will
propose a substitute nominee if any nominee is not available for election.
GENERAL INFORMATION ABOUT THE NOMINEES
All of the nominees are currently directors of the Company. Each has agreed
to be named in this proxy statement and to serve as a director if elected. All
nominees have been designated as "Continuing Directors" as defined in the
Company's Certificate of Incorporation.
Related party transactions between the Company and certain directors, or
their immediate family members or affiliates, are set forth in this proxy
statement under the heading "Certain Transactions." Information regarding late
filings of stock ownership forms by certain directors is set forth in this
proxy statement, under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance."
Name Age Position
- ---- --- --------
Melville R. Barlow 71 Director
Mortimer M. Caplin 84 Director
Philip David 69 Director
Robert E. Edwards 52 Executive Vice President-Fairchild Fasteners and Director
Steven L. Gerard 55 Director
Harold J. Harris 71 Director
Daniel Lebard 61 Director
Herbert S. Richey 78 Director
Eric I. Steiner 38 President, Chief Operating Officer and Director
Jeffrey J. Steiner 63 Chairman of the Board and Chief Executive Officer
Melville R. Barlow. Director Since 1996. Consultant to the Company:
September 1995 to June 1996. President of Pilkington Aerospace, Inc.
(manufacturer of aircraft transparencies): July 1991 through March 1994.
Corporate Vice President of General Dynamics and General Manager of General
Dynamics Electronics Division (manufacturer of military aircraft automatic
test equipment): June 1984 to March 1991.
Mortimer M. Caplin. Director Since 1990. Senior member of Caplin & Drysdale
(attorneys): 1964 to Present. Director of Presidential Realty Corporation and
Danaher Corporation.
Philip David. Director Since 1985. Consultant to the Company: January 1988
to June 1993. Company employee: January 1988 to December 1989. Professor of
Urban Development at Massachusetts Institute of Technology: 1971 to 1988.
Director of IRI International, Inc.
2
Robert E. Edwards. Director Since 1998. Executive Vice President of
Fairchild Fasteners: March 1998 to Present. Chief Operating Officer of
Fairchild Fasteners U.S. Operations: January 2000 to Present. Chief Executive
Officer of Fairchild Fasteners Direct: March 1998 to December 1999. President
and Chief Executive Officer of Edwards and Lock Management Corporation
(predecessor of Fairchild Fasteners Direct): 1983 to 1998. Pursuant to the
merger agreement by which the Company acquired Fairchild Fasteners Direct, Mr.
Edwards is to be nominated for election as a director every year as long as he
continues to own at least 541,258 shares of Class A common stock.
Steven L. Gerard. Director Since 1999. Chairman and Chief Executive Officer
of Great Point Capital, Inc. (financial and operating consultants): 1998 to
Present. Chairman and Chief Executive Officer of Ocean View Capital, Inc., a
manufacturer of insulated wire and cable: September 1992 to August 1997.
Director of Lennar Corporation and Aviation Sales Co.
Harold J. Harris. Director Since 1985. President of Wm. H. Harris, Inc.
(retailer): 1955 to Present. Director of Capital Properties Incorporated of
Rhode Island.
Daniel Lebard. Director Since 1996. Chairman of Supervisory Board of Daniel
Lebard Management Development SA, a consulting firm in Paris, France, which
performs management services: 1982 to Present. Chief Executive Officer of ISPG
and Executive Chairman of Albright & Wilson plc (manufacturer of added value
phosphate products): 1998 to Present.
Herbert S. Richey. Director Since 1977. President of Richey Coal Company
(coal properties-brokerage and consulting): 1979 to December 1993.
Dr. Eric I. Steiner. Director Since 1988. President of the Company:
September 1998 to Present. Chief Operating Officer of the Company: November
1996 to Present. President and Chief Executive Officer of Fairchild Fasteners:
August 1995 to Present. Executive Vice President of the Company: November 1996
to September 1998. Senior Vice President, Operations of the Company: May 1992
to November 1996. Dr. Steiner is the son of Jeffrey J. Steiner.
Jeffrey J. Steiner. Director Since 1985. Chairman of the Board and Chief
Executive Officer of the Company: December 1985 to Present. President of the
Company: July 1991 to September 1998. Director of Communications Intelligence
Corp., Franklin Holding Corp., and Global Sources Ltd.
Articles have appeared in the French press reporting an inquiry by a French
magistrate into allegedly improper business transactions involving Elf
Acquitaine, a French petroleum company, its former chairman and various third
parties, including Maurice Bidermann. In connection with this inquiry, the
magistrate has made inquiry into allegedly improper transactions between Mr.
Steiner and that petroleum company. In response to the magistrate's request
that Mr. Steiner appear in France as a witness, Mr. Steiner submitted written
statements concerning the transactions and appeared in person before the
magistrate and others. The magistrate has put Mr. Steiner under examination
(mis en examen) with respect to this matter and imposed a surety (caution) of
ten million French Francs which has been paid. Mr. Steiner has not been
charged.
3
Board Meetings
The Board held seven meetings during fiscal 2000, and acted five times by
unanimous written consent. No incumbent director attended less than seventy-
five percent of the aggregate number of meetings of the Board and committees
on which he served.
Board Committees
The Board has five standing committees. The following chart describes the
function and membership of each standing committee and the number of times it
met in fiscal 2000:
Audit Committee
(Held 5 meetings)
Function Members
- -------- -------
. Examines and considers matters relating to the Herbert Richey (Chairman)
internal and external audits of the Company's Melville Barlow
accounts and its financial affairs. Mortimer Caplin
Steven Gerard
Harold Harris
. Selects the Company's independent auditors.
The Board of Directors has determined that all members of the Audit
Committee are "independent" as defined in the listing standards of the New
York Stock Exchange. The Board was advised that the law firm of Caplin &
Drysdale (of which Mortimer Caplin is a partner) provides certain legal
services to the Company from time to time. However, such services are not
provided by Mr. Caplin himself, and the amount of such services is less than
$60,000 a year. Based on this, the Board has determined that Mr. Caplin is
independent of the Company and its management, and that the business
relationship with his law firm does not impede on such independence.
The Board has adopted a written charter for the Audit Committee. A copy of
the current charter is attached hereto as Appendix 1.
Compensation and Stock Option Committee
(Held 5 meetings and acted 3 times by written consent)
Function Members
- -------- -------
. Initial responsibility for all compensation Philip David (Chairman)
actions affecting the Company's executive Melville Barlow
officers, including base salaries, bonus awards, Daniel Lebard
stock option awards and the terms and conditions Herbert Richey
of their employment.
. Administers the Company's stock option plan.
Executive Committee
(Acted 4 times by written consent)
Function Members
- -------- -------
. May consider pertinent matters and exercise all Jeffrey Steiner (Chairman)
powers of the Board, which by law it may exercise Mortimer Caplin
when the Board is not in session. Herbert Richey
Eric Steiner
4
Corporate Ethics and Compliance Committee
(Held 2 meetings)
Function Members
- -------- -------
. Oversees the Company's ethics programs. Mortimer Caplin (Chairman)
Melville Barlow
Herbert Richey
Nominating Committee
(Acted 1 time by written consent)
Function Members
- -------- -------
. Considers and recommends to the Board candidates Jeffrey Steiner (Chairman)
for election to the Board of Directors by the Eric Steiner
shareholders. Harold Harris
Directors Compensation
Board members that are not salaried employees of the Company receive
separate compensation for Board service. That compensation includes:
Annual Retainer: $20,000
Attendance Fees: $2,500 for each Board meeting.
$2,500 for each Audit Committee meeting.
$1,000 per meeting for all other Board Committee
meetings.
Expenses related to attendance.
Stock Options: Under the 1996 Non-Employee Directors Stock Option Plan
(the "1996 NED Plan") each non-employee director is
issued stock options for 30,000 shares at the time he or
she is first elected as a director. Thereafter, each
director is issued stock options for 1,000 shares on an
annual basis (immediately after each Annual Meeting).
Under the 2000 Non-Employee Directors Stock Option Plan
(the "2000 NED Plan") each non-employee director will be
issued stock options for 7,500 shares (52,500 shares in
the aggregate) immediately after the 2000 Annual Meeting.
See discussion of the 2000 NED Plan under Proposal No. 2
of this Proxy Statement.
Bonus: In April 2000, each Board member who is not an employee
of the Company was granted a bonus of 1,000 shares (per
director) of Global Sources Ltd. with a value at the time
of issuance of approximately $15.97 per share.
Nominees for Next Year's Annual Meeting
The Nominating Committee will consider written recommendations for nominees
for next year's annual meeting, submitted prior to June 12, 2001, by
shareholders to the Secretary of the Company. Biographical information and the
written consent of the potential nominee must accompany the recommendation.
5
INFORMATION AS TO EXECUTIVE OFFICERS
Set forth below is certain information about each executive officer of the
Company who is not a director of the Company. All of the executive officers of
the Company are elected by the Board to serve until the next annual meeting of
the Board or until their successors are elected and qualified. Related party
transactions between the Company and certain officers (or their immediate
family members or affiliates) are set forth in this proxy statement under the
heading "Certain Transactions."
Michael T. Alcox, 52, has served as Senior Vice President and Chief
Financial Officer of the Company since July 2000. Mr. Alcox previously served
as Vice President (from September 1996 to July 2000), as Senior Vice President
and Chief Financial Officer (from December 1987 to September 1996), as
Treasurer (from September 1990 to November 1991) and as a Director (from 1988
to 1999).
John L. Flynn, 54, has served as Senior Vice President, Tax, of the Company
since September 1994 and as Vice President, Tax, from August 1989 to September
1994.
Donald E. Miller, 53, has served as Executive Vice President of the Company
since September 1998, as General Counsel since January 1991 and as Corporate
Secretary since January 1995. He served as Senior Vice President of the
Company from January 1991 through September 1998.
Warren D. Persavich, 47, has served as President of the Company's
Distribution Division since April 1999, and as Senior Vice President and Chief
Operating Officer of Banner Aerospace, Inc. since May 1998. Prior to that, he
served as Senior Vice President and Chief Financial Officer of Banner
Aerospace from June 1990 through May 1998, and as Vice President of Banner
Aerospace from March 1990 through June 1990.
Karen L. Schneckenburger, 51, has served as Vice President of the Company
since September 1992 and as Treasurer of the Company since November 1991.
Prior to that, she served as Director of Finance of Fairchild Industries from
1986 through 1989.
Robert A. Sharpe II, 42, has served as Senior Vice President of the Company
since September 1998 and as Executive Vice President of Fairchild Fasteners
since July 1996. He served as Chief Financial Officer of Fairchild Fasteners
from July 1996 through April 1999, and as a Director of the Company from 1995
to 1999. He was a Consultant for Fairchild Fasteners from October 1995 to July
1996. Prior to joining Fairchild, he served as Vice President, Corporate
Development of Smithfield Foods, Inc. (a pork-products company) from July 1994
to July 1996.
6
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and officers to file reports (on Forms 3, 4 and 5) with
the Securities and Exchange Commission, disclosing their ownership, and
changes in their ownership, of stock in the Company. Copies of these reports
must also be furnished to the Company. Based solely on a review of these
copies, the Company believes that during fiscal year 2000 all reports were
filed on a timely basis, except as follows: Mr. Jeffrey Steiner filed a Form 4
with the SEC on March 23, 2000 (reporting the purchase of 23,000 shares of
Class A Stock) that was due to be filed on March 10, 2000. Mr. Harold Harris
filed a Form 4 with the SEC on March 10, 2000 (reporting the distribution of
2,232 shares of Class A Stock from the Harris' Profit Sharing Account) that
was due to be filed on May 10, 1999.
