SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c)
or Rule 14a-12
SHARED TECHNOLOGIES FAIRCHILD INC.
-----------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------
(Name of Person[s] Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-(6)(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
--------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- -------------------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
--------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------------------------------
(3) Filing party:
--------------------------------------------------------------
(4) Date filed:
--------------------------------------------------------------
SHARED TECHNOLOGIES FAIRCHILD INC.
100 GREAT MEADOW ROAD
WETHERSFIELD, CONNECTICUT 06109
(860) 258-2400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1997
The Annual Meeting of Stockholders of Shared Technologies Fairchild
Inc. (the "Company") will be held at the Company's offices, located at 100 Great
Meadow Road, Wethersfield, Connecticut 06109 on Wednesday, April 30, 1997, at
10:00 a.m., for the purpose of considering and acting upon the following
matters:
1. To elect one class of three Directors;
2. To ratify certain amendments to the Company's 1996 Equity
Incentive Plan;
3. To approve the material terms of the performance goals
for the fiscal 1997 incentive compensation awards for certain
executives of the Company;
4. To ratify the grant of certain warrants to non-employee
Directors; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Pursuant to the provisions of the Company's Bylaws, the Board of
Directors has fixed the close of business on April 8, 1997 as the record date
for determining the stockholders of the Company entitled to notice of, and to
vote at, the meeting or any adjournment thereof.
Stockholders who do not expect to be present in person at the meeting
are urged to date and sign the enclosed proxy and promptly mail it in the
accompanying envelope. The proxy will not be used if you attend and vote at the
meeting in person or if you revoke the proxy prior to the meeting.
By Order of the Board of Directors
KENNETH M. DORROS
Secretary
Dated: April 15, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
SHARED TECHNOLOGIES FAIRCHILD INC.
100 GREAT MEADOW ROAD
WETHERSFIELD, CONNECTICUT 06109
(860) 258-2400
-------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
-------------------
April 30, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Shared Technologies Fairchild Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on April 30, 1997 and at any adjournment of that
meeting. All proxies will be voted in accordance with the instructions contained
therein and, if no choice is specified, the proxies will be voted in favor of
the proposals set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by giving written
notice to that effect to the Secretary of the Company.
The Board of Directors has fixed April 8, 1997 as the record date for
determining stockholders who are entitled to vote at the meeting. At the close
of business on April 8, 1997, there were outstanding and entitled to vote
15,704,399 shares of common stock of the Company, $.004 par value per share
("Common Stock"). Each share is entitled to one vote.
The presence of the holders of at least one-third in interest of the
outstanding shares of Common Stock of the Company is necessary to constitute a
quorum at the meeting. Therefore, holders of not less than 5,234,800 shares of
Common Stock must be present in person or by proxy for there to be a quorum.
Shares of Common Stock represented by all proxies received, including proxies
that withhold authority for the election of Directors, as well as "broker
non-votes", discussed below, count toward establishing the presence of a quorum.
Assuming the presence of a quorum, Directors of the Company are elected
by plurality vote of the shares of Common Stock present in person or by proxy
and voting in the election of Directors. Shares may be voted for or withheld
from each nominee for election as a director. Shares for which the vote is
withheld and "broker non-votes" will be excluded entirely and have no effect on
the election of Directors of the Company.
Assuming the presence of a quorum, an affirmative vote of a majority of
the shares of Common Stock present in person or by proxy and voting will be
required for ratification of the amendments to the 1996 Equity Incentive Plan,
for approval of the material terms of the performance goals for the 1997
incentive compensation awards, and for ratification of the grant of certain
warrants to non-employee Directors. As to such matters, shares may be voted for
or against each such matter or may abstain from voting thereon. Abstentions and
"broker non-votes," discussed below, are not counted in determining the number
of votes cast with respect to each such matter.
Under applicable rules, brokers who hold shares of the Company's Common
Stock in street name have the authority to vote the shares in the broker's
discretion on "routine" matters if they have not received specific instructions
from the beneficial owner of the shares. Item 1, the uncontested election of
Directors, is a "routine" matter for this purpose. With respect to matters which
are determined by the appropriate broker-dealer regulatory organization to be
"non-routine," which includes Items 2, 3 and 4 on the agenda for this meeting of
the Company's stockholders, brokers may not vote shares held in street name
without specific instructions from the beneficial owner. If a broker holding
shares in street name submits a proxy card on which the broker physically lines
out the matter (whether it is "routine" or "non-routine") or does not indicate a
specific choice
("for", "against" or "abstain") on a matter that is "non-routine," that action
is called a "broker non-vote" as to that matter. "Broker non-votes", whether
with respect to "routine" matters, such as Item 1 on the agenda for this
meeting, or "non-routine" matters, are not counted in determining the number of
votes cast with respect to the matter. If a broker submits a proxy but does not
indicate a specific choice on a "routine" matter, the shares will be voted as
specified in the proxy card. At this meeting of the Company's stockholders,
shares represented by such a proxy card would be voted for the election of the
director nominees.
The Company's Annual Report for the fiscal year ended December 31, 1996
is being mailed to stockholders with the mailing of this Notice and Proxy
Statement on or about April 15, 1997.
MATTERS TO BE BROUGHT BEFORE THE MEETING
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Board of Directors currently consists of ten members (and one
vacancy to be filled), divided into two classes of four Directors each and one
class of three Directors, with the terms of each class staggered so that the
term of one class expires at each annual meeting of the stockholders.
The terms of Directors in one class, consisting of three current
Directors, Anthony D. Autorino, Thomas H. Decker, Vincent DiVincenzo and a
vacancy created by the recent death of Edward J. McCormack, Jr., expire at the
1997 annual meeting. All of the nominees are currently members of the Board.
Unless otherwise instructed in the proxy, all proxies will be voted for the
election of each of these nominees to a three-year term expiring at the 2000
annual meeting, with each to hold office until his successor has been duly
elected and qualified. Stockholders who do not wish their shares to be voted for
a particular nominee may so indicate in the space provided on the proxy card.
Management does not contemplate that any of the nominees will be unable to
serve, but in that event, proxies solicited hereby will be voted for the
election of another person or persons to be designated by the Board of
Directors. Due to the recent death of Mr. McCormack, the Board was unable, as of
the date of this Proxy Statement, to find a suitable candidate to fill his seat,
and accordingly, the Board has not nominated anyone to fill such vacancy. The
Board intends to interview and elect, pursuant to the Company's by-laws and the
General Corporation Law of the State of Delaware, a new director to fill such
vacancy subsequent to the Company's annual meeting of stockholders. Such
director's term shall expire at the 1998 annual meeting of stockholders.
