<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[_]Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[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]No fee required
[_]$125 per Exchange Act Rules 0-11(c)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[_]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:
5) Total fee paid:
--------
* Set forth the amount of which the filing is calculated and state how
it was determined.
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE FAIRCHILD CORPORATION
45025 Aviation Drive
Suite 400
Dulles, VA 20166-7516
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
Date:
Thursday, November 18, 1999
Time:
10:00 a.m.
Place:
Dulles Airport Marriott
45020 Aviation Drive
Dulles, Virginia
Matters to be voted on:
1. Election of ten directors.
2. Amendment to Director Stock Option Plan, to permit deferment of
compensation.
3. Approval of performance goals and incentive compensation for the
President.
4. Approval of performance goals and incentive compensation for the Chief
Executive Officer.
5. Any other matters properly brought before the shareholders at the
meeting.
By Order of the Board of Directors
Donald E. Miller
Executive Vice President & Secretary
October 8, 1999
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Page
General Information About Voting 1
Proposal No. 1: Election of directors 2
General Information About the Nominees 2
Information As to Executive Officers 6
Section 16(a) Beneficial Ownership Reporting Compliance 7
Executive Compensation 8
Table: Summary Compensation 8
Table: Options Granted 9
Table: Option Exercises and Year-End Value 10
Employment Agreements and Change of Control Arrangements 11
Pension and Retirement Benefits 14
Report of the Compensation Committee 16
Stock Performance Graphs 19
Stock Ownership 22
Certain Transactions 24
Proposal No. 2: Amendment to Director Stock Option Plan 26
Proposal No. 3: President's Performance Goals and Incentive
Compensation 28
Proposal No. 4: Chief Executive Officer's Performance Goals and
Incentive Compensation 29
Relationship with Independent Accountants 30
Shareholder Proposals 30
Annual Report 30
Exhibit A: Copy of Amendment to Director Stock Option Plan A-1
</TABLE>
i
<PAGE>
PROXY STATEMENT
Your vote at the annual meeting is important to us. Please vote your shares
of common stock by completing the enclosed proxy card and returning it to us in
the enclosed envelope. This proxy statement has information about the annual
meeting and was prepared by the Company's management for the board of
directors. This proxy statement was first mailed to shareholders on October 8,
1999.
GENERAL INFORMATION ABOUT VOTING
Who can vote?
Only shareholders of record holding Class A common stock or Class B common
stock as of the close of business on September 28, 1999, will be entitled to
receive notice of the annual meeting and to vote at the meeting.
On September 28, 1999, there were 22,272,522 shares of Class A common stock
and 2,621,652 shares of Class B common stock outstanding and eligible to vote.
Shares of common stock owned by the Company or any subsidiary are not entitled
to vote, and are not included in the number of outstanding shares.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each proposal
to be considered at the annual meeting. Sign and date the proxy card and mail
it back to us in the enclosed envelope. The proxyholders named on the proxy
card will vote your shares as you instruct. If you sign and return the proxy
card but do not vote on a proposal, the proxyholders will vote for you on that
proposal. Unless you instruct otherwise, the proxyholders will vote for each of
the ten director nominees and for each of the other proposals to be considered
at the meeting.
What if other matters come up at the annual meeting?
The matters described in this proxy statement are the only matters we know
will be voted on at the annual meeting. If other matters are properly presented
at the meeting, the proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving the Company's secretary a written notice revoking your proxy
card or by signing, dating, and returning to us a new proxy card. We will honor
the proxy card with the latest date.
Can I vote in person at the annual meeting rather than by completing the proxy
card?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you may attend the annual meeting and vote your
shares in person.
What do I do if my shares are held in "street name"?
If your shares are held in the name of your broker, a bank, or other nominee,
that party should give you instructions for voting your shares.
How are votes counted?
We will hold the annual meeting if holders of a majority of the shares of
Class A common stock and Class B common stock entitled to vote either sign and
return their proxy cards or attend the meeting. If you sign and return your
proxy card, your shares will be counted to determine whether we have a quorum
even if you abstain or fail to vote on any of the proposals listed in the proxy
card.
If your shares are held in the name of a nominee, and you do not tell the
nominee by November 8, 1999 how to vote your shares (so-called "broker
nonvotes"), the nominee can vote them as it sees fit only on matters that the
New York Stock Exchange determines to be routine, and not on any other
proposal. Broker nonvotes will be counted as present to determine if a quorum
exists but will not be counted as present and entitled to vote on any
nonroutine proposal.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, some of our employees may
contact you by phone, by mail, or in person. None of these employees will
receive any extra compensation for doing this. The Company will also reimburse
brokerage houses and others forwarding proxy materials to beneficial owners of
stock.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
An entire board of directors, consisting of ten members, will be elected at
the annual meeting. The directors elected will hold office until their
successors are elected, which should occur at the next annual meeting. We
recommend a vote "FOR" the nominees presented below.
Vote Required. The ten nominees receiving the highest number of votes will
be elected. Votes withheld for a nominee will not be counted.
Nominations. At the annual meeting, we will nominate the persons named in
this proxy statement as directors. Although we do not know of any reason why
one of these nominees might not be able to serve, the board of directors will
propose a substitute nominee if any nominee is not available for election.
GENERAL INFORMATION ABOUT THE NOMINEES
All of the nominees, other than Mr. Gerard, are currently directors of the
Company. Each has agreed to be named in this proxy statement and to serve as a
director if elected. All nominees have been designated as "Continuing
Directors" as defined in the Company's Certificate of Incorporation.
Related party transactions between the Company and certain directors, or
their immediate family members or affiliates, are set forth in this proxy
statement under the heading "Certain Transactions." Information regarding late
filings of stock ownership forms by certain directors is set forth in this
proxy statement, under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance."
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Melville R. Barlow 69 Director
Mortimer M. Caplin 83 Director
Philip David 68 Director
Robert E. Edwards 51 Executive Vice President-Fairchild Fasteners and Director
Steven L. Gerard 54 Director (New)
Harold J. Harris 70 Director
Daniel Lebard 60 Director
Herbert S. Richey 77 Director
Eric I. Steiner 37 President, Chief Operating Officer and Director
Jeffrey J. Steiner 62 Chairman of the Board and Chief Executive Officer
</TABLE>
Melville R. Barlow. Director since 1996. Consultant to the Company:
September 1995 to June 1996. President of Pilkington Aerospace, Inc.
(manufacturer of aircraft transparencies): July 1991 through March 1994.
Corporate Vice President of General Dynamics and General Manager of General
Dynamics Electronics Division (manufacturer of military aircraft automatic
test equipment): June 1984 to March 1991.
Mortimer M. Caplin. Director since 1990. Senior member of Caplin & Drysdale
(attorneys): 1964 to Present. Director of Presidential Realty Corporation and
Danaher Corporation.
Philip David. Director since 1985. Consultant to the Company: January 1988
to June 1993. Company employee: January 1988 to December 1989. Professor of
Urban Development at Massachusetts Institute of Technology: 1971 to 1988.
Director of IRI International, Inc.
2
<PAGE>
Robert E. Edwards. Director since 1998. Executive Vice President of
Fairchild Fasteners and Chief Executive Officer of Fairchild Fasteners Direct:
March 1998 to Present. President and Chief Executive Officer of Edwards and
Lock Management Corporation (predecessor of Fairchild Fasteners Direct): 1983
to 1998. Pursuant to the merger agreement by which the Company acquired
Fairchild Fasteners Direct, Mr. Edwards is to be nominated for election as a
director every year as long as he continues to own at least 541,258 shares of
Class A common stock.
Steven L. Gerard. New Director. Chairman and Chief Executive Officer of
Great Point Capital, Inc.: 1998 to Present. Chairman and Chief Executive
Officer of Ocean View Capital, Inc., a manufacturer of insulated wire and
cable: September 1992 to August 1997. Director of Banner Aerospace, Inc.: 1992
to Present. Director of U.S. Home Corp.
Harold J. Harris. Director since 1985. President of Wm. H. Harris, Inc.
(retailer): 1955 to Present. Director of Capital Properties Incorporated of
Rhode Island.