7
EXECUTIVE COMPENSATION
Table: Summary Compensation
Long Term
Compensation
Annual Compensation Awards
---------------------------------------- -----------------------
Securities
Other Annual Underlying All Other
Name and Fiscal Salary Bonus Compensation Options Compensation
Principal Position Year ($)(1) ($)(1) ($) (#) ($)(2)
------------------ ------ --------- ---------- ------------ ---------- ------------
Jeffrey J. Steiner, 2000 2,061,554 3,623,314 -- -- 31,983
Chairman & CEO 1999 2,007,215 11,207,617 -- 25,000 29,927
1998 1,644,627 7,854,684 -- 100,000 29,927
Robert E. Edwards, 2000 530,000 205,273 -- -- 4,000
Executive Vice President 1999 520,000 200,000 -- 20,000 4,000
of Fairchild Fasteners 1998 170,000 -- -- -- 4,000
Donald E. Miller, 2000 352,675 449,656 -- 25,000 8,231
Executive Vice
President, 1999 332,345 900,000 -- 25,000 6,331
General Counsel &
Secretary 1998 283,287 501,000 -- 20,000 5,354
Warren D. Persavich 2000 224,042 337,978 -- -- 4,812
President of 1999 213,294 99,225 -- -- 4,438
Distribution Division 1998 -- -- -- -- --
Eric I. Steiner, 2000 565,386 829,850 -- 25,000 8,304
President & COO 1999 510,618 4,300,000 -- 75,000 6,562
1998 377,700 601,000 -- 40,000 6,662
Footnotes on next page
8
- --------
(1) Bonuses shown in the table for 2000 include a bonus of Global Sources
shares, with a market value (at the time the compensation was awarded) as
follows: J. Steiner--30,000 shares ($479,100 market value); R. Edwards--
2,000 shares ($31,940 market value); D. Miller--5,000 shares ($79,850
market value); E. Steiner--5,000 shares ($79,850 market value).
Salary and bonuses shown in the table for 1998 do not include
compensation paid to the named executive officers by Banner Aerospace,
which at the time was less than a wholly-owned subsidiary of the Company.
Such compensation was as follows, based on Banner Aerospace's 1998 fiscal
year.
Banner Stock Options
Aerospace For Banner
Fiscal Year Individual Salary Bonus Common Stock Other Compensation
----------- ------------ -------- -------- ------------- ------------------
1998 J. Steiner $400,000 $180,000 130,000 1,792
D. Miller 9,600 0 0 350,000
W. Persavich 189,000 70,875 40,000 505,804
E. Steiner 45,667 0 30,000 200,200
(2) Includes the following for fiscal 2000:
a. Company matching contributions under 401(k) savings plan, as follows:
J. Steiner $4,250
R. Edwards 4,000
D. Miller 4,176
W. Persavich 4,812
E. Steiner 4,250
b. Income imputed for split-dollar life insurance coverage, as follows:
J. Steiner $25,927
c. Imputed interest on loans to officers, as follows:
J. Steiner $1,806
D. Miller 4,054
W. Persavich 1,806
E. Steiner 4,054
9
Table: Options Granted in 2000 Fiscal Year
Individual Grants
----------------------------------------------
Potential Realizable
Value at Assumed
% of Rates of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees Price Expiration ----------------------
Name Granted in Fiscal 2000 ($/Sh) Date 5% ($) (1) 10% ($) (1)
---- ---------- -------------- -------- ---------- ---------- -----------
Jeffrey J. Steiner 0 -- -- -- -- --
Robert E. Edwards 0 -- -- -- -- --
Donald E. Miller 25,000(2) 15.7% 10.00 08/03/04 319,071 402,628
Warren D. Persavich 0 -- -- -- -- --
Eric I. Steiner 25,000(2) 15.7% 10.00 08/03/04 319,071 402,628
- --------
(1) The potential realizable value for each named executive officer reflects
the increase in value of the shares granted, based on a beginning price
equal to the stock option exercise price and assuming rates of stock value
appreciation of 5% and 10%, respectively, over a period of five years. The
actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised.
(2) These options were granted on 8/4/99; 25% became exercisable on 8/4/00;
50% are exercisable on 8/4/01; 75% are exercisable on 8/4/02; and 100% are
exercisable on 8/4/03.
Table: Option Exercises and Year-End Value
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
June 30, 2000 June 30, 2000
Shares Acquired Value ------------------------- --------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- --------------- -------- ----------- ------------- ----------- -------------
Jeffrey Steiner 60,000 303,750(1) 703,584 76,250 (2,578,691) (1,242,813)
Robert Edwards -- -- 5,000 15,000 (47,500) (142,500)
Donald Miller 45,000 179,063(1) 50,450 61,250 (460,844) (577,031)
Warren Persavich -- -- 150,602 -- (548,682) --
Eric Steiner 48,100 180,675(1) 162,261 131,250 (1,623,512) (1,337,344)
- --------
(1) Pursuant to the Company's Stock Option Deferral Plan, officers may defer
the gain on exercise of stock options. An officer's deferred gain is
issued in the form of "Deferred Compensation Units," representing the
number of shares of common stock that the officer shall be entitled to
receive upon expiration of the deferral period.
Under the Stock Option Deferral Plan, the following named executive
officers deferred gain as follows:
J. Steiner deferred $303,750 in exchange for 33,986 Deferred Compensation
Units;
D. Miller deferred $120,000 in exchange for 13,568 Deferred Compensation
Units; and
E. Steiner deferred $125,938 in exchange for 14,254 Deferred Compensation
Units.
10
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The following summarizes employment agreements and change of control
agreements:
.Employment Agreement between the Company and Jeffrey Steiner:
Term of the Agreement: Five year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Minimum Base Salary Under
the Agreement:
As determined by the Compensation Committee.
Current Base Salary: $1,700,000.
Payments in Event of Death: Estate to receive an amount equal to one year's
base salary, plus bonuses for the fiscal year
in which death occurred.
Payments in Event of
Termination Due to
Disability: Fifty percent of base salary for two years,
plus bonuses for the fiscal year in which
disability occurred.
Payments in the event of
a "change in control":
2.99 times base salary and 2.99 times the
preceding year's bonus.
. Employment Agreement between Banner Aerospace (Company Subsidiary) and
Jeffrey Steiner:
Term of the Agreement: Three year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Minimum Base Salary Under
the Agreement:
Not less than $250,000 per year, and an annual
bonus if certain performance targets are met.
Current Base Salary: $400,000.
Payments in Event of Death: Estate to receive an amount equal to one year's
base salary, plus bonuses for the fiscal year
in which death occurred.
Payments in Event of
Termination Due to
Disability:
Fifty percent of base salary for two years,
plus bonuses for the fiscal year in which
disability occurred.
Payments in the event of
a "change in control":
2.99 times base salary and 2.99 times the
preceding year's bonus.
11
. Service Agreement between Banner Investments (U.K.) PLC, (Company
Subsidiary) and Jeffrey Steiner:
Term of the Agreement: Year to year.
Minimum Base Salary Under
the Agreement:
Annual compensation at the greater of $400,000
or pound sterling 204,000.
. Employment Agreement and Registration Rights Agreement between the Company
and Robert Edwards
Term of Employment Initial term of 2 years, ending March 2000;
Agreement: thereafter year to year. Either party may
terminate the agreement on six months notice.
Minimum Base Salary Under
the Employment Agreement:
$520,000 per year.
Current Base Salary: $520,000.
Payments in Event of Death: Estate to receive payments accrued through date
of death.
Payments in Event of
Termination Due to
Disability:
No special payments after termination due to
disability. Reduced payments during term of
disability prior to employment termination.
Payments in the event of
a "change in control":
Subject to approval by the Company's lenders,
the Company may be required (at Mr. Edwards'
election) to purchase Mr. Edwards' shares of
stock in the Company in the event of a change
of control transaction, at the same price paid
to Mr. Steiner for his shares in any such
change of control. Similarly, the Company may
require Mr. Edwards to sell his shares in order
to complete any change of control transaction.
(Registration Rights Agreement between the
Company and Mr. Edwards.)
.Letter Agreement between the Company and Donald Miller
Payments in the event of
Termination Without Cause:
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
Payments in the event of
a "change in control":
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
12
.Employment Agreement between the Banner Aerospace and Warren Persavich:
Term of the Agreement: Three year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Minimum Base Salary Under
the Agreement:
$155,000 per year.
Current Base Salary: $222,000.
Minimum Annual Bonus Under
the Agreement:
50% of base salary if certain performance goals
are met.
Payments in Event of Death: Estate to receive payments accrued through the
date of death, plus six months base salary and
bonuses for the fiscal year in which employment
is terminated.
Payments in Event of
Termination Due to
Disability:
Base salary continued through the date of
employment termination. Employee to receive
bonuses for the fiscal year in which employment
is terminated.
Payments in the event of
Termination without Cause:
Lump sum payment equal to salary through
remainder of three year term, plus severance
bonus of 50% of base salary. In addition,
employee to receive an extra bonus equal to the
bonus that would have been earned for a period
of two years after the termination date,
reduced by the amount of the severance bonus.
.Employment Agreement between the Company and Eric Steiner:
Term of the Agreement: Three year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Minimum Base Salary Under
the Agreement:
$540,000 per year.
Current Base Salary: $725,000.
Payments in Event of Death: Same as the Company's highest compensated
officer. Currently, Jeffrey Steiner is the
highest compensated officer. (See death
benefits described above under Jeffrey's
Steiner's employment agreement.)
Payments in Event of
Termination Due to
Disability: Same as the Company's highest compensated
officer. Currently, Jeffrey Steiner is the
highest compensated officer. (See disability
and termination benefits described above under
Jeffrey's Steiner's employment agreement.)
Payments in the event of
a "change in control":
2.99 times base salary and 2.99 times the
average annual bonus for the preceding five
years.
13
PENSION AND RETIREMENT BENEFITS
Fairchild Retirement Plan. The following table illustrates the amount of
estimated annual fixed retirement benefits payable under the Fairchild
Retirement Plan to an employee retiring in 2000, at age 65, at various salary
levels (average of highest five consecutive years out of last ten years of
service) and years of service. The Fairchild Retirement Plan defines salary as
total compensation, subject to the Internal Revenue Service's limit on the
amount of compensation that may be used to compute benefits under qualified
pension plans. This limit is equal to $170,000 for 2000.
Annual 10 Years 20 Years 30 Years 40 Years
Salary of Service of Service of Service of Service
------ ---------- ---------- ---------- ----------
$ 25,000 $ 2,001 $ 4,002 $ 6,004 $ 7,313
50,000 4,596 9,192 13,788 16,711
100,000 10,596 21,192 31,788 38,336
150,000 16,596 33,192 49,788 59,961
200,000 17,796 35,592 51,948 64,286
250,000 17,796 35,592 51,948 64,286
For purposes of determining benefits under the Fairchild Retirement Plan,
the following executive officers have years of credit and average salaries as
follows:
Officer Average Salary Years of Credit
------- -------------- ----------------
Jeffrey J. Steiner $160,000 9 yrs., 6 mths.
Robert E. Edwards $160,000 2 yrs., 3 mths.
Donald E. Miller $160,000 8 yrs., 5 mths.
Warren D. Persavich $160,000 22 yrs., 9 mths.
Eric I. Steiner $160,000 8 yrs., 3 mths.
14
Supplemental Executive Retirement Plans. The Company has two Supplemental
Executive Retirement Plans for certain key executives which provide additional
retirement benefits based on final average earnings and years of service, as
follows:
Unfunded SERP Funded SERP
------------------------------------ -----------------------
Retirement Benefits Provides a maximum retirement Same as the Unfunded
benefit (in the aggregate for both SERP.
