<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
The Fairchild Corporation
(Name of Registrant as Specified In Its Charter)
The Fairchild Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
- -----------
* Set forth the amount of which the filing is calculated and state how it
was determined.
[_] 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:
================================================================================
<PAGE>
THE FAIRCHILD CORPORATION
WASHINGTON DULLES INTERNATIONAL AIRPORT
300 WEST SERVICE ROAD
P.O. BOX 10803
CHANTILLY, VIRGINIA 20153
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 21, 1996
----------------
TO THE STOCKHOLDERS OF THE FAIRCHILD CORPORATION:
The Annual Meeting of Stockholders of The Fairchild Corporation, a Delaware
corporation (the "Company"), will be held at the Marriott Hotel, Washington
Dulles International Airport, 333 West Service Road, Chantilly, Virginia, on
Thursday, November 21, 1996, at 10:00 a.m. (local time), for the following
purposes:
1. To elect twelve (12) directors of the Company for the ensuing year;
2. To amend the 1986 Non-Qualified and Incentive Stock Option Plan;
3. To approve the grant of options to certain employees under the 1986
Non-Qualified and Incentive Stock Option Plan;
4. To approve the 1996 Non-Employee Directors Stock Option Plan;
5. To approve the material terms of the performance goals for the fiscal
1997 incentive compensation award for the Company's Chief Executive
Officer;
6. To approve the material terms of the performance goals for fiscal
years 1997, 1999, 2000 and 2001 incentive compensation award for the
President and General Manager of Fairchild Technologies, GmbH; and
7. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only stockholders of record as of the close of business on September 24,
1996, will be entitled to notice of and to vote at the Annual Meeting and at
any adjournments or postponements thereof.
By Order of the Board of Directors
Donald E. Miller
Senior Vice President & Secretary
October 8, 1996
KINDLY DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE
ENCLOSED STAMPED, ADDRESSED ENVELOPE.
<PAGE>
THE FAIRCHILD CORPORATION
WASHINGTON DULLES INTERNATIONAL AIRPORT
300 WEST SERVICE ROAD
P.O. BOX 10803
CHANTILLY, VIRGINIA 20153
October 8, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of The Fairchild
Corporation (the "Company") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 10:00 a.m. on Thursday, November 21, 1996 and
at any adjournments or postponements thereof, at the Marriott Hotel,
Washington Dulles International Airport, 333 West Service Road, Chantilly,
Virginia. Only holders of record of the Company's Class A Common Stock, par
value $.10 per share ("Class A Stock"), and Class B Common Stock, par value
$.10 per share ("Class B Stock"), at the close of business on September 24,
1996 will be entitled to vote at the Annual Meeting. On September 24, 1996,
there were 13,842,237 shares of Class A Stock and 2,632,690 shares of Class B
Stock outstanding and eligible to vote. Each share of Class A Stock entitles
the holder thereof to one vote, and each share of Class B Stock entitles the
holder thereof to ten votes, on each matter scheduled to come before the
Annual Meeting. Class A Stock and Class B Stock are sometimes collectively
referred to herein as "Stock."
This Proxy Statement and enclosed proxy form are first being mailed to the
Company's shareholders on or about October 8, 1996.
Any proxy given pursuant to this solicitation and received in time for the
Annual Meeting will be voted as specified in such proxy. If no instructions
are given, proxies will be voted "FOR" the election of the nominees named
below under the caption "Election of Directors--Information as to Nominees,"
and "FOR" each of the other proposals set forth in the Notice of Annual
Meeting and this Proxy Statement.
The holders of record of outstanding Stock present in person or represented
by proxy constituting a majority of the votes entitled to be cast at the
Annual Meeting shall constitute a quorum for the transaction of business at
the Annual Meeting. Abstentions and broker non-votes (shares held by a broker
or nominee which are represented at the Annual Meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular
proposal) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business.
In the election of directors, holders of Stock are entitled to elect twelve
directors with the twelve candidates who receive the highest number of
affirmative votes being elected. Votes against a candidate and votes withheld
have no legal effect.
The proposals in this Proxy Statement (other than the election of directors)
require the affirmative vote of a majority of votes entitled to be cast by
holders of shares of Stock present at the Annual Meeting in person or
represented by proxy. Abstentions from voting in such proposals have the
effect of a negative vote. Broker non-votes are not deemed entitled to vote
and have no effect for purposes of determining whether a proposal has been
approved. However, under New York Stock Exchange rules, with respect to Items
2, 3 and 4 of this Proxy Statement all votes cast either for or against such
proposals must (in the aggregate) represent at least 50% in interest of all
shares of Stock entitled to vote. Abstentions and broker non-votes make it
more difficult to meet this New York Stock Exchange requirement.
<PAGE>
The Board does not know of any matters, other than those specified herein,
which will be presented for action at the Annual Meeting. In the event that
any other matters should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their best judgment on such matters.
Any proxy may be revoked at any time prior to its exercise by notifying the
Company's Secretary in writing at the above address, by delivering a duly
executed proxy bearing a later date or by attending the Annual Meeting and
voting in person.
ITEM 1. ELECTION OF DIRECTORS
Twelve directors are to be elected for the ensuing year to hold office until
the next annual meeting of stockholders and until their successors are elected
and qualified. Except for Melville R. Barlow, Colin M. Cohen and Daniel
Lebard, all nominees were elected to the Board at the 1995 annual meeting of
stockholders. All nominees have been designated as "Continuing Directors" as
defined in the Company's Certificate of Incorporation, as amended.
INFORMATION AS TO NOMINEES
Set forth below is information about each nominee for election as a
director, based on information supplied by him, including his name, age and
principal occupations during the past five years, and certain directorships
held by him.
MICHAEL T. ALCOX, 48, served as Senior Vice President and the Chief
Financial Officer of the Company from December 1987 through September 1996. He
also served as Treasurer of the Company from September 1990 until November
1991. Mr. Alcox served as Vice President and Chief Financial Officer of RHI
Holdings, Inc. (6) ("RHI Holdings") and as Vice President and Chief Financial
Officer of Fairchild Industries, Inc. (7) ("Fairchild Industries") from 1990
through March 1996. Since September 30, 1996, Mr. Alcox serves as a Vice
President to the Company, not employed on a full time basis. Mr. Alcox is a
director of Banner Aerospace, Inc. (8) ("Banner Aerospace"). He became a
director of the Company in 1988. (1) (4)
MELVILLE R. BARLOW, 67, was a consultant to the Company from September 1995
through September 1996. From July 1991 through March 1994 he was President of
Pilkington Aerospace, Inc. (manufacturer of aircraft transparencies). From
June 1984 through March 1991, he was a Corporate Vice President of General
Dynamics and General Manager of General Dynamics Electronics Division
(manufacturer of military aircraft automatic test equipment). He became a
director of the Company in 1996. (3)
MORTIMER M. CAPLIN, 80, has been a senior member of Caplin & Drysdale
(attorneys) since 1964. Mr. Caplin serves as a director of Presidential Realty
Corporation and Danaher Corporation. He became a director of the Company in
1990. (1) (2) (5)
COLIN M. COHEN, 45, was Managing Director of Citicorp Securities, Inc.
(Chicago) until September 1996. He served in such capacity for more than five
years. He was responsible for the customer origination, structuring and
monitoring of the Citibank affiliated relationships and transactions in the
mid-West for the Citicorp Structure Finance Group. In addition, he was
responsible for the development and management of a portfolio for the Citicorp
Global Aviation Department, an industry sector of the Global Relationship
Banking Division of Citicorp. Mr. Cohen became a director of the Company in
September 1996, and the Company's Senior Vice President--Business Development
and Finance, and Chief Financial Officer effective October 1, 1996. Pursuant
to his employment agreement with the Company, Mr. Cohen is to be nominated for
election as a director every fiscal year during his term of employment.
2
<PAGE>
PHILIP DAVID, 65, was a consultant to the Company from January 1988 to June
1993. He was also an employee of the Company from January 1988 to December
1989. He was a Professor of Urban Development at Massachusetts Institute of
Technology until June 1988. Dr. David is also a director of IRI International,
Inc. He became a director of the Company in 1985. (3)
HAROLD J. HARRIS, 67, is President of Wm. H. Harris, Inc. (retailer). He is
a director of Capital Properties Incorporated of Rhode Island. He became a
director of the Company in 1985. (2) (4)
SAMUEL J. KRASNEY, 71, retired in 1993 as the Chairman of the Board, the
Chief Executive Officer and President of Banner Aerospace (8), positions he
had held since June 1990. He continues to serve as a director of Banner
Aerospace (since June 1990) and also serves as the Vice Chairman of the Board
of the Company (since December 1985). He served as the Chief Operating Officer
of the Company from December 1985 until December 1989. Mr. Krasney has served
as the managing partner of ABBA Capital Enterprises since October 1985. Mr.
Krasney is a director of FabriCenters of America, Inc. and Waxman Industries,
Inc. He became a director of the Company in 1968.
DANIEL LEBARD, 57, is the Chairman of the Board of Daniel Lebard Management
Development SA, a consulting firm in Paris, France, which sells management
services. He has served in such capacity for more than the last five years.
Since 1995, he also serves as Chief Executive Officer of Groupe Sofrecid SA
and Kvaerner-Clecim SA, engineering companies whose headquarters are in Paris.
HERBERT S. RICHEY, 74, served as President of Richey Coal Company (coal
properties-brokerage and consulting) until December 1993. He became a director
of the Company in 1977. (1) (2) (3) (5)
ROBERT A. SHARPE II, 38, has served as Executive Vice President and Chief
Financial Officer of Fairchild Fasteners (a division of Fairchild Holding
Corp. (10)) since July 1996, and as consultant for Fairchild Fasteners from
October 1995 through July 1996. He served as Vice President, Corporate
Development of Smithfield Foods, Inc. (a pork-products company) from July 1994
through July 1996, where he was responsible for corporate development as well
as three of Smithfield's operating subsidiaries. Prior to that time, Mr.
Sharpe served as Senior Vice President of NationsBank Corporation (a national
bank) and held other management positions with NationsBank. Mr. Sharpe is a
director of Capital Associates, Inc. and Capital Associates International,
Inc. He became a director of the Company in 1995.
DR. ERIC I. STEINER, 34, has served as Senior Vice President, Operations of
the Company since May 1992, and is currently President of Fairchild Fasteners,
a division of Fairchild Holding Corp. (10) Prior thereto, he served as
President of Camloc/RAM Products, one of the Company's operating units, from
September 1993 to February 1995. He served as Vice President, Business
Planning of the Company from March 1991 until May 1992. He also served as Vice
President of Fairchild Industries (7) from May 1992 through March 1996. He
received an M.B.A. from Insead in France in 1990. Prior thereto, he received
an M.D. in 1988 from Faculte de Medicine de Paris and was a medical doctor at
Hospitaux De Paris in France until November 1989. He is a director of Banner
Aerospace. (8) Dr. Steiner became a director of the Company in 1988. He is the
son of Jeffrey J. Steiner. (1)
JEFFREY J. STEINER, 59, has served as the Chairman of the Board and the
Chief Executive Officer of the Company since December 1985, and as President
of the Company since July 1, 1991. He has served as the Chairman of the Board,
the Chief Executive Officer and President of Banner Aerospace (8) since
September 1993. He has served as the Chairman, President, and the Chief
Executive Officer of RHI Holdings (6) since 1988. He served as the Vice
Chairman of the Board of Rexnord Corporation (9) from July 1992 to December
1993, and as the Chairman, President and Chief Executive Officer of Fairchild
Industries (7) from July 1991 through March 1996. Mr. Steiner is and for the
past five years has been President of Cedco Holdings Ltd., a Bermuda
corporation (a securities investor). He serves as a director of The Franklin
Corporation and The Copley Fund, and as director and Vice Chairman of
3
<PAGE>
the Board of Shared Technologies Fairchild Inc. He became a director of the
Company in 1985. He is the father of Dr. Eric I. Steiner. (1) (4)
The persons named in the proxies will vote the proxies for the election of
the aforementioned nominees for director except where the authority to vote
for the nominees is withheld by the stockholder submitting the proxy. In the
event that any nominee refuses or is unable to serve as a director (which is
not now anticipated), the persons named as proxies reserve full discretion to
vote for any other person who may be nominated.
- --------
(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 Nominating Committee.
(5) Member of the Corporate Ethics and Compliance Committee.
(6) RHI Holdings, Inc. is a wholly owned subsidiary of the Company. RHI
Holdings, Inc. is a registered Company.
(7) Until March 1996, the Company indirectly owned all of the common stock of
Fairchild Industries, Inc. which (until such time) was a registered
company.
(8) The Company has a significant equity position (approximately 59.3% as of
June 30, 1996) in Banner Aerospace, Inc. Effective as of February 25,
1996, Banner Aerospace, Inc. became a consolidated subsidiary of the
Company.
(9) Until December 1993, the Company had a significant equity position in
Rexnord Corporation.
(10) Fairchild Holding Corp. is a wholly-owned subsidiary of RHI Holdings,
Inc., which is a wholly-owned subsidiary of the Company.