Daniel Lebard. Director since 1996. Chairman of Supervisory Board of Daniel
Lebard Management Development SA, a consulting firm in Paris, France, which
performs management services: 1982 to Present. Chief Executive Officer of ISPG
and Executive Chairman of Albright & Wilson plc (manufacturer of added value
phosphate products): 1998 to Present.
Herbert S. Richey. Director since 1977. President of Richey Coal Company
(coal properties-brokerage and consulting): 1979 to December 1993.
Dr. Eric I. Steiner. Director since 1988. President of the Company:
September 1998 to Present. Chief Operating Officer of the Company: November
1996 to Present. President and Chief Executive Officer of Fairchild Fasteners:
August 1995 to Present. Executive Vice President of the Company: November 1996
to September 1998. Senior Vice President, Operations of the Company: May 1992
to November 1996. Dr. Steiner is the son of Jeffrey J. Steiner.
Jeffrey J. Steiner. Director since 1985. Chairman of the Board and Chief
Executive Officer of the Company: December 1985 to Present. President of the
Company: July 1991 to November 1998. President of Cedco Holdings Ltd., a
Bermuda corporation (a securities investor). Director of Corporate Express,
Inc. and The Copley Fund. Mr. Steiner is the father of Dr. Eric I. Steiner.
Articles have appeared in the French press reporting an inquiry by a French
magistrate into certain allegedly improper business transactions involving Elf
Acquitaine, a French petroleum company, its former chairman and various third
parties, including Maurice Bidermann. In connection with this inquiry, the
magistrate has made inquiry into allegedly improper transactions between Mr.
Steiner and that petroleum company. In response to the magistrate's request
that Mr. Steiner appear in France as a witness, Mr. Steiner submitted written
statements concerning the transactions and appeared in person before the
magistrate and others. Mr. Steiner, who was put under examination (mis en
examen), by the magistrate, with respect to this matter, has not been charged.
Mr. Steiner appeared before the Tribunal de Grande Instance de Paris, to
answer a charge of knowingly benefiting in 1990, from a misuse by Mr.
Bidermann of corporate assets of Societe Generale Mobiliere et Immobiliere, a
French corporation in which Mr. Bidermann is believed to have been the sole
shareholder. Mr. Steiner was assessed a fine of two million French Francs in
connection therewith. Both Mr. Steiner and the prosecutor (parquet) have
appealed the decision.
3
<PAGE>
Board Meetings
The Board held eight meetings during fiscal 1999, and acted nine times by
unanimous written consent. No incumbent director attended less than seventy-
five percent of the aggregate number of meetings of the Board and committees
on which he served.
Board Committees
The Board has five standing committees. The following chart describes the
function and membership of each standing committee and the number of times it
met in fiscal 1999:
Audit Committee
(Held 6 meetings)
<TABLE>
<CAPTION>
Function Members
- -------- -------
<S> <C>
. Examines and considers matters relating to the Mortimer Caplin
internal and external audits of the Company's Melville Barlow
accounts and its financial affairs. Harold Harris
Herbert Richey (Chairman)
. Selects the Company's independent auditors.
</TABLE>
Compensation and Stock Option Committee
(Held 4 meetings and acted 5 times by written consent)
<TABLE>
<CAPTION>
Function Members
- -------- -------
<S> <C>
. Initial responsibility for all compensation actions Melville Barlow
affecting the Company's executive officers, Philip David (Chairman)
including base salaries, bonus awards, stock option Daniel Lebard
awards and the terms and conditions of their Herbert Richey
employment.
. Administers the Company's stock option plan.
</TABLE>
Executive Committee
(Acted 6 times by written consent)
<TABLE>
<CAPTION>
Function Members
- -------- -------
<S> <C>
. May consider pertinent matters and exercise all Mortimer Caplin
powers of the Board, which by law it may exercise Herbert Richey
when the Board is not in session. Eric Steiner
Jeffrey Steiner (Chairman)
</TABLE>
Corporate Ethics and Compliance Committee
(Held 3 meetings)
<TABLE>
<CAPTION>
Function Members
- -------- -------
<S> <C>
. Oversees the Company's ethics programs. Melville Barlow
Mortimer Caplin (Chairman)
Herbert Richey
</TABLE>
4
<PAGE>
Nominating Committee
(Held 1 Meeting)
<TABLE>
<CAPTION>
Function Members
- -------- -------
<S> <C>
. Considers and recommends to the Board candidates Harold Harris
for election to the Board of Directors by the Eric Steiner
shareholders. Jeffrey Steiner (Chairman)
</TABLE>
Directors Compensation
Board members who are not salaried employees of the Company receive separate
compensation for Board service. That compensation includes:
Annual Retainer: $20,000
Attendance Fees: $2,500 for each Board meeting
$1,000 for each Board Committee meeting
Expenses related to attendance
Stock Options: Initial grant of 30,000 shares to each non-employee
director; thereafter, 1,000 shares annually.
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, 2000, by
shareholders 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. All of the executive officers of
the Company are elected by the Board to serve until the next annual meeting of
the Board or until their successors are elected and qualified. Related party
transactions between the Company and certain officers (or their immediate
family members or affiliates) are set forth in this proxy statement under the
heading "Certain Transactions."
Colin M. Cohen, 48, has served as the Company's Senior Vice President
(Business Development and Finance), and Chief Financial Officer since October
1996, and as Controller of the Company since March 1998. Prior to joining
Fairchild, he served as Managing Director of Citicorp Securities, Inc., from
August 1991 to September 1996.
Leroy A. Dack, 55, has served as Senior Vice President of the Company and as
Chief Operating Officer of U.S. Operations for Fairchild Fasteners, since
April 1999. He served as Division President of Kaynar Technologies (acquired
by Fairchild in April 1999) from 1994 to 1999.
John L. Flynn, 53, has served as Senior Vice President, Tax of the Company
since September 1994 and as Vice President, Tax from August 1989 to September
1994.
Jordan A. Law, 55, has served as Senior Vice President of Fairchild
Fasteners since April 1999. He served as Chairman of the Board, President and
Chief Executive Officer of Kaynar Technologies Inc. (acquired by Fairchild in
April 1999) from 1994 to 1999.
Donald E. Miller, 52, has served as Executive Vice President of the Company
since September, 1998, as General Counsel since January 1991 and as Corporate
Secretary since January 1995. He served as Senior Vice President of the
Company from January 1991 through September 1998.
Jacques S. Moskovic, 62, has served as Senior Vice President of the Company
since 1996, and as President and Chief Executive Officer of Fairchild
Technologies since 1994. Prior to joining Fairchild, he served as Chairman and
President of Compagnie Pour Le Developpement Industriel, a France based
company specializing in electronics.
Karen L. Schneckenburger, 50, has served as Vice President of the Company
since September 1992 and as Treasurer of the Company since November 1991.
Prior to that, she served as Director of Finance of Fairchild Industries from
1986 through 1989.
Robert A. Sharpe II, 41, has served as Senior Vice President, Operations of
the Company since September 1998 and as Executive Vice President of Fairchild
Fasteners since July 1996. He served as Chief Financial Officer of Fairchild
Fasteners from July 1996 through April 1999. He was a Consultant for Fairchild
Fasteners from October 1995 to July 1996. Prior to joining Fairchild, he
served as Vice President, Corporate Development of Smithfield Foods, Inc. (a
pork-products company) from July 1994 to July 1996.
David Wynne-Morgan, 68, has served as Senior Vice President, Corporate
Communications of the Company since September 1997. Since 1996, he also serves
as Chairman of WMC Communications, Ltd. (communications consultants). From
1994 through 1996 he was Director of Corporate Communications of Barrick Gold
(a NYSE listed company, gold mining and processing enterprises) and Horsham
Corporation (a Canadian publicly held property company, now known as TrizecHan
Corporation).