Supplemental Executive Retirement
Plans) equal to the difference
between (i) sixty percent (60%) of
the participant's average base
salary for the last five years of
employment and (ii) the aggregate of
other pension benefits, profit
sharing benefits, stock option
benefits and primary Social Security
payments to which the participant is
entitled.
Funding This is an unfunded obligation of This plan is a funded
the Company, not subject to ERISA obligation of the
regulations. The Company makes Company. Such funding
discretionary contributions to a contributions are not
Rabbi Trust to help meet its assets available to the
obligations under this plan, but the creditors of the
assets under such trust are subject Company.
to the claims of the Company's
creditors.
Pre-Retirement Subject to the approval of the None.
Distributions Compensation Committee, the plan
permits participants who are age 60
or over, to elect to receive a lump
sum retirement advance on an
actuarially reduced basis.
Participants Executive Officers. All persons Same as the unfunded
named in the Summary Compensation plan.
Table (other than Mr. Edwards) are
eligible for participation in this
plan.
Special Years of Pursuant to a letter agreement with None
Service Accreditation Mr. Miller, for purposes of
determining years of service with
the Company under the Supplemental
Executive Retirement Plans, Mr.
Miller is credited with two years of
service for each of the first ten
years he is employed by the Company.
15
REPORT OF THE COMPENSATION COMMITTEE
The following report does not constitute solicitation material and is not
considered filed or incorporated by reference into any other Company filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934,
unless we state otherwise.
The Compensation and Stock Option Committee is composed of at least two non-
employee Directors. It has initial responsibility for all compensation actions
affecting the Company's executive officers, including base salaries, bonus
awards, stock option awards and the terms and conditions of their employment.
Compensation Philosophy
The Committee's goals are to:
. Provide compensation competitive with other similar companies.
. Reward executives consistent with the performance of the Company.
. Recognize individual performance.
. Encourage executives to increase shareholder value.
Components of Executive Officer Compensation
Cash Compensation (Base Salary, Annual Incentive Bonus and Special
Bonuses)--The Company manages the total cash compensation to provide median
levels of cash compensation at average levels of corporate, business unit, and
individual performance. Cash compensation consists of two components: (i) a
base salary that is competitive with that of other companies paying at the
median level of the market, and/or (ii) an annual incentive opportunity that
is variable and is reflective of the financial performance of the Company
and/or the individual performance of the executive officer. When high levels
of performance are achieved, the level of cash compensation may exceed the
median of the market. Conversely, when the Company, business unit, or the
individual falls short of the predetermined goals, the level of cash
compensation may be substantially below the market median. The objective of
this mix is to deliver total annual cash compensation competitive with
compensation offered at other companies facing similar challenges for similar
positions, while simultaneously linking the payment of the annual cash
incentive to the achievement of specific objectives in the Company's annual
operating plan as approved by the Board.
Mix Between Salary and Annual Incentive Pay--The mix between salary and
annual incentive pay is related to an executive's job grade. Executives at
higher grade levels in the Company have a greater percentage of their total
cash compensation contingent on the accomplishment of business objectives,
i.e. the higher the executive grade level, the greater the proportion of
annual compensation that is "at risk." The award and size of the performance
bonus are based upon: (i) the executive officer's performance against goals
determined by the Company's Chief Executive Officer; and/or (ii) the
performance of the executive officer's unit within the Company against that
unit's goals; or (iii) the performance of the Company against Company goals.
Goals vary from year to year and from unit to unit and, with regard to
individual goals of executive officers, usually include both quantitative and
qualitative factors.
Bonuses for Extraordinary Transactions--In addition to annual bonuses, the
Committee also occasionally awards special bonuses in connection with
extraordinary transactions by the Company. The bonuses generally are awarded
to individuals who make significant contributions towards the initiation,
structuring and consummation of the transactions.
In fiscal 2000, management continued to implement effectively its long-term
strategies, which included the disposition of non-core assets and an increased
focus of its efforts on its aerospace parts
16
businesses. The Committee believes that the success of these strategies is
evidenced by: (i) $23.2 million of annual cost savings for integration of
Kaynar Technologies (acquired in the fourth quarter of 1999); (ii) the sale of
the Company's minority position in Nacanco for $48.2 million and a gain of
$25.7 million; (iii) the spin-off of Fairchild Bermuda to the Company's
shareholders on April 13, 2000 (which allowed the Company's shareholders to
own, in the aggregate, approximately 4.75% of Global Sources Ltd.); (iv) the
sale of Camloc Gas Springs for approximately $5 million (including payment for
a non-compete covenant); (v) the sale of the corporate headquarters building
(in Dulles, VA) for approximately $12 million; and (vi) the sale of Dallas
Aerospace for approximately $57 million. Based on the foregoing, the Committee
approved salary, annual incentive pay and bonuses for extraordinary
transactions for the Company's named executive officers as set forth under the
Summary Compensation Table of this proxy statement.
Stock Option Grants--The Committee believes that stock option grants serve
as a desirable long-term method of compensation because they closely ally the
interests of management with the preservation and enhancement and realization
of shareholder value and serve as an additional incentive to promote the
success of the Company. In fiscal 2000, the Committee approved the grant of
130,000 stock options to the Company's executive officers and 15,000 stock
options to other employees. Included in these grants were 50,000 options
granted to the named executive officers. The CEO received no stock options.
Total Compensation Program--The Committee believes that the total
compensation program for executives of the Company (cash compensation, bonuses
and stock option grants) is on a level with the compensation programs provided
by other companies facing similar challenges. The Committee believes that any
amounts paid under the annual incentive plan will be appropriately related to
corporate and individual performance, yielding awards that are directly linked
to the annual financial and operational results of the Company within the
framework of the challenges faced.
Compensation of CEO
Jeffrey J. Steiner has served as Chairman of the Board and Chief Executive
Officer of the Company since 1985, and as President from July 1991 through
September 1998. In fixing Mr. Steiner's salary and target bonus levels, as
well as determining the size of stock options, if any, the Committee and the
Board typically review the strategic direction and financial performance of
the Company, including enterprise value, revenue and profit levels. In
addition, the Committee reviews Mr. Steiner's performance as Chairman of the
Board and Chief Executive Officer, his importance to the Company and his
success in implementing its strategic goals both through his entrepreneurial
actions and investment banking acumen.
Mr. Steiner has developed and established initiatives aimed at improving the
operating efficiency and financial performance of the Company. During the last
twelve months, the Company has disposed of non-core assets and increased its
focus on the aerospace industry. Under the direction of Mr. Steiner, the
Company: (i) achieved $23.2 million of annual cost savings from the
integration of Kaynar Technologies (acquired in the fourth quarter of 1999);
(ii) sold its minority position in Nacanco for $48.2 million and a gain of
$25.7 million; (iii) spun off Fairchild Bermuda to the Company's shareholders
(which allowed the Company's shareholders to own, in the aggregate,
approximately 4.75% of Global Sources Ltd.); (iv) sold Camloc Gas Springs for
approximately $5 million (including payment for a non-compete covenant); (v)
sold the corporate headquarters building (in Dulles, VA) for approximately $12
million; (vi) sold Dallas Aerospace for approximately $57 million; and
(vii) implemented further aggressive cost reduction and cost control programs
at all organizational and divisional levels.
Base Compensation--Mr. Steiner's base compensation for fiscal 2000 was
$1,200,000 pursuant to his employment agreement with the Company and $400,000
pursuant to his employment agreement with Banner Aerospace, plus $400,000 for
services in the United Kingdom.
17
Incentive Compensation Performance Goals--The performance goals for and
maximum amount of Mr. Steiner's incentive compensation (i.e., compensation
beyond base salary) approved by the shareholders at the last Annual Meeting,
were as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 2000, the Chief Executive Officer may receive up
to three percent (3%) of such pre-tax profits.
2. If the Company engages in an extraordinary transaction (e.g. purchase or
sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2000, the Chief Executive Officer may receive
up to two and one-half percent (2 1/2%) of the total value of the
transaction.
3. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
Incentive Compensation for 2000 Transactions--Based on such performance
goals being achieved, the Committee determined that Mr. Steiner should receive
$3,144,214 plus 30,000 shares of Global Sources Ltd. (valued at $479,100) as
incentive compensation for fiscal 2000. Except for $22,450, the total
incentive compensation paid to Mr. Steiner for fiscal 2000 is within the
performance goals approved last year by the shareholders.
Stock Option Compensation--In fiscal 2000, the Committee did not approve the
grant of any stock options to Mr. Jeffrey Steiner under the Stock Option Plan.
Internal Revenue Code Section 162(m)
The Committee has considered the impact of Section 162(m) Internal Revenue
Code of 1986, as amended (the "Code"), which in certain circumstances
disallows income tax deductions for compensation in excess of $1,000,000. This
disallowance provision does not apply to performance-based compensation and
certain other forms of compensation. The Committee currently intends to
structure the Company's incentive compensation awards to the Company's Chief
Executive Officer and other executive officers in a manner that complies with
the Code's requirements for performance-based compensation to ensure that the
Company is entitled to deduct such compensation. One of these requirements is
that the shareholders approve the material terms of performance goals for such
awards. To satisfy this requirement, the shareholders are being asked in this
proxy statement to approve the material terms of the performance goals for the
fiscal 2001 incentive compensation award for the following officers: the
Senior Vice President, Tax, the Chief Financial Officer, the Executive Vice
President, the President and the Chief Executive Officer.
Respectfully submitted by the members of the Compensation and Stock Option
Committee of the Board of Directors:
Philip David, Chairman
Melville R. Barlow
Daniel Lebard
Herbert S. Richey
18
REPORT OF THE AUDIT COMMITTEE
The following report does not constitute solicitation material and is not
considered filed or incorporated by reference into any other Company filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934,
unless we state otherwise.
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management is responsible for the financial
statements and the reporting process, including the system of internal
controls. The independent auditors are responsible for expressing an opinion
on the conformity of the audited financial statements with accounting
principles generally accepted in the United States.
In fulfilling its responsibilities:
. The Audit Committee reviewed and discussed the audited financial
statements contained in the 2000 Annual Report on SEC Form 10-K with the
Company's management and the independent auditors.
. The Audit Committee discussed with the independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
. The Audit Committee received from the independent auditors written
disclosures regarding the auditors' independence, as required by
Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and discussed with the auditors their
independence from the Company and its management.
In reliance on the reviews and discussions noted above, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Company's Annual Report on SEC
Form 10-K for the year ended June 30, 2000, for filing with the Securities and
Exchange Commission.
Respectfully submitted by the members of the Audit Committee of the Board of
Directors:
Herbert S. Richey (Chairman)
Melville R. Barlow
Mortimer M. Caplin
Steven L. Gerard
Harold J. Harris
19
STOCK PERFORMANCE GRAPHS
The following stock performance graphs do not constitute solicitation
material and are not considered filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, unless we state otherwise.
Changes In Indexes Used In Prior Year:
Last year we provided Fairchild's stock price performance compared to a
market index and an industry index.
Our market index was the S&P 600 Smallcap Index, on the basis that Fairchild
fits the definition of a "smallcap company." We will continue to use this
index.
As an industry index, we used the S&P 400 Midcap Aerospace/Defense Index. We
could not use the S&P Smallcap Aerospace/Defense Index because this Index did
not provide figures for a period of more than five years. This year, however,
the S&P Smallcap Aerospace/Defense Index provides figures for more than five
years. We therefore intend to use the S&P Smallcap Aerospace/Defense Index on
a going-forward basis.
20
COMPARISON TO S&P 600 SMALLCAP INDEX/S&P 400 MIDCAP AEROSPACE/DEFENSE INDEX:
The following graph compares the performance of the Company's Class A Stock
with that of the S&P 600 Smallcap Index and the S&P 400 Midcap
Aerospace/Defense Index (consisting of three aerospace/defense manufacturers).