The following table and narrative sets forth information regarding the
principal occupation, other affiliations, committee memberships and age, for the
three nominees and each Director continuing in office.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
'FOR' EACH OF THESE NOMINEES.
<TABLE>
<CAPTION>
Director Position Term
Name Age Since With Company Ends
---- --- ----- ------------ ----
<S> <C> <C> <C> <C>
Nominees for Election:
Anthony D. Autorino (1)(4).......... 57 1986 Chairman, Chief Executive Officer 1997
and Director
Thomas H. Decker(4)................. 55 1992 Director 1997
Vincent DiVincenzo(4)............... 47 1992 Senior Vice President - Administration 1997
and Finance, Treasurer, Chief Financial
Officer and Director
-2-
DIRECTORS CONTINUING IN OFFICE:
William A. DiBella(2)(3)............ 54 1986 Director 1998
Natalia Hercot(3)................... 31 1996 Director 1998
Donald E. Miller(2)................. 50 1996 Director 1998
Mel D. Borer(1)(4).................. 53 1996 President, Chief Operating Officer and 1999
Director
Ajit G. Hutheesing(3)(4)............ 61 1994 Director 1999
Jo McKenzie(3)...................... 62 1991 Director 1999
Jeffrey J. Steiner(1)(4)............ 60 1996 Vice Chairman and Director 1999
</TABLE>
- ------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation and Stock Option Committee.
(4) Member of the Strategic Steering Committee.
MEL D. BORER has been President, Chief Operating Officer and a Director
of the Company since March 1996. He was Vice President of Fairchild Industries,
Inc. from 1991 until March 1996 and President of Fairchild Communications
Services Company from 1989 until March 1996.
AJIT G. HUTHEESING has been a Director of the Company since June 1994.
Mr. Hutheesing is the founder, Chairman and Chief Executive Officer of
International Capital Partners, Inc. ("ICP"). Prior to starting ICP in 1988, he
was Chairman of the Board and Director of Corporate Finance of The Sherwood
Group. Before joining Sherwood, Mr. Hutheesing was with the J. Henry Schroder
Corporation from 1975 to 1986 and held the position of Vice Chairman from 1982.
Prior to that time, Mr. Hutheesing spent ten years with the International
Finance Corporation, a private sector investment banking arm of the World Bank.
Mr. Hutheesing is Chairman of Age Wave, Inc. He also serves as a director of
Counsel Corporation and Cryenco Sciences Inc. He was educated at Cambridge
University in England where he received a B.S. degree in chemistry, physics and
mathematics and an M.A. degree in chemical engineering. Mr. Hutheesing holds an
M.B.A. degree from Columbia University.
JO MCKENZIE has been a Director of the Company since June 1991. Mrs.
McKenzie is a former Republican State Chairwoman of Connecticut and has held a
wide variety of Republican Party leadership positions at the federal, state and
local levels. Recently, Mrs. McKenzie served as a Republican National
Committeewoman from Connecticut. From 1993, Mrs. McKenzie has been a consultant
to businesses providing hospitality services.
JEFFREY J. STEINER has been Vice Chairman of the Board and a Director
since March 1996. He has been Chairman of the Board and Chief Executive Officer
of The Fairchild Corporation ("TFC") since December 1985, and President of TFC
since July 1, 1991. Mr. Steiner also served as President of TFC from November
1988 until January 1990. He has served as Chairman of the Board, Chief Executive
Officer and President of Banner Aerospace since September 1993. He served as
Vice Chairman of the Board of Rexnord Corporation from July 1992 to December
1993. He served as Chairman, President and Chief Executive Officer of Fairchild
Industries, Inc. from July 1991 until March 1996 and of RHI Holdings, Inc. since
1988. Mr. Steiner is and for
-3-
the past five years has been President of Cedco Holdings Ltd. He serves as a
director of The Franklin Corporation, The Copley Fund and TFC.
ANTHONY D. AUTORINO is the Chairman of the Board, Chief Executive
Officer, and Director. Mr. Autorino has been Chairman, President and Chief
Executive Officer of the Company since January 1986. From January 1985 to
January 1986, he was Chairman and Chief Executive Officer of ShareTech, a joint
venture between United Technologies Corporation and AT&T. He was President of
United Technologies Building System Company from 1981 to 1984 and was its
Chairman and Chief Executive Officer from 1984 to 1985. Mr. Autorino joined the
Hamilton Standard Division of United Technologies in 1960, holding the positions
of Vice President, Executive Vice President and President of the Division. Mr.
Autorino was Chairman of the firearms manufacturer Colt's Manufacturing Company,
Inc. and of its parent company, CF Holding Corp. from March 1990 to March 1992.
He also served as Acting Chief Executive Officer from September 1991 to December
1991. Mr. Autorino is also a director of FiberVision Corporation. Mr. Autorino
serves on the Board of Directors of the Connecticut Children's Medical Center.
THOMAS H. DECKER has been a Director of the Company since May 1992.
Since September 1992, Mr. Decker has served as a Senior Vice President of
Investments at Prudential Securities. From 1981 to September 1992 he served as a
Senior Vice President at Tucker Anthony Incorporated. Mr. Decker also serves as
a director of FiberVision Corporation.
WILLIAM A. DIBELLA has been a Director of the Company since April 1986.
From 1981 to 1997, Mr. DiBella served as a Connecticut State Senator, including
serving as both the Senate Majority Leader and the Senate Minority Leader. Prior
thereto, he served as Chairman of the Finance, Revenue and Bonding Committee.
Mr. DiBella was Chairman of the Metropolitan District Commission from 1977 to
1981, was a member of the Hartford City Council from 1971 to 1979 and Deputy
Mayor from 1975 to 1977.
VINCENT DIVINCENZO is Senior Vice President - Administration and
Finance, Chief Financial Officer and Director. He has been a Director of the
Company since May 1992 and Senior Vice President - Administration and Finance,
Treasurer and Chief Financial Officer since September 1993. Mr. DiVincenzo
joined the Company in July 1988 and served as its Vice President - Finance,
Treasurer and Chief Financial Officer until September 1993. From 1987 to 1988,
Mr. DiVincenzo was Controller of KCR Technology, Inc. From 1982 to 1986, he was
employed by Lorlin Test Systems (formerly Eaton Corporation) serving as
controller in his last capacity. Prior to 1982, Mr. DiVincenzo served as Manager
of General Accounting for Interrad Corporation and for the ConDiesel Mobile
Equipment Division of Condec Corporation.