4
<PAGE>
BOARD OF DIRECTORS AND CERTAIN COMMITTEE MATTERS
BOARD MEETINGS
The Board held seven meetings during fiscal 1996. 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 (i) an Audit Committee whose primary functions are to examine
and consider matters relating to the internal and external audits of the
Company's accounts and its financial affairs and to select the Company's
independent auditor; (ii) a Compensation and Stock Option Committee which 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 (including setting incentive
compensation targets for the CEO), and which administers the Company's stock
option plan; (iii) an Executive Committee whose functions include considering
pertinent matters and exercising all the powers of the Board, which by law it
may exercise when the Board is not in session; (iv) a Corporate Ethics and
Compliance Committee to oversee the Company's ethics programs; and (v) a
Nominating Committee to consider and recommend to the Board candidates for
election to the Board of Directors by the stockholders. During fiscal 1996,
the Audit Committee held two meetings, the Compensation and Stock Option
Committee held three meetings, the Nominating Committee held one meeting and
the Corporate Ethics and Compliance Committee held two meetings. In addition
to meetings, the Board and several committees took various actions during
fiscal 1996 by unanimous written consent.
DIRECTORS COMPENSATION
During fiscal 1996, directors who were not employed by the Company or its
subsidiaries received a quarterly retainer of $2,500, a $2,500 stipend for
each regular Board meeting attended, a $500 stipend for any committee meetings
attended that were not held on the same date as a Board meeting, and
reimbursement for travel expenses. (The Company has four regular Board
meetings each year.)
Pursuant to the 1996 Non-Employee Directors Stock Option Plan (subject to
approval at the Annual Meeting), outside directors will receive initial
options for 2,000 shares of Class A Stock (for existing outside directors),
and 30,000 shares of Class A Stock (for new outside directors). On a going
forward basis, outside directors will receive options for 1,000 shares of
Class A Stock for each additional year of service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee during fiscal
1996 were as follows: Philip David, Harold Harris (through November 1, 1995),
Frederick McCarthy (through May 16, 1996), Herbert Richey (from May 9, 1996),
and Robert Sharpe (through July 1996). Mr. Harris served as a special
consultant for the Company with respect to a specific assignment, for a period
commencing on November 1, 1995, and he ceased to be on the Committee as of
such date. Mr. Sharpe served as a consultant for Fairchild Fasteners for a
period commencing on October 27, 1995 (at which time he ceased to participate
in Stock Option awards by the Committee) and became an officer of Fairchild
Fasteners in July 1996 (at which time he ceased to be on the Committee).
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 10, 1997 by
stockholders to the Secretary of the Company. Biographical information and the
written consent of the potential nominee must accompany the recommendation.
5
<PAGE>
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 or a nominee, based on
information supplied by the officer, including the officer's name, age and
principal occupations during the past five years. 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.
ROBERT D. BUSEY, 53, has served as Vice President of the Company since
September 1992. Mr. Busey also served as Vice President of Fairchild
Industries (1) from November 1993 through March 1996. Prior to September 1992,
Mr. Busey was Assistant Vice President of the Company and held other
management positions with Fairchild Industries.
JOHN L. FLYNN, 50, has served as Senior Vice President, Tax of the Company
since September 1994 and as Vice President, Tax since August 1989. Mr. Flynn
also served as Vice President, Tax of Fairchild Industries (1) from November
1986 through March 1996.
HAROLD R. JOHNSON, 73, Brig. Gen., USAF (Ret.), has served as Senior Vice
President, Business Development of the Company since November 1990. General
Johnson also served as Vice President of Fairchild Industries (1) from
February 1988 through March 1996.
ROBERT H. KELLEY, 48, has served as Vice President, Employee Benefits of the
Company since November 1993. He also served as Vice President of Fairchild
Industries (1) from November 1993 through March 1996. Prior thereto, he held
other management positions with Fairchild Industries.
DONALD E. MILLER, 49, has served as Senior Vice President and General
Counsel of the Company since January 1991 and Corporate Secretary since
January 1995. Mr. Miller also served as Vice President and General Counsel of
Fairchild Industries (1) from November 1991 through March 1996. Prior to 1991,
Mr. Miller was a principal of the law firm of Temkin & Miller, Ltd. in
Providence, Rhode Island. Mr. Miler is a director of Shared Technologies
Fairchild Inc.
JACQUES S. MOSKOVIC, 59, has served as President and CEO of Fairchild
Technologies (2) since September 1994. Prior to that, he served as Chairman
and President of Compagnie Pour Le Developpement Industriel, a French based
company specializing in the production, sales and service of equipment to the
electronics industry. Mr. Moskovic held such position for more than five
years.
KAREN L. SCHNECKENBURGER, 47, has served as Vice President of the Company
since September 1992 and as Treasurer of the Company since November 1991. Ms.
Schneckenburger also served as Treasurer of Fairchild Industries (1) from
August 1989 through March 1996. Prior thereto, she served as Director of
Finance of Fairchild Industries from 1986 through 1989.
- --------
(1) Until March 1996, the Company indirectly owned all of the common stock of
Fairchild Industries, Inc. which (until such time) was a registered
company.
(2) Fairchild Technologies is a business unit of the Company that plans long
term strategy and control functions of Fairchild Technologies, GmbH,
Fairchild Technologies USA and other Company subsidiaries in the
semiconductor, CD and LCD industries.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation information
for each of the Company's Chairman and Chief Executive Officer and the other
four most highly compensated executive officers of the Company whose salary
and bonus exceeded $100,000 for the fiscal year ended June 30, 1996 (the
"named executive officers").
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------------------------- -----------------------
Other Securities
Fiscal Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- --------------------------- ------ ---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Steiner, 1996 $1,754,011(1) $3,750,000 -- 222,700 23,037(3)
Chairman, CEO & 1995 1,550,011 180,000 -- 60,000 23,130(4)
President 1994 1,550,011 2,728,096 -- -- 26,439(5)
Michael T. Alcox, 1996 223,090 324,813 -- 51,700 4,812(6)
Sr. Vice President & CFO 1995 215,010 53,750 -- 20,000 3,750(6)
1994 240,010 203,750 14,857(2) -- 5,904(6)
John L. Flynn, 1996 186,164 309,850 -- 17,400 5,375(6)
Sr. Vice President, Tax 1995 170,019 42,500 -- 15,000 3,750(6)
1994 200,019 134,000 -- -- 5,903(6)
Donald E. Miller, 1996 205,210 319,825 -- 26,700 8,009(7)
Sr. Vice President, 1995 185,016 46,250 -- 20,000 6,195(8)
General Counsel & 1994 169,266 196,250 -- 20,000 5,946(6)
Secretary
Jacques S. Moskovic, 1996 250,788 125,000 -- 26,700 --
President and CEO of 1995 132,500 125,000 -- 25,000 --
Fairchild Technologies 1994 -- -- -- -- --
</TABLE>
- --------
(1) Includes: $1,150,000 base salary for fiscal year 1996 paid by the Company,
and $400,011 base salary for fiscal year 1996 paid by a U.K. based
subsidiary of the Company. Also includes $204,000 paid in fiscal year 1996
as compensation for a temporary voluntary salary reduction taken in 1992
due to the Company's significant loss during that year. Does not include a
long term compensation bonus award, reported below. Does not include
salary paid to Mr. Steiner by Banner Aerospace, a 59.3% subsidiary of the
Company. Mr. Steiner is the Chairman, President and Chief Executive
Officer of Banner Aerospace, and is entitled to compensation as determined
by the Banner Aerospace Board of Directors. As reported in Banner
Aerospace's 1996 proxy statement, Mr. Steiner's compensation in Banner
Aerospace's 1996 fiscal year consisted of $262,500 salary, $157,500 bonus,
and stock options for 150,000 shares of Banner Aerospace common stock.
(2) Tax gross up payments related to reimbursement of relocation costs.
(3) Includes $19,287 for value of premiums paid by the Company for split-
dollar life insurance coverage and $3,750 for Company contributions under
401(k) savings plan.
(4) Includes $19,380 for value of premiums paid by the Company for split-
dollar life insurance coverage and $3,750 for Company contributions under
401(k) savings plan.
(5) Includes $19,493 for value of premiums paid by the Company for split-
dollar life insurance coverage.
(6) Company contributions under 401(k) savings plan.
(7) Includes $3,306 in imputed interest on a loan by the Company to Mr. Miller
and $4,703 for Company contributions under 401(k) savings plan, and $3,750
for Company contributions under 401(k) savings plan.
(8) Includes $2,445 in imputed interest on a loan by the Company to Mr. Miller
and $3,750 for Company contributions under 401(k) savings plan.
7
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made to each of the named executive officers during the fiscal
year ended June 30, 1996.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
% of Total Potential Realizable Value at
Options Assumed Rates of Stock Price
Granted to Appreciation for
Securities Employees Exercise Option Term
Underlying in Fiscal Price Expiration ---------------------------------
Name Options Granted 1996 ($/Sh) Date 5% ($) 10% ($)
- ---- --------------- ---------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Steiner 222,700(1)(2) 41.2% $3.625 9/13/00 $223,039(3) $492,857(3)
Michael T. Alcox 51,700(1)(2) 9.6% 3.625 9/13/00 51,779(3) 114,417(3)
John L. Flynn 17,400(1) 3.2% 3.625 9/13/00 17,426(3) 38,508(3)
Donald E. Miller 26,700(1) 4.9% 3.625 9/13/00 26,741(3) 59,090(3)
Jacques S. Moskovic 26,700(1) 4.9% 3.625 9/13/00 26,741(3) 59,090(3)
</TABLE>
- --------
(1) These options were granted on September 14, 1995 and 25% became
exercisable on September 14, 1996, 50% are exercisable on September 14,
1997, 75% are exercisable on September 14, 1998, and 100% are exercisable
on September 14, 1999.
(2) Jeffrey Steiner and Michael Alcox had stock options for 282,500 shares of
Class A Stock and 31,500 shares of Class A Stock, respectively, that
expired on October 14, 1995. The exercise price of such stock options was
$6.50 per share; and the closing price for Class A Stock on October 14,
1995 was $6.125 per share.
(3) The potential realizable value for each named executive officer reflects
the increase in value of the shares granted, based on a beginning price of
$3.625 and assuming rates of stock value appreciation of 5% and 10%,
respectively, over a period of five years. The actual value, if any, an
executive may realize will depend on the excess of the stock price over
the exercise price on the date the option is exercised.
OPTION EXERCISES AND YEAR-END VALUES
The following table shows exercises and values of options held by the named
executive officers as of June 30, 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money Options
Acquired Options at FY-End at FY-End
on Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Steiner -- -- 15,000 267,700 161,250 2,933,450
Michael T. Alcox 70,750 301,925 -- 67,950 -- 743,075
John L. Flynn -- -- 18,000 29,900 163,125 325,463
Donald E. Miller -- -- 33,750 42,950 300,625 468,075
Jacques S. Moskovic -- -- 6,250 45,450 72,656 511,669
</TABLE>
LONG TERM INCENTIVE COMPENSATION AWARDS
As described below under caption "Compensation and Stock Option Committee
Report on Executive Compensation--Compensation of CEO", Jeffrey Steiner's
compensation includes incentive compensation bonuses based on extraordinary
transactions completed during the fiscal year. In approving Mr. Steiner's
incentive compensation for extraordinary transactions in fiscal year 1996, the
Board conditioned a portion of such award on the Company's receipt of payment
(due on July 29, 1996) on a promissory note delivered by the purchaser in
connection with the Company's sale ofD-M-E Company. Such contingent payment is
not considered as part of fiscal year 1996 compensation but is, instead,
considered part of fiscal year 1997 compensation. The total amount of such
contingent award was $4,130,000, which was paid to Mr. Steiner in the first
quarter of fiscal year 1997.
8
<PAGE>
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Jeffrey Steiner--Mr. Jeffrey Steiner has an amended and restated employment
agreement with the Company dated September 10, 1992. The term of the current
agreement, under which Mr. Steiner is entitled to receive a base salary
determined by the Compensation and Stock Option Committee of the Board
($1,400,000 for the current fiscal year), is five years and is extended
annually for additional one-year periods unless either party gives notice not
to extend the agreement. If Mr. Steiner dies during the term or any extended
term of the agreement, his estate will receive an amount equal to one year's
base salary, plus bonus, if any, for the fiscal year during which death has
occurred, and if the Company terminates the agreement because of Mr. Steiner's
disability for more than nine consecutive months, or shorter periods
aggregating nine months during any twelve month period, he will receive fifty
percent of his base salary for two years, plus bonus, if any, for the fiscal
year during which termination of his employment has occurred. In the event of
a "change in control" of the Company or a "trigger event" such as a merger in
which the Company is not the surviving corporation, or a sale of substantially
all of the Company's assets, the term of employment will terminate upon
payment to Mr. Steiner of severance compensation in an amount equal to the sum
of 2.99 times his base salary and 2.99 times the preceding year's bonus paid
to him. Mr. Steiner signed a service agreement on April 6, 1990 with Banner
Investments (U.K.) PLC, a subsidiary of the Company ("Banner U.K."), pursuant
to which Mr. Steiner is entitled to receive pound sterling 204,000 annually
for the term of the agreement. Pursuant to an amendment dated November 18,
1992, Mr. Steiner's annual compensation from Banner U.K. was adjusted, to
avoid currency fluctuation, to the greater of $400,000 or pound sterling
204,000. Pursuant to the terms of the stipulation of settlement of the action
entitled Piven, et al. v. Steiner et al. filed in the Court of Chancery of the
State of Delaware, Mr. Steiner: (a) was not granted any new stock options for
the period from the effective date of the settlement through June 30, 1993;
and (b) did not receive a bonus from the Company through fiscal year 1995
greater than, without duplication, (i) one and one-half percent of the total
value of any extraordinary transaction, subject to approval of the
Compensation and Stock Option Committee, and (ii) three percent of Income from
Continuing Operations before Taxes on Income and Extraordinary Items. For the
period of fiscal years 1992 through 1996, Mr. Steiner's base salary was paid
at an annual rate of $250,000 a year less than its then current level of
$1,400,000 per year. Effective July 1, 1996, Mr. Steiner's base salary was
reinstated to $1,400,000 per fiscal year. Mr. Steiner also has an employment
agreement with Banner Aerospace, which establishes Mr. Steiner's compensation
by Banner Aerospace at $250,000 per year, and an annual award of 60% of base
compensation if certain performance targets established for all senior
officers of Banner Aerospace are met. Banner Aerospace is a 59.3% subsidiary
of the Company. Mr. Steiner's compensation by Banner Aerospace is set by the
board of directors of Banner Aerospace.