The graph plots the growth in value of an initial $100 investment over the
indicated five year period with all dividends reinvested.
[GRAPH]
Fiscal
Year Ended THE FAIRCHILD S&P 600 S&P MIDCAP 400
June 30: CORPORATION -
CLASS A SMALLCAP INDEX AEROSPACE/DEFENSE INDEX
1995 $100.00 $100.00 $100.00
1996 433.33 126.01 126.09
1997 533.33 153.34 176.15
1998 598.15 183.18 189.18
1999 377.78 186.26 179.91
2000 144.44 213.06 187.95
* $100 INVESTED ON 6/30/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
21
COMPARISON TO S&P 600 SMALLCAP INDEX / S&P 600
SMALLCAP AEROSPACE/DEFENSE INDEX:
The following graph compares the performance of the Company's Class A Stock
with that of the S&P 600 Smallcap Index and the S&P Smallcap Aerospace/Defense
Index (consisting of five aerospace/defense manufacturers). The graph plots
the growth in value of an initial $100 investment over the indicated five year
period with all dividends reinvested.
[GRAPH]
Fiscal
Year Ended THE FAIRCHILD S&P 600 S&P SMALLCAP 600
June 30: CORPORATION -
CLASS A SMALLCAP INDEX AEROSPACE/DEFENSE INDEX
1995 $100.00 $100.00 $100.00
1996 433.33 126.01 110.12
1997 533.33 153.34 152.15
1998 598.15 183.18 211.16
1999 377.78 186.26 174.62
2000 144.44 213.06 101.11
* $100 INVESTED ON 6/30/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
22
STOCK OWNERSHIP
The following table shows the number of shares beneficially owned (as of
August 31, 2000) by:
. each person who we know beneficially owns more than 5% of the common
stock;
. each director;
. each executive officer named in the Summary Compensation Table; and
. the directors and executive officers as a group.
Number of Shares Percent Number of Shares Percent
Name of Class A Stock (1) of Class of Class B Stock (1) of Class
- ---- -------------------- -------- -------------------- --------
Melville R. Barlow 25,500(2) * -- --
Mortimer M. Caplin 125,364(2) * -- --
J.J. Cramer & Co. 1,500,000(4) 6.69% -- --
Philip David 42,856(2) * -- --
Dimensional Fund
Advisors Inc. 1,892,429(4) 8.44%
Robert E. Edwards 1,136,595(2) 5.06% -- --
Steven L. Gerard 5,618(2) * -- --
Harold J. Harris 95,230(2) (3) * -- --
Gabelli Funds, LLC 1,583,926(4) 7.06% -- --
Daniel Lebard 40,856(2) * -- --
Donald E. Miller 114,293(2) (3) * -- --
Warren D. Persavich 160,520(2) * -- --
Herbert S. Richey 36,698(2) * -- --
Eric I. Steiner 352,043(2) (3) 1.55% 15,000 *
Jeffrey J. Steiner 7,136,116(2) (6) 27.56% 2,938,996(6) 98.08%
The Steiner Group LLC 6,102,684(4) (5) 24.08% 2,908,996(5) 97.07%
All directors and
executive officers as a
group (16 persons) 9,499,843(2) (7) 35.82% 2,954,596(7) 98.60%
- --------
* Represents less than one percent.
(1) The Class A Stock Column includes shares of Class B Stock, which are
immediately convertible into Class A Stock on a share-for-share basis.
Options that are exercisable immediately or within sixty days after
August 31, 2000 appear in the Class A Stock column. Outstanding warrants
are exercisable into shares of either Class A Stock or Class B Stock and
appear in both the Class A Stock and Class B Stock columns.
(2) Includes exercisable stock options to purchase Class A Stock, as follows:
M. Barlow, 25,500 shares; M. Caplin, 5,000 shares; P. David, 5,000
shares; R. Edwards, 10,000 shares; H. Harris, 20,000 shares; D. Lebard,
25,500 shares; D. Miller, 56,250 shares; W. Persavich, 126,947 shares, H.
Richey, 5,000 shares; S. Gerard, 5,518 shares; E. Steiner, 206,011
shares; J. Steiner, 519,634 shares; Directors and Executive Officers as a
group, 1,137,160 shares.
(3) Includes shares beneficially owned, as follows: H. Harris--24,768 shares
of Class A Stock owned by the Wm. H. Harris, Inc. Profit-Sharing Plan and
7,500 shares held by his wife. D. Miller--300 shares of Class A Stock
owned by Mr. Miller as custodian for his child; Mr. Miller disclaims any
beneficial interest therein. E. Steiner--5,000 shares of Class A Stock
owned by Dr. Steiner as custodian for his children; Dr. Steiner disclaims
any beneficial interest therein; 10,762 shares held in 401k Savings Plan;
and 10,000 shares held in the E&P Steiner Family Investment LLC.
(4) Based on the following information:
J.J. Cramer & Co., 40 Fulton Street, New York, NY 10038. Information as of
March 6, 2000 contained in a 13D/A-10, filed on March 15, 2000, with the
SEC by J.J. Cramer & Co., Cramer Capital Corporation, Cramer Partners,
L.P., James J. Cramer and Karen L. Cramer.
23
Gabelli Funds, LLC, One Corporate Center, Rye, NY 10580-1434. Information
as of April 10, 2000, contained in a Schedule 13D/A-6 filed on April 12,
2000 with the SEC by Gabelli Funds, Inc.
The Steiner Group LLC, c/o Faust Rabbach Oppenheim LLP, 488 Madison Avenue,
New York, NY 10022. Information provided to the Company by the shareholder.
Dimensional Fund Advisors Inc. 1299 Ocean Avenue, 11th Floor, Santa Monica,
CA 90401. Information as of December 31, 1999, contained in a Schedule 13G
filed on February 11, 2000 with the SEC by Dimensional Fund Advisors, Inc.
(5) The Steiner Group LLC is a Delaware limited liability company. Jeffrey J.
Steiner is its sole manager. The members are Jeffrey J. Steiner (with a
20% membership interest), and The Jeffrey Steiner Family Trust (with an
80% membership interest). The Jeffrey Steiner Family Trust is a trust
created for the benefit of the issue of Jeffrey J. Steiner. The Steiner
Group LLC holds 3,193,688 shares of Class A Stock, 2,533,996 shares of
Class B Stock, and 375,000 Warrants. 1,100,000 shares of Class B Stock
owned by The Steiner Group LLC have been pledged to banks as collateral
for loans to Jeffrey Steiner. All 3,193,688 shares of Class A Stock owned
by The Steiner Group LLC have been pledged to NationsBank, N.A. together
with other personal property as collateral for a line of credit and
personal loans to Mr. Steiner.
(6) Mr. Jeffrey Steiner, 110 East 59th Street, New York, NY 10022. Mr.
Steiner is the sole manager of The Steiner Group LLC, and as such may be
deemed to beneficially own the same shares of Class A Stock and Class B
Stock owned directly or beneficially by The Steiner Group LLC, as
discussed in footnote (5) to this table.
Class A Stock shown in the table as owned by Mr. Steiner include:(i)
6,102,684 shares owned by The Steiner Group LLC (see footnote (5)); (ii)
440,254 shares owned of record by Mr. Steiner; (iii) exercisable stock
options to purchase 519,634 shares of Class A Stock (see footnote (2));
(iv) 38,500 shares of Class A Stock owned by Mr. Steiner as custodian for
his children; (v) 30,000 shares of Class B Stock (convertible on a one-to-
one basis to Class A Stock) owned by Mr. Steiner as custodian for his
children; (vi) 2,400 shares of Class A Stock owned by the Jeffrey Steiner
Family Foundation; and (vii) 2,644 shares of Class A Stock held in his 401k
Savings Plan.
71,700 shares of Class A Stock owned by Mr. Steiner have been pledged as
collateral to NationsBank N.A.
Class B Stock shown in the table as owned by Mr. Jeffrey Steiner include:
(i) 2,533,996 shares and 375,000 Warrants owned by The Steiner Group LLC
(see footnote (5)); and (ii) 30,000 shares of Class B Stock owned by Mr.
Steiner as custodian for his children.
Mr. Steiner disclaims beneficial ownership of shares owned by The Steiner
Group LLC, the Jeffrey Steiner Family Foundation, and shares owned by him
as custodian for his children.
(7) Includes warrants as described in footnotes (1), (5) and (6) above.
24
CERTAIN TRANSACTIONS
. The Company occasionally uses a chartered helicopter owned by an affiliate
of Mr. Jeffrey Steiner. Cost for such flights charged to the Company for
business related travel are comparable to those charged in arm's length
transactions between unaffiliated third parties. Total amount paid by the
Company in fiscal 2000 for such helicopter was approximately $200,000.
. Mr. Steiner occupies certain space in the Company's building in London,
England, for which he is charged arm's length rent by the Company
((Pounds)49,140 per year).
. The Company invested approximately $3.7 million in WIS Partners, a Bermuda
limited partnership investing in West Indian Space (a satellite monitoring
venture). The Company did not wish to invest more than $3.7 million in this
venture. The Company made a loan to Jeffrey Steiner in the amount of
$200,000 for Mr. Steiner to invest in WIS Partners. The loan was interest
free, and has been deducted from Mr. Steiner's bonus for fiscal 2000.
. In fiscal 2000, the Company sold its remaining Optical Disc Business
(formerly part of Fairchild Technologies) to Convac Technologies, Ltd., a
Hong Kong corporation ("Convac Hong Kong"). In connection with such
transaction, Fairchild received a 19% ownership interest in Convac Hong
Kong. Subsequently, Convac Hong Kong agreed to issue a 20% ownership
interest to Quilvest Asian Equity Limited, diluting Fairchild's ownership
interest in Convac Hong Kong to 15%. In addition, Quilvest may be entitled
to receive another 30% interest (if certain conditions are not met), in
which case Fairchild's ownership interest in Convac Hong Kong will be
diluted to 10.63%. In connection with the investment by Quilvest, Quilvest
has the right to put all its Convac Hong Kong shares to Convac Holdings,
the largest shareholder of Convac Hong Kong. This put is guaranteed by the
principal shareholder of Convac Holdings and Mr. Jeffrey Steiner. Mr.
Steiner is not a shareholder of Convac Holdings. However, in exchange for
his guaranty, if the put is exercised, and he is required to make payment
under his guaranty, a part of the profits (if any) generated by Convac
Holdings may be attributable to Mr. Steiner, if he so elects.
Preceding its investment in Convac Hong Kong, Quilvest made a $2 million
loan to Convac Hong Kong, which is due in October 2000. If such loan is not
repaid, then all amounts owed by Convac Hong Kong to Fairchild (for the
sale of the Optical Disc Business to Convac Hong Kong) are subordinated to
the Quilvest loan.
. Jeffrey Steiner has a minority ownership interest in Mulberry Phosphates,
Inc. Mulberry subleases from Fairchild approximately 1,650 square feet in
Fairchild's New York office, at a rental equal to the rent paid by
Fairchild to the prime landlord for such space. Due to financial
difficulties, since January 2000, Mulberry has failed to make rental
payments to Fairchild under the sublease.
. On March 2, 1998, the Company consummated the acquisition (by merger) of
Fairchild Fasteners Direct from Robert E. Edwards. Pursuant to the merger
agreement, Mr. Edwards is entitled to receive an earnout, for a period of
two years, based on the earnings of Fairchild Fasteners Direct (previously
known as Special-T). Mr. Edwards was paid approximately $592,000 in March
2000 pursuant to this earnout provision. This is the last payment under the
earnout provision. Mr. Edwards was not an officer, director or employee of
the Company at the time that such merger agreement was entered into.