NATALIA HERCOT has been a Director of the Company since March 1996. She
was a Director of Fairchild Industries, Inc. ("FII") from 1989 until March 1996.
Since 1991, she has served in various capacities at both TFC and FII, and
currently serves as International Coordinator and Translator at TFC. Ms. Hercot
is the daughter of Jeffrey J. Steiner.
DONALD E. MILLER has been a Director of the Company since April 1996.
Mr. Miller has served as Senior Vice President and General Counsel of TFC since
January 1991 and Corporate Secretary since January 1995. Mr. Miller also served
as Vice President and General Counsel of Fairchild Industries, Inc. from
November 1991 through March 1996.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors
which provides the opportunity for direct contact between the Company's
independent public accountants and the Board. The Audit Committee is currently
comprised of Messrs. DiBella and Miller. The Audit Committee met once during the
year ended December 31, 1996. The Audit Committee reviews the effectiveness of
the auditors during the annual audit, the Company's internal control policies
and procedures and considers and recommends the selection of the Company's
independent public accountants.
-4-
The Company has a standing Compensation and Stock Option Committee of
the Board of Directors which provides recommendations to the Board regarding
compensation programs of the Company. The Compensation and Stock Option
Committee is currently comprised of Messrs. Hutheesing and DiBella, Ms. Hercot
and Mrs. McKenzie. The Compensation and Stock Option Committee met three times
during the fiscal year ended December 31, 1996.
The Company has an Executive Committee of the Board of Directors which
is authorized to act on behalf of the Board of Directors when the Board is not
in session. The Executive Committee is currently comprised of Messrs. Autorino,
Steiner and Borer. The Executive Committee met twice during the year ended
December 31, 1996.
The Company has a Strategic Steering Committee, which is authorized to
review, analyze and present to the Board of Directors various options, such as
strategic alliances. The Strategic Steering Committee is currently comprised of
Messrs. Autorino, Steiner, Borer, DiVincenzo, Hutheesing and Decker. The
Strategic Steering Committee met once during the year ended December 31, 1996.
During the year ended December 31, 1996, the Board of Directors held
seven meetings. Each of the Directors attended at least 75% of the total number
of meetings of the Board of Directors held during the period in which they
served on the Board, except for Mr. Hutheesing, who attended 71% of the
meetings. Each of the Directors also attended at least 75% of all committees of
the Board of Directors on which they respectively served, except for Mr.
Hutheesing, who attended 66% of the meetings of the Compensation and Stock
Option Committee. The Company does not have a standing nominating committee.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive cash
compensation of $750 per meeting of the Board of Directors attended ($400 if
attended by teleconference) and $500 for each committee meeting attended ($400
if attended by teleconference), plus reimbursement of out-of-pocket expenses for
attendance at each Board or committee meeting. In addition, such Directors
receive an annual fee of $10,000, payable quarterly in arrears.
The Company has a formula-based stock option plan for independent
Directors, the 1994 Directors Option Plan (the "Directors' Plan"). Under the
Directors' Plan, an "independent director" is a Director of the Company who is
neither an employee nor a principal stockholder of the Company. The Directors'
Plan provides for a one-time grant of an option to purchase 15,000 shares of
Common Stock to all independent Directors who served during the 1994-95 term,
issuable as of September 22, 1994.
The Directors' Plan further provides for the grant of an option to
purchase 15,000 shares of Common Stock to each independent director first
elected after September 22, 1994, the effective date of the Directors' Plan.
Each independent director who received a one-time option grant on
September 22, 1994 who was elected to a new term as a director in 1995 or 1996
received upon such reelection a grant of an option for 5,000 or 10,000 options,
respectively. Reelection after 1996 of any independent director in service as of
September 22, 1994 entitles such director to a grant of 15,000 options.
All options will be exercisable at the closing bid price for the date
preceding the date of grant on which there was a sale of Common Stock on the
principal national securities exchange on which the Common Stock was then listed
or admitted to trading. Options will vest at the rate of one-third per year of
service completed as a director, and are exercisable for so long as the optionee
continues as an independent director of the Company and for a period of 90 days
after the optionee ceases to be a director of the Company. The options will in
no event be exercisable for a period in excess of ten years following the grant
date.
-5-
PROPOSAL TO AMEND THE 1996 EQUITY INCENTIVE PLAN
(ITEM 2 ON PROXY CARD)
In 1996, the Board of Directors authorized, and the Company's
stockholders approved, the 1996 Equity Incentive Plan (the "1996 Plan"),
pursuant to which the Company may offer shares, and share-based compensation, to
key employees and consultants of, and persons having a business relationship
with, the Company, its subsidiaries and affiliates. The 1996 Plan provides for
the grant to eligible persons of stock options, stock appreciation rights,
restricted stock, performance shares, and performance units (the "Awards"). The
1996 Plan is administered by the Compensation and Stock Option Committee of the
Company's Board of Directors (the "Compensation Committee"), which is entitled
to make all determinations with respect to selection of participants and the
Awards to be granted. Officers and full-time salaried employees of the Company
who, in the judgment of the Compensation Committee, are in a position to make a
substantial contribution to the management, growth and success of the Company
are eligible to receive Awards.
The 1996 Plan originally provided that not more than 1.5 million shares
of Common Stock be granted under the 1996 Plan, substantially all of which have,
to date, been granted. The Compensation Committee has authorized, subject to
stockholder approval, increasing the capacity of the 1996 Plan by 750,000
shares, to an aggregate of 2.25 million shares. The Company's stockholders will
be asked to approve such increase at the annual meeting.
In order to preserve the deductibility of certain compensation expenses
relating to the 1996 Plan, the Company originally established limits on the
maximum number of non-statutory stock options that may be granted under the 1996
Plan to the following executives of the Company: Mr. Autorino, 500,000; Mr.
Steiner, 350,000; Mr. Borer, 150,000; and Mr. DiVincenzo, 100,000. In no event
shall more than 100,000 options be issuable to any other participant. In order
to assure the preservation of such deductibility, and assuming the stockholders'
ratification of the proposed increase of 750,000 shares to the 1996 Plan, the
Compensation Committee has authorized, subject to stockholder approval at the
annual meeting, increasing the limits on the maximum number of non-statutory
stock options that may be granted under the 1996 Plan to the following
executives of the Company, as follows: Mr. Autorino, 625,000; Mr. Steiner,
450,000; Mr. Borer, 225,000; and Mr. DiVincenzo, 175,000.