Senior Officers--Messrs. Flynn and Miller each have a letter agreement with
the Company dated October 21, 1994, as amended December 21, 1994. Each
agreement provides that if the Company terminates their employment for reasons
other than cause prior to October 21, 1997, they each will receive a severance
payment equal to one year of their then current base salary and incentive
compensation (to the extent it could have been earned) based on their then
current bonus target prorated through the date of termination. In addition, in
the event of a change of control of the Company occurring prior to October 21,
1997, Messrs. Flynn and Miller each will receive a sum equal to two times
their then current annual base salary, payable one-half on the date of change
of control and the balance over a one year period, provided and so long as
they remain or endeavor to remain employees of the Company and their
employment is not terminated for cause.
Jacques Moskovic--Mr. Moskovic has two employment agreements with Company
subsidiaries, which provide that he will serve as the President of Fairchild
Technologies from September 1, 1994 until his employment is terminated. Mr.
Moskovic is entitled to receive a base salary of not less than $190,000 per
year for the remainder of the term, plus eligibility to earn an annual
incentive bonus of 50% of his then current base salary or $80,000 (whichever
is greater). If Mr. Moskovic's employment is terminated at any time, for
reasons other than cause, he will receive a severance payment equal to
9
<PAGE>
the standard package paid by the Company to senior officers employed for a
similar time period as Mr Moskovic. In addition, Mr. Moskovic is entitled to
the same change in control provisions as are applicable to other senior
officers of the Company. The Company's current severance package for senior
officers, and the change in control policy for senior officers is as described
in the above paragraph under caption "Senior Officers". In addition, pursuant
to an Appreciation Rights Agreement, upon a change of control, Mr. Moskovic is
entitled to receive 10% of the appreciation in value of the companies
supervised by Fairchild Technologies. The appreciation in value (as further
described in the Appreciation Rights Agreement) is a multiple of cash flow for
the Fairchild Technologies companies (4 times cash flow) or a multiple of EBIT
for the Fairchild Technologies companies (5 times EBIT), whichever is greater,
less the Company's investments in Fairchild Technologies. Fairchild
Technologies is a business unit of the Company that plans long term strategy
and control functions of Fairchild Technologies, GmbH, Fairchild Technologies
USA and other Company subsidiaries in the semiconductor, CD and LCD
industries.
PENSION AND RETIREMENT BENEFITS
Fairchild Retirement Plan. The Company and its subsidiaries have a number of
defined benefit pension plans covering substantially all U.S. employees.
Effective January 1, 1991, the Company adopted the Retirement Plan for
Employees of Fairchild Industries, Inc. ("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 1996, 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
$150,000 for 1996. The benefit amounts listed in the following table are not
subject to any deduction for Social Security benefits or other offset amounts.
<TABLE>
<CAPTION>
10 Years 20 Years 30 Years 40 Years
Annual Salary of Service of Service of Service of Service
------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 25,000 $ 1,897 $ 3,794 $ 5,691 $ 6,952
50,000 4,897 9,794 14,691 17,764
100,000 10,897 21,794 32,691 39,389
150,000 16,897 33,794 50,691 61,014
200,000 20,497 40,994 61,491 73,989
250,000 23,250 46,500 69,749 83,911
</TABLE>
The named executive officers participate in the Fairchild Retirement Plan.
For purposes of determining benefits under the Fairchild Retirement Plan, Mr.
Steiner's average salary is $150,000 with five years and six months of
credited service. Mr. Alcox's average salary is $150,000 with five years and
six months of credited service. Mr. Miller's average salary is $150,000 with
four years and five months of credited service. Mr. Flynn's average salary is
$150,000 with eight years and eight months of credited service. Mr. Moskovic's
average salary is $150,000 with nine months of credited service.
Supplemental Executive Retirement Plan. The Company has a Supplemental
Executive Retirement Plan for certain key executives which provides additional
retirement benefits based on final average earnings and years of service.
Benefits which may be payable under this plan are not included in the Summary
Compensation Table. This plan provides a maximum retirement benefit equal to
the difference between sixty percent of the participant's average base salary
for the last five years of employment and the aggregate of the participant's
(i) other Company defined pension benefits, (ii) profit sharing/ESOP benefits,
and (iii) primary Social Security payment. This plan is unfunded, unqualified
and is not subject to the Employee Retirement Income Security Act of 1974, as
amended. The plan was amended in June 1988 to provide for lump sum pre-
retirement advances on an actuarially reduced basis, at the election of
participants age sixty or over, contingent upon approval of
10
<PAGE>
the Compensation and Stock Option Committee. All persons named in the Summary
Compensation Table are eligible for participation in this plan.
The annual contributions under the Retirement Plan and the Supplemental
Executive Retirement Plan attributable to persons named in the Summary
Compensation Table are not shown since they cannot be readily determined by
the regular actuaries of said plans. Directors who are not employees of the
Company or one of its subsidiaries are not eligible to participate in these
retirement plans.
Rabbi Trust. Effective August 31, 1995, the Company established a grantor
trust, of which the Company is the grantor. The Company intends to make
contributions to such trust to provide a source of funds to assist the Company
in meeting its liabilities under the Supplemental Executive Retirement Plan.
Assets for such trust are considered general assets of the Company and are
subject to claims of the Company's creditors in the event of insolvency.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee"), which is composed of at least two non-employee Directors, 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. The Committee administers
the Company's 1986 Non-Qualified and Incentive Stock Option Plan (the "1986
Plan").
COMPENSATION PHILOSOPHY
The Committee makes appropriate recommendations concerning executive
compensation, and reports to the Board. 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
shareholders. Specifically, the Company's policies and programs endeavor to:
(i) link executive compensation to sustainable increases in the financial
performance of the Company and preservation or realization of shareholder
value; (ii) provide rewards contingent upon Company or business unit
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. During
each fiscal year, the Committee reviews and recommends to the Board, with any
modification it deems appropriate, base salary levels for the Company's
executive officers, including the named executive officers and certain other
senior managers.
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 (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, 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.
11
<PAGE>
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 yearly performance bonus, when
awarded, is generally paid in August with respect to the preceding fiscal
year. The award and size of the performance bonus are based upon: (i) the
executive officer's performance against individual goals; and (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 1996, management continued to effectively implement its long-term
strategies, which included the disposition of non-core assets, the reduction
of indebtedness and the focus of its efforts on its aerospace parts
businesses. The Committee believes that the success of these strategies is
evidenced by the disposition of D-M-E Company and Fairchild Data, the merger
of Fairchild Communications Services Company into Shared Technologies
Fairchild Inc., and the increase in the Company's holdings in Banner
Aerospace, Inc. from 47.7% to 59%. Based on this performance and the
successful consummation of these transactions, the Committee approved salary,
annual incentive pay and bonuses for extraordinary transactions for the
Company's named executives 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 stockholder value and serve as an additional incentive to promote the
success of the Company. In fiscal 1996, the Committee approved the grant of
360,300 stock options to the Company's senior management and 179,778 stock
options to other employees. Included in these grants were 122,500 options
granted to the named executive officers (other than the CEO), and 222,700
options granted to the CEO.
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. The Committee also believes that the 1986
Plan provides opportunities to participants that are consistent with the
returns that are generated on behalf of the Company's shareholders.
COMPENSATION OF CEO
Jeffrey J. Steiner, has served as the Chairman of the Board and the Chief
Executive Officer of the Company since 1985 and as President since July 1991.
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 revenue and profit levels. In addition, the Committee reviews Mr.
Steiner's performance as the Chairman of the Board, the Chief Executive
Officer and President, his importance to the Company and his success in
implementing its strategic goals both through his entrepreneurial actions and
investment banking acumen.
12
<PAGE>
Mr. Steiner has developed and established initiatives aimed at improving the
operating efficiency and financial performance of the Company. Following
several years of record earnings, the Company's earnings from operations
declined sharply in 1991, as a result of the global industrial recession and
an unusual combination of circumstances affecting those businesses of the
Company that serve the aerospace and aviation industry, including, but not
limited to, reductions in commercial air travel and defense spending, as well
as the deregulation of the airline industry. These events required major
changes in the way the Company conducts its business, as well as new and
innovative business strategies. During the fiscal year ended June 30, 1996,
under the direction of Mr. Steiner, the Company significantly improved
profitability and (i) sold D-M-E Company to Cincinnati Milacron Inc. for
consideration of approximately $245 million, (ii) merged Fairchild
Communications Services Company into Shared Technologies Inc., in a
transaction valued at more than $280 million, where the Company has retained a
42% (fully diluted) equity interest in the surviving entity, Shared
Technologies Fairchild Inc., (iii) exchanged the Harco unit of its Fairchild
Fastener Division for common stock of Banner Aerospace, Inc., increasing the
Company's position in Banner Aerospace, Inc. from 47.2% (as of June 30, 1995)
to 59.3% (as of June 30, 1996), (iv) sold Fairchild Data Corporation to SSE
Telecom, Inc. in a transaction valued at approximately $4.5 million (exclusive
of warrants and earnout), (v) reduced the Company's debt-to-equity ratio from
13.7 to 1 at the end of fiscal 1995 to 2.0 to 1 at the end of fiscal 1996, and
(vi) implemented further aggressive cost reduction and cost control programs
at all organizational and divisional levels.
Mr. Steiner's overall leadership and aggressive implementation efforts
relating to the recapitalization, restructuring, diversification, growth,
divestiture, cost-reduction, and management enhancement programs of the
Company, and his willingness to frequently travel abroad on Company
assignments, have proved to be invaluable in progressing toward improved
financial performance and the achievement of long-term goals and objectives.
Base Compensation--Mr. Steiner's base compensation for fiscal year 1996
($1,150,000) was less than that specified in his employment agreement, but in
accordance with the deductions agreed to under the Piven settlement agreement.
In addition to his base compensation, Mr. Steiner received an additional
$204,000 in fiscal year 1996 as compensation for a temporary voluntary salary
reduction taken in 1992 due to the Company's significant loss during that
year.
Incentive Compensation--The performance goals for and maximum amount of Mr.
Steiner's incentive compensation (i.e., compensation beyond base salary) were
approved by the shareholders at the 1995 Annual Meeting, as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 1996, the Chief Executive Officer may receive up to
three percent (3%) of such pre-tax profits.
2. If the Company engages in any extraordinary transactions (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 1996, the Chief Executive Officer may receive up to one and
one-half percent (1 1/2%) of the total value of the transaction.
Based on such performance goals being achieved, the Committee determined
that Mr. Steiner should receive $3,750,000 in incentive compensation for
fiscal 1996. The total incentive compensation paid to Mr. Steiner for fiscal
1996 is within the performance goals approved last year by the shareholders.
An additional bonus was awarded to Mr. Steiner as incentive compensation for
extraordinary transactions, conditioned however on the Company's receipt of
payment (due on or about July 29, 1996) on a promissory note delivered by the
purchaser in connection with the Company's sale of D-M-E Company. Such
contingent payment is not considered as part of fiscal year 1996 compensation
but is, instead, considered part of fiscal year 1997 compensation.
Stock Option Compensation--In addition, in fiscal 1996, the Committee
approved the grant of 222,700 stock options to Mr. Steiner under the 1986
Plan.
13
<PAGE>
Compensation by Banner Aerospace, Inc.--Mr. Steiner is the Chairman,
President and Chief Executive Officer of Banner Aerospace, Inc., a New York
Stock Exchange listed company of which the Company owns approximately 59.3%
(ownership percentage determined as of June 30, 1996). Mr. Steiner's
compensation for his services to Banner Aerospace is determined by the Banner
Aerospace compensation committee and the Banner Aerospace board of directors.
Such compensation is not reviewed by the Committee or the Company's Board.
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 full deductibility of 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 elsewhere in this Proxy Statement to approve the
material terms of the performance goals for the fiscal 1997 incentive
compensation award for the Company's Chief Executive Officer, and the 1997,
1999, 2000 and 2001 incentive compensation awards for James Moriarty.
Compensation and Stock Option
Committee of the Board of Directors
Philip David, Chairman
Herbert Richey
Melville R. Barlow
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the performance of the Company's Class A Stock
with that of the S & P 500 Stock Index and the S & P Manufacturing
(Diversified Industrials) Index (consisting of 12 industrial manufacturers).
The graph plots the growth in value of an initial $100 investment over the
indicated five year period with all dividends reinvested.