. In fiscal 1999, the Company made loans in the aggregate amount of $300,000
to Robert Sharpe in order to assist him in relocating from California to
Virginia. The first loan for $100,000 was repaid in full on October 1,
1998. The second loan, for $200,000, bears interest at 5.48% per annum,
requires annual interest payments, and is due in full on June 30, 2001. In
fiscal 2000, the Company made another loan of $95,000 to Mr. Sharpe to
assist him in his relocation, of which
25
$89,311 was repaid on March 8, 2000, with the balance plus interest of
5.42% per annum to be repaid in full by September 30, 2000. The highest
balance of all such loans in fiscal 2000 (including interest) was $308,204.
The outstanding balance of all such loans as of September 19, 2000 was
$216,802.
. Pursuant to the Company's officer and director loan program, in fiscal 1999
and fiscal 2000, the Company made loans to certain key employees and
directors, to be used by such employees to purchase Fairchild Class A
Common Stock. The aggregate amount of such loans to officers and directors
in fiscal 2000 was $2,157,783. Loans made in fiscal 2000 and fiscal 1999
(respectively) were as follows:
Fiscal
Fiscal 2000 1999
------------- ----------
Mortimer Caplin $ 105,970.69
Philip David $ 105,897.51
John Flynn $ 167,255.43 $ 7,422.96
Harold Harris $ 105,897.51
Natalia Hercot (daughter of J. Steiner) $ 167,397.59
Daniel Lebard $ 105,897.51
Donald Miller $ 167,255.43 $ 7,422.96
Warren Persavich $ 167,255.43 $ 7,422.96
Herbert Richey $ 105,963.15
Robert Sharpe $ 167,255.43 $ 7,422.96
Eric Steiner $ 167,255.43 $ 7,422.96
Jeffrey Steiner $ 167,255.43 $ 7,422.96
Other Officers (Aggregate) $ 457,226.70 $29,691.84
------------- ----------
Total $2,157,783.24 $74,229.60
============= ==========
All such loans are non-interest bearing, have maturity dates ranging from 2
1/2 to 4 1/2 years, and become due and payable immediately upon the
termination of employment (for senior management) or director affiliation
(for a director).
. Eric Steiner (son of Jeffrey Steiner) is an executive officer of the
Company. His compensation is set forth in the compensation table of the
proxy statement. Natalia Hercot (daughter of Jeffrey Steiner) is a Vice
President of the Company, for which she was compensated $168,000 in fiscal
2000. Thierry Steiner (son of Jeffrey Steiner) is an employee of the
Company, for which he was compensated $32,000 in fiscal 2000. A brother of
Robert Sharpe is an employee of Fairchild Fasteners, for which he was
compensated approximately $199,000 in fiscal 2000.
. Ms. Linda Edwards, the wife of Robert Edwards, is a partner of the law firm
of Paul, Hastings, Janosfky & Walker LLP, which rendered legal services to
the Company during fiscal 2000. The Company intends to use the services of
this firm during fiscal 2001.
* * *
26
PROPOSAL NO. 2
APPROVAL OF THE ISSUANCE OF
52,500 STOCK OPTIONS TO
NON-EMPLOYEE DIRECTORS
(Pursuant to the 2000 NED Plan)
At the annual meeting, you will be asked to approve the Company's 2000 Non-
Employee Directors Stock Option Plan (the "2000 NED Plan"). The purpose of the
2000 NED Plan is to issue an aggregate of 52,500 option shares to the
Company's non-employee directors. We recommend that you vote "FOR" this
proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. In addition, under New York Stock Exchange
rules, all votes cast for or against such proposal must (in the aggregate)
represent at least 50% of the outstanding shares of the Company entitled to
vote on such matter.
Because the pool of shares available under the 2000 NED Plan does not exceed
5% of the outstanding common stock of the Company, brokers have discretion to
vote in favor of this proposal. Therefore, broker nonvotes will be counted as
present (for quorum purposes) and entitled to vote on this proposal.
Summary of the Plan
Shares Available for The Company has seven non-employee directors.
Stock Options: On the date of the 2000 Annual Meeting
(assuming this proposal is adopted) each non-
employee director will be issued 7,500 shares
of the Company's Class A Common Stock, for an
aggregate of 52,500 shares. This number
(52,500) represents approximately 0.21% of the
Company's issued and outstanding stock as of
September 29, 2000.
All stock options will be granted on the date
of the 2000 Annual Meeting (after obtaining
shareholder approval). No stock options will
be issued under the 2000 NED Plan after such
date.
Exercise Price for The exercise price for the Stock Options shall
Stock Options: be 100% of the fair market value of the shares
on the date of the 2000 Annual Meeting.
Payment of Stock The holder of an option can choose to pay the
Option Exercise Price: exercise price in cash, with the Company's
common stock (valued at the closing price of
the common stock on the date of exercise), or
by cashless exercise. In a cashless exercise,
the option holder irrevocably instructs his or
her broker to sell the shares to be acquired
upon exercise of the option and pay the
exercise price to the Company.
Eligibility:
All non-employee directors of the company are
eligible to receive stock options under the
2000 NED Plan. There are seven such directors.
27
Administration of the The 2000 NED Plan will be administered by the
Plan: Board (excluding non-employee directors). The
Board will be authorized to interpret the 2000
NED Plan but will have no discretion with
respect to the selection of directors to
receive options, the date on which stock
options will be issued, the number of shares
subject to the 2000 NED Plan, or the purchase
price for the shares subject to options.
Amendments to the The Board may terminate, amend or modify the
Plan: 2000 NED Plan at any time. However, any
amendment or modification that increases the
total amount of stock on which options may be
granted under the 2000 NED Plan, changes the
manner of determining the option price,
changes the classes of individuals eligible to
receive options, changes the number of options
which may be granted to each director, changes
the times when such options are granted, or
materially increases the benefits under the
2000 NED Plan will require the consent of the
Company's stockholders.
Exercise of Stock All stock options under the 2000 NED Plan will
Options: contain the following vesting schedule: (i)
after one year from the date of grant, the
holder may exercise up to 25% of the stock
options covered by the award; (ii) after two
years from the date of grant, the holder may
exercise up to 50% of the stock options
covered by the award; (iii) after three years
from the date of grant, the holder may
exercise up to 75% of the stock options
covered by the award; and (iv) after four
years from the date of grant, the holder may
exercise up to 100% of the stock options
covered by the award.
If a non-employee director ceases to serve as
a member of the Board (other than due to death
or disability), all options granted to such
director under the 2000 NED Plan shall expire
three months thereafter, or on their stated
expiration date, whichever occurs first.
If a non-employee director ceases to serve as
a member of the Board due to death or
disability, all options granted to such
director under the 2000 NED Plan shall expire
one year thereafter, or on their stated
expiration date, whichever occurs first.
Deferment of Gain: Pursuant to the Company's stock option
deferral plan, directors may elect to defer
the gain upon exercise of any stock options
granted under the 2000 NED Plan. The "gain" is
the difference between the exercise price of a
stock option and the value of the shares on
the date the option is exercised. If a
director elects to defer the gain, he will
receive deferred compensation units from the
Company equal to the dollar amount of the gain
divided by the fair market value of the
Company's common stock. At the end of the
deferral period, the director will receive the
number of shares of Class A Common Stock equal
to the number of deferred compensation units
previously issued to the director.
28
Tax Consequences. The following discussion addresses certain U.S. federal
income tax consequences in connection with the 2000 NED Plan. State tax
treatment is subject to individual state laws and is not reviewed in this
discussion. Stock Options under the 2000 NED Plan shall be "Non-Qualified
Stock Options." A Non-Qualified Stock Option results in no taxable income to
the optionee or deduction to the Company at the time it is granted. An
optionee exercising such an option will, at that time, realize taxable
compensation in the amount of the difference between the option price and the
then market value of the shares. Subject to the applicable provisions of the
Internal Revenue Code, a deduction for federal income tax purposes will be
allowable to the Company in the year of exercise in an amount equal to the
taxable compensation realized by the optionee.
Beneficiaries of Plan. If the 2000 NED Plan is approved at the Annual
Meeting, the following directors will immediately receive stock options for
7,500 shares each (for an aggregate of 52,500 shares): Melville Barlow,
Mortimer Caplin, Philip David, Steven Gerard, Harold Harris, Daniel Lebard and
Herbert Richey. Such stock options shall be exercisable at the fair market
value of the Company's Class A Stock as of the date of the Annual Meeting. As
of September 29, 2000, the closing price on the New York Stock Exchange for
the Company's Class A Stock was $6.3750 per share.
The stock options issued to the non-employee directors under the 2000 NED
Plan are in addition to (and not in lieu of) stock options issued to non-
employee directors under the 1996 NED Plan. The 1996 NED Plan is described in
this Proxy Statement under the caption "Directors Compensation."
A copy of the 2000 NED Plan is attached hereto as Appendix 2.
29
PROPOSAL NO. 3
APPROVAL OF PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR THE SENIOR VICE PRESIDENT, TAX
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation and Stock Option
Committee with respect to fiscal 2001 incentive compensation awards for the
Company's Senior Vice President, Tax (Mr. John Flynn).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the incentive compensation
award for the Senior Vice President, Tax, is to meet the requirements of
Section 162(m). We recommend that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and shall not be entitled to vote on this proposal.
Performance Goals. On September 27, 2000, the Company's Compensation and
Stock Option Committee established performance goals for the Senior Vice
President, Tax's, fiscal 2001 incentive compensation award and the maximum
amount payable to the Senior Vice President, Tax, if the goal is achieved. The
performance goals and maximum amount payable for fiscal 2001 are as follows:
1. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2001, the Senior Vice President, Tax, may
receive up to 1/3 of 1 percent of the total value of the transaction.
2. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the Senior Vice
President, Tax, in fiscal 2001 based on his individual contribution,
consistent with the foregoing goal and in an amount no greater than the
maximum amount set forth above.
Assuming the shareholders approve the material terms of the performance goal
as described herein, the Company believes that any such incentive compensation
award to the Senior Vice President, Tax, will qualify as performance-based
compensation that will be deductible from the Company's gross income for
federal income tax purposes.
30
PROPOSAL NO. 4
APPROVAL OF PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR THE CHIEF FINANCIAL OFFICER
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation and Stock Option
Committee with respect to fiscal 2001 incentive compensation awards for the
Company's Chief Financial Officer (Mr. Michael Alcox).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the incentive compensation
award for the Chief Financial Officer, is to meet the requirements of Section
162(m). We recommend that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and shall not be entitled to vote on this proposal.
Performance Goals. On September 27, 2000, the Company's Compensation and
Stock Option Committee established performance goals for the Chief Financial
Officer's fiscal 2001 incentive compensation award and the maximum amount
payable to the Chief Financial Officer if the goal is achieved. The
performance goals and maximum amount payable for fiscal 2001 are as follows:
1. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2001, the Chief Financial Officer may receive
up to 1/3 of 1 percent of the total value of the transaction.
2. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the Chief
Financial Officer in fiscal 2001 based on his individual contribution,
consistent with the foregoing goal and in an amount no greater than the
maximum amount set forth above.
Assuming the shareholders approve the material terms of the performance goal
as described herein, the Company believes that any such incentive compensation
award to the Chief Financial Officer will qualify as performance-based
compensation that will be deductible from the Company's gross income for
federal income tax purposes.
31
PROPOSAL NO. 5
APPROVAL OF PERFORMANCE GOALS AND INCENTIVE COMPENSATION
FOR THE EXECUTIVE VICE PRESIDENT
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation and Stock Option
Committee with respect to fiscal 2001 incentive compensation awards for the
Company's Executive Vice President (Mr. Donald Miller).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the incentive compensation
award for the Executive Vice President, is to meet the requirements of Section
162(m). We recommend that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and shall not be entitled to vote on this proposal.