Accordingly, at the annual meeting, the Company's stockholders will be
asked to approve the amendment of the 1996 Plan in two respects: (i) to increase
the capacity of the 1996 Plan by an additional 750,000 shares; and (ii) to
establish the foregoing limits on the number of options that may be granted to
the aforesaid executives of the Company.
A summary, as well as the full text, of the original 1996 Plan are
contained in the Company's Proxy Statement for the Annual Meeting of
Stockholders dated April 26, 1996, a copy of which is available upon request to
the Company's Investor Relations Department at the Company's address appearing
on the front page of this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' THIS PROPOSAL.
APPROVAL OF MATERIAL TERMS OF PERFORMANCE GOALS
FOR FISCAL 1997 INCENTIVE COMPENSATION AWARDS
FOR CERTAIN EXECUTIVES OF THE COMPANY
(ITEM 3 ON PROXY CARD)
At the Annual Meeting, the stockholders will be asked to approve the
material terms of the performance goals for the fiscal 1997 incentive
compensation awards ("Awards") for certain executives of the Company. Effective
for tax years beginning in 1994, the Internal Revenue Code of 1986, as amended,
(the "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
-6-
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 stockholders 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.
On March 27, 1997, the Company's Compensation and Stock Option
Committee (the "Compensation Committee") established performance goals for the
following executives of the Company and the maximum amount payable to such
executives if the goals are achieved. The executives covered by these
performance goals are Messrs. Autorino, Steiner, Borer and DiVincenzo (the
"Executives"). The performance goals and maximum amounts payable for fiscal
1997, as set forth below, are based on the Company's success in substantially
achieving or exceeding target levels of annual revenues and of EBITDA, i.e.,
earnings before interest, taxes, depreciation and amortization, as follows. The
target levels for such revenues and EBITDA have been established by the
Compensation Committee as $190 million and $45 million, respectively (the "Base
Targets"). The Compensation Committee has further established secondary target
levels for annual revenues and EBITDA of $200 million and $50 million,
respectively (the "Secondary Targets").
1. In the event that the Company fails to achieve revenues and EBITDA
in excess of the Base --- Targets, then no incentive compensation shall be paid
to the Executives.
2. In the event that the Company achieves revenues and EBITDA in excess
of the Base Targets, then each Executive shall receive an Award in an amount
equal to 25% of each Executive's base salary.
3. In the event that the Company achieves revenues and EBITDA in excess
of the Secondary Targets, then each Executive shall be eligible to receive an
Award in an amount of up to 80% of each Executive's base salary, as determined
in the discretion of the Compensation Committee. The Committee retains the right
to determine the actual amount of incentive compensation to be awarded to the
Executives in fiscal 1997 based on their individual contributions, consistent
with the foregoing goals and limitations.
4. In the event that the Company (i) achieves revenues and EBITDA in
excess of the Base Targets, and (ii) either achieves revenues or EBITDA in
excess of their respective Secondary Targets, then each Executive shall receive
a discretionary Award, as determined in the discretion of the Compensation
Committee, in an amount of not less than 25% of base salary, but no greater than
50% of base salary.
Assuming the stockholders approve the material terms of the performance
goals as described herein, the Company believes that any such incentive
compensation award to the Executives will qualify as performance-based
compensation that will be deductible from the Company's gross income for federal
income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' THIS PROPOSAL.
PROPOSAL TO RATIFY THE GRANT OF
CERTAIN WARRANTS TO NON-EMPLOYEE DIRECTORS
(ITEM 4 ON PROXY CARD)
At the Annual Meeting, the shareholders will be asked to ratify the
grant of certain warrants, as compensation, to the Company's non-employee
Directors (Jo McKenzie, Natalia Hercot, Thomas H. Decker, William A. DiBella,
Ajit G. Hutheesing and Donald E. Miller, and to Edward J. McCormack, Jr., who
died in February 1997). More specifically, on December 18, 1996, the
Compensation and Stock Option Committee of the Board of Directors approved the
grant of certain warrants for the purchase of Company-owned shares of the common
stock of Shared Technologies Cellular, Inc. ("STC Common Stock"), subject to the
approval of the Company's Board of Directors. Subsequently, on February 11,
1997, the Company's Board of Directors approved the grant of such warrants,
subject to ratification by the Company's Stockholders.
-7-
Each such Director received a warrant to purchase 25,000 shares of STC
Common Stock (except as indicated below) from the Company, which warrants have
an exercise price equal to the fair market value of STC Common Stock as of
December 18, 1996 ($1.72 per share, the closing bid price for such shares on the
Nasdaq market on such date). The warrants shall become exercisable in three
equal tranches, as follows: the first tranche shall be exercisable on May 1,
1997, the second tranche shall be exercisable on May 1, 1998, and the last
tranche shall be exercisable on December 31, 1998; provided, however, that the
Board of Directors may accelerate such vesting schedule at its discretion. All
such warrants, if not exercised, shall expire May 1, 1999, unless extended at
the discretion of the Board of Directors.
In addition to the grant of 25,000 warrants, as described above, an
additional 75,000 such warrants were granted to Mr. DiBella as compensation for
consulting services provided by Mr. DiBella to the Company during 1996.
Accordingly, the Stockholders will be asked to ratify the grant of an aggregate
of 250,000 such warrants.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' THIS PROPOSAL.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company who are not also Directors. The executive
officers are elected annually by the Board of Directors following the Annual
Meeting of Stockholders and serve at the discretion of the Board.
<TABLE>
<CAPTION>
Position
Name Age With Company
---- --- ------------
<S> <C> <C>
Paul R. Barry.................. 32 Senior Vice President -- Business Development
Kenneth M. Dorros.............. 37 Senior Vice President, General Counsel and
Secretary
Lawrence J. Dressel............ 45 Senior Vice President -- Field Operations
</TABLE>
PAUL R. BARRY is Senior Vice President -- Business Development. Mr.
Barry has been Vice President -- Business Development of the Company since
November 1995. Mr. Barry joined the Company in October 1989 as Manager --
Investor Relations. From June 1990 to December 1990 he served as a Regional
Director. He then served as a Vice President until November 1992, then became
Vice President -- Operations until January 1995, and held the position of
President of the FMS Division from January 1995 until November 1995. Mr. Barry
is a graduate of Massachusetts College of Pharmacy and received an M.B.A. from
Rensselaer Polytechnic Institute. Mr. Barry is the son-in-law of Mr. Autorino.
KENNETH M. DORROS is Senior Vice President, General Counsel and
Secretary. He has been General Counsel of the Company since June 1986. Mr.