TOTAL SHAREHOLDER RETURN
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Fiscal Year Ending June 30; 1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Fairchild Corporation-Class A 100 53.69 40.97 43.80 38.15 165.30
- ---------------------------------------------------------------------------------------------
S&P 500 Index 100 113.41 128.87 130.68 164.75 207.59
- ---------------------------------------------------------------------------------------------
S&P Manuf.-Diversified Index 100 98.96 117.28 131.00 173.22 221.02
- ---------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
THE FAIRCHILD CORPORATION
The table below sets forth as of August 30, 1996 the number of shares and
percent of Class A Stock and Class B Stock beneficially owned by (i) each
person known by the Company to own beneficially more than five percent of any
class of Stock, (ii) each director and nominee for director, (iii) each named
executive officer, and (iv) the directors, nominees and executive officers of
the Company as a group. Except as otherwise indicated in the footnotes to the
table, the persons named possess sole voting power and investment power with
respect to all shares shown as beneficially owed by them. As of August 30,
1996, there were 13,805,149 shares of Class A Stock and 2,633,590 shares of
Class B Stock issued and outstanding.
<TABLE>
<CAPTION>
Number of Shares Percent of Number of Shares Percent
Name of Class A Stock(1) Class of Class B Stock(1) of Class
- ---- ------------------- ---------- ------------------- --------
<S> <C> <C> <C> <C>
Michael T. Alcox 41,025(2) * 600 *
Melville R. Barlow -- -- -- --
Mortimer M. Caplin 78,750 * -- --
Colin M. Cohen -- -- -- --
Philip David 45,000(3) * -- --
Dimensional Fund 728,700(4) 5.28% -- --
Advisors
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401
Fairchild Industries 711,009(5) 5.15% -- --
Master Retirement
Trust, 300 West
Service Road
Chantilly, VA 20153
John L. Flynn 30,415(6) * -- --
FMR Corp. 1,417,900(7) 10.27% -- --
Fidelity Management &
Research Co.
82 Devonshire St.,
Boston, MA 02109
Harold J. Harris 113,700(8) * -- --
Samuel J. Krasney 731,040(9) 5.29% -- --
25700 Science Park
Drive
Cleveland, OH 44122
Daniel Lebard -- -- -- --
Donald E. Miller 60,925(10) * -- --
Jacques S. Moskovic 12,925(11) * -- --
Paske Investments, Ltd. 6,402,684(5)(12) 38.30% 2,908,996(18) 96.69%
The Friday Trust
Stinbes Limited
Bestin Ltd.
c/o Lloyds Bank
International (Jersey)
Ltd.
P.O. Box 482,
Commercial House
Commercial Street
St. Helier, Jersey JE4
8W2
Channel Islands,
British Isles
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percent of Number of Shares Percent
Name of Class A Stock(1) Class of Class B Stock(1) of Class
- ---- ------------------- ---------- ------------------- --------
<S> <C> <C> <C> <C>
RHI Holdings Master 966,966(5) 7.00% -- --
Trust
300 West Service Road
Chantilly, VA 20153
Herbert S. Richey 32,250(13) * -- --
Robert A. Sharpe II 7,700(14) * -- --
Eric I. Steiner 109,641(15) * 15,000 *
Jeffrey J. Steiner 6,718,059(16) 39.90% 2,944,996(19) 97.89%
110 East 59th Street
New York, NY 10022
All directors and 8,026,934(17) 46.95% 2,960,596(20) 98.40%
executive officers as a
group (19 persons)
</TABLE>
- --------
* 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 30, 1996 appear in the Class A Stock column. Warrants are
immediately 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 17,925 shares of Class A
Stock.
(3) Includes exercisable stock options to purchase 22,500 shares of Class A
Stock.
(4) Based on information included on a Schedule 13G dated as of December 31,
1995.
(5) Based on information provided by the shareholder.
(6) Includes exercisable stock options to purchase 26,100 shares of Class A
Stock.
(7) Based on information as of August 31, 1996, contained in a Schedule 13G
dated September 9, 1996, filed with the SEC by Fidelity Management &
Research Company, a wholly owned subsidiary of FMR Corp., and a
registered investment adviser ("FMR"). According to the Schedule 13G: (i)
FMR has sole dispositive power with respect to all 1,417,900 shares of
such Class A Stock, and sole voting power with respect to 902,200 shares
of such Class A Stock; and (ii) various persons have the right to receive
or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the Class A Stock. The Schedule 13G indicates that the
interest of one person, Fidelity Management Trust Company, in such Class
A Stock amounted to 866,300 shares or 6.27% of the total outstanding
Class A Stock as of August 30, 1996.
(8) Includes 27,000 shares of Class A Stock owned by the Wm. H. Harris, Inc.
Profit-Sharing Plan and exercisable stock options to purchase 22,500
shares of Class A Stock.
(9) Includes 24,000 shares owned by Mr. Krasney's wife; Mr. Krasney disclaims
beneficial ownership of such shares.
(10) Includes exercisable stock options to purchase 45,425 shares of Class A
Stock.
(11) Includes exercisable stock options to purchase 12,925 shares of Class A
Stock.
(12) Paske Investments, Ltd. owns no shares of record. It is the beneficial
owner of shares of Class A Stock owned of record or beneficially by its
indirect wholly owned subsidiaries, as follows: (A) Stinbes Limited
(Address: c/o ATC Trustees (Cayman) Ltd., P.O. Box 30592 SMB, Piccadilly
Centre, 2nd Floor, Grand Cayman, Cayman Islands, B.W.I.) 3,256,296 shares
(including (i) 347,300 shares of Class A Stock, (ii) 2,533,996 shares of
Class B Stock convertible on a one-to-one basis to Class A Stock, and
(iii) exercisable warrants to purchase 375,000 shares of Class
17
<PAGE>
A Stock or Class B Stock); and (B) Bestin Ltd. (Address: c/o ATC Trustees
(BVI) Ltd., Abbot Building, 2nd Floor, P.O. Box 933, Road Town, Tortola,
B.V.I.) 3,146,388 shares.
Paske Investments, Ltd. is a wholly-owned subsidiary of The Friday Trust,
a trust organized under the laws of Jersey, Channel Islands, of which the
sole trustee is Lloyds Bank Trust Company (Channel Islands) Limited. The
Friday Trust is deemed the beneficial owner of the same shares of Class A
Stock deemed beneficially owned by Paske Investments, Ltd.
(13) Includes exercisable stock options to purchase 26,250 shares of Class A
Stock.
(14) Includes exercisable stock options to purchase 7,500 shares of Class A
Stock.
(15) Includes exercisable stock options to purchase 53,025 shares of Class A
Stock. Includes 5,000 shares of Class A Stock owned by Mr. Eric Steiner
as custodian for his children.
(16) Mr. Jeffrey Steiner is the settlor and a beneficiary of The Friday Trust
(the sole shareholder of Paske Investments, Ltd.), and as such may be
deemed to beneficially own the same shares of Class A Stock deemed
beneficially owned by Paske Investments, Ltd., as discussed in footnote
(12) to this table. Class A Shares shown in the table as owned by Mr.
Jeffrey Steiner include: (i) 6,402,684 shares owned directly or
beneficially by Paske Investments and subsidiaries (see footnote (12));
(ii) 98,700 shares owned of record by Mr. Steiner; (iii) exercisable
stock options to purchase 85,675 shares of Class A Stock; (iv) 45,500
shares of Class A Stock owned by Mr. Steiner as custodian for his
children; (v) 20,000 shares of Class A Stock owned by Mr. Steiner's wife
(Mr. Steiner disclaims beneficial ownership of such shares); (vi) 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; (vii) 6,000
shares of Class B Stock (convertible on a one-to-one basis to Class A
Stock) owned by Mr. Steiner's wife (Mr. Steiner disclaims beneficial
ownership of such shares); and (viii) 29,500 shares of Class A Stock
owned by the Jeffrey Steiner Family Foundation (Mr. Steiner disclaims
beneficial ownership of such shares).
(17) Includes exercisable stock options and warrants as described in footnotes
above, plus exercisable stock options for 8,275 shares of Class A Stock
not otherwise reported above.
(18) Paske Investments, Ltd. owns no shares of record. It is the beneficial
owner of shares of Class B Stock owned of record or beneficially by its
indirect wholly owned subsidiaries, as follows: (A) Stinbes Limited
(Address: c/o ATC Trustees (Cayman) Ltd., P.O. Box 30592 SMB, Piccadilly
Centre, 2nd Floor, Grand Cayman, Cayman Islands, B.W.I.) 2,908,996 shares
(including (i) 2,533,996 shares of Class B Stock, and (ii) exercisable
warrants to purchase 375,000 shares of Class A Stock or Class B Stock);
and (B) Bestin Ltd. (Address: c/o ATC Trustees (BVI) Ltd., Abbot
Building, 2nd Floor, P.O. Box 933, Road Town, Tortola, B.V.I.) no shares
of Class B Stock.
Paske Investments, Ltd. is a wholly-owned subsidiary of The Friday Trust,
a trust organized under the laws of Jersey, Channel Islands, of which the
sole trustee is Lloyds Bank Trust Company (Channel Islands) Limited. The
Friday Trust is deemed the beneficial owner of the same shares of Class B
Stock deemed beneficially owned by Paske Investments, Ltd.
(19) Mr. Jeffrey Steiner is the settlor and a beneficiary of The Friday Trust
(the sole shareholder of Paske Investments, Ltd.), and as such may be
deemed to beneficially own the same shares of Class B Stock deemed
beneficially owned by Paske Investments, Ltd., as discussed in footnote
(18) to this table. Class B Shares shown in the table as owned by Mr.
Jeffrey Steiner include: (i) 2,908,996 shares owned directly or
beneficially by Paske Investments and subsidiaries (see footnote (18));
(ii) 30,000 shares of Class B Stock owned by Mr. Steiner as custodian for
his children; and (iii) 6,000 shares of Class B Stock owned by Mr.
Steiner's wife (Mr. Steiner disclaims beneficial ownership of such
shares).
(20) Includes exercisable stock options and warrants as described in footnotes
above.
Late Filings: Mr. Jerry R. Lirette, an officer of the Company through
January 1996, filed a Form 4 with the Securities and Exchange Commission on
June 10, 1996, reporting the sale of 2,500 shares that was due to be filed on
February 10, 1996, a sale of 2,500 shares that was due to be filed on April
10, 1996, and a sale of 2,500 shares that was due to be filed on May 10, 1996.
18
<PAGE>
BANNER AEROSPACE, INC.
Effective as of February 25, 1996, Banner Aerospace became a consolidated
subsidiary of the Company. The common stock of Banner Aerospace is publicly
traded on the New York Stock Exchange. As of June 30, 1996, the Company owned
approximately 59.3% of the issued and outstanding shares of common stock of
Banner Aerospace (based on 23,409,610 shares of Banner Aerospace common stock
issued and outstanding as of June 30, 1996). The following table sets forth as
of June 30, 1996 the number of shares and percent of common stock of Banner
Aerospace beneficially owned by (i) the Company, (ii) each director and
nominee for director, (ii) each named executive officer, and (iv) the
directors, nominees and executive officers of the Company as a group. Except
as otherwise indicated in the footnotes to the table, the persons named
possess sole voting power and investment power with respect to all shares
shown as beneficially owed by them.
<TABLE>
<CAPTION>
Number of Shares of Common
Name Stock of Banner Aerospace, Inc. Percent of Class
---- ------------------------------- ----------------
<S> <C> <C>
Michael T. Alcox 39,000(1) *
The Fairchild Corporation 13,886,477(2) 59.3%
Melville R. Barlow -- --
Mortimer M. Caplin 50,000(3) *
Colin M. Cohen -- --
Philip David -- --
John L. Flynn 600 *
Harold J. Harris -- --
Samuel J. Krasney 91,000 *
Daniel Lebard -- --
Donald E. Miller 2,500 *
Jacques S. Moskovic -- --
Herbert S. Richey -- --
Robert A. Sharpe II -- *
EricI. Steiner 12,500(4)(5) *
Jeffrey J. Steiner 14,302,589(6)(7) 60.3%
All directors and execu-
tive officers as a group
(19 persons) 14,498,189 61.09%
</TABLE>
- --------
* Represents less than one percent.
(1) Includes stock options for 7,000 shares
(2) Includes shares of Banner Aerospace Common Stock owned of record by The
Fairchild Corporation and its subsidiaries.
(3) Includes 40,000 shares owned by Mr. Caplin's wife. Mr. Caplin disclaims
beneficial ownership of such shares.
(4) Includes stock options for 10,000 shares.
(5) The shares are held by Eric Steiner as guardian for his minor children,
and he disclaims any beneficial interest therein.
(6) Includes 105,000 shares of Banner Aerospace Common Stock owned of record
by Jeffrey Steiner and 3,612 shares owned by Jeffrey Steiner through the
Banner Aerospace Savings and Retirement Plan. Also includes 13,886,477
shares owned directly or indirectly by The Fairchild Corporation; Mr.
Steiner disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein. Also includes 2,500 shares held by
Jeffrey Steiner's spouse as custodian for minor children; Mr. Steiner
disclaims any beneficial ownership of such shares.
(7) Includes stock options for 305,000 shares of Banner Aerospace Common
Stock.