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and officers to file reports (on Forms 3, 4 and 5) with
the Securities and Exchange Commission, disclosing their ownership, and
changes in their ownership, of stock in the Company. Copies of these reports
must also be furnished to the Company. Based solely on a review of these
copies, the Company believes that during fiscal year 1999 all reports were
filed on a timely basis, except as follows: Mr. Jeffrey Steiner filed a Form 4
with the SEC on August 10, 1999 (reporting the purchase of 2,000 shares of
Class A Stock) that was due to be filed on June 10, 1999. Mr. John Flynn filed
a Form 4 with the SEC on May 10, 1999 (reporting the sale of 150 shares of
Class A Stock in January 1998 and 150 shares of Class A Stock in April 1998)
that was due to be filed by February 10, 1998 and May 10, 1998 respectively.
Mr. David Wynne-Morgan filed a Form 4 with the SEC on July 9, 1999 (reporting
the purchase of 5,000 shares of Class A Stock) that was due to be filed on May
10, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
Table: Summary Compensation
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Fiscal Salary Bonus Compensation Options Compensation
Principal Position Year ($)(1) ($)(1) ($) (#) ($) (2)
------------------ ------ --------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Steiner, 1999 2,007,215 11,207,617 -- 25,000 29,927
Chairman & CEO 1998 1,644,627 7,854,684 -- 100,000 29,927
1997 1,800,000 4,705,000 -- 30,000 29,168
Robert E. Edwards, 1999 520,000 200,000 -- 20,000 4,000
Executive Vice 1998 170,000 -- -- 4,000
President of Fairchild 1997 -- -- -- --
Fasteners
John L. Flynn 1999 269,230 875,000 -- 10,000 3,173
Sr. Vice President 1998 239,980 351,000 -- 10,000 4,000
1997 201,560 150,000 -- 15,000 6,993
Donald E. Miller, 1999 332,345 900,000 -- 25,000 6,331
Executive Vice 1998 283,287 501,000 -- 20,000 5,354
President, General 1997 221,554 150,000 -- 30,000 9,293
Counsel & Secretary
Eric I. Steiner, 1999 510,618 4,300,000 -- 6,562
President & COO 1998 377,700 601,000 -- 40,000 6,662
1997 265,403 370,000 155,306(3) 120,000 8,026
</TABLE>
- -------
(1) Salary and bonuses shown in the table for 1998 and 1997 do not include
compensation paid to the named executive officers by Banner Aerospace,
which at the time was less than a wholly-owned subsidiary of the Company.
Such compensation was as follows, based on Banner Aerospace's fiscal years
1998 and 1997.
<TABLE>
<CAPTION>
Banner Stock Options
Aerospace For Banner
Fiscal Year Individual Salary Bonus Common Stock Other Compensation
- ----------- ---------- -------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
1998 J. Steiner $400,000 $180,000 130,000
J. Flynn 0 0 0 $300,000 **
D. Miller 9,600 0 0 350,000 **
E. Steiner 45,667 0 30,000 200,000 **
**Other compensation consisted of Allied Shares issued as bonus,
the receipt of which has been deferred by the officer. Shares are
valued as of the date of grant.
1997 J. Steiner $300,000 $273,375 80,000
J. Flynn 0 0 0
D. Miller 9,600 0 0
E. Steiner 16,000 0 5,000
</TABLE>
8
<PAGE>
(2) Includes the following for fiscal 1999:
a. Company matching contributions under 401(k) savings plan, as follows:
J. Steiner $4,000
R. Edwards 4,000
J. Flynn 3,173
D. Miller 3,769
E. Steiner 4,000
b. Income imputed for split-dollar life insurance coverage, as follows:
J. Steiner $25,927
c. Imputed interest on loans to officers, as follows:
D.Miller $2,562
E. Steiner 2,562
(3) Includes the following: $82,155 temporary living expenses; and $60,319 tax
gross up of temporary living expenses.
Table: Options Granted in 1999 Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Rates of Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------- -------------------------------
% of
Total
Options
Granted
Securities to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted 1999 ($/Sh) Date 5% ($) (1) 10% ($) (1)
---- ---------- --------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Steiner 25,000(2) 7.6% 14.375 09/16/03 458,664 578,777
Robert E. Edwards 20,000(2) 6.0% 14.375 09/16/03 366,931 463,022
John L. Flynn 10,000(2) 3.0% 14.375 09/16/03 183,466 231,511
Donald E. Miller 25,000(2) 7.6% 14.375 09/16/03 458,664 578,777
Eric I. Steiner 75,000(2) 22.7% 14.375 09/16/03 1,375,992 1,736,331
</TABLE>
- --------
(1) The potential realizable value for each named executive officer reflects
the increase in value of the shares granted, based on a beginning price
equal to the stock option exercise price and assuming rates of stock value
appreciation of 5% and 10%, respectively, over a period of five years. The
actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised.
(2) These options were granted on 9/17/98; 25% became exercisable on 9/17/99;
50% are exercisable on 9/17/00; 75% are exercisable on 9/17/01; and 100%
are exercisable on 9/17/02.
9
<PAGE>
Table: Option Exercises and Year-End Value
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Options at
June 30, 1999 June 30, 1999
------------------------- -------------------------
Shares
Acquired
on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Steiner -- -- 669,231 170,675 3,310,236 (457,903)
Robert Edwards -- -- -- 20,000 -- (32,500)
John Flynn -- -- 41,050 29,350 230,800 (78,275)
Donald Miller 15,000 135,000(1) 70,025 61,675 336,478 (185,966)
Eric Steiner -- -- 147,836 168,775 208,822 (530,241)
</TABLE>
- --------
(1) Pursuant to the Company's Stock Option Deferral Plan, officers may defer
the gain on exercise of stock options. An officer's deferred gain is
issued in the form of "Deferred Compensation Units," representing the
number of shares of common stock that the officer shall be entitled to
receive upon expiration of the deferral period. Under the Stock Option
Deferral Plan, the following named executive officers deferred gain as
follows: D. Miller, deferred $135,000 in exchange for 8,852 Deferred
Compensation Units.
10
<PAGE>
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The following summarizes employment agreements and change of control
agreements:
Employment Agreement between the Company and Jeffrey Steiner:
Term of the Agreement: Five year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Base Salary Under the Agreement:
As determined by the Compensation Committee.
Current Salary: $1,200,000 per year.
Payments in Event of Death: Estate to receive an amount equal to one year's
base salary, plus bonuses for the fiscal year
in which death occurred.
Payments in Event of Termination Due to Disability:
Fifty percent of base salary for two years,
plus bonuses for the fiscal year in which
disability occurred.
Payments in the event of a "change in control":
2.99 times base salary and 2.99 times the
preceding year's bonus.
Employment Agreement between Banner Aerospace (Company Subsidiary) and
Jeffrey Steiner:
Term of the Agreement: Three year term, extended annually by an
additional 12 months unless either party gives
timely notice not to extend the agreement.
Base Salary Under the Agreement:
Not less than $250,000 per year, and an annual
bonus if certain performance targets are met.
Current Salary: $400,000.
Payments in Event of Death: Estate to receive an amount equal to one year's
base salary, plus bonuses for the fiscal year
in which death occurred.
Payments in Event of Termination Due to Disability:
Fifty percent of base salary for two years,
plus bonuses for the fiscal year in which
disability occurred.
Payments in the event of a "change in control":
2.99 times base salary and 2.99 times the
preceding year's bonus.
11
<PAGE>
Service Agreement between Banner Investments (U.K.) PLC, (Company Subsidiary)
and Jeffrey Steiner:
Term of the Agreement: Year to year.
Base Salary Under the Agreement:
Annual compensation at the greater of $400,000
or pound sterling 204,000.
Letter Agreement between the Company and Donald Miller
Payments in the event of Termination of Employment Without Cause:
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
Payments in the event of a "change in control":
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
Letter Agreement between the Company and John Flynn
Payments in the event of Termination of Employment Without Cause:
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
Payments in the event of a "change in control":
2 times then current annual base salary, plus 1
times salary in lieu of bonus.
12
<PAGE>
Employment Agreement and Registration Rights Agreement between the Company and
Robert Edwards
Term of Employment Agreement:
Initial term of 2 years, ending March 2000;
thereafter year to year. Either party may
terminate the agreement on six months notice.
Base Salary Under Employment Agreement:
$520,000 per year.
Current Salary: $520,000.
Payments in Event of Death: Estate to receive payments accrued through date
of death.