Performance Goals. On September 27, 2000, the Company's Compensation and
Stock Option Committee established performance goals for the Executive Vice
President's fiscal 2001 incentive compensation award and the maximum amount
payable to the Executive Vice President if the goal is achieved. The
performance goals and maximum amount payable for fiscal 2001 are as follows:
1. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2001, the Executive Vice President may receive
up to 1/3 of 1 percent of the total value of the transaction.
2. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the Executive
Vice President in fiscal 2001 based on his individual contribution, consistent
with the foregoing goal and in an amount no greater than the maximum amount
set forth above.
Assuming the shareholders approve the material terms of the performance goal
as described herein, the Company believes that any such incentive compensation
award to the Executive Vice President will qualify as performance-based
compensation that will be deductible from the Company's gross income for
federal income tax purposes.
32
PROPOSAL NO. 6
APPROVAL OF
PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR
THE PRESIDENT
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation and Stock Option
Committee with respect to fiscal 2001 incentive compensation awards for the
Company's President (Dr. Eric Steiner).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the President's incentive
compensation award is to meet the requirements of Section 162(m). We recommend
that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and shall not be entitled to vote on this proposal.
Performance Goals. On September 27, 2000, the Company's Compensation and
Stock Option Committee established performance goals for the President's
fiscal 2001 incentive compensation award and the maximum amount payable to the
President if the goal is achieved. The performance goals and maximum amount
payable for fiscal 2001 are as follows:
1. If the Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA) of Fairchild Fasteners in Fiscal 2001, as computed in the same
manner as under the Company's Credit Agreement in effect as of July 1,
2000, is more or less than Fairchild Fasteners planned EBITDA ("Target
EBITDA") as submitted to the Board of Directors of the Company on
September 19, 2000, then the President may receive an incentive
compensation award in accordance with the following table:
Percentage of Target EBITDA Percentage of Base Salary
--------------------------- -------------------------
Less than 85% 0%
85% or more, but less than 90% 30%
90% or more, but less than 95% 45%
95% or more, but less than 100% 60%
100% or more, but less than 105% 75%
105% or more, but less than 110% 100%
110% or more 125%
2. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2001, the President may receive up to two
percent (2%) of the total value of the transaction.
33
3. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
All of the foregoing will be computed in such a manner as to avoid
duplication.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the President in
fiscal 2001 based on his individual contribution, consistent with the
foregoing goal and in an amount no greater than the maximum amount set forth
above.
Assuming the shareholders approve the material terms of the performance goal
as described herein, the Company believes that any such incentive compensation
award to the President will qualify as performance-based compensation that
will be deductible from the Company's gross income for federal income tax
purposes.
34
PROPOSAL NO. 7
APPROVAL OF
PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR
THE CHIEF EXECUTIVE OFFICER
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation and Stock Option
Committee with respect to fiscal 2001 incentive compensation awards for the
Company's Chief Executive Officer (Mr. Jeffrey Steiner).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the Chief Executive Officer's
incentive compensation award is to meet the requirements of Section 162(m). We
recommend that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and shall not be entitled to vote on this proposal.
Performance Goals. On September 19, 2000, the Company's Compensation and
Stock Option Committee established performance goals for the Chief Executive
Officer's fiscal 2001 incentive compensation award and the maximum amount
payable to the Chief Executive Officer if the goals are achieved. The
performance goals and maximum amounts payable for fiscal 2001 are as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 2001, the Chief Executive Officer may receive up
to three percent (3%) of such pre-tax profits.
2. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2001, the Chief Executive Officer may receive
up to two and one-half percent (2 1/2%) of the total value of the
transaction.
3. Notwithstanding the foregoing, the payment of incentive compensation in
connection with extraordinary transactions is restricted as follows:
. There shall be no cash incentive compensation awards on acquisitions
by the Company;
. There shall be no incentive compensation awards in connection with
the Company's issuance of any debt securities (bonds, credit
agreements, etc.); and
. There shall be no incentive compensation awards in connection with
raising of equity through investment bankers.
All of the foregoing will be computed in such a manner as to avoid
duplication.
35
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the Chief
Executive Officer in fiscal 2001 based on his individual contribution,
consistent with the foregoing goals and in an amount no greater than the
maximum amounts set forth above.
Assuming the shareholders approve the material terms of the performance
goals as described herein, the Company believes that any such incentive
compensation award to the Chief Executive Officer will qualify as performance-
based compensation that will be deductible from the Company's gross income for
federal income tax purposes.
36
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent auditor since
1968. No change is contemplated. Representatives of Arthur Andersen will be
available at the annual meeting to make a statement, if they so desire, and to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
If you want to include a shareholder proposal in the proxy statement for the
2001 annual meeting, it must be delivered to the Company before June 12, 2001.
If you want to submit a shareholder proposal for the 2001 annual meeting but
you do not require that such proposal be included in the Company's proxy
materials, you must notify the Company of such proposal before August 26,
2001. If such notice is not received by August 26, 2001, the proposal shall be
considered untimely and shall not be presented at the 2001 annual meeting.
All shareholder proposals must conform to the requirements set forth in
Regulation 14A under the Securities Exchange Act of 1934, and should be
submitted to the Company's headquarters, 45025 Aviation Drive, Suite 400,
Dulles, VA 20166-7516, Attention: Secretary.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended June
30, 2000, was mailed to shareholders with or prior to mailing of this proxy
statement. The Company will provide free of charge to any shareholder as of
the record date who so requests in writing, a copy of the Company's annual
report on Form 10-K for fiscal 2000. Requests for such copies should be
directed to Donald E. Miller, Executive Vice President & Secretary, The
Fairchild Corporation, 45025 Aviation Drive, Suite 400, Dulles, VA 20166-7516.
By Order of the Board of Directors
/s/ Donald E. Miller
Donald E. Miller
Executive Vice President
& Secretary
37
Appendix 1
Charter of the Audit Committee
1. General (Structure, Process and Membership Requirements).
(a) Membership. The Company shall have an audit committee (the "Audit
Committee") comprised of at least three members ("Members") of the
Company's Board of Directors. Each Member of the Audit Committee shall
be independent of the Company's management and shall be free from any
relationship that would interfere with the exercise of judgment
independent of the Company's management.
Members of the Audit Committee shall meet the following criteria:
(i) Independence of Audit Committee Members: Each Member must be
independent. "Independent" is defined as having no relationship
with the Company that may interfere with the Member's exercise of
his independence from management of the Company.
(ii) Each Member must be financially literate (as interpreted by the
Company's Board of Directors in its business judgment)
(iii) Accounting or Related Financial Management Expertise: At least
one Member of the Audit Committee must have accounting or related
financial management expertise (as interpreted by the Company's
Board of Directors in its business judgment).
(iv) No Employment of Audit Committee Members: Neither the Member nor
anyone in his immediate family may be an officer or employee of
the Company (or any of its affiliates) or have been an officer or
employee of the Company (or any of its affiliates) in the last
three years.
(v) No Business Relationship Between Audit Committee Members and the
Company: If a Member (or any organization in which such Member is a
partner, controlling shareholder or executive officer) has (or in
the last three years, has had) a business relationship with the
Company (including a commercial, industrial banking, consulting,
legal, accounting or other relationship), the Board of Directors
must specifically determine that (in the Board of Directors'
business judgment) such business relationship does not interfere
with the Member's exercise of his independent judgment. In making
this determination, the Board shall consider, among other things,
the materiality of the relation to the Company, to the Member and,
if applicable, to the organization with which the director is
affiliated.
(vi) No Cross Compensation Links: If any executive officer of the
Company is a member of the audit committee of another
organization, then no executive officer of such other organization
may serve as a Member of the Company's Audit Committee.
(b) Purpose. The purpose of the Audit Committee shall be to assist the
Company's Board of Directors in discharging its responsibilities with
respect to (i) the Company's internal accounting, auditing and
financial reporting controls, policies, procedures and practices
(collectively, "Internal Controls"), and (ii) the Company's outside
auditors.
(c) Appointment and Term. The Chairman and each other Member of the Audit
Committee shall be appointed by the Company's Board of Directors to
serve a term of one year or until their successors have been duly
appointed and assume office.
(d) Committee Meetings. The Audit Committee shall hold at least four
regular meetings each year, and such additional meetings as the
Chairman or a majority of the Members of the Audit Committee may deem
necessary or advisable.
A-1
The Audit Committee may require the presence and participation of any
officer or employee of the Company, the Company's internal auditors, or the
Company's outside auditors at any meeting of the Audit Committee.
(e) Minutes. The Audit Committee shall prepare and approve minutes of its
meetings, and such minutes shall be submitted to the Company's Board of
Directors for review and to the Company's Secretary for inclusion in
the Company's minute books.
(f) Reports of Actions. The Audit Committee shall promptly report all
actions it has taken to the Company's Board of Directors for
ratification.
2. Responsibilities of the Audit Committee (Scope of Audit Committee's
Responsibilities and How It Carries Out These Responsibilities).
(a) Internal Controls. The Audit Committee shall review the actions taken
by the Company's management to ensure that the Company adopts,
maintains and adheres to a system of Internal Controls that provides
reasonable assurances that (1) all transactions of the Company are
properly authorized and are reflected in the books and records of the
Company, (2) the risk of financial misconduct is minimized and any such
misconduct is promptly detected and reported, (3) the Company is able
to prepare and publish financial statements that are fairly presented,
have been prepared in accordance with generally accepted accounting
principles, and comply with all applicable requirements, and (4) the
internal and external audits of the Company are adequate and comply
with all applicable requirements. The Audit Committee shall review with
the Company's Chief Financial Officer and outside auditors at least
annually the adequacy and effectiveness of the Company's Internal
Controls.
(b) Financial Statements. The Audit Committee shall review the Company's
published financial statements, including without limitation (1) any
unusual or non-recurring items therein, (2) the accounting principles
applied therein, (3) any changes in previously applied accounting
principles, and (4) management's report accompanying the Company's
annual financial statements included in the Company's Annual Report to
Shareholders.
(c) Internal Audit. The Audit Committee shall review (1) the Company's
internal audit plans with management and the Company's outside auditors
(which review shall be conducted at least annually), (2) management's
appointment, replacement, reassignment or dismissal of the Company's
internal auditors, (3) the progress and key findings of the Company's
internal audits, (4) the compensation paid by the Company to its
internal auditors for all services rendered (which review shall be
conducted at least annually), (5) all reports, criticisms, problems,
issues, recommendations or other matters submitted or raised by the
Company's internal auditors, and management's responses, actions and
follow-up with respect thereto, and (6) all disagreements between
management and the Company's internal auditors.
(d) Independent Outside Auditors. The Audit Committee shall annually review
(1) management's recommendation with respect to the selection of the
Company's outside auditors, and provide to the Company's Board of
Directors a recommendation with respect to such selection, (2) the
scope of the Company's annual examination and audit with the Company's
outside auditors, (3) management's evaluation of the independence of
the Company's outside auditors, (4) the letter from the Company's
outside auditors with respect to their independence from the Company's
management and their unrestricted access to the Audit Committee, (5)
the report from the Company's outside auditors with respect to the
services that they have provided to the Company and other related
matters, (6) the compensation paid by the Company to its outside
auditors for all services rendered, (7) all reports, criticisms,
problems, issues, recommendations or other matters submitted or raised
by the Company's outside auditors, and management's responses, actions
and follow-up with
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respect thereto, and (8) all disagreements between management and the
Company's independent public accounts.