Dorros became Secretary in 1987 and he was named a Vice President in 1992 and a
Senior Vice President in February, 1996. Prior thereto, he was Assistant General
Counsel of ShareTech since 1985. A graduate of Lehigh University, Mr. Dorros
received his law degree from the Fordham University School of Law. He is
admitted to the bars of New York and Connecticut.
LAWRENCE J. DRESSEL is Senior Vice President - Field Operations, having
served in such capacity since March, 1996. Prior to such date, and since April,
1988, Mr. Dressel held the same title at Fairchild Communications Services
Company.
-8-
EXECUTIVE COMPENSATION
1. REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is responsible for establishing the compensation, including
bonus and incentive arrangements, of the Company's Chief Executive Officer and
for reviewing the compensation of other executive officers of the Company and
its operating subsidiaries, as established by the Chief Executive Officer.
The Committee makes appropriate recommendations concerning executive
compensation, and reports to the Board of Directors. Under the supervision,
approval and review of the Committee, the Company's compensation policies and
programs are designed to motivate, retain and attract management with incentives
linked to financial performance of the Company and the value that is delivered
to its stockholders. Specifically, the Company's policies and programs endeavor
to: (i) link executive compensation to sustainable increases in the financial
performance of the Company, where possible, and where not possible, preservation
or realization of stockholder value; (ii) provide rewards contingent upon
Company performance; (iii) differentiate compensation based upon individual
contribution, (iv) promote teamwork among executives and other Company
employees; and (v) encourage the retention of a sound management team.
The Company's objective is to manage the total cash compensation to
provide median levels of cash compensation at average levels of corporate 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 (ii) an annual incentive opportunity that is variable
and is reflective of the financial performance of the Company and 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 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.
The Chief Executive Officer's salary is determined annually by the
Committee based on the Committee's evaluation of a variety of factors, each of
which is weighted by each member of the Committee according to his own
experience and background. Among the criteria used by each member of the
Committee in making his evaluation of the appropriate compensation of the Chief
Executive Officer to the Company are: (i) the compensation of the chief
executives of competitive entities; (ii) his influence on the performance of the
Company through his management skills; (iii) his ability to work with, influence
and effectuate the policies of the Board of Directors; (iv) his skill in long
range planning for the Company's future growth and activities; and (v) the
manner in which he positions the Company to succeed in a highly competitive and
diversified market.
The award and size of any performance bonus are based upon the
performance of the Company against Company goals. Goals vary from year to year
and, with regard to individual goals of executive officers, usually include both
quantitative and qualitative factors. 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 consummation of the transactions.
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 stockholder
value and serve as an additional incentive to promote the success of the
Company.
The Committee has considered the impact of a recently enacted provision
of the 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
-9-
Company's incentive compensation awards and awards under the 1996 Equity
Incentive Plan in a manner that complies with the Code's requirements for
performance-based compensation to ensure that the Company is entitled to full
deductibility of such compensation.
The Committee believes that the total compensation program for
executives of the Company is on a level with the compensation programs provided
by other companies facing similar challenges.
Respectfully submitted,
Ajit G. Hutheesing
Chairman
William A. DiBella
Natalia Hercot
Jo McKenzie
2. RECOMMENDATIONS OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer recommends to the Committee the proposed
compensation (other than his own) of each executive officer of the Company and
its operating subsidiaries.
In making his evaluation of the performance of an executive officer in
his or her area of responsibility, and in formulating his recommendation to the
Committee, while the Chief Executive Officer adheres to the criteria and
principles enunciated in the Committee's report set forth above, he relies most
heavily on the following criteria used by the Committee:
(a) the executive's influence on the performance of the Company
through his or her management skills;
(b) the executive's skill in long range planning for the Company's
future growth and activities; and
(c) the manner in which the executive positions the Company to
succeed in the future.
Respectfully submitted,
Anthony D. Autorino
Chairman and Chief Executive Officer
The following table sets forth the annual and long-term compensation
awarded or paid to or earned by the Company's Chief Executive Officer and each
of the Company's other four most highly paid executive officers (collectively,
the "Named Executive Officers") for the fiscal years ended 1996, 1995 and 1994:
-10-
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Securities
Salary Bonus Other Annual Underlying
Name & Principal Position Year ($) ($) Compensation($) Options(#)(a)
- ------------------------- ---- --- -- --------------- -------------
<S> <C> <C> <C> <C> <C>
Anthony D. Autorino........... 1996 461,742 184,000 53,287(b) 500,000
Chairman, President and 1995 330,000 50,000 60,564(c) --
Chief Executive Officer 1994 325,808 15,000 5,079(d) 120,000
Jeffrey J. Steiner............ 1996 255,770 127,000 --(e) 350,000
Vice Chairman
Mel D. Borer 1996 186,148 136,553 15,809(f) 150,000
President and Chief
Operating Officer
Vincent DiVincenzo 1996 133,508 55,200 9,372(g) 100,000
Senior Vice President -- 1995 112,000 25,000 12,899(h) 10,000
Administration, Chief Financial
Officer and Treasurer
Lawrence J. Dressel 1996 137,073 42,755 5,138(i) 45,000
Senior Vice President --
Operations
</TABLE>
- ------------------------
(a) Represents options granted pursuant to the Company's 1987 Stock Option
Plan for grants prior to 1996, and pursuant to the Company's 1996
Equity Incentive Plan for grants in 1996.
(b) Includes $4,750, representing the market value of 1,030 shares of the
Company's Common Stock contributed to Mr. Autorino's account under the
Company's Savings and Retirement Plan in 1996. Under this plan, prior
to April 1, 1996, the Company made matching contributions in Company
Common Stock equal in value to 50% of an employee's contributions, up
to 5% of the employee's salary. Since April 1, 1996, such matching
contributions are made at the rate of 25% of employees' contribution in
Company Common Stock and another 25% in cash. Also includes $147 paid
by the Company for group term life insurance and $47,448 for additional
life insurance. Also includes $942 for automobile lease expenses. As
additional compensation in 1996, Mr. Autorino received a warrant to
purchase 480,000 shares of common stock of the Company's affiliate,
Shared Technologies Cellular, Inc., which shares are owned by the
Company ("STC Common Stock"), at a purchase price of $1.72 per share,
the fair market value for such shares on the date of grant, December
18, 1996.