Payments in Event of Termination Due to Disability:
No special payments after termination due to
disability. Reduced payments during term of
disability prior to employment termination.
Payments in the event of a "change in control":
Subject to approval by the Company's lenders,
the Company may be required (at Mr. Edwards'
election) to purchase Mr. Edwards' shares of
stock in the Company in the event of a change
of control transaction, at the same price paid
to Mr. Steiner for his shares in any such
change of control. Similarly, the Company may
require Mr. Edwards to sell his shares in order
to complete any change of control transaction.
(Registration Rights Agreement between the
Company and Mr. Edwards.)
13
<PAGE>
PENSION AND RETIREMENT BENEFITS
Fairchild Retirement Plan. The following table illustrates the amount of
estimated annual fixed retirement benefits payable under the Fairchild
Retirement Plan to an employee retiring in 1999, 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 $160,000 for 1999.
<TABLE>
<CAPTION>
40
Years
Annual 10 Years 20 Years 30 Years of
Salary of Service of Service of Service Service
------ ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
$ 25,000 $2,490 $4,980 $7,471 $ 9,028
50,000 4,755 9,510 14,265 17,267
100,000 10,755 21,510 32,265 38,892
150,000 16,755 33,510 50,265 60,517
200,000 22,755 45,510 68,265 82,142
250,000 28,755 57,510 86,265 103,767
</TABLE>
For purposes of determining benefits under the Fairchild Retirement Plan,
the following executive officers have years of credit and average salaries as
follows:
<TABLE>
<CAPTION>
Officer Average Salary Years of Credit
------- -------------- ----------------
<S> <C> <C>
Jeffrey J. Steiner $160,000 8 yrs., 6 mths.
Robert E. Edwards $160,000 1 yr., 3 mths.
John L. Flynn $160,000 11 yrs., 8 mths.
Donald E. Miller $160,000 7 yrs., 5 mths.
Eric I. Steiner $160,000 7 yrs., 3 mths.
</TABLE>
14
<PAGE>
Supplemental Executive Retirement Plans. The Company has two Supplemental
Executive Retirement Plans for certain key executives which provide additional
retirement benefits based on final average earnings and years of service, as
follows:
<TABLE>
<CAPTION>
Unfunded SERP Funded SERP *
-------------------------------------------- ------------------------------
<S> <C> <C>
Retirement Benefits Provides a maximum retirement benefit Same as the Unfunded SERP.
(in the aggregate for both Supplemental
Executive Retirement Plans) equal to
the difference between (i) sixty percent
(60%) of the participant's average base
salary for the last five years of
employment and (ii) the aggregate of
other pension benefits, profit sharing
benefits, stock option benefits and
primary Social Security payments to
which the participant is entitled.
Funding This is an unfunded obligation of the This plan is a funded
Company, not subject to ERISA obligation of the Company.
regulations. The Company makes Such funding contributions are
discretionary contributions to a Rabbi not assets available to the
Trust to help meet its obligations under creditors of the Company.
this plan, but the assets under such trust
are subject to the claims of the
Company's creditors.
Pre-Retirement Subject to the approval of the None.
Distributions Compensation Committee, the plan
permits participants who are age 60 or
over, to elect to receive a lump sum
pre-retirement advance on an actuarially
reduced basis.
Participants Executive Officers. All persons named Same as the unfunded plan.
in the Summary Compensation Table
are eligible for participation in this plan.
Special Years of Pursuant to letter agreements with None.
Service Messrs. J. Flynn and D. Miller, for
Accreditation purposes of determining years of service
with the Company under the
Supplemental Executive Retirement
Plans, such individuals are credited with
two years of service for each of the first
ten years they are employed by the
Company.
</TABLE>
- --------
* Note: The Funded SERP has not yet received approval from the IRS.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The following report does not constitute solicitation material and is not
considered filed or incorporated by reference into any other Company filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934,
unless we state otherwise.
The Compensation and Stock Option Committee is composed of at least two non-
employee Directors. It has initial responsibility for all compensation actions
affecting the Company's executive officers, including base salaries, bonus
awards, stock option awards and the terms and conditions of their employment.
Compensation Philosophy
The Committee's goals are to:
. Provide compensation competitive with other similar companies.
. Reward executives consistent with the performance of the Company.
. Recognize individual performance.
. Encourage executives to increase shareholder value.
Components of Executive Officer Compensation
Cash Compensation (Base Salary, Annual Incentive Bonus and Special
Bonuses)--The Company manages the total cash compensation to provide median
levels of cash compensation at average levels of corporate, business unit, and
individual performance. Cash compensation consists of two components: (i) a
base salary that is competitive with that of other companies paying at the
median level of the market, and (ii) an annual incentive opportunity that is
variable and is reflective of the financial performance of the Company and/or
the individual performance of the executive officer. When high levels of
performance are achieved, the level of cash compensation may exceed the median
of the market. Conversely, when the Company, business unit, or the individual
falls short of the predetermined goals, the level of cash compensation may be
substantially below the market median. The objective of this mix is to deliver
total annual cash compensation competitive with compensation offered at other
companies facing similar challenges for similar positions, while
simultaneously linking the payment of the annual cash incentive to the
achievement of specific objectives in the Company's annual operating plan as
approved by the Board.
Mix Between Salary and Annual Incentive Pay--The mix between salary and
annual incentive pay is related to an executive's job grade. Executives at
higher grade levels in the Company have a greater percentage of their total
cash compensation contingent on the accomplishment of business objectives,
i.e. the higher the executive grade level, the greater the proportion of
annual compensation that is "at risk." The award and size of the performance
bonus are based upon: (i) the executive officer's performance against goals
determined by the Company's Chief Executive Officer; and (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.
16
<PAGE>
In fiscal 1999, management continued to effectively implement its long-term
strategies, which included the disposition of non-core assets, the refinancing
of indebtedness and an increased focus of its efforts on its aerospace parts
businesses. The Committee believes that the success of these strategies is
evidenced by an increase of $6.2 million in the fiscal 1999 operating profits
of Fairchild Fasteners and negotiations leading to the acquisition of Kaynar
Technologies Inc., SNEP S.A. and Technico S.A. (which are aerospace fastener
manufacturers). Based on the foregoing, the Committee approved salary, annual
incentive pay and bonuses for extraordinary transactions for the Company's
named executive officers as set forth under the Summary Compensation Table of
this proxy statement.
Stock Option Grants--The Committee believes that stock option grants serve
as a desirable long-term method of compensation because they closely ally the
interests of management with the preservation and enhancement and realization
of shareholder value and serve as an additional incentive to promote the
success of the Company. In fiscal 1999, the Committee approved the grant of
177,500 stock options to the Company's executive officers and 153,500 stock
options to other employees. Included in these grants were 130,000 options
granted to the named executive officers (other than the CEO), and 25,000
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 Stock
Option 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 Chairman of the Board and Chief Executive
Officer of the Company since 1985, and as President from July 1991 through
September 1998. In fixing Mr. Steiner's salary and target bonus levels, as
well as determining the size of stock options, if any, the Committee and the
Board typically review the strategic direction and financial performance of
the Company, including revenue and profit levels. In addition, the Committee
reviews Mr. Steiner's performance as Chairman of the Board and Chief Executive
Officer, his importance to the Company and his success in implementing its
strategic goals both through his entrepreneurial actions and investment
banking acumen.
Mr. Steiner has developed and established initiatives aimed at improving the
operating efficiency and financial performance of the Company. During the last
twelve months, the Company has carried out a program of acquisitions and
dispositions in order to focus on the aerospace industry. Under the direction
of Mr. Steiner, the Company (i) increased operating profits of Fairchild
Fasteners by $6.2 million; (ii) acquired Kaynar Technologies Inc., SNEP S.A.
and Technico S.A., which are aerospace fastener manufacturers; (iii) raised
$225 million from the issuance of additional debt securities; (v) refinanced
its bank debt; and (vi) implemented further aggressive cost reduction and cost
control programs at all organizational and divisional levels.