The outside auditors of the Company are ultimately accountable to the
Board of Directors and the Audit Committee. The Audit Committee and the
Board of Directors have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside auditors
(or to nominate the outside auditors to be proposed for shareholder
approval in any proxy statement).
The Audit Committee is responsible for:
(i) Ensuring that the outside auditors submit on a periodic basis to
the Audit Committee a formal written statement delineating all
relationships between the auditors and the Company;
(ii) Actively engaging in a dialogue with the outside auditors with
respect to any disclosed relationships or services that may impact
the objectivity and independence of the outside auditors; and
(iii) Recommending that the Board of Directors take appropriate action
in response to the outside auditors' report to satisfy itself of
the outside auditors' independence.
(e) Second Opinions. The Audit Committee shall review decisions by
management to obtain second opinions on significant accounting issues
and any actions taken by management in reliance on such opinions.
(f) Meetings. The Audit Committee shall meet at least annually with (1)
appropriate officers and employees of the Company to discuss tax
matters affecting the Company, and (2) in-house counsel to discuss
legal matters affecting the Company.
3. Annual Consultation with Outside Auditors. In order to ensure that the Audit
Committee receives all the information necessary to carry out its
responsibilities, the Audit Committee shall request, at least annually,
confirmation from the Company's outside auditors that they have informed the
Audit Committee as to (a) the initial selection of and changes in significant
accounting policies and their application, (b) the process used in formulating
sensitive accounting estimates, (c) adjustments proposed by the auditor but not
recorded by the Company that could cause future financial statements to be
materially misstated, (d) disagreements with management and whether or not
satisfactorily resolved, (e) cases when management consulted with other
accountants about auditing and accounting matters, (f) difficulties encountered
in performing the annual audit, and (g) any other significant Internal Control
or financial reporting matter.
4. Preparation of Annual Financial Statements. Each year, prior to releasing
the Company's audited financial statements, the Audit Committee shall take the
following action:
(a) The Audit Committee shall review and discuss the audited financial
statements with management;
(b) The Audit Committee shall discuss with the Company's independent
auditors the matters required to be discussed by SAS 61, as may be
modified or supplemented;
(c) The Audit Committee shall receive and review the written disclosures
and the letter from the independent auditors required by ISB Standard
No. 1, as may be modified or supplemented, and shall discuss with the
auditors the auditors' independence.
(d) Based on the review and discussions referred to in sub-paragraphs (a)
through (c) above, the Audit Committee shall determine (and shall
report in the Company's Annual Proxy Statement) if it recommends to the
Board of Directors that the financial statements be included in the
Annual Report on Form 10-K.
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(e) Each Member of the Audit Committee shall provide such information as
may be reasonably requested by the Company in order to enable the Board
to review whether the Members of the Audit Committee are independent,
as defined in NYSE listing standards and as defined in Section 1 of
this Charter.
(f) The Audit Committee shall review its own compliance with the policies
and procedures of this Charter, including without limitation compliance
with the following Sections:
Section 2(a) (review with the CFO and outside auditors the adequacy and
effectiveness of the Company's internal controls);
Section 2(b) (review the Company's financial statements);
Section 2(c) (review with management and outside auditors the Company's
internal audit plans);
Section 2(d) (review recommendation and selection of outside auditors;
determine that the outside auditors are independent);
Section 2(e) (review any decisions by management to obtain second
opinions on significant accounting issues);
Section 2(f) (meet with officers and employees to discuss tax and legal
matters); and
Section 3 (annual consultation with outside auditors).
(g) The Company shall provide to the NYSE written confirmation regarding:
(i) The Board's annual determination regarding the independence of
Members of the Audit Committee;
(ii) The financial literacy of the Audit Committee Members;
(iii) The determination that at least one Audit Committee Member has
accounting or related financial management expertise; and
(iv) The Board's annual review and reassessment of the adequacy of this
Charter.
5. Compliance with NYSE Requirements. Sections 1(a), 2(d) and 4(g) of this
Charter are intended to comply with Rules 303.01 and 303.02 of the NYSE Listed
Company Manual (as last modified on 12/20/99). In the event of any amendments
to such Rules, the Board shall consider parallel amendments to this Charter.
This Charter was approved by the Company's Board of Directors on February
17, 2000.
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Appendix 2
2000 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN OF
THE FAIRCHILD CORPORATION
1. Purpose.
The purpose of this 2000 Non-Employee Directors Stock Option Plan (the
"Plan") is to retain qualified and competent persons to serve as members of
the board of directors (the "Board") of The Fairchild Corporation (the
"Company") by providing a means whereby such persons acquire an equity
interest in the Company thereby securing for the Company and its stockholders
the benefits inherent in such equity ownership by persons whose advice and
counsel are important to the Company's future growth and continued success.
2. Administration.
(a) The Board (excluding participation by Non-Employee Directors) shall (i)
administer the Plan, (ii) establish such rules and regulations as it
may deem appropriate for the proper administration of the Plan, and
(iii) take such actions, make such determinations and issue such
interpretations in connection with the Plan (or the Options issued
thereunder) as it may deem necessary or advisable.
(b) The Board may from time to time appoint a Committee (the "Committee"),
comprised of at least three members of the Board who are not Non-
Employee Directors, and may delegate to the Committee full power and
authority to take any and all action required or permitted to be taken
by the Board under the Plan. The Board or the Committee, as applicable,
shall hereinafter be referred to as the "Administrator."
(c) The Administrator shall have no discretion with respect to the
selection of directors to receive Awards under the Plan, the number of
shares subject to the Plan or to each Award, or the purchase price for
shares subject to Awards. The Administrator shall have no authority to
materially increase benefits under the Plan.
(d) The Administrator may establish from time to time such regulations,
provisions, and procedures within the terms of the Plan as, in its
opinion, may be advisable in the administration of the Plan.
(e) The Administrator may designate the Secretary of the Company or other
employees of the Company to assist the Administrator in the
administration of the Plan and may grant authority to such persons to
execute documents on behalf of the Administrator.
3. Stock.
The common stock (the "Common Stock") to be made the subject of Awards under
the Plan shall be the shares of Class A Common Stock of the Company, $.10 par
value per share. The total amount of Common Stock for which Awards may be
granted under the Plan shall not exceed, in the aggregate, 52,500 shares,
subject to adjustment in accordance with the provisions of Section 12 hereof.
4. Award of Options.
(a) Awards shall be granted only to directors of the Board who (at the time
of Award): (i) are not employees of the Company, and (ii) have not been
employees of the Company for the past three (3) years ("Non-Employee
Directors").
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(b) All Awards granted under the Plan shall be non-qualified options not
entitled to special tax treatment under Section 422 of the Internal
Revenue Code of 1986, as amended (the "IRC").
(c) All Awards under this Plan shall be granted immediately after
shareholder approval of the Plan, at the rate of 7,500 stock options
per each of the seven (7) Non-Employee Directors.
(d) Every recipient of Awards pursuant to this Plan shall be bound by the
terms and provisions of this Plan (including the restriction on
assignability of options set forth in Section 8 below); and, the
acceptance of options pursuant to this Plan shall constitute a binding
agreement between the recipient and the Company.
5. Number of Shares to Be Granted.
Each person who is a Non-Employee Director of the Company at the time of
adoption of the Plan by the stockholders shall be granted an option for 7,500
shares of Stock (the "Awards" or "Options").
6. Price.
The exercise price of each Option shall be the closing price of the Common
Stock on the New York Stock Exchange (the "NYSE") on the date the stockholders
approve the Plan.
The closing price of the Common Stock, as of any particular day, shall be as
reported by the NYSE; provided, however, that if the Common Stock is not
listed on the NYSE on the date the option price is to be determined, the
option price shall be the last price reported by the NYSE prior to the option
date.
7. Vesting Schedule.
Each Award under the Plan will contain the following vesting schedule: (i)
after one year from the date of grant, the holder may exercise up to 25% of
the Options covered by the Award; (ii) after two years from the date of grant,
the holder may exercise up to 50% of the Options covered by the Award; (iii)
after three years from the date of grant, the holder may exercise up to 75% of
the Options covered by the award; and (iv) after four years from the date of
grant, the holder may exercise up to 100% of the Options covered by the Award.
All Options will expire five years after the date of grant of the Award.
8. Transferability.
No Option may be transferable by a holder other than by will or the laws of
descent and distribution. During the lifetime of a holder, the Option may be
exercisable only by such holder. A holder who acquires Common Stock hereunder
may only transfer such Common Stock in compliance with applicable federal and
state securities laws.
9. Termination of Directorship.
If, on or after the date the Awards are granted, a holder ceases to serve as
a director of the Company for any reason other than death or disability
(including: (i) resignation, (ii) removal as a director of the Company by the
stockholders of the Company, with or without cause, or (iii) a holder's
decision not to stand for reelection at the next shareholders meeting), the
holder shall have the right to exercise any remaining Options under the
holder's Award (to the extent such Options shall have vested prior to
resignation, removal or other termination) on the earlier of: (a) three months
after such resignation, removal or other termination, or (b) the expiration
date of the Award. Thereafter, the Award and all Options thereunder shall be
deemed to have expired.
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10. Death or Disability.
If, on or after the date the Awards are granted, a holder ceases to serve as
a director of the Company due to death or disability, the holder (or the
personal representative of the holder or the person or persons to whom the
Options shall have been transferred by will or by the laws of decent and
distribution), shall have the right to exercise any remaining Options under
the holder's Award (to the extent such Options shall have vested prior to
death or disability) on the earlier of: (a) one year after termination due to
death or disability, or (b) the expiration date of the Award. Thereafter, the
Award and all Options thereunder shall be deemed to have expired.
11. Payment for Stock.
(a) The purchase price of Common Stock issued upon exercise of options
granted hereunder shall be paid in full on the date of purchase.
Payment shall be made either in cash or such other consideration as the
Administrator deems appropriate, including, without limitation, Common
Stock already owned by the holder or Common Stock to be acquired by the
holder upon exercise of the option having a total fair market value, as
determined by the Administrator, equal to the purchase price, or a
combination of cash and Common Stock having a total fair market value,
as so determined, equal to the purchase price.
(b) Common Stock shall not be issued upon the exercise of options unless
and until the aggregate amount of federal, state or local taxes of any
kind required by law to be withheld, if any, with respect to the
exercise of such options have been paid or satisfied or provision for
their payment and satisfaction has been made upon such terms as the
Administrator may prescribe, including, without limitation, payment of
any such taxes by exchanging shares of Common Stock previously owned by
the holder or acquired upon the exercise of an option.
12. Stock Adjustments.
(a) The total amount of Common Stock for which options shall be granted
under the Plan and option terms (both as to the number of shares of
Common Stock and the price of the option) shall be appropriately
adjusted for any increase or decrease in the number of outstanding
shares of Common Stock resulting from payment of a Common Stock
dividend on the Common Stock, a subdivision or combination of the
Common Stock, or a reclassification of the Common Stock, and (in
accordance with the provisions contained in the following paragraph) in
the event of a consolidation or a merger in which the Company will be
the surviving corporation.
(b) After the merger of one or more corporations into the Company in which
the Company shall be the surviving corporation, or after any
consolidation of the Company and one or more other corporations, each
holder shall, at no additional cost, be entitled, upon any exercise of
his option, to receive, in lieu of the number of shares of Common Stock
as to which such option shall then be so exercised, the number and
class of shares of Common Stock or other securities to which such
holder would have been entitled pursuant to the terms of the applicable
agreement of merger or consolidation if at the time of such merger or
consolidation such holder had been a holder of record of a number of
shares of Common Stock equal to the number of shares for which such
option may then be so exercised. Comparable rights shall accrue to each
holder in the event of successive mergers or consolidations of the
character described above.