(c) Includes $4,620, representing the market value of 1,045 shares of the
Company's Common Stock contributed to Mr. Autorino's account under the
Company's Savings and Retirement Plan in 1995. Also includes $450 paid
by the Company for group term life insurance, $47,448 for additional
life insurance and $4,018 for supplemental disability insurance. Also
includes $4,028 for automobile lease expenses. As additional
compensation in 1995, Mr. Autorino received a warrant to purchase
60,000 shares of STC Common Stock at a purchase price of $2.50 per
share, the fair market value for such shares on the date of grant,
December 26, 1995.
-11-
(d) Includes $4,629, representing the market value of 1,351 shares of the
Company's Common Stock contributed to Mr. Autorino's account under the
Company's Savings and Retirement Plan in 1994. Also includes $450 paid
by the Company for group term life insurance.
(e) As additional compensation in 1996, Mr. Steiner received a warrant to
purchase 300,000 shares of STC Common Stock at a purchase price of
$1.72 per share, the fair market value for such shares on the date of
grant, December 18, 1996.
(f) Includes $4,288, representing the market value of 614 shares of the
Company's Common Stock contributed to Mr. Borer's account under the
Company's Savings and Retirement Plan and $4,288 of cash matching
contributions made by the Company for Mr. Borer's account under such
plan in 1996. Also includes $3,873 paid by the Company for group term
life insurance and $3,360 for additional life insurance.
(g) Includes $3,097, representing the market value of 561 shares of the
Company's Common Stock contributed to Mr. DiVincenzo's account under
the Company's Savings and Retirement Plan and $1,716 of cash matching
contributions made by the Company for Mr. DiVincenzo's account under
such plan in 1996. Also includes $4,370 paid by the Company for life
insurance and $189 for automobile lease expenses. As additional
compensation in 1996, Mr. DiVincenzo received a warrant to purchase
144,000 shares of STC Common Stock at a purchase price of $1.72 per
share, the fair market value for such shares on the date of grant,
December 18, 1996.
(h) Includes $4,086, representing the market value of 973 shares of the
Company's Common Stock contributed to Mr. DiVincenzo's account under
the Company's Savings and Retirement Plan in 1995. Also includes $174
paid by the Company for group term life insurance and $4,370 for
additional life insurance. Also includes $4,269 for automobile lease
expenses. As additional compensation in 1995, Mr. DiVincenzo received a
warrant to purchase 50,000 shares of STC Common Stock at a purchase
price of $2.50 per share, the fair market value for such shares on the
date of grant, December 26, 1995.
(i) Includes $1,713, representing the market value of 243 shares of the
Company's Common Stock contributed to Mr. Dressel's account under the
Company's Savings and Retirement Plan and $1,713 of cash matching
contributions made by the Company for Mr. Dressel's account under such
plan in 1996. Also includes $1,712 paid by the Company for group term
life insurance.
3. COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
William A. DiBella, a Director and member of the Compensation and Stock
Option Committee, also provided consulting services to the Company during 1996.
An aggregate of 100,000 warrants for the purchase of shares of Shared
Technologies Cellular, Inc. from the Company, as described elsewhere in this
Proxy Statement, were granted to Mr. DiBella; 75,000 of such warrants were
granted to Mr. DiBella as compensation for such consulting services.
4. EMPLOYMENT AGREEMENTS.
As of March 13, 1996, the Company entered into two-year employment
agreements with Messrs. Autorino, Borer, DiVincenzo and Steiner providing for
current base salaries of $585,000, $265,000, $185,000 and $350,000,
respectively. Each of these agreements provides for certain termination and
change-of-control payments, under certain circumstances. Each of the aforesaid
executives would be entitled to a non-compete payment, in the event of
termination of employment without cause, in an amount approximately equal to two
years of base salary. In the event of a change-of-control of the Company, each
such executive would be entitled to a parachute payment of an amount equal to
two years of base salary, plus an amount equal to two years of target bonuses
(defined as 50% of base salary).
-12-
The Company has also entered into employment agreements with
approximately 14 other employees providing for severance payments including up
to 15 months of base pay and bonus. With respect to employment agreements for
certain senior managers, including Messrs. Autorino, Borer, DiVincenzo and
Steiner, payments amounting to up to $5 million in the aggregate would be
payable in the event of a change of control of the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of
stock options during the fiscal year ended December 31, 1996 to the Named
Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
-----------------
Number of % Of Total Potential Realizable
Securities Options Value At Assumed
Underlying Granted To Rates Of Stock
Options Employees Exercise Or Price Appreciation
Granted In Fiscal Base Price Expiration For Option Term
Name (#)(a) Year(b) ($/Sh) Date 5% ($) 10% ($)
---- ------------ ------------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Anthony D. Autorino........... 500,000 32.3 4.375 4/16/06 1,375,707 3,486,312
Jeffrey J. Steiner............ 350,000 22.6 4.375 4/16/06 962,995 2,440,418
Mel D. Borer.................. 150,000 9.7 4.375 4/16/06 412,712 1,045,894
Vincent DiVincenzo............ 100,000 6.5 4.375 4/16/06 275,141 697,262
Lawrence J. Dressel........... 45,000 2.9 4.375 4/16/06 123,814 313,768
</TABLE>
- ------------------
(a) Options to acquire shares of Common Stock of the Company granted
pursuant to the Company's 1996 Equity Incentive Plan. All options are
exercisable at a price equal to the fair market value of the Common
Stock of the Company on the date of grant.
(b) Based on a total of 1,546,000 options granted during the fiscal year
ended December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table presents information concerning options exercised
during the fiscal year ended December 31, 1996 and the value of unexercised
stock options at the end of the fiscal year ended December 31, 1996 with respect
to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Name Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
----- ------------ ------------ --------------------------- --------------------------
<S> <C> <C> <C> <C>
Anthony D. Autorino .......... 50,000 245,312 187,916/523,334 $1,044,819/$2,503,754
Jeffrey J. Steiner............ -- -- --/350,000 --/$1,662,500
Mel D. Borer.................. -- -- --/150,000 --/$712,500
Vincent DiVincenzo ........... 37,500 160,208 23,332/121,668 $116,869/$592,299
Lawrence J. Dressel........... -- -- --/45,000 --/$213,750
</TABLE>
-13-
SECURITIES OWNERSHIP
The following table sets forth certain information as of April 8, 1997,
with respect to the Common Stock owned by (i) each Director of the Company, (ii)
the Named Executive Officers, (iii) all Directors and executive officers of the
Company as a group, and (iv) each person who is known by the Company to own
beneficially more than 5% of the Common Stock. Unless otherwise indicated in the
footnotes to the table, all stock is owned of record and beneficially by the
persons listed in the table.