During fiscal 1999, under the direction of Mr. Steiner, Banner Aerospace (i)
resolved the acquisition price paid by Allied Signal for disposition of the
Banner Hardware Group in January 1998; and (ii) sold Solair to Kellstrom
Industries.
Base Compensation--Mr. Steiner's base compensation for fiscal 1999 was
$1,200,000 pursuant to his employment agreement with the Company and $400,000
pursuant to his employment agreement with Banner Aerospace, plus $400,000 for
services in the United Kingdom.
17
<PAGE>
Incentive Compensation Performance Goals--The performance goals for and
maximum amount of Mr. Steiner's incentive compensation (i.e., compensation
beyond base salary) approved by the shareholders at the last Annual Meeting,
were as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 1999, 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 1999, the Chief Executive Officer may receive
up to two and one-half percent (2 1/2%) of the total value of the
transaction.
Incentive Compensation for 1999 Transactions--Based on such performance
goals being achieved, the Committee determined that Mr. Steiner should receive
$6,000,000 in incentive compensation for fiscal 1999. The Compensation
Committee of Banner Aerospace determined that Mr. Steiner should receive
$5,207,617 in incentive compensation in 1999. The total incentive compensation
paid to Mr. Steiner for fiscal 1999 is within the performance goals approved
last year by the shareholders.
Stock Option Compensation--In addition, in fiscal 1999, the Committee
approved the grant of 25,000 stock options to Mr. Jeffrey Steiner under the
Stock Option Plan.
Internal Revenue Code Section 162(m)
The Committee has considered the impact of Section 162(m) Internal Revenue
Code of 1986, as amended (the "Code"), which in certain circumstances
disallows income tax deductions for compensation in excess of $1,000,000. This
disallowance provision does not apply toperformance-based compensation and
certain other forms of compensation. The Committee currently intends to
structure the Company's incentive compensation awards to the Company's Chief
Executive Officer and other executive officers in a manner that complies with
the Code's requirements for performance-based compensation to ensure that the
Company is entitled to deduct such compensation. One of these requirements is
that the shareholders approve the material terms of performance goals for such
awards. To satisfy this requirement, the shareholders are being asked in this
proxy statement to approve the material terms of the performance goals for the
fiscal 2000 incentive compensation award for the Chief Executive Officer and
for the President.
Compensation and Stock Option
Committee
of the Board of Directors
Philip David, Chairman
Melville R. Barlow
Daniel Lebard
Herbert S. Richey
18
<PAGE>
STOCK PERFORMANCE GRAPHS
The following stock performance graphs do not constitute solicitation
material and are not considered filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, unless we state otherwise.
Changes In Indexes Used In Prior Years:
In prior years, we have provided Fairchild's stock price performance
compared to the S&P 500 Index (a market index), and the S&P Manufacturers
(Diversified Industrials) Index (a line of business index).
Change in Market Index:
The S&P 500 is a market index composed generally of large market capital
stocks with an average market equity capitalization of over $20 billion per
member. By comparison, Fairchild's market equity is closer to $200 million.
For this reason, the Company has elected to change its comparison to the S&P
600 Smallcap Index, which is composed of members with an average market equity
capitalization of less than $600 million. The Smallcap indices include such
Fairchild/Banner competitors as SPS Technologies, Aviation Sales, and AAR.
Change In Industry Index:
In the past three years, Fairchild has substantially divested itself of its
non-aerospace operations, and has been focusing on aerospace manufacturing
and, to a lesser extent, aerospace distribution. Therefore, an industry-
focused index would serve as a better relative performance benchmark for
Fairchild's stock.
The S&P Manufacturing (Diversified Industrials) Index is principally a large
cap member stock index. The Company has therefore elected to change to the S&P
Midcap Aerospace/Defense Index, which measures the performance of the
aerospace/defense sector of the broader Index. (In the future, the Company
proposes to use the S&P Smallcap Aerospace/Defense Index. However, this Index
does not provide figures for periods prior to 1996).
19
<PAGE>
COMPARISON TO S&P 500 STOCK INDEX / S&P MANUFACTURING
(DIVERSIFIED INDUSTRIALS) INDEX:
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 CHART APPEARS HERE]
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
Fairchild Corporation--Class A 100.00 87.10 377.42 464.52 520.97 329.03
S&P 500 Index 100.00 125.99 159.61 214.90 279.90 343.43
S&P Manuf.-Diversified Index 100.00 132.09 169.15 143.86 307.29 423.51
Fiscal Year Ending June 30
20
<PAGE>
COMPARISON TO S&P 600 SMALLCAP INDEX / S&P MIDCAP AEROSPACE/DEFENSE INDEX:
The following graph compares the performance of the Company's Class A Stock
with that of the S & P 600 Smallcap Index and the S & P Midcap
Aerospace/Defense Index (consisting of four aerospace/defense manufacturers).
The graph plots the growth in value of an initial $100 investment over the
indicated five year period with all dividends reinvested.
[TOTAL SHAREHOLDER RETURN CHART APPEARS HERE]
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
Fairchild Corporation--Class A 100.00 87.10 377.42 464.52 520.97 329.03
S&P 600 Smallcap Index 100.00 120.30 151.93 184.39 220.19 215.05
S&P Midcap Aero/Def Index 100.00 121.27 152.69 202.45 219.37 248.80
Fiscal Year Ending June 30
21
<PAGE>
STOCK OWNERSHIP
The following table shows the number of shares beneficially owned (as of
August 31, 1999) by:
. each person who we know beneficially owns more than 5% of the common
stock;
. each director;
. each executive officer named in the Summary Compensation Table; and
. the directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Shares Percent of Number of Shares Percent of
Name of Class A Stock (1) Class of Class B Stock (1) Class
- ---- ------------------- ---------- ------------------- ----------
<S> <C> <C> <C> <C>
Melville R. Barlow 17,000(2) * -- --
Mortimer M. Caplin 99,000(2) * -- --
J.J. Cramer & Co. 3,017,800(4) 13.57% -- --
Philip David 56,500(2) * -- --
Robert E. Edwards 1,087,516(2) 4.89% -- --
John L. Flynn 64,741(2) * -- --
Steven L. Gerard 5,618(2) * -- --
Harold J. Harris 107,356(2) (3) * -- --
Gabelli Funds, Inc. 1,965,865(4) 8.84% -- --
Daniel Lebard 17,000(2) * -- --
Donald E. Miller 116,796(2) (3) * -- --
Herbert S. Richey 49,200(2) * -- --
Eric I. Steiner 293,512(2) (3) 1.31% 15,000 *
Jeffrey J. Steiner 7,250,966(2) (6) 27.96% 2,938,996(6) 98.08%
The Steiner Group, LLC 6,102,684(4) (5) 24.27% 2,908,996(5) 97.07%
All directors and
executive officers as a
group (19 persons) 9,391,337(2) (7) 35.24% 2,953,996(7) 98.58%
</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
31, 1999 appear in the Class A Stock column. Outstanding warrants are
exercisable into shares of either Class A Stock or Class B Stock and
appear in both the Class A Stock and Class B Stock columns.
(2) Includes exercisable stock options to purchase Class A Stock, as follows:
M. Barlow, 17,000 shares; M. Caplin, 4,000 shares; P. David, 34,000
shares; R. Edwards, 5,000 shares; J. Flynn, 52,900 shares; H. Harris,
45,250 shares; D. Lebard, 17,000 shares; D. Miller, 94,200 shares;
H. Richey, 39,000 shares; S. Gerard, 5,518 shares; E. Steiner, 189,111
shares; J. Steiner, 763,584 shares; Directors and Executive Officers as a
group, 1,465,688 shares.
(3) Includes shares beneficially owned, as follows: H. Harris--27,000 shares
of Class A Stock owned by the Wm. H. Harris, Inc. Profit-Sharing Plan. D.
Miller--300 shares of Class A Stock owned by Mr. Miller as custodian for
his child; Mr. Miller disclaims any beneficial interest therein. E.
Steiner--5,000 shares of Class A Stock owned by Dr. Steiner as custodian
for his children; Dr. Steiner disclaims any beneficial interest therein.