(c) In the event of any sale of all or substantially all of the assets of
the Company, or any merger of the Company into another corporation, or
any dissolution or liquidation of the Company or, in the discretion of
the Board, any consolidation or other reorganization in which it is
impossible or impracticable to continue in effect any options, all
options granted under the
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Plan (and not previously exercised) shall immediately vest and shall
terminate unless exercised at least one business day before the
scheduled closing of such event; provided that any such vesting,
exercise or termination shall be conditioned on the closing of such
transaction; and provided further that the Board may in its discretion,
require instead that all options granted under the Plan and not
previously exercised shall be assumed by such other corporation on the
basis provided in the preceding paragraph to the extent possible or
practical.
(d) The adjustments described in this Section 12 and the manner of
application of the foregoing provisions shall be determined by the
Board in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become
subject to an option.
13. Rights as a Stockholder.
A holder or a transferee of an Option shall have no rights as a stockholder
with respect to any share of Common Stock covered by such holder's Option
until such holder has become the holder of record of such share of Common
Stock, and, except for stock dividends as provided in Section 12 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights in
respect of such share for which the record date is prior to the date on which
he or she shall become the holder of record thereof.
14. Amendment and Termination.
The Board may at any time terminate, amend or modify the Plan in any respect
it deems suitable; provided, however, that no such action of the Board,
without the approval of the stockholders of the Company, may: (i) increase the
total amount of Common Stock on which Options may be granted under the Plan,
(ii) change the manner of determining the option price, (iii) change the class
of individuals eligible to receive Awards, (iv) change the number of Options
which may be granted to each director, (v) change the times when such Options
are granted, or (vi) materially increase the benefits under the Plan; provided
further that no amendment, modification or termination of the Plan may in any
manner affect any Option theretofore granted under the Plan without the
consent of the then holder. Notwithstanding the foregoing, the Plan may not be
amended more than once in any six-month period except to comply with changes
in the IRC, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any rules or regulations promulgated under either the IRC or
ERISA.
15. Investment Purpose.
At the time of exercise of any option, the Company may, if it shall deem it
necessary or desirable for any reason, require the holder to (i) in the
absence of an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), represent in writing to the Company
that it is such holder's then intention to acquire the Common Stock for
investment and not with a view to the distribution thereof, or (ii) postpone
the date of exercise until such time as the Company has available for delivery
to the holder a prospectus meeting the requirements of all applicable
securities laws.
16. Right to Remove Director.
Nothing contained herein or in any Award shall restrict the right of the
stockholders of the Company to remove any holder as director at any time, with
or without cause, or shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company shall retain a director
for any period of time, or at any particular rate of compensation.
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17. Finality of Determinations.
Each determination, interpretation, or other action made or taken pursuant
to the provisions of the Plan by the Administrator shall be final and be
binding and conclusive for all purposes.
18. Indemnification of Directors.
Each director of the Company, solely in his or her capacity as a director,
shall be indemnified by the Company against all costs and expenses reasonably
incurred by such director in connection with any action, suit or proceeding to
which he or she or any of the other directors may be a party by reason of any
action taken or failure to act under or in connection with the Plan, or any
Award thereunder, and against all amounts paid in settlement thereof (provided
such settlement shall be approved by independent legal counsel) or paid in
satisfaction of a judgment in any such action, suit or proceeding, to the
extent permitted by Delaware law. Upon the institution of any such action,
suit or proceeding, a director of the Company shall notify the Company in
writing, giving the Company an opportunity, at its own expense, to handle and
defend the same before such director undertakes to handle it on his or her own
behalf.
19. Governing Law.
The Plan shall be governed by the laws of the State of Delaware.
20. Effective Date.
The Plan shall become effective upon the date of its adoption by the Board
(September 26, 2000), subject to approval by the stockholders of the Company
at the Annual Meeting to be held on November 20, 2000. If the Plan is approved
by the stockholders at such Annual Meeting, Initial Stock Awards (as defined
in Section 5 of the Plan) shall be issued as of such Annual Meeting date, with
the exercise price determined as of such date and the expiration date for such
options being five years from such date. If the Plan is not approved by the
stockholders at such Annual Meeting, the Plan shall be null and void.
21. Override.
All transactions under the Plan are intended to comply with applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or any action by the Administrator fails to
so comply, it shall be deemed null and void, to the extent permitted by law
and as deemed advisable by the Administrator.
22. DEFERRAL OF COMPENSATION
22.1Defined Terms.
22.1.1 "Award" means an award of stock options to a Non-Employee
Director under this Plan.
22.1.2 "Committee" means the full Board of Directors (excluding the
participation of Non-Employee Directors) or a committee of three
of more Directors (excluding Non-Employee Directors).
22.1.3 "Deferral Date" means, in connection with any Deferred
Compensation Unit, the date on which any deferred compensation
with respect thereto would have been paid if no deferral
election had been made.
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22.1.4 "Deferred Compensation Plan" means the Company's Stock Option
Deferral Plan dated February 9, 1998 (as amended from time to
time). Generally, participation in the Deferred Compensation
Plan is limited to Executive Officers and Directors who are
deemed "Accredited Investors" for purposes of Federal Securities
Laws.
22.1.5 "Deferred Compensation Units" means the right of a Non-Employee
Director to receive distributions of deferred compensation
pursuant to the Deferred Compensation Plan in the form of
Shares, determined in accordance with the terms of this Plan and
the Deferred Compensation Plan, and based on the Fair Market
Value of Shares on the Deferral Date.
22.1.6 "Dividend Equivalents" means the right of a Non-Employee
Director to receive Shares equal to:
(i) the per Share cash dividends declared by the Company from
time to time,
(ii) multiplied by the number of Deferred Compensation Units
credited to the account of the Non-Employee Director as of
each applicable dividend record date,
(iii) divided by the Fair Market Value on the related dividend
payment date.
22.1.7 "Fair Market Value" means with respect to the Company's Shares
the closing price of the Shares as of the date on which the
value is to be determined, as reported on the New York Stock
Exchange or such other source of quotation for, or reports of,
trading activity in Shares as the Committee may from time to
time select.
22.1.8 "Shares" means shares of the Company's Class A Common Stock.
22.2Deferred Compensation Units
22.2.1 Granting of Deferred Compensation Units: To the extent elected
by any Non-Employee Director and permitted by the Deferred
Compensation Plan, the Committee may award Deferred Compensation
Units to any Non-Employee Director in lieu of all or any portion
of the gain that would otherwise be recognized by such Non-
Employee Director upon exercise of a stock option. All Deferred
Compensation Units shall be subject to the terms of this Plan
and the Deferred Compensation Plan.
22.2.2 Effect of Grants: The number of Shares distributable to Non-
Employee Directors pursuant to each Deferred Compensation Unit
shall be charged against the maximum number of Shares of Common
Stock that may be issued under this Plan at any time. The number
of Shares distributable to Non-Employee Directors pursuant to
Dividend Equivalents shall not be charged against the number of
Shares issuable under this Plan.
22.2.3 Accounting; Fractional Units:
(a) The number of Deferred Compensation Units credited to the
account of any Non-Employee Director shall be rounded to the
nearest one-thousandth of a Unit. The account to which
Deferred Compensation Units are credited shall be an
unsecured general obligation of the Company. The Company
will maintain records of the number of Deferred Compensation
Units for the account of each Non-Employee Director, in
part, to prevent an issuance of shares of Common Stock in
excess of the authorized shares.
(b) Notwithstanding paragraph (a) above, upon distribution of
any Shares represented by Deferred Compensation Units, the
number of shares shall be
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rounded downward to the nearest whole share and no fractional
shares shall be issued. Fractional Units remaining after the
final distribution to any Non-Employee Director shall be
cancelled without obligation to the Non-Employee Director.
22.2.4 Exercise of Rights Under Awards: Shares used to pay the purchase
price on the exercise of Awards subject to the Deferred
Compensation Plan, shall have been held by the Non-Employee
Director for a period of not less than six months (or such
longer period as may be required under the terms of the Award).
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The Fairchild Corporation
This proxy is solicited on behalf of the Board of Directors of The
Fairchild Corporation.
The undersigned hereby appoints Jeffrey J. Steiner, John L. Flynn and
Donald E. Miller as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Class A Common Stock, par value $.10 per share, and Class B Common
Stock, par value $.10 per share, of The Fairchild Corporation held of record by
the undersigned on September 29, 2000 at the Annual Meeting of Stockholders to
be held on Monday, November 20, 2000 at 10:00 a.m. (local time) and at any
adjournments or postponements thereof.
"Please Mark Inside Boxes so that Data Processing Equipment will Record Your
Votes."
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
(Continued and to be signed on the reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL LISTED NOMINEES, AND FOR APPROVAL OF THE OTHER PROPOSALS:
1. ELECTION OF DIRECTORS
[ ] FOR all listed nominees [ ] WITHHELD for all.
(except as marked to the contrary
below).
Melville R. Barlow, Mortimer M. Caplin, Philip David, Robert E. Edwards, Steven
L. Gerard, Harold J. Harris, Daniel Lebard, Herbert S. Richey, Eric I. Steiner,
and Jeffrey J. Steiner.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ------------------
2. TO APPROVE THE ISSUANCE OF 52,500 STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE SENIOR
VICE PRESIDENT, TAX;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE CHIEF
FINANCIAL OFFICER;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE
EXECUTIVE VICE PRESIDENT;
6. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE
PRESIDENT;
7. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE CHIEF
EXECUTIVE OFFICER;
8. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name(s) appear hereon.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give
full title as such.
Date
------------------------------------------------
------------------------------------------------
------------------------------------------------
Signature(s)
THE FAIRCHILD CORPORATION
SAVINGS PLAN FOR EMPLOYEES OF
THE FAIRCHILD CORPORATION
VOTING INSTRUCTIONS TO TRUSTEE
These voting instructions are solicited on behalf of the Board of Directors of
The Fairchild Corporation.
To the Trustee:
In accordance with the provisions of the Savings Plan for Employees of The
Fairchild Corporation, I hereby instruct you, as Trustee, to vote or cause to be
voted at the Annual Meeting of Stockholders of The Fairchild Corporation to be
held on November 20, 2000, and any adjournments thereof, all shares of The
Fairchild Corporation standing to my credit in the Master Trust covering the
foregoing Plan in which I may be a participant and which I am entitled to vote
at such meeting as follows:
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given by 10:00 a.m. (EST) Monday, November 13,
2000, this proxy will be voted in the same percentage as shares held by
participants for which the Trustee has received timely voting instructions. The
Trustee will hold your voting directions in strict confidence. The Proxy may
vote in its discretion upon any other matters properly coming before the Annual
Meeting and any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY
(Continued on the reverse side)
Please sign exactly as name(s) appear hereon.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give
full title as such.
Date _______________________________________, 2000
------------------------------------------------
------------------------------------------------
Signature(s)
" Please Mark Inside Boxes so that Data Processing Equipment will Record Your
Votes."
1. ELECTION OF DIRECTORS
[ ] FOR all listed nominees [ ] WITHHELD for all.
(except as marked to the contrary
below).
Melville R. Barlow, Mortimer M. Caplin, Philip David, Robert E. Edwards, Steven
L. Gerard, Harold J. Harris, Daniel Lebard, Herbert S. Richey, Eric I. Steiner,
and Jeffrey J. Steiner.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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2. TO APPROVE THE ISSUANCE OF 52,500 STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE SENIOR
VICE PRESIDENT, TAX;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE CHIEF
FINANCIAL OFFICER;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE
EXECUTIVE VICE PRESIDENT;
6. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE
PRESIDENT;
7. TO APPROVE THE PERFORMANCE GOALS AND INCENTIVE COMPENSATION FOR THE CHIEF
EXECUTIVE OFFICER;
8. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.