<TABLE>
<CAPTION>
Percentage Of
Number Of Shares Common Stock
Names and Addresses(a) Beneficially Owned (b) Outstanding
---------------------- ---------------------- -----------
<S> <C> <C>
DIRECTORS AND OFFICERS
Anthony D. Autorino (c)....... 1,290,370 8.0%
Chairman, Chief Executive Officer
and Director
Mel D. Borer (d).............. 50,705 *
President, Chief Operating
Officer and Director
Thomas H. Decker (e).......... 24,750 *
Director
William A. DiBella (f)........ 48,413 *
Director
Vincent DiVincenzo (g)........ 59,842 *
Director, Senior Vice President
-- Administration and Finance,
Treasurer and Chief Financial Officer
Lawrence J. Dressel (h)....... 15,243 *
Senior Vice President
-- Field Operations
Natalia Hercot (i)............ 5,000 *
Director
Ajit G. Hutheesing (j)........ 319,957 2.0%
Director
Jo McKenzie (k)............... 19,575 *
Director
Donald E. Miller (l).......... 6,000 *
Director
Jeffrey J. Steiner (m)........ 4,155,173 23.9%
Vice Chairman and Director
All Directors and executive (n) 6,141,090 34.5%
officers as a group (13 persons)
-14-
Percentage Of
Number Of Shares Common Stock
Names And Addresses(a) Beneficially Owned(b) Outstanding
---------------------- --------------------- -----------
PRINCIPAL STOCKHOLDERS
The Fairchild Corporation (o) 10,121,568 51.6%
and RHI Holdings, Inc.
300 West Service Road
P.O. Box 10803
Chantilly, VA 20153
Zesiger Capital Group LLC (p) 1,759,475 10.7%
320 Park Avenue
New York, NY 10022
J.J. Cramer & Co.............. 994,100 6.3%
100 Wall Street
New York, NY 10005
</TABLE>
- --------------------
* Less than 1%
(a) The mailing address of each of the Company's Directors and executive
officers is c/o Shared Technologies Fairchild Inc., 100 Great Meadow
Road, Wethersfield, Connecticut 06109.
(b) Except as otherwise specifically noted, the number of shares stated as
being owned beneficially includes shares believed to be held
beneficially by spouses and minor children. The inclusion herein of any
shares deemed beneficially owned does not constitute an admission of
beneficial ownership of those shares. Each stockholder possesses sole
voting and investment power with respect to the shares listed opposite
such stockholder's name, except as otherwise indicated.
(c) Includes 354,583 shares currently issuable upon exercise of options.
Also includes 93,250 shares owned of record by Mr. Autorino's spouse,
as to which Mr. Autorino disclaims beneficial ownership. Also includes
6,919 shares owned by Mr. Autorino through the Company's Savings and
Retirement Plan. Also includes 11,500 shares of Series D Preferred
Stock, which are convertible into 11,500 shares of Common Stock, and
11,500 Common Stock Purchase Warrants, which are convertible into an
additional 11,500 shares of Common Stock. Also includes 200,000 shares
owned by the Autorino Family Limited Partnership, of which Mr. Autorino
is the general partner. Also includes 17,500 shares of Series D
Preferred Stock owned of record by Mr. Autorino's spouse and 17,500
Common Stock Purchase Warrants also owned by her, as to which shares
and warrants Mr. Autorino disclaims beneficial ownership.
(d) Includes 50,000 shares currently issuable upon exercise of options by
Mr. Borer. Also includes 614 shares owned by Mr. Borer through the
Company's Savings and Retirement Plan.
(e) Includes 8,750 shares currently issuable upon exercise of options by
Mr. Decker.
(f) Includes 19,663 shares currently issuable upon exercise of options by
Mr. DiBella. Also includes 28,750 shares owned of record by Mr.
DiBella's spouse, as to which shares Mr. DiBella disclaims beneficial
ownership.
-15-
(g) Includes 56,665 shares currently issuable upon exercise of options by
Mr. DiVincenzo. Also includes 3,177 shares owned by Mr. DiVincenzo
through the Company's Savings and Retirement Plan.
(h) Includes 15,000 shares currently issuable upon exercise of options by
Mr. Dressel. Also includes 243 shares owned by Mr. Dressel through the
Company's Savings and Retirement Plan.
(i) Includes 5,000 shares currently issuable upon exercise of options by
Ms. Hercot.
(j) Includes 15,000 shares currently issuable upon exercise of options by
Mr. Hutheesing. Also includes a Common Stock Purchase Warrant which is
convertible into 298,957 shares of Common Stock, which is owned of
record by International Capital Partners, Inc., of which Mr. Hutheesing
is the Chairman, Chief Executive Officer and a stockholder.
(k) Includes 19,575 shares currently issuable upon exercise of options by
Mrs. McKenzie.
(l) Includes 5,000 shares currently issuable upon exercise of options by
Mr. Miller.
(m) Includes 116,667 shares currently issuable upon exercise of options.
Also includes deemed beneficial ownership of 39.9% of those shares held
by RHI Holdings, Inc. ("RHI") and beneficially owned by The Fairchild
Corporation ("TFC"). RHI is a wholly-owned subsidiary of TFC. See note
(o) below. Mr. Steiner beneficially owns 39.9% of TFC and may therefore
be deemed the beneficial owner of 39.9% of the shares of Common Stock
beneficially owned by TFC. Through his ownership of the majority of
voting shares of TFC, however, Mr. Steiner may be deemed to
beneficially own all shares of Common Stock beneficially owned by TFC.
(n) Includes a total of 744,651 shares which officers and Directors of the
Company have the right to acquire under outstanding stock options. Also
includes 29,000 shares of Series D Preferred Stock currently
convertible into 29,000 shares of Common Stock and 29,000 Common Stock
Purchase Warrants, as set forth in footnote (c) above. Also includes
298,957 shares of Common Stock issuable upon conversion of a Common
Stock Purchase Warrant, as set forth in footnote (c) above. Also
includes 16,308 shares owned by officers and Directors through the
Company's Savings and Retirement Plan.
(o) Includes 6,200,000 shares of Common Stock and 250,000 shares of 6%
Cumulative Convertible Preferred Stock, which are convertible into
3,921,568 shares of Common Stock, all of which is beneficially owned by
TFC through its wholly-owned subsidiary, RHI. TFC's and RHI's ownership
interest in the Company, based solely on its ownership of outstanding
shares of Common Stock (6,200,000 shares) and without giving effect to
the conversion of the 6% Cumulative Convertible Preferred Stock
(convertible into 3,921,568 shares of Common Stock), is 39.5%.