(4) Based on the following information:
J.J. Cramer & Co., 100 Wall Street, New York, NY 10005. Information as of
January 31, 1999, contained in a Form 4 (for January 1999), filed with the
SEC by J.J. Cramer & Co., Cramer Capital Corporation, Cramer Partners, L.P.,
James J. Cramer and Karen L. Cramer.
22
<PAGE>
Gabelli Funds, Inc., One Corporate Center, Rye, NY 10580-1434. Information
as of April 25, 1999, contained in a Schedule 13D/A dated April 30, 1999,
filed with the SEC by Gabelli Funds, Inc.
The Steiner Group LLC, c/o Faust Rabbach Oppenheim LLP, 488 Madison Avenue,
New York, NY 10022. Information provided to the Company by the shareholder.
(5) The Steiner Group LLC is a Delaware limited liability company. Jeffrey J.
Steiner is its sole manager. The members are Jeffrey J. Steiner (with a
20% membership interest), and The Jeffrey Steiner Family Trust (with an
80% membership interest). The Jeffrey Steiner Family Trust is a trust
created for the benefit of the issue of Jeffrey J. Steiner. The Steiner
Group LLC holds 3,193,688 shares of Class A Stock, 2,533,996 shares of
Class B Stock, and 375,000 Warrants. 1,100,000 shares of Class B Stock
owned by The Steiner Group LLC have been pledged to banks as collateral
for loans to Jeffrey Steiner. All 3,193,688 shares of Class A Stock owned
by The Steiner Group LLC have been pledged to NationsBank, N.A. together
with other personal property as collateral for a line of credit and
personal loans to Mr. Steiner.
(6) Mr. Jeffrey Steiner, 110 East 59th Street, New York, NY 10022. Mr. Steiner
is the sole manager of The Steiner Group LLC, and as such may be deemed to
beneficially own the same shares of Class A Stock and Class B Stock owned
directly or beneficially by The Steiner Group LLC., as discussed in
footnote (5) to this table.
Class A Stock shown in the table as owned by Mr. Steiner include:(i)
6,102,684 shares owned by The Steiner Group LLC (see footnote (5));
(ii) 313,798 shares owned of record by Mr. Steiner; (iii) exercisable stock
options to purchase 763,584 shares of Class A Stock (see footnote (2));
(iv) 38,500 shares of Class A Stock owned by Mr. Steiner as custodian for
his children; (v) 30,000 shares of Class B Stock (convertible on a one-to-
one basis to Class A Stock) owned by Mr. Steiner as custodian for his
children; and (vi) 2,400 shares of Class A Stock owned by the Jeffrey
Steiner Family Foundation.
71,700 shares of Class A Stock owned by Mr. Steiner have been pledged as
collateral to NationsBank N.A.
Class B Stock shown in the table as owned by Mr. Jeffrey Steiner include:
(i) 2,533,996 shares owned by The Steiner Group LLC (see footnote (5)); and
(ii) 30,000 shares of Class B Stock owned by Mr. Steiner as custodian for
his children.
Mr. Steiner disclaims beneficial ownership of shares owned by Steiner Group,
LLC, the Jeffrey Steiner Family Foundation and shares owned by him as
custodian for his children.
(7) Includes warrants as described in footnotes (1), (5) and (6) above.
23
<PAGE>
CERTAIN TRANSACTIONS
On July 28, 1999, the Company sold its 31.9% interest in Nacanco Paketleme,
a Turkish beverage can manufacturer, to American National Can Group, Inc., for
$48,252,200. Fairchild also agreed to provide consulting services to Nacanco
Paketleme for a three-year period for $1,456,000 per year. Jeffrey Steiner
simultaneously sold his 3.1% interest in Nacanco, for $4,745,800 and also
agreed to provide consulting services to Nacanco for a three-year period for
$144,000 per year.
On September 14, 1999, the Company invested (indirectly) approximately $3.6
million in a satellite company. Simultaneously with such investment, a family
member of Jeffrey Steiner invested approximately $500,000 in the same
satellite company.
On April 20, 1999, the Company consummated the acquisition (by merger) of
Kaynar Technologies Inc. Leroy Dack and Jordan Law were officers of Kaynar
Technologies prior to the acquisition, and (as a result of the merger)
received the following: (i) payment from Fairchild's transfer agent for their
shares of Kaynar Technologies common stock (on the same terms and conditions
as all other Kaynar shareholders); (ii) payment for their Kaynar vested stock
options ($333,750 to Mr. Dack and $438,750 to Mr. Law) according to Kaynar's
"Change of Control" terms and conditions; and (iii) payment for one year's
compensation to Mr. Dack ($353,000) and two year's compensation to Mr. Law
($905,000), according to Kaynar's "Change of Control" terms and condition.
On March 2, 1998, the Company consummated the acquisition (by merger) of
Fairchild Fasteners Direct from Robert E. Edwards. Pursuant to the merger
agreement, Mr. Edwards is entitled to receive an earnout, for a period of two
years, based on the earnings of Fairchild Fasteners Direct (previously known
as Special-T). Mr. Edwards was paid approximately $1,066,000 in September 1999
(in a combination of cash and stock) pursuant to this earnout provision. Mr.
Edwards was not an officer, director or employee of the Company at the time
that such merger agreement was entered into.
The Company occasionally uses a chartered helicopter owned by an affiliate
of Mr. Jeffrey Steiner. Cost for such flights charged to the Company for
business related travel are comparable to those charged in arm's length
transactions between unaffiliated third parties. Total amount paid by the
Company in fiscal 1999 for such helicopter was approximately $125,000.
For a period of approximately 6 months, Mr. Steiner occupied certain space
in the Company's building in London, England, for which he was charged arm's
length rent by the Company.
The Company leases office space in Nanterre, France from a company
controlled by Jacques S. Moskovic. Current rent under the lease is $9,807 per
month. The lease expires on June 30, 2000.
The Company made a loan in the aggregate amount of $200,000 to Robert Sharpe
in order to assist him in relocating from California to Virginia. Such loan
bears interest at 5.48% per annum, requires annual interest payments, and is
due in full on June 30, 2001.
In April 1999, the Company acquired full ownership of Banner Aerospace, Inc.
pursuant to a merger. The shareholders of Banner Aerospace received .7885
shares of Fairchild Class A common stock in exchange for each share of Banner
Aerospace common stock. Mr. J. Steiner exchanged an aggregate of 109,580
shares of Banner Aerospace common stock for an aggregate of 86,402 shares of
the Company's Class A common stock pursuant to the merger.
Pursuant to the Company's officer loan program, the Company made loans to
certain key employees, to be used by such employees to purchase Fairchild
common stock. The aggregate amount of such loans to executive officers in
fiscal 1999 was $44,537 (Cohen, Flynn, Miller, Sharpe, E. Steiner and J.
Steiner: $7,333 each), with an additional $429,647 loaned to executive
officers in the
24
<PAGE>
beginning of calendar year 1999 (Cohen, Flynn, N. Hercot [daughter of J.
Steiner], Miller, Sharpe, E. Steiner and J. Steiner: $61,358 each). All loans
are interest free, and are due in full in five years. The Company has approved
an additional loan program to officers and directors for fiscal 2000, but no
loans have been made under such plan at this time.
Eric Steiner (son of Jeffrey Steiner) is an executive officer of the
Company. His compensation is set forth in the compensation table of this proxy
statement. Natalia Hercot (daughter of Jeffrey Steiner) is a Vice President of
the Company, for which she was compensated $343,800 in fiscal 1999. A brother
of Robert Sharpe is an employee of Fairchild Fasteners, for which he was
compensated approximately $200,000 in fiscal 1999.
Ms. Linda Edwards, the wife of Robert Edwards, is a partner of the law firm
of Paul, Hastings, Janosfky & Walker LLP, which rendered legal services to the
Company during fiscal 1999. The Company intends to use the services of this
firm during fiscal 2000.
The Company engages the services of WMC Communications, Ltd. (communications
consultants), of which David Wynne-Morgan is the Chairman and principal
shareholder. Compensation by the Company for such services in 1999 was
approximately $440,000 (plus expenses). The Company intends to continue to use
the services of WMC Communications.
* * *
25
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO DIRECTOR STOCK OPTION PLAN
TO PERMIT DEFERMENT OF COMPENSATION.