19
<PAGE>
CERTAIN TRANSACTIONS
STOCKHOLDERS, OFFICERS AND DIRECTORS
The Company elected not to complete a $1,000,000 investment in an Israeli
company involved in the semi-conductor and metrology industry. The Company
made such investment in such company as a nominee investor, with the
beneficial ownership of such investment being entirely in Messrs. Jeffrey
Steiner, Harold Harris, Fred McCarthy, Jacques Moskovic and Philip David. The
funds for such investment were advanced entirely by such beneficial owners.
In March 1994, Banner Aerospace purchased a $750,000 certificate of deposit
(the "Certificate") from a foreign institution, which was subsequently forced
by governmental action to cease business. As an accommodation to Banner
Aerospace, in December 1994, an affiliate of Mr. Jeffrey Steiner agreed to
attempt to effect collection of the Certificate and, to this end, acquired the
Certificate from Banner Aerospace for $750,000, payable over two years. Mr.
Steiner has paid Banner Aerospace $500,000, but has received no payment from
the issuer of the Certificate. On May 20, 1996, the Board of Directors of
Banner Aerospace agreed to make the last $250,000 payment conditional upon the
collection of any proceeds received by the affiliate from the Certificate.
In fiscal year 1996, the Company completed the purchase of substantially all
shares of stock of Compagnie Pour Le Developpement Industriel (a French based
company) from Jacques Moskovic (President of Fairchild Technologies), for an
aggregate purchase price of $750,000. Compagnie Pour Le Developpement
Industriel ("CDI") is a distributor of products of Fairchild Technologies GmbH
(a Company subsidiary). Upon termination of employment, Mr. Moskovic has
certain rights to buy back such CDI stock, at the Company's original purchase
price plus all additional investments by the Company in CDI, plus interest
from the date of each investment.
Mortimer M. Caplin, a director of the Company, is a senior member of the law
firm of Caplin & Drysdale, which rendered legal services to the Company during
fiscal 1996. The Company intends to use the services of this firm during
fiscal 1997.
Prior to becoming a director and Chief Financial Officer of the Company in
1996, Colin Cohen was an employee (managing director) of Citicorp Securities,
Inc., which rendered investment banking services to the Company during fiscal
1996. The Company intends to use the services of this firm during fiscal 1997.
Prior to being employed full time by Fairchild Fasteners, Mr. Sharpe (a
director of the Company) served as a consultant to the Company regarding the
operation and administration of Fairchild Fasteners. For such services, in
October 1995 Mr. Sharpe was granted options for 30,000 shares, exercisable at
a price of $6 per share.
* * *
ITEM 2. APPROVAL OF AMENDMENTS TO THE
1986 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
(EXTENDING THE EXPIRATION DATE OF THE PLAN TO
APRIL 9, 2006)
The Company's 1986 Non-Qualified and Incentive Stock Option Plan (the "1986
Plan") was originally adopted by the Board on April 9, 1986, and was approved
by the Company's stockholders at the 1986 annual meeting. The 1986 Plan was
last amended and restated on September 6, 1990. The purpose of the 1986 Plan
is to encourage ownership of Class A Stock by officers and key employees of
the Company and its subsidiaries, to encourage their continued employment with
the Company and to provide them with additional incentive to promote the
success of the Company.
20
<PAGE>
There will be presented at the Annual Meeting a proposal to approve the
amendments to the 1986 Plan adopted by the Board on May 23,1996, subject to
stockholder approval. These amendments ("1996 Stock Option Plan Amendments"),
which are summarized below, extend the expiration date of the 1986 Plan. The
original expiration date was April 9, 1996; the new expiration date is April
9, 2006. The following summary is qualified in its entirety by reference to
the full text of the amended and restated 1986 Plan set forth in the attached
Exhibit A.
DESCRIPTION OF THE PLAN:
General Information. 4,320,000 shares of Class A Stock are authorized for
issuance upon exercise of stock options under the 1986 Plan. As of August 30,
1996, approximately ten (10) executive officers (including directors who are
officers) and 2,100 employees were eligible to participate in the 1986 Plan,
including officers and employees of Company subsidiaries.
As of August 30, 1996, an aggregate of 2,690,203 shares of Class A Stock
were issued pursuant to the 1986 Plan, and there remained outstanding
unexercised stock option, to purchase 1,109,862 shares of Class A Stock.
Adjustments shall be made in the number and kind of shares subject to the 1986
Plan, and in the exercise price of stock options under the 1986 Plan, to
reflect changes in the Company's Class A Stock as a result of corporate
restructure, reclassification, merger, stock split or similar events.
Stock Options. The 1986 Plan provides for the granting of options intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended ("Incentive Stock Options"), as well as the granting of options
that do not meet those requirements ("Non-Qualified Stock Options"), or a
combination of the foregoing. Under the 1986 Plan, options must be granted at
not less than fair market value; however, Incentive Stock Options granted to
participants owning more than 10% of the total combined voting power of all
classes of stock of the Company or, if applicable, a subsidiary or parent of
the Company, must be granted at not less than 110% of the fair market value.
The exercise price is payable in cash or, with the approval of the Stock
Option Committee, in shares of Class A Stock or Class B Stock (valued at their
fair market value at the date of exercise) or a combination of such stock and
cash.
Eligibility and Administration. Officers (including officers who are members
of the Board) and key employees of the Company or its subsidiaries are
eligible to receive Incentive Stock Options and/or Non-Qualified Stock Options
under the 1986 Plan. Non-employee consultants of the Company or its
subsidiaries are eligible to receive Non-Qualified Stock Options under the
1986 Plan. The 1986 Plan is administered by a committee (the "Stock Option
Committee") of members of the Board who are "disinterested persons" within the
meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The 1986 Plan provides that the Stock Option Committee will select those
employees to whom options under the 1986 Plan will be granted and will
otherwise administer the 1986 Plan, taking into account the duties of the
employees, their present and potential contributions to the success of the
Company and such other factors as the Stock Option Committee deems relevant in
connection with accomplishing the purposes of the 1986 Plan. Prior to the 1996
Stock Option Plan Amendments, no stock options could be granted under the 1986
Plan after April 9, 1996. Pursuant to the 1996 Stock Option Plan Amendments,
stock options may be granted through (but not after) April 9, 2006. All stock
options outstanding as of April 9, 2006 shall continue to be exercisable
pursuant to their terms. The Board may from time to time amend the 1986 Plan,
provided, however, that no amendments shall be made without stockholder
approval if stockholder approval is required under Section 422 of the Internal
Revenue Code or Rule 16b-3 under the Exchange Act.
Exercise. Stock options under the 1986 Plan may be exercisable for a term of
not more than ten years from the date of grant. Pursuant to the 1996 Stock
Option Plan Amendments, each stock option award granted after November 21,
1996, must contain a vesting schedule pursuant to which stock
21
<PAGE>
options covered by each award are exercisable within the following time
periods: (i) after one year from the date of grant, the grantee may exercise
up to 25% of the stock options covered by such award; (ii) after two years
from the date of grant, the grantee may exercise up to 50% of the stock
options covered by such award; (iii) after three years from the date of grant,
the grantee may exercise up to 75% of the stock options covered by such award;
and (iv) after four years from the date of grant, the grantee may exercise up
to 100% of the stock options covered by such award.
Typically, a stock option granted under the 1986 Plan is exercisable only
during the term of its holder's employment with the Company and for a
prescribed period thereafter. In the event of an unusual corporate event such
as liquidation, merger, other business combination, or acquisition or change
in control of the Company, the Board, in its sole discretion, and on a case-
by-case basis, may terminate options effective 90 days after the occurrence of
such unusual corporate event, in which event the right to exercise such
terminated options is accelerated.
Tax Consequences. The following discussion addresses certain federal income
tax consequences in connection with the 1986 Plan. State tax treatment is
subject to individual state laws and is not reviewed in this discussion.
Incentive Stock Options. An Incentive Stock Option results in no taxable
income to the optionee or a deduction to the Company at the time it is granted
or exercised. If the optionee retains the stock received as a result of an
exercise of an Incentive Stock Option for at least two years from the date of
the grant and one year from the date of exercise, then the gain is treated as
long-term capital gain. If the shares are disposed of during this period, the
options will be treated as a Non-Qualified Stock Option. The Company receives
a tax deduction only if the shares are disposed of during such period. The
deduction is equal to the amount of taxable income to the optionee.
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.
Limit on Shares Issuable to Chief Executive Officer. Pursuant to the 1996
Stock Option Plan Amendment, the number of shares of Class A Common Stock
subject to awards granted under the 1986 Plan to Jeffrey Steiner (Chairman and
Chief Executive Officer) for the period of May 23, 1996 through April 9, 2006,
shall not exceed a total of 1,200,000 shares.
Beneficiaries of Plan. As of August 30, 1996, the number of options
available for awards under the 1986 Plan was 519,935. In addition, if
1,109,862 options outstanding as of August 30, 1996 lapse prior to exercise,
such options again become available for awards under the 1986 Plan. The tables
in this Proxy Statement under "Executive Compensation--Options Granted in
Fiscal year 1996" and "Executive Compensation--Option Year End Values"
summarize the outstanding options under the 1986 Plan, prior to the 1996 Stock
Option Plan Amendments. Since future awards under the 1986 Plan (as amended)
are subject to approval by the Stock Option Committee, it is not possible to
determine how many future stock options will be awarded to the named executive
officers, to executive officers as a group, or to other employees as a group,
nor the dollar value of such future stock options. Assuming that all remaining
stock options presently available for award under the 1986 Plan were granted
to executive officers only, such group would receive additional options for
519,935 shares of Class A Stock in the aggregate. On August 30, 1996, the
closing price on the New York Stock Exchange for the Company's Class A Stock
was $14 per share, as reported in The Wall Street Journal.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENTS TO THE 1986 NON-
QUALIFIED AND INCENTIVE STOCK OPTION PLAN.
* * *
22
<PAGE>
ITEM 3: APPROVAL OF GRANTS OF STOCK OPTIONS
TO CERTAIN EMPLOYEES UNDER THE
1986 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
At the Annual Meeting, the Stockholders will be asked to approve the grant
of stock options for certain employees.
The Company's 1986 Plan expired on April 9, 1996. On May 23, 1996, the Board
amended the 1986 Plan to extend its expiration date, subject to approval by
the Company's stockholders. See discussion under Item 2 above (Approval of
Amendments to the 1986 Non-Qualified and Incentive Stock Option Plan).
Any awards granted under the 1986 Plan from the period of April 9, 1996
through the date of the Annual Meeting were made contingent on the following
action: (i) approval by the Company's stockholders of the amendment to the
1986 Plan (as discussed under Item 2 above--Approval of Amendments to the 1986
Non-Qualified and Incentive Stock Option Plan), and (ii) approval of such
awards by the Company's stockholders at the Annual Meeting.
The following awards made after April 9, 1996 are submitted for approval by
the Company's stockholders:
<TABLE>
<CAPTION>
Number of
Shares Per Share
Underlying Stock Exercise Expiration
Employee Date Options Price Date
-------- ------- ---------------- --------- ----------
<S> <C> <C> <C> <C>
Colin Cohen 10/1/96 50,000 (1) 9/30/01
John Flynn 5/23/96(2) 7,500(3) $ 7.000(4) 9/11/99(5)
9/12/96 10,000 $14.875(1) 9/11/01
Donald Miller 5/23/96(2) 5,000(3) $ 7.000(4) 9/11/99(5)
9/12/96 25,000 $14.875(1) 9/11/01
James Moriarty 7/22/96 15,000 $12.75(1) 7/21/01
Jacques Moskovic 9/12/96 10,000 $14.875(1) 9/11/01
Eric Steiner 5/23/96(2) 7,000(3) $ 7.000(4) 9/11/99(5)
9/12/96 35,000 $14.875(1) 9/11/01
Jeffrey Steiner 9/12/96 30,000 $14.875(1) 9/11/01
Other Employees (Non-Of- 6/13/96 5,390 in the $15.500(1) 6/12/01
ficers) aggregate
9/12/96 77,000 in the $14.875(1) 9/11/01
aggregate-
</TABLE>
- --------
(1) Closing price on date of issuance of stock option.
(2) Extension of exercise period of stock options previously granted on
9/12/91.
(3) Same number of shares as underlying stock options previously granted on
9/12/91.
(4) Same exercise price as stock options previously granted on 9/12/91.
(5) Expiration extended 3 years from 9/11/96 to 9/11/99.
The exercise price for such stock options is the fair market value of the
Company's Class A Stock at the time of the original award by the Stock Option
Committee (date of grant noted in the table above). Such stock options are
subject to all the terms and conditions of the 1986 Plan.
23
<PAGE>
Tax Consequences: For federal income tax purposes, such stock options
constitute Non-Qualified Stock Options. Please see discussion under Item 2
above (Approval of Amendments to the 1986 Non-Qualified and Incentive Stock
Option Plan), under caption "Tax Consequences--Non-Qualified Stock Options"
for a discussion of the tax consequences of Non-Qualified Stock Options.