(p) Includes 797,475 shares currently issuable upon exercise of Common
Stock Purchase Warrants by Zesiger Capital Group LLC.
CUMULATIVE STOCKHOLDER RETURN
The following graph and chart compare the cumulative annual stockholder
return on the Company's Common Stock over the period commencing December 31,
1991 through December 31, 1996 to that of "Center for Research in Securities
Prices ("CRSP") Total Return Index for the Nasdaq Stock Market (U.S. Companies)"
and the CRSP Total Return Index for Standard Industrial Classification Code 4800
- -- 4899 US & Foreign ("SIC Code Index") assuming the investment of $100 on
December 31, 1991. In calculating total annual stockholder return, reinvestment
of dividends is assumed. The stock performance graph and chart below are not
necessarily indicative of future price performance.
Line Graph using plot points shown in table below:
-16-
<TABLE>
<CAPTION>
- -------------------------- ------------ ------------ ------------ ------------ ------------ -------------
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
- -------------------------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Shared Technologies $100.00 $ 79.10 $ 51.10 $ 57.70 $ 51.90 $120.30
Fairchild Inc.
- -------------------------- ------------ ------------ ------------ ------------ ------------ -------------
Nasdaq Stock Market $100.00 $116.40 $133.60 $130.60 $184.70 $227.10
(US Companies)
- -------------------------- ------------ ------------ ------------ ------------ ------------ -------------
SIC Code Index $100.00 $122.80 $189.40 $158.10 $207.00 $211.50
- -------------------------- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1996, approximately $288,000 had been paid for life
insurance premium payments made on behalf of Anthony D. Autorino, the Company's
Chairman and Chief Executive Officer. The amount was repaid from the proceeds of
a $2,500,000 face value life insurance policy which was owned by Mr. Autorino
and whose estate was the beneficiary. In January 1994, the beneficiary on the
policy was changed from Mr. Autorino's estate to the Company in order to reduce
the premium payments required by the Company. As of December 31, 1996, the
amount due to the Company related to premiums paid exceeded the cash surrender
value of the policy by $130,000. Accordingly, Mr. Autorino has agreed to
reimburse the Company for this amount.
On September 17, 1996, Mr. Autorino, the Company's Chairman and Chief
Executive Officer, borrowed $125,000 from the Company pursuant to a promissory
note, providing for interest payable at one percentage point above the prime
rate. Such indebtedness, including accrued interest, was due and outstanding as
of March 31, 1997.
The Company provides telecommunications services to The Fairchild
Corporation ("TFC") and certain of its affiliates. Mr. Steiner, Vice Chairman
and a Director, is Chairman of TFC, which is the parent company of RHI Holdings,
Inc. In 1996, the Company billed TFC and such affiliates $951,922 for such
services.
The Company leases approximately 12,713 square feet of office space
from Fairchild at the Company's operations headquarters in Chantilly, Virginia,
pursuant to a five-year lease dated June 1, 1996. In 1996, the Company paid
$148,600 to Fairchild for such purpose.
The Company has retained Fairchild to provide tax preparation and
consulting services through February 12, 1998. The annual fees for such services
is $212,500.
An aggregate of 100,000 warrants for the purchase of shares of Shared
Technologies Cellular, Inc. from the Company, as described elsewhere in this
Proxy Statement, were granted to Mr. DiBella; 75,000 of such warrants were
granted to Mr. DiBella as compensation for consulting services provided by Mr.
DiBella to the Company during 1996.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP audited the Company's financial statements for the
fiscal year ended December 31, 1996. Arthur Andersen LLP has no direct or
indirect material financial interest in the Company or its subsidiaries. The
Board of Directors has selected Arthur Andersen LLP to audit the Company's
financial statements for the fiscal year ending December 31, 1997.
No representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting of Stockholders or to make a statement or respond to
questions from stockholders.
-17-
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the Annual Meeting of Stockholders. However, if any other matters
are properly presented at the Annual Meeting of Stockholders, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for out-of-pocket expenses
thereby incurred.
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for consideration at the
Company's next annual meeting of stockholders, which is currently scheduled to
be held on April 30, 1998, must submit the proposal to the Company so that it is
received at the principal executive offices of the Company, 100 Great Meadow
Road, Wethersfield, Connecticut 06109, on or before December 16, 1997. Any
stockholder desiring to submit a proposal should consult applicable regulations
of the Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who own more than 10% of the
Company's outstanding shares of Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") and
Nasdaq. Officers, Directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
In accordance with the provisions of Item 405 of Regulation S-K, the
Company knows of no delinquent filings by any such persons under Section 16(a)
of the Exchange Act during the fiscal year ended December 31, 1996.
FORM 10-K
A COPY OF THE COMPANY'S FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER AS OF
THE RECORD DATE UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT,
SHARED TECHNOLOGIES FAIRCHILD INC., 100 GREAT MEADOW ROAD, WETHERSFIELD,
CONNECTICUT 06109.
-18-
SHARED TECHNOLOGIES FAIRCHILD INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Anthony D.
Autorino and Vincent DiVincenzo, or either of them, as proxies, each with the
power to appoint his substitute, and hereby authorizes them to represent and to
vote, as designated below, all shares of Common Stock of Shared Technologies
Fairchild Inc. held of record by the undersigned on April 8, 1997 at the Annual
Meeting of Stockholders to be held on April 30, 1997, or any adjournment or
adjournments thereof.
This proxy when properly executed will be voted in the manner directed
by the undersigned stockholder. If no direction is made, this proxy will be
voted "FOR" proposals 1, 2, 3 and 4. Please sign exactly as name appears on the
reverse side. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title of such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by general partner or other authorized person.
1. To elect one class of three Directors:
ANTHONY D. AUTORINO, THOMAS H. DECKER AND VINCENT DIVINCENZO
[ ] FOR all nominees.
[ ] WITHHOLD from all nominees. [ ] FOR, except vote withheld from
the following nominee(s):
2. To ratify certain amendments to the Company's 1996 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the material terms of the performance goals for the fiscal 1997
incentive compensation awards for certain executives of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the grant of certain warrants to non-employee Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. (PROXY IS CONTINUED AND IS
TO BE SIGNED AND DATED ON THE OTHER SIDE)
Dated: April ___, 1997
-------------------------------
-------------------------------
(Signatures)
-------------------------------
-------------------------------
New Address
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY AND USE THE ENCLOSED ENVELOPE.