At the annual meeting, you will be asked to vote to approve an amendment to
the Company's Stock Option Plan for Non-Employee Directors. The purpose of the
amendment is to permit deferment of gain upon exercise of stock options. We
recommend that you vote "FOR" the amendment.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will be counted as present
and entitled to vote on this proposal.
Summary of the Plan. Here is a summary of the significant terms of the Plan.
The Plan was originally approved by the Shareholders at the 1996 annual
meeting.
<TABLE>
<C> <S>
Total Number of
Shares Covered............ 250,000 Shares of Class A common stock
Administration............ The Board of Directors (excluding non-employee
directors) administers the Plan. The Board may
terminate, amend or modify the Plan at any time.
However, any amendment or modification that
increases the total number of shares covered by
the 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
Plan, must be approved by the shareholders.
Eligible Persons.......... Directors of the Company who are not also
officers or employees of the Company (so-called
"non-employee directors")
Exercise Price............ The closing price of the Company's Class A common
stock on the date we grant the option.
Option Grants............. Non-employee directors receive the following:
. Initial Stock Options: Stock options for 30,000 shares on the day they
first become a director; and
. Annual Stock Options: Stock options for 1,000 shares for each
additional year in which they remain on the board
of directors.
Term of Options........... Normally 5 years. If a director dies, his or her
stock options expire one year after death. If a
director ceases to be a member of the board, his
or her stock options expire 3 months thereafter.
Vesting of Options........ Initial stock options vest 25% each year. Annual
stock options vest 100% on the date they are
issued.
Exercise of Options....... The holder of an option can choose to pay the
exercise price for the option in cash, with the
Company's common stock (valued at the closing
price of the common stock, subject however to
approval by the board of directors), or by a
cashless exercise. In a cashless exercise, the
option holder irrevocably instructs his or her
broker to sell the shares to be acquired upon
exercise of the option and pay the exercise price
to the Company.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
Transferability......... Options are not transferable except by will or the laws of descent
and distribution.
Term of Plan............ The Plan will expire on September 11, 2006.
</TABLE>
Description of Amendment to the Plan.
On May 21, 1999, we amended the Plan (subject to shareholder approval) to
allow directors to defer the gain upon exercise of a stock option. The "gain"
is the difference between the exercise price of a stock option and the value
of the shares on the date the stock option is exercised.
If a director elects to defer the gain, he will file a deferral election
form with the Company, specifying the date on which he wishes to receive the
gain. The gain is converted into the right to receive "Deferred Compensation
Units" from the Company. The number of Deferred Compensation Units is
determined by dividing the dollar amount of the gain by the fair market value
of the Company's common stock on the date that the director exercises the
stock options. At the end of the deferral period, the director will receive
the number of shares of common stock equal to the number of Deferred
Compensation Units previously issued to the director.
Deferred Compensation Units do not earn any interest during the deferral
period. However, if the Company issues any dividends on its shares of common
stock during the deferral period, the directors who have elected to defer gain
are entitled to receive dividends equal to the amount they would have received
on the Deferred Compensation Units had they been converted into common stock.
A copy of the amendment to the plan is attached as Exhibit A to this proxy
statement.
Federal Income Tax Consequences to Option-Holders.
The grant of stock options to directors under the Plan does not result in
any taxable income to the option holder and does not constitute a deduction
for the Company at the time that the stock option is granted. Normally, when
the option holder exercises the stock option, he will at that time have to
recognize income equal to the gain. (The "gain" is the difference between the
exercise price of a stock option and the value of the shares on the date the
stock option is exercised.) At that time, the Company is entitled to a
deduction equal to the gain reported by the option holder.
If a director elects to defer gain (pursuant to the amendment to the Plan),
he would not have to report the gain as income until such time as the deferral
period is over, and the Company would not be entitled to a deduction until
such time as the deferral period is over.
This is only a summary of the federal income tax consequences of the grant
and exercise of options under the Plan. It is not a complete statement of all
tax consequences. In particular, we have not discussed the income tax laws of
any municipality, state or foreign country where an option holder resides.
27
<PAGE>
PROPOSAL NO. 3
APPROVAL OF
PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR
THE PRESIDENT
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation Committee with respect
to fiscal 2000 incentive compensation awards for the Company's President and
Chief Operating Officer (Dr. Eric Steiner).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the President's incentive
compensation award is to meet the requirements of Section 162(m). We recommend
that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and entitled to vote on this proposal.
Performance Goals. On September 16, 1999, the Company's Compensation and
Stock Option Committee established performance goals for the President's
fiscal 2000 incentive compensation award and the maximum amount payable to the
President if the goal is achieved. The performance goal and maximum amount
payable for fiscal 2000 are as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 2000, the President may receive up to two percent
(2%) of such pre-tax profits.
2. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2000, the President may receive up to two
percent (2%) of the total value of the transaction.
All of the foregoing will be computed in such a manner as to avoid
duplication.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the President in
fiscal 2000 based on his individual contribution, consistent with the
foregoing goal and in an amount no greater than the maximum amount set forth
above.
Assuming the shareholders approve the material terms of the performance goal
as described herein, the Company believes that any such incentive compensation
award to the President will qualify as performance-based compensation that
will be deductible from the Company's gross income for federal income tax
purposes.
28
<PAGE>
PROPOSAL NO. 4
APPROVAL OF
PERFORMANCE GOALS AND
INCENTIVE COMPENSATION FOR
THE CHIEF EXECUTIVE OFFICER
At the annual meeting, you will be asked to approve the material terms of
the performance goals established by the Compensation Committee with respect
to fiscal 2000 incentive compensation awards for the Company's Chief Executive
Officer (Mr. Jeffrey Steiner).
Section 162(m) of the Internal Revenue Code disallows deductions for
publicly-held corporations with respect to compensation in excess of
$1,000,000 paid to certain executive officers. However, compensation payable
solely on account of attainment of one or more performance goals is not
subject to this deduction limitation if:
. the performance goals are objective, pre-established and determined by a
compensation committee comprised solely of two or more outside
directors,
. the material terms of the performance goals under which the compensation
is to be paid are disclosed to the shareholders and approved by a
majority vote, and
. the compensation committee certifies that the performance goals and
other material terms were in fact satisfied before the compensation is
paid.
The purpose of seeking shareholder approval of the Chief Executive Officer's
incentive compensation award is to meet the requirements of Section 162(m). We
recommend that you vote "FOR" this proposal.
Vote Required. To be approved, this matter must receive the affirmative vote
of a majority of the shares present (in person or by proxy) at the meeting and
entitled to vote on such matter. Broker nonvotes will not be counted as
present and entitled to vote on this proposal.
Performance Goals. On July 27, 1999, the Company's Compensation and Stock
Option Committee established performance goals for the Chief Executive
Officer's fiscal 2000 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 2000 are as follows:
1. If the Company (including its consolidated subsidiaries) achieves pre-
tax profits for fiscal 2000, the Chief Executive Officer may receive up
to three percent (3%) of such pre-tax profits.
2. If the Company engages in an extraordinary transaction (e.g., purchase
or sale of assets not in the ordinary course, including, without
limitation, through a public offering or private placement of
securities) during fiscal 2000, the Chief Executive Officer may receive
up to two and one-half percent (2 1/2%) of the total value of the
transaction.
All of the foregoing will be computed in such a manner as to avoid
duplication.
The Compensation and Stock Option Committee retains the right to determine
the actual amount of incentive compensation to be awarded to the Chief
Executive Officer in fiscal 2000 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.
29
<PAGE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent auditor since
1968. No change is contemplated. Representatives of Arthur Andersen will be
available at the annual meeting to make a statement, if they so desire, and to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
If you want to include a shareholder proposal in the proxy statement for the
2000 annual meeting, it must be delivered to the Company before June 10, 2000.
If you want to submit a shareholder proposal for the 2000 annual meeting but
you do not require that such proposal be included in the Company's proxy
materials, you must notify the Company of such proposal before August 24,
2000. If such notice is not received by August 24, 2000, the proposal shall be
considered untimely and shall not be presented at the 2000 annual meeting.