Effect of Contingency: If the amendments to the 1986 Stock Option Plan (Item
2 above) are not approved by the Company's stockholders, or if the stock
options under this Item 3 are not approved by the Company's stockholders, such
stock options shall be null and void. If both contingencies are satisfied,
such stock options shall be deemed awarded as of the date the Stock Option
Committee made each such award.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE GRANT OF STOCK OPTIONS
TO CERTAIN EMPLOYEES
* * *
ITEM 4: APPROVAL OF THE 1996 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
At the Annual Meeting, the Stockholders will be asked to approve the 1996
Non-Employee Directors Stock Option Plan of The Fairchild Corporation (the
"1996 NED Plan"). The 1996 NED Plan is designed to maintain the Company's
ability to attract and retain qualified and competent persons to serve as
outside directors of the Company by providing a means whereby such persons
acquire an equity interest in the Company, and to secure for the Company and
its stockholders the benefit of the incentives inherent in such equity
ownership by persons whose advice and counsel are important to the Company's
future growth and continued success. The following summary describing material
provisions of the 1996 NED Plan is qualified in its entirety by reference to
the full text of the 1996 NED Plan set forth in the attached Exhibit B.
DESCRIPTION OF THE PLAN:
Participation: Participation in the 1996 NED Plan is limited to members of
the Board who (at the time of each award under the 1996 NED Plan) are not
employees (and for the previous three fiscal years, have not been employees)
of the Company or any of its subsidiaries ("Non-Employee Directors"). Assuming
that all the directors nominated in this Proxy Statement are elected at the
Annual Meeting, there will be immediately after the Annual Meeting six
directors meeting the definition of Non-Employee Directors. Persons who serve
or have served as consultants for the Company or its subsidiaries are eligible
to be treated as Non-Employee Directors.
Stock Option Grants. If approved by the Stockholders, the 1996 NED Plan will
automatically grant (as of the date of the Annual Meeting) options for 30,000
shares of Class A Stock for each of Melville Barlow and Daniel Lebard (new
Non-Employee Directors) and options for 2,000 shares of Class A Stock for each
of the other Non-Employee Directors (four (4) persons) (collectively, the
"Initial Stock Option Grant"). Each person who becomes a Non-Employee Director
after the Annual Meeting shall be granted an option for 30,000 shares of Class
A Stock at the time such person first becomes a Non-Employee Director ("New
Director Stock Option Grant"). On the date of each annual meeting following
the Annual Meeting, each person elected as a Non-Employee Director at such
meeting shall be granted an option for 1,000 additional shares of Class A
Stock (an "Annual Stock Option Grant"), provided that such person has served
as a Non-Employee Director for at least six months prior to such annual
meeting. Anyone who first becomes a Company director when he is an employee of
the Company or any of its subsidiaries, is not eligible to receive a New
Director Stock Option under the 1996 NED Plan.
24
<PAGE>
Shares Available Under 1996 NED Plan. An aggregate of 250,000 shares of
Class A Stock will be subject to the 1996 NED Plan. Shares subject to options
which terminate unexercised will be available for future option grants. No
options may be granted under the 1996 NED Plan after September 12, 2006 (ten
years from the date the 1996 NED Plan was adopted by the Board). All stock
options outstanding as of September 12, 2006 shall continue to be exercisable
pursuant to their terms. Adjustments shall be made in the number and kind of
shares subject to the 1996 NED Plan, and in the exercise price of stock
options under the 1996 NED Plan, to reflect changes in the Company's Class A
Stock as a result of corporate restructure, reclassification, merger, stock
split or similar events.
Exercise of Stock Options. The Initial Stock Option Grants for 30,000 shares
each granted to Melville Barlow and Daniel Lebard and all subsequent New
Director Stock Option Grants vest 25% each year from the date of grant; all
other stock option grants under the 1996 NED Plan vest immediately upon the
date of grant. All stock options granted under the 1996 NED Plan expire five
years after the date they were granted. 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 1996 NED Plan shall expire three
months after such person ceases to be a member of the Board, 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 1996 NED Plan shall expire one year
from the director's death or disability, or on their stated expiration date,
whichever occurs first. The exercise price for each stock option under the
1996 NED Plan shall be the fair market value of the Company's Class A Stock on
the date of grant. The exercise price is payable in cash or, with the approval
of the Stock Option Committee, in shares of Class A Stock or Class B Stock
(valued at their fair market value at the date of exercise) or a combination
of such stock and cash.
Administration. The 1996 NED Plan will be administered by the Board
(excluding the participation of Non-Employee Directors) or by a committee of
three or more directors (excluding Non-Employee Directors) (the "Plan
Administrator"). The Plan Administrator will be authorized to interpret the
1996 NED Plan but will have no discretion with respect to the selection of
directors to receive options, the number of shares subject to the 1996 NED
Plan or to each grant thereunder, or the purchase price for shares subject to
options. The Plan Administrator shall have no authority to materially increase
the benefits under the 1996 NED Plan. The Board may terminate, amend or modify
the 1996 NED Plan at any time. However, any amendment or modification that
increases the total amount of Class A Stock on which options may be granted
under the 1996 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
1996 NED Plan, will require the approval of Company stockholders.
Tax Consequences. For federal income tax purposes, options under the 1996
NED Plan constitute Non-Qualified Stock Options. Please see discussion under
Item 2 above (Approval of Amendments to the 1986 Non-Qualified and Incentive
Stock Option Plan), under caption "Tax Consequences--Non-Qualified Stock
Options" for a discussion of the tax consequences of Non-Qualified Stock
Options.
Beneficiaries of Plan. If the 1996 NED Plan is approved at the Annual
Meeting, the following directors will immediately receive stock options:
Melville Barlow, 30,000 shares; Mortimer Caplin, 2,000 shares; Philip David,
2,000 shares; Harold Harris, 2,000 shares; Daniel Lebard, 30,000 shares;
Herbert S. Richey, 2,000 shares. This constitutes stock options for an
aggregate 68,000 shares of Class A Stock issued to Non-Employee Directors as a
group. 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. On August 30,
1996, the closing price on the New York Stock Exchange for the Company's Class
A Stock was $14 per share, as reported in The Wall Street Journal.
25
<PAGE>
All Non-Employee Directors are entitled to receive additional options for
1,000 shares each year, up to an aggregate of 250,000 shares for all options
issued under the 1996 NED Plan.
Executive officers and management directors are not eligible to participate
in the 1996 NED Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
* * *
ITEM 5: APPROVAL OF MATERIAL TERMS OF PERFORMANCE GOALS FOR FISCAL 1997
INCENTIVE COMPENSATION AWARD FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER
At the Annual Meeting, the shareholders will be asked to approve the
material terms of the performance goals for the fiscal 1997 incentive
compensation award for the Company's Chief Executive Officer. Effective for
tax years beginning in 1994, 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 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.
On September 12, 1996, the Company's Compensation and Stock Option Committee
established performance goals for the Chief Executive Officer's fiscal 1997
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 1997 are as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 1997, 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 1997, the Chief Executive Officer may receive up to one and
one-half percent (1 1/2%) of the total value of the transaction.
All of the foregoing will be computed in such a manner 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 Chief
Executive Officer in fiscal 1997 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.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THIS PROPOSAL
* * *
26
<PAGE>
ITEM 6: APPROVAL OF MATERIAL TERMS OF PERFORMANCE GOALS FOR FISCAL YEARS 1997,
1999, 2000 AND 2001 INCENTIVE COMPENSATION AWARDS FOR PRESIDENT AND GENERAL
MANAGER OF FAIRCHILD TECHNOLOGIES GMBH
The Company (through its subsidiaries) has engaged James M. Moriarty as
President and General Manager of Fairchild Technologies GmbH, pursuant to
which he will have responsibilities with respect to the Company's subsidiaries
engaged in the semiconductor industry (collectively, Fairchild Technologies).
As described in Item 5 above, certain incentive compensation awards paid to
officers are not deductible under the Code unless approved by the
shareholders. At the Annual Meeting, the shareholders will be asked to approve
the material terms of the performance goals for fiscal years 1997, 1999, 2000
and 2001 incentive compensation awards for Mr. Moriarty.
The following incentive bonus plans have been established for Mr. Moriarty,
subject to shareholder approval:
1. Executive Incentive Plan. The Executive Incentive Plan for Mr.
Moriarty stipulates measurable performance objectives for each fiscal year,
that (if fully met) will result in a bonus to Mr. Moriarty in the maximum
amount of 165% of his base salary for such fiscal year. The performance
objectives for fiscal year 1997 are based on meeting specified targets
under the following categories: track booking, new key accounts, new
products, product line realization and definition, and organizational
development. Per determination of the Compensation and Stock Option
Committee, the specified targets under each category are not disclosed
since such information could be deemed confidential and disclosure could
have an adverse effect on the Company. If the specified criteria for fiscal
year 1997 are fully met, Mr. Moriarty would be entitled to a bonus in the
maximum amount of $313,500.
2. Business Development Incentive Plan. The Business Development
Incentive Plan focuses on the long-term growth, market share and
profitability of Fairchild Technologies. It stipulates measurable
performance objectives for Fairchild Technologies (specified in terms of
meeting net revenue goals and operating profit goals) that, if fully met,
will result in a bonus to Mr. Moriarty during fiscal year 1999, Fiscal Year
2000 and Fiscal Year 2001 in the maximum amount of $500,000 per year. Per
determination of the Compensation and Stock Option Committee the specified
net revenue goals and operating profit goals for fiscal years 1999, 2000,
and 2001 are not specified since such information could be deemed
confidential and disclosure could have an adverse effect on the Company.
The above-described incentive compensation plans for Mr. Moriarty were
approved by the Compensation and Stock Option Committee on May 23, 1996, and
ratified on September 12, 1996.
The bonuses under the above-described incentive compensation plans for Mr.
Moriarty will be computed in such a manner to avoid duplication.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to Mr. Moriarty
during fiscal years 1997, 1999, 2000 and 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 Mr. Moriarty will qualify as performance-based
compensation that will be deductible from the Company's gross income for
federal income tax purposes.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THIS PROPOSAL
* * *
27
<PAGE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent auditor since
1968. No change is contemplated. A representative of Arthur Andersen LLP will
be present at the Annual Meeting, will have an opportunity to make a statement
if he or she desires to do so, and will be available to respond to any
appropriate questions.
EXPENSES OF SOLICITATION
The cost of soliciting these proxies will be borne by the Company. In
addition to the use of the mail, proxies may be solicited by directors,
officers or employees of the Company, in person, or by telephone or fax. The
Company will also reimburse brokerage houses and others forwarding proxy
materials to beneficial owners of stock.
STOCKHOLDER PROPOSALS
Stockholders of the Company who wish to make a proposal to be included in
the Company's proxy materials for its 1997 annual meeting of stockholders must
cause such proposal to be received by the Company at its corporate
headquarters, Washington Dulles International Airport, 300 West Service Road,
P.O. Box 10803, Chantilly, Virginia 20153, Attention: Donald E. Miller, Senior
Vice President & Secretary, not later than June 10, 1997.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1996, was mailed to stockholders with or prior to mailing of this Proxy
Statement. The Company will provide free of charge to any stockholder as of
the record date who so requests in writing, a copy of the Company's annual
report on Form 10-K for fiscal year 1996. Requests for such copies should be
directed to Donald E. Miller, Senior Vice President & Secretary, The Fairchild
Corporation, Washington Dulles International Airport, 300 West Service Road,
P.O. Box 10803, Chantilly, Virginia 20153.
By Order of the Board of Directors
Donald E. Miller
Senior Vice President & Secretary
28
<PAGE>
EXHIBIT A
(LANGUAGE TO BE ADDED IS INDICATED BY UNDERLINING.)
1986 NON-QUALIFIED AND INCENTIVE
STOCK OPTION PLAN OF
THE FAIRCHILD CORPORATION
(AMENDED AND RESTATED AS OF MAY 23, 1996)
1. PURPOSE OF THE PLAN.
This 1986 Non-Qualified and Incentive Stock Option Plan of The Fairchild
-------------
Corporation (previously known as Banner Industries, Inc.) adopted on April 9,
- ---------------------------------------------------------
1986, as amended and restated as of May 23, 1996, is intended to encourage
------------------------------------------
officers, key employees, and non-employee consultants of the Company to
acquire or increase their ownership of Class A Common Stock of the Company on
--------------------
reasonable terms. The opportunity so provided is intended to foster in
participants a strong incentive to put forth maximum effort for the continued
success and growth of the Company and its Subsidiaries, to aid in retaining
individuals who put forth such efforts, and to assist in attracting the best
available individuals to the Company and its Subsidiaries in the future.
2. DEFINITIONS.
When used herein the following terms shall have the meaning set forth below:
2.1 "Affiliate" means, with respect to any specified person or entity, a
person or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the person or entity specified.
2.2 "Award" means an Option.
2.3 "Award Agreement" means a written agreement in such form as may be,
from time to time, hereafter approved by the Committee, which shall be duly
executed by the Company and which shall set forth the terms and conditions
of an Award under the Plan.
2.4 "Board" means the Board of Directors of The Fairchild Corporation
-------------------------
(previously known as Banner Industries, Inc.).
---------------------------------------------
2.5 "Code" means the Internal Revenue Code of 1986, as in effect at the
time of reference, or any successor revenue code which may hereafter be
adopted in lieu thereof, and reference to any specific provisions of the
Code shall refer to the corresponding provisions of the Code as it may
hereafter be amended or replaced.
2.6 "Committee" means the Stock Option Committee of the Board or any
other committee appointed by the Board whose members meet the requirements
for eligibility to serve set forth in Section 4 which is invested by the
Board with responsibility for the administration of the Plan.
2.7 "Company" means The Fairchild Corporation (previously known as Banner
-----------------------------------------------------
Industries, Inc.).
-----------------
2.8 "Employees" means officers (including officers who are members of the
Board), key employees and non-employee consultants of the Company or any of
its Subsidiaries.
2.9 "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 Composite Tape or
such other source of quotation for, or reports of, trading activity in
Shares as the Committee may from time to time select.
2.10 "Incentive Stock Option" means an Option meeting the requirements
and containing the limitations and restrictions set forth in Section 422 of
---
the Code.
2.11 "Non-Qualified Stock Option" means an Option other than an Incentive
Stock Option.
A-1
<PAGE>
2.12 "Option" means the right to purchase, at a price and for a term
fixed by the Committee in accordance with the Plan, subject to such other
limitations and restrictions as the Plan and the Committee impose, the
number of Shares specified by the Committee.
2.13 "Parent" means any corporation, other than the Company, in an
unbroken chain of corporations ending with the Company if, at the time of
the granting of the Option, each of the corporations other than the Company
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain.
2.14 "Plan" means the Company's 1986 Non-Qualified and Incentive Stock
Option Plan, as amended from time to time.
2.15 "Shares" means shares of the Company's $.10 par value Class A Common
Stock or, if by reason of the adjustment provisions hereof any rights under
an Award under the Plan pertain to any other security, such other security.
2.16 "Subsidiary" means any corporation other than the Company in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
2.17 "Successor" means the legal representative of the estate of a
deceased Employee of the person or persons who shall acquire the right to
exercise an Award by bequest or inheritance or by reason of the death of
the Employee.
2.18 "Term" means the period during which a particular Award may be
exercised.
3. STOCK SUBJECT TO THE PLAN.
There will be reserved for use, upon the exercise of Awards to be granted
from time to time under the Plan, an aggregate of 4,320,000 Shares, which
Shares may be, in whole or in part, as the Board shall from time to time
determine, authorized by unissued Shares, or issued Shares which shall have
been reacquired by the Company. Any Shares subject to issuance upon exercise
of Options but which are not issued because of a surrender, lapse, expiration
or termination of any such Option prior to issuance of the Shares shall once
again be available for issuance in satisfaction of Awards. It is noted that
the number of Shares reserved but unissued for Awards under the Plan as of May
23, 1996 (the date the Plan was amended to extend for an additional ten years)
was 1,629,797 Shares. The aggregate number of Shares issued under Awards
granted prior to the May 23, 1996 amendment and pursuant to Awards granted
after the May 23, 1996 amendment shall not, in any event, exceed 4,320,000
Shares.
4. ADMINISTRATION OF THE PLAN.
The Board shall appoint the Committee, which shall consist of not less than
two (2) disinterested members of the Board as defined in Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934.
Subject to the requirements of Rule 16b-3, participation in a stock option
plan exclusively for non-employee directors (where such stock option plan is
administered by the full Board or is administered pursuant to a formula),
shall not disqualify a member of the Board as being eligible to serve on the
Committee under this Plan.
Subject to the provisions of the Plan, the Committee shall have full
authority, in its discretion, to determine the Employees to whom Awards shall
be granted, the number of Shares to be covered by each of the Awards, and the
terms of any such Award; to amend or cancel Awards (subject to Section 18 of
the Plan); to accelerate the vesting of Awards; to require the cancellation or
surrender of any previously granted options under this Plan or any other plans
of the Company as a condition to the granting of an Award; to interpret the
Plan; and to prescribe, amend, and rescind rules and regulations
A-2
<PAGE>
relating to it, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting of
Awards hereunder.
The Board may, from time to time, appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall select one of
its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall constitute
a quorum. Any action of the Committee may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully as
effective as if it had been taken by a vote of a majority of the members at a
meeting duly called and held. The Committee shall make such rules and
regulations for the conduct of its business as it shall deem advisable and
shall appoint a Secretary who shall keep minutes of its meetings and records
of all action taken in writing without a meeting. No member of the Committee
shall be liable, in the absence of bad faith, for any act or omission with
respect to his service on the Committee.
5. EMPLOYEES TO WHOM AWARDS MAY BE GRANTED.
Awards may be granted in each calendar year or portion thereof while the
Plan is in effect to such of the Employees as the Committee, in its
discretion, shall determine.
In determining the Employees to whom Awards shall be granted and the number
of Shares to be subject to purchase under such Awards, the Committee shall
take into account the duties of the respective Employees, their present and
potential contributions to the success of the Company, and such other factors
as the Committee shall deem relevant in connection with accomplishing the
purposes of the Plan.
No Award shall be granted to any member of the Committee so long as his
membership on the Committee continues or to any member of the Board who is not
also an officer, key employee, or non- employee consultant of the Company or
any Subsidiary.
6. STOCK OPTIONS.
6.1 Types of Stock Options. Options granted under this Plan may be (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii) a
combination of the foregoing, except that only Non-Qualified Stock Options may
be granted to non-employee consultants. The Award Agreement shall designate
whether an Option is an Incentive Stock Option or a Non-Qualified Stock
Option.
6.2 Option Price. The option price per share of any Option granted under the
Plan shall not be less than the Fair Market Value of the Shares covered by the
Option on the date the Option is granted.
Notwithstanding anything herein to the contrary, in the event an Incentive
Stock Option is granted to an employee who, at the time such Incentive Stock
Option is granted, owns, as defined in Section 422 of the Code, stock
---
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of:
(I) the Corporation; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, a Parent,
then the option price per share of any Incentive Stock Option granted to such
Employee shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares covered by the Option on the date the Option is
granted.
A-3
<PAGE>
6.3. Terms of Options. Options granted hereunder shall be exercisable for a
Term of not more than ten (10) years from the date of grant thereof, but shall
be subject to earlier termination as hereinafter provided. Each Award
Agreement issued hereunder shall specify the Term of the Option, which Term
shall be determined by the Committee in accordance with its discretionary
authority hereunder. Each Award Agreement issued after November 21, 1996,
----------------------------------------------------
shall provide that Options thereunder may be exercised within the following
- ---------------------------------------------------------------------------
time limitations: (i) After one (1) year from the date of the Award, it may be
- ------------------------------------------------------------------------------
exercised as to not more than 25% of the Shares originally subject to the
- -------------------------------------------------------------------------
Option; (ii) After two years from the date of the Award, it may be exercised
- ----------------------------------------------------------------------------
as to not more than an aggregate of fifty percent (50%) of the Shares
- ---------------------------------------------------------------------
originally subject to the Option; (iii) After three years from the date of the
- ------------------------------------------------------------------------------
Award, it may be exercised as to not more than an aggregate of seventy five
- ---------------------------------------------------------------------------
percent (75%) of the Shares originally subject to the Option; and (iv) After
- ----------------------------------------------------------------------------
four years from the date of the Award, it may be exercised as to any part or
- ----------------------------------------------------------------------------
all of the Shares originally subject to the Option.
- ---------------------------------------------------
Notwithstanding anything herein to the contrary, in the event an Incentive
Stock Option granted to an Employee who, at the time such Incentive Stock
Option is granted, owns, as defined in Section 422 of the Code, stock
---
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of:
(i)the corporation; or
(ii)if applicable, a Subsidiary; or
(iii)if applicable, a Parent,
then such Incentive Stock Option shall not be exercisable more than five (5)
years from the date of grant thereof, but shall be subject to earlier
termination as hereinafter provided.
6.4. Limit on Grant of Options. From and after May 23, 1996, the number of
------------------------------------------
shares of Class A Common Stock subject to Awards granted under the Plan to
- --------------------------------------------------------------------------
Jeffrey Steiner, (Chairman and Chief Executive Officer) for the period of May
- -----------------------------------------------------------------------------
23, 1996 through April 9, 2006), shall not exceed a total of 1,200,000 shares.
- ------------------------------------------------------------------------------
Determinations under this Section shall be made in a manner consistent with
- ---------------------------------------------------------------------------
Section 162(m) of the Code.
- ---------------------------
7. LIMIT ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS GRANTED AFTER
DECEMBER 31, 1986.
In any calendar year ending after December 31, 1986, no Employee may be
granted an Incentive Stock Option hereunder to the extent that the aggregate
Fair Market Value (determined at the time the option is granted) of the stock
with respect to which incentive stock options are exercisable for the first
time by such Employee during any calendar year (under all such plans of the
Employee's employer corporation and, if any, its Parent and Subsidiary
corporations) exceeds the sum of One Hundred Thousand Dollars ($100,000.00).
For purposes of the preceding sentence, options shall be taken into account in
- ------------------------------------------------------------------------------
the order in which they were granted. Any option granted under the Plan which
- -----------------------------------------------------------------------------
is intended to be an Incentive Stock Option but which exceeds the limitation
- ----------------------------------------------------------------------------
set forth in this Section 7 of the Plan shall be a Non-Qualified Stock Option.
- ------------------------------------------------------------------------------
8. DATE OF GRANT.
The date of grant of an Award granted hereunder shall be the date on which
the Committee acts in granting the Award.
9. EXERCISE OF RIGHTS UNDER AWARDS.
An Employee entitled to exercise an Award may do so by delivery of a written
notice to that effect specifying the number of Shares with respect to which
the Award is being exercised and any other information the Committee may
prescribe. The notice shall be accompanied by payment in full of the
A-4
<PAGE>
purchase price of any Shares to be purchased, which payment may be made in
cash or, with the Committee's approval, in Shares (or shares of the Company's
---------------------------
Class B Common Stock) valued at Fair Market Value at the time of exercise or
- ---------------------
combination thereof. No Shares shall be issued upon exercise of an Option
until full payment has been made therefor. All notices or requests provided
for herein shall be delivered to the Vice President--Finance of the Company.
10. AWARD TERMS AND CONDITIONS.
Each Award or each agreement setting forth an Award shall contain such other
terms and conditions not inconsistent herewith as shall be approved by the
Board or by the Committee.
11. RIGHTS OF THE AWARD HOLDER.
The holder of an Award shall not have any of the rights of a stockholder
with respect to the Shares subject to purchase under his Award, except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of the Award.
12. NONTRANSFERABILITY OF AWARDS.
An Award shall not be transferable, other than by will or the laws of
descent and distribution, and an Award may be exercised, during the lifetime
of the holder of the Award, only by him.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of changes in all of the outstanding Shares by reason of stock
dividends, stock splits, recapitalization, mergers, consolidations,
combinations, or exchange of shares, separations, reorganizations or
liquidations, the number and class of Shares available under the Plan in the
aggregate, the number and class of Shares subject to Awards theretofore
granted, applicable purchase prices and all other applicable provisions,
shall, subject to the provisions of the Plan, be equitably adjusted by the
Committee (which adjustment may, but need not, include payment to a holder of
an Award in cash or Shares in an amount equal to the difference between the
price at which such Award may be exercised and the then current fair market
value of the Shares subject to such Award as equitably determined by the
Committee). The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional Share which might otherwise become subject to an Award.
14. UNUSUAL CORPORATE EVENTS.
Notwithstanding anything to the contrary, in the case of an unusual
corporate event such as liquidation, merger, reorganization (other than a
reorganization as defined by Section 368(a)(1)(F) of the Code), or other
business combination, acquisition or change in the control of the Company
through a tender offer or otherwise, the Board may, in its sole discretion,
determine, on a case by case basis, that each Award granted under the Plan
shall terminate ninety (90) days after the occurrence of such unusual
corporate event, but, in the event of any such termination the Award holder
shall have the right, commencing at least five (5) days prior to such unusual
corporate event and subject to any other limitation on the exercise of such
Award in effect on the date of the exercise to immediately exercise any
Options in full, without regard to any vesting limitations, to the extent they
shall not have been exercised.
15. FORMS OF OPTIONS.
Nothing contained in the Plan nor any resolution adopted or to be adopted by
the Board or the stockholders of the Company shall constitute the granting of
any Award. An Award shall be granted
A-5
<PAGE>
hereunder only by action taken by the Committee in granting an Award. Whenever
the Committee shall designate an Employee for the receipt of an Award, the
Secretary or the President of the Company, or such other person as the
Committee shall appoint, shall forthwith send notice thereof to the Employee,
in such form as the Committee shall approve, stating the number of Shares
subject to Award, its Term, and the other terms and conditions thereof. The
notice shall be accompanied by a written Award Agreement in such form as may
from time to time hereafter be approved by the Committee, which shall have
been duly executed by or on behalf of the Company. If the surrender of
previously issued Awards is made a condition of the grant, the notice shall
set forth the pertinent details of such condition, and the written Award
Agreement executed by or on behalf of the Company shall be delivered to the
Employee on the day such surrender is made, but shall be dated as of the date
on which the Committee designated the employee to receive an Award hereunder.
Execution by the Employee to whom such Award is granted of said Award
Agreement in accordance with the provisions set forth in this Plan shall be a
condition precedent to the exercise of any Award.
16. TAXES.
The Company shall have the right to require a person entitled to receive
Shares pursuant to the exercise of an Award under the Plan to pay the Company
the amount of any taxes which the Company is or will be required to withhold
with respect to such Shares before the certificate for such Shares is
delivered pursuant to the Award. Furthermore, the Company may elect to deduct
such taxes from any other amounts payable then or any time thereafter in cash
to the Employee. If the Employee disposes of Shares acquired pursuant to an
Incentive Stock Option in any transaction considered to be a disqualifying
transaction under Sections 421 and 422 of the Code, the Company shall have the
right to deduct any taxes required by law to be withheld from any amounts
otherwise payable to the Employee.