All shareholder proposals must conform to the requirements set forth in
Regulation 14A under the Securities Exchange Act of 1934, and should be
submitted to the Company's headquarters, 45025 Aviation Drive, Suite 400,
Dulles, VA 20166-7516, Attention: Secretary.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended June
30, 1999, was mailed to shareholders with or prior to mailing of this proxy
statement. The Company will provide free of charge to any shareholder as of
the record date who so requests in writing, a copy of the Company's annual
report on Form 10-K for fiscal 1999. Requests for such copies should be
directed to Donald E. Miller, Executive Vice President & Secretary, The
Fairchild Corporation, 45025 Aviation Drive, Suite 400, Dulles, VA 20166-7516.
By Order of the Board of Directors
Donald E. Miller
Executive Vice President
& Secretary
30
<PAGE>
Exhibit A
Amendment Dated as of May 21, 1999 To
Non-Employee Director Stock Option Plans of
The Fairchild Corporation
The Fairchild Corporation (the "Corporation") has entered into various stock
option plans for its non-employee directors (the "NED Plans").
Each NED Plan is hereby amended to add the following provisions:
DEFERRAL OF COMPENSATION
1. Defined Terms.
1.1 "Award" means an award of stock options to a Non-Employee Director
under the Corporation's NED Plans.
1.2 "Committee" means the full Board of Directors (excluding the
participation of Non-Employee Directors) or a committee of three of
more Directors (excluding Non-Employee Directors).
1.3 "Deferral Date" means, in connection with any Deferred Compensation
Unit, the date on which any deferred compensation with respect thereto
would have been paid if no deferral election had been made.
1.4 "Deferred Compensation Plan" means the Corporation's Stock Option
Deferral Plan dated February 9, 1998 (as amended from time to time).
Generally, participation in the Deferred Compensation Plan shall be
limited to Executive Officers and Directors who are deemed "Accredited
Investors" for purposes of Federal Securities Laws.
1.5 "Deferred Compensation Units" means the right of a Non-Employee
Director to receive distributions of deferred compensation pursuant to
the Deferred Compensation Plan in the form of Shares, determined in
accordance with the terms of the Deferred Compensation Plan and this
Amendment to the NED Plans, and based on the Fair Market Value of Shares
on the Deferral Date.
1.6 "Dividend Equivalents" means the right of a Non-Employee Director to
receive Shares equal to:
(i) the per Share cash dividends declared by the Corporation from time
to time,
(ii) multiplied by the number of Deferred Compensation Units credited
to the account of the Non-Employee Director as of each applicable
dividend record date,
(iii) divided by the Fair Market Value on the related dividend payment
date.
1.7 "Fair Market Value" means with respect to the Corporation'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.
1.8 "NED Plans" means all of the Corporation's stock option plans for Non-
Employee Directors, including individual stock option awards to Non-
Employee Directors.
1.9 "Non-Employee Director" means any director of the Corporation who is
not also an employee or executive officer of the Corporation or any of
its subsidiaries.
1.10 "Shares" means shares of the Corporation's Class A Common Stock.
A-1
<PAGE>
2. Deferred Compensation Units
2.1 Granting of Deferred Compensation Units: To the extent elected by any
Non-Employee Director and permitted by the Deferred Compensation Plan,
the Committee may award Deferred Compensation Units to any Non-Employee
Director in lieu of all or any portion of the gain that would otherwise
be recognized by such Non-Employee Director upon exercise of a stock
option. All Deferred Compensation Units shall be subject to the terms of
this Amendment to the NED Plans and the Deferred Compensation Plan.
2.2 Effect of Grants: The number of Shares distributable to Non-Employee
Directors pursuant to each Deferred Compensation Unit shall be charged
against the maximum number of Shares of Common Stock that may be issued
under the NED Plans at any time. The number of Shares distributable to
Non-Employee Directors pursuant to Dividend Equivalents shall not be
charged against the number of Shares issuable under the NED Plans.
2.3 Accounting; Fractional Units:
(a) The number of Deferred Compensation Units credited to the account of
any Non-Employee Director shall be rounded to the nearest one-
thousandth of a Unit. The account to which Deferred Compensation Units
are credited shall be an unsecured general obligation of the
Corporation. The Corporation will maintain records of the number of
Deferred Compensation Units for the account of each Non-Employee
Director, in part, to prevent an issuance of shares of Common Stock in
excess of the authorized shares.
(b) Notwithstanding paragraph (a) above, upon distribution of any Shares
represented by Deferred Compensation Units, the number of shares shall
be rounded downward to the nearest whole share and no fractional shares
shall be issued. Fractional Units remaining after the final
distribution to any Non-Employee Director shall be cancelled without
obligation to the Non-Employee Director.
2.4 Exercise of Rights Under Awards:
Shares used to pay the purchase price on the exercise of Awards subject
to the Deferred Compensation Plan, shall have been held by the Non-
Employee Director for a period of not less than six months (or such
longer period as may be required under the terms of the Award).
Except as amended hereby, the NED Plans shall remain in full force and
effect.
This Amendment to the NED Plans is effective as of May 21, 1999.
A-2
<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 28, 1999 at the Annual Meeting of Stockholders to
be held on Thursday, November 18, 1999 at 10:00 a.m. (local time) and at any
adjournments or postponements thereof.
" Please Mark Inside Boxes so that Data Processing Equipment will Record Your
Votes."
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
(Continued and to be signed on the reverse side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL LISTED NOMINEES, AND FOR APPROVAL OF THE OTHER PROPOSALS:
1. ELECTION OF DIRECTORS
/ / FOR all listed nominees / / WITHHELD for all.
(except as marked to the contrary
below).
Melville R. Barlow, Mortimer M. Caplin, Philip David, Robert E. Edwards,
Steven L. Gerard, Harold J. Harris, Daniel Lebard, Herbert S. Richey,
Eric I. Steiner, and Jeffrey J. Steiner.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. TO AMEND THE COMPANY'S DIRECTOR STOCK OPTION PLAN TO PERMIT DEFERMENT OF
COMPENSATION;
/ / FOR / / AGAINST / / ABSTAIN
3. TO APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS FOR THE FISCAL 2000
INCENTIVE COMPENSATION AWARD FOR THE COMPANY'S PRESIDENT;
/ / FOR / / AGAINST / / ABSTAIN
4. TO APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS FOR THE FISCAL 2000
INCENTIVE COMPENSATION AWARD FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER;
/ / FOR / / AGAINST / / ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name(s) appear hereon.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give
full title as such.
Date _______________________________________
_______________________________________
_______________________________________
Signature(s)
<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 18, 1999, 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 15, 1999,
this proxy will be voted in the same percentage as shares held by participants
for which the Trustee has received timely voting instructions. The Trustee will
hold your voting directions in strict confidence. The Proxy may vote in its
discretion upon any other matters properly coming before the Annual Meeting and
any adjournments thereof.
" Please Mark Inside Boxes so that Data Processing Equipment will Record Your
Votes."
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
(Continued, and to be signed on other side)
<PAGE>
1. ELECTION OF DIRECTORS
/ / FOR all listed nominees / / WITHHELD for all.
(except as marked to the contrary
below).
Melville R. Barlow, Mortimer M. Caplin, Philip David, Robert E. Edwards,
Steven L. Gerard, Harold J. Harris, Daniel Lebard, Herbert S. Richey,
Eric I. Steiner, and Jeffrey J. Steiner.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. TO AMEND THE COMPANY'S DIRECTOR STOCK OPTION PLAN TO PERMIT DEFERMENT OF
COMPENSATION;
/ / FOR / / AGAINST / / ABSTAIN
3. TO APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS FOR THE FISCAL 2000
INCENTIVE COMPENSATION AWARD FOR THE COMPANY'S PRESIDENT;
/ / FOR / / AGAINST / / ABSTAIN
4. TO APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS FOR THE FISCAL 2000
INCENTIVE COMPENSATION AWARD FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER;
/ / FOR / / AGAINST / / ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name(s) appear hereon.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give
full title as such.
Date _______________________________________
_______________________________________
_______________________________________
Signature(s)