17. TERMINATION OF PLAN.
The Plan shall terminate ten (10) years from April 9, 1996 (i.e., on April
-----------------------------
9, 2006), and an Award shall not be granted under the Plan after that date
- --------
although the terms of any Awards may be amended in accordance with the Plan at
any time prior to the end of its Term. Any Awards outstanding at the time of
termination of the Plan shall continue in full force and effect according to
the terms and conditions of the Award and the Plan. It is noted that the Plan
-------------------------
(prior to the amendment and restatement on May 23, 1996) originally expired on
- ------------------------------------------------------------------------------
April 9, 1996 and (as a result of the amendment and restatement on May 23,
- --------------------------------------------------------------------------
1996), the Plan terminates ten years from April 9, 1996.
- --------------------------------------------------------
18. AMENDMENT OF THE PLAN.
The Plan may be amended at any time and from time to time by the Board, but
no amendment without the approval of the stockholders of the Company shall:
(a) increase the maximum number of Shares as to which Options may be
granted under the Plan;
(b) expand or change the class of persons eligible to receive Awards;
(c) permit the purchase price of Shares subject to an Option granted
under the Plan to be less than the fair market value of such Shares at the
time the Option is granted;
(d) extend the term of the Plan; or
(e) materially increase the benefits to Employees under the Plan.
Notwithstanding the discretionary authority granted to the Committee in
Section 4 of the Plan, no amendment or cancellation of the Plan or any Award
granted under the Plan shall alter or impair any of the rights or obligations
of any person, without his consent, under any Award theretofore granted under
the Plan.
A-6
<PAGE>
19. DELIVERY OF SHARES ON EXERCISE.
Delivery of certificates for Shares pursuant to an Award may be postponed by
the Company for such period as may be required for it with reasonable
diligence to comply with any applicable requirements of any federal, state or
local law or regulation or any administrative or quasi-administrative
requirement applicable to the sale, issuance, distribution or delivery of such
Shares.
20. FEES AND COSTS.
The Company shall pay all original issue taxes (not including income taxes)
----------------------------
on the exercise of any Award granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
21. EFFECTIVENESS OF THE PLAN.
The Plan first became effective when approved by the Board on April 9, 1986.
-----
The Plan, as amended and restated on May 23, 1996 (the "1996 Amendment")
------------------------------------------------------------------------
shall be submitted to the Company's stockholders for approval. Unless the 1996
- ------------------------------------------------------------------------------
Amendment is approved by the affirmative votes of the holders of shares having
- ------------------------------------------------------------------------------
a majority of the voting power of all shares entitled to vote on the Plan and
- -----------------------------------------------------------------------------
represented at a meeting duly held in accordance with Delaware law within
- -------------------------------------------------------------------------
twelve (12) months after the 1996 Amendment was approved by the Board: (i) the
- ------------------------------------------------------------------------------
Plan will revert to its terms, as amended through April 9, 1996; (ii) the 1996
- ------------------------------------------------------------------------------
Amendment shall be void and of no force or effect; and (iii) all Awards or
- --------------------------------------------------------------------------
amendments to Awards made after April 9, 1996 shall be void and of no force or
- ------------------------------------------------------------------------------
effect.
- -------
22. OTHER PROVISIONS.
As used in the Plan, and in Awards and other documents prepared in
implementation of the Plan, references to the masculine pronoun shall be
deemed to refer to the feminine or neuter, and references in the singular or
plural shall refer to the plural or singular, as the identity of the person or
persons or entity or entities being referred to may require. The captions used
in the Plan and in such Awards and other documents prepared in implementation
of the Plan are for convenience only and shall not affect the meaning of any
provision hereof or thereof.
A-7
<PAGE>
EXHIBIT B
1996 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN OF
THE FAIRCHILD CORPORATION
(ADOPTED AS OF SEPTEMBER 12, 1996)
1. PURPOSES.
The purposes of the The Fairchild Corporation Non-Employee Directors Stock
Option Plan (the "Plan") are to attract and retain qualified and competent
persons for service 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 and to secure for the
Company and its stockholders the benefit of the incentives 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, subject to the provisions of the Plan,
such rules and regulations as it may deem appropriate for the proper
administration of the Plan, and (iii) make such determinations under, and such
interpretations of, and take such steps 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"),
which shall be 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, whether or not the power and the authority of the
Committee is hereinafter fully set forth. 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 options, the number of shares subject to the Plan or
to each Option Grant hereunder, or the purchase price for shares subject to
Option Grants hereunder. 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 Committee 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 an option
under the Plan shall be the shares of Class A Common Stock of the Company,
$.10 par value per share, whether authorized and unissued or treasury stock.
The total amount of Common Stock for which options may be granted under the
Plan shall not exceed, in the aggregate, 250,000 shares, subject to adjustment
in accordance with the provisions of Section 12 hereof. Any shares of Common
Stock which were the subject of unexercised portions of any terminated or
expired options may again be subject to the grant of options under the Plan
during the remaining term of the Plan.
B-1
<PAGE>
4. AWARD OF OPTIONS.
(a) Options shall be granted only to directors of the Board who (at the time
of Option grant): (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"). Persons who serve or have served as consultants for the Company
or its subsidiaries are eligible to be treated as Non-Employee Directors.
(b) All options 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) Any and all options granted under this Plan shall be granted not later
than ten (10) years from September 12, 1996, the date the Plan was adopted by
the Board.
(d) Every recipient of options 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.
At the time of adoption of the Plan by the stockholders, Non-Employee
Directors in office as of such date shall be granted options on such date as
follows (collectively, the "Initial Stock Option Grant"): (A) each Non-
Employee Director who has been in office for less than three (3) months,
options for 30,000 shares (which shall vest 25% each year from the date of
grant); and (B) all other Non-Employee Directors, options for 2,000 shares
each (which shall vest immediately).
Each person who becomes a Non-Employee Director of the Company after the
adoption of the Plan by the stockholders shall be granted an option for 30,000
shares of Common Stock at the time such person first becomes a Non-Employee
Director of the Company (a "New Director Stock Option Grant"); provided, that,
anyone who first becomes a Company director when he is an employee of the
Company or any of its subsidiaries is not eligible thereafter to receive a New
Director Stock Option Grant. New Director Stock Option Grants shall vest 25%
each year from the date of grant.
On the date of each annual meeting or special meeting in lieu of annual
meeting of the stockholders of the Company, each person who continues to serve
as a Non-Employee Director of the Company immediately after such meeting shall
be granted an option for 1,000 additional shares of Common Stock (an "Annual
Stock Option Grant"); provided that he or she has served as a Non-Employee
Director for at least six months prior to such meeting.
Initial Stock Option Grants, New Director Stock Option Grants and Annual
Stock Option Grants are collectively referred to herein as "Option Grants".
The options shall be deemed automatically granted at the times, in the amounts
and at the option prices set forth herein without any further action on the
part of the Administrator and the proper officers of the Company are
authorized, empowered and directed to execute and deliver a confirmation of
Option Grants ("Option Grant Confirmation") to reflect each such grant at the
times, in the amounts and at the option prices determined in accordance with
the Plan.
6. PRICE.
(a) In the case of an Initial Stock Option Grant, the exercise price of such
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.
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(b) In the case of a New Director Stock Option Grant, the exercise price of
such Option shall be the closing price of the Common Stock on the NYSE on the
date of the New Director Stock Option Grant.
(c) In the case of an Annual Stock Option Grant, the exercise price of such
Option shall be the closing price of the Common Stock on the NYSE on the date
of the Annual Stock Option Grant.
(d) The closing price of the Common Stock, as of any particular day, shall
be as reported in The Wall Street Journal; 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 in The Wall
Street Journal prior to the option date.
7. TERM.
Except for the Initial Stock Option Grants (which shall vest as provided in
Section 5 above), and New Director Stock Option Grants (which shall vest 25%
each year from the date of grant), all options granted under the Plan will
vest immediately upon the date of grant (subject to Sections 9, 10 and 20
hereof). All vested options may be exercised by the holder thereof (a
"Holder") in whole at any time after they vest, but no option may be exercised
in any amount later than five (5) years from the date such option was granted.
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 an option is granted under the Plan, 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)
Holder's decision not to stand for reelection at the next shareholders
meeting), the Holder shall have the right subject to Section 10 not later than
the earlier of (A) three months after such resignation or removal or (B) the
termination date of the option as set forth in the Option Grant Confirmation
to exercise such option, to the extent the right to exercise such option shall
have accrued at the date of such resignation or removal, except to the extent
that such option theretofore shall have been exercised.
10. DEATH OR DISABILITY.
If a Holder dies or becomes disabled (within the meaning of Section 22(e)(3)
of the IRC) while a director of the Company, the Holder, the personal
representative of the Holder or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and distribution, or
the disabled Holder, shall have the right not later than the earlier of: (i)
one year from the date of the Holder's death or disability, or (ii) the
termination date of the option as set forth in the Option Grant Confirmation,
to exercise such option to the extent the right to exercise such option shall
have accrued at the date of death or disability, except to the extent such
option theretofore shall have been exercised.
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
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<PAGE>
consideration as the Administrator deems appropriate, including, without
limitation, Common Stock (or shares of the Company's Class B 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
Plan and not previously exercised shall terminate unless exercised at least
one business day before the scheduled closing of such event; provided that any
such 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
B-4
<PAGE>
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 options, (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 Option Grant Confirmation 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.
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
option granted 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.
B-5
<PAGE>
20. EFFECTIVE DATE.
The Plan shall become effective upon the date of its adoption by the Board
(September 12, 1996), subject to approval by the stockholders of the Company
at the Annual Meeting held in November 1996. If the Plan is approved by the
stockholders at such Annual Meeting, Initial Stock Option Grants (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.
With respect to persons subject to Section 16 of the Exchange Act,
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 action by the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Administrator.
22. TERMINATION OF THE PLAN.
The Plan shall terminate ten (10) years from September 12, 1996. No Option
Grants shall be granted under the Plan after such date. Any Option Grants
outstanding at the time of termination of the Plan shall continue in full
force and effect according to the terms and conditions of such Option Grants.
B-6
<PAGE>
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 24, 1996 at
the Annual Meeting of Stockholders to be held on
Thursday, November 21, 1996 at 10:00 a.m. (local time)
and at any adjournments or postponements thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
[X] Please mark
your votes
as this
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.
Item 1--ELECTION OF DIRECTORS: Michael T. Alcox, Melville R. Barlow, Mortimer M.
Caplin, Colin M. Cohen, Philip David, Harold J. Harris, Samuel J. Krasney,
Daniel Lebard, Herbert S. Richey, Robert A. Sharpe II, Eric I. Steiner, and
Jeffrey J. Steiner.
For Withhold
[_] [_]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- ------------------------------------------------------
Item 2--To approve amendments to the 1986 non-qualified and incentive stock
option plan.
For Against Abstain
[_] [_] [_]
Item 3--To approve grants of stock options to certain employees under the 1986
non-qualified and incentive stock option plan.
For Against Abstain
[_] [_] [_]
Item 4--To approve the 1996 non-employee directors stock option plan.
For Against Abstain
[_] [_] [_]
Item 5--To approve material terms of performance goals for fiscal 1997 incentive
compensation award for the Company's Chief Executive Officer.
For Against Abstain
[_] [_] [_]
"PLEASE MARK INSIDE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR
VOTES."
Item 6--To approve material terms of performance goals for fiscal 1997, 1999,
2000 and 2001 incentive compensation awards for President and General Manager of
Fairchild Technologies GmbH.
For Against Abstain
[_] [_] [_]
Item 7--In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
+++++++
+
+
+
Signature(s) ___________________________ Date _______________________________
NOTE: 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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
<PAGE>
- ---------------------------------------------------------
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 21, 1996 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) November 19, 1996, 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.
(Continued, and to be signed on other side)
- ----------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Please mark
[X] your votes
as this
Item 1--ELECTION OF DIRECTORS Michael T. Alcox, Melville R. Barlow, Mortimer M.
Caplin, Colin M. Cohen, Philip David, Harold J. Harris, Samuel J. Krasney,
Daniel Lebard, Herbert S. Richey, Robert A. Sharpe II, Eric I. Steiner, and
Jeffrey J. Steiner.
For Withhold for all
[_] [_]
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- -------------------------------
Item 2--To approve amendments to the 1986 non-qualified and incentive stock
option plan.
For Withhold for all Abstain
[_] [_] [_]
"PLEASE MARK INSIDE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR
VOTES."
Item 3--To approve grants of stock options to certain employees under the 1986
non-qualified and incentive stock option plan.
For Withhold for all Abstain
[_] [_] [_]
Item 4--To approve the 1996 non-employee directors stock option plan.
For Withhold for all Abstain
[_] [_] [_]
Item 5--To approve material terms of performance goals for fiscal 1997 incentive
compensation award for the Company's Chief Executive Officer.
For Withhold for all Abstain
[_] [_] [_]
Item 6--To approve material terms of performance goals for fiscal 1997, 1999,
2000 and 2001 incentive compensation awards for President and General Manager
of Fairchild Technologies GmbH.
For Withhold for all Abstain
[_] [_] [_]
Item 7--In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Signature(s) Date
------------------------------------------ -----------------
NOTE: 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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
- --------------------------------------------------------------------------------
