sec document
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 25)(1)
The Fairchild Corporation
-------------------------
(Name of Issuer)
Class a Common Stock and Class B Common Stock, Par Value $0.10 Per Share
------------------------------------------------------------------------
(Title of Class of Securities)
Class A Common Stock: 303698 10 4
---------------------------------
Class B Common Stock: 303698 20 3
---------------------------------
(CUSIP Numbers)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 6, 2006
--------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
NOTE. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-7 for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 28 Pages)
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
NOTES).
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 2 of 28 Pages
303698 20 3
------------------------ ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
THE STEINER GROUP LLC
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
13-4035166
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware, USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 5,727,684 Class A Shares*
OWNED BY 2,533,996 Class B Shares
EACH -----------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
- 0 - Class A Shares
- 0 - Class B Shares
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
5,727,684 Class A Shares*
2,533,996 Class B Shares
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 - Class A Shares
- 0 - Class B Shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
5,727,684 Class A Shares*
2,533,996 Class B Shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8% of Class A Shares, 96.7% of Class B Shares
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
--------
* Assumes the conversion of the Class B Shares on a share-for-share basis
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 3 of 28 Pages
303698 20 3
------------------------ ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
JEFFREY J. STEINER
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Austria
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 469,062 Class A Shares
OWNED BY 30,000 Class B Shares
EACH -----------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
- 0 - Class A Shares
- 0 - Class B Shares
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
469,062 Class A Shares*
30,000 Class B Shares
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 - Class A Shares
- 0 - Class B Shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
469,062 Class A Shares*
30,000 Class B Shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.1% of Class A Shares, 1.1% of Class B Shares
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
--------
* Assumes the conversion of the Class B Shares on a share-for-share basis
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 4 of 28 Pages
303698 20 3
------------------------ ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ERIC I. STEINER
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 289,481 Class A Shares*
OWNED BY 15,000 Class B Shares
EACH -----------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
6,017,165 Class A Shares*
2,548,996 Class B Shares
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
289,481 Class A Shares*
15,000 Class B Shares
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,017,165 Class A Shares*
2,548,996 Class B Shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
6,017,165 Class A Shares*
2,548,996 Class B Shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.9% of Class A, 97.2% of Class B
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
--------
* Assumes the conversion of the Class B Shares on a share-for-share basis
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 5 of 28 Pages
303698 20 3
------------------------ ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NATALIA F. HERCOT
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 98,505 Class A Shares*
OWNED BY 15,000 Class B Shares
EACH -----------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
5,826,189 Class A Shares*
2,548,996 Class B Shares
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
98,505 Class A Shares*
15,000 Class B Shares
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
5,826,189 Class A Shares*
2,548,996 Class B Shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
5,826,189 Class A Shares*
2,548,996 Class B Shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.2% of Class A Shares, 97.2% of Class B Shares
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
--------
* Assumes the conversion of the Class B Shares on a share-for-share basis
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 6 of 28 Pages
303698 20 3
------------------------ ----------------------
The following constitutes Amendment No. 25 ("Amendment No. 25") to the
Schedule 13D filed by the undersigned. This Amendment No. 25 amends the Schedule
13D as specifically set forth.
Item 2. IDENTITY AND BACKGROUND.
Item 2 is hereby amended to add the following:
The Steiner Group LLC, Jeffrey J. Steiner, Eric I. Steiner, and Natalia
F. Hercot are hereinafter sometimes collectively referred to as the "Reporting
Persons". Any disclosures herein with respect to persons other than the
Reporting Persons are made on information and belief after making inquiry to the
appropriate party.
By reason of the terms of that Memorandum of Understanding, dated
August 6, 2006, by and between Philip S. Sassower and Jeffrey J. Steiner (the
"MOU"), more fully described in Item 4, the Reporting Persons affirm that
they constitute a "group" within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934 with respect to the proposed transaction
described in Item 4 of this Schedule 13D. Pursuant to Rule 13d-1(k)(2), the
Sassower Group (i.e., Philip S. Sassower, The Philip S. Sassower 1996 Charitable
Remainder Annuity Trust and Andrea Goren) (the "Sassower Group") and the
Reporting Persons are each filing a separate Schedule 13D with the SEC. The
Reporting Persons expressly disclaim beneficial ownership of any securities held
by the Sassower Group.
Item 4. PURPOSE OF TRANSACTION.
Item 4 is hereby amended to add the following:
On August 7, 2006, FA Holdings I, LLC, a newly-formed Delaware limited
liability company ("Holdings LLC"), controlled by Jeffrey J. Steiner and Philip
S. Sassower, submitted a proposal (the "Proposal Letter") from Holdings LLC on
behalf of its members and their affiliates to the Issuer offering to acquire all
of the outstanding capital stock of the Issuer not currently owned by the
Reporting Persons or the Sassower Group for $2.73 per share in cash. According
to the Proposal Letter, the acquisition would be effected by means of a merger
into the Issuer of a wholly-owned Delaware subsidiary of Holdings LLC, with the
Issuer being the surviving company. The Proposal Letter provides that the offer
is subject to the negotiation and execution of a definitive merger agreement,
the refinancing of any Issuer or Issuer subsidiary debt that comes due as a
result of the merger, limited supplemental due diligence, participation by
Jeffrey J. Steiner and Eric I. Steiner in the management of the Issuer after
consummation of the merger (on terms to be agreed upon), the approval of the
board of directors and the affirmative vote of the holders of a majority of the
shares of the Issuer (including those shares held by the Reporting Persons and
the Sassower Group, but including therein any Class B shares of common stock
only on a one vote-per share basis) and the receipt of necessary regulatory
approvals. The Proposal Letter provides that the proposal therein will expire at
5:00 p.m., New York City time, on August 31, 2006.
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 7 of 28 Pages
303698 20 3
------------------------ ----------------------
In the event the board of directors of the Issuer recommends the
proposed merger to its shareholders, the merger and related transactions receive
requisite shareholder approval and are consummated, the MOU provides that the
Issuer would cease to be a registered company under the Securities Exchange Act
of 1934 and its securities would no longer be listed on the New York Stock
Exchange or Pacific Stock Exchange and transactions in its common stock will not
be reported or quoted on any automated quotation system.
In addition, Jeffrey J. Steiner and Philip S. Sassower entered into a
Memorandum of Understanding (the "MOU") as of August 6, 2006 which sets forth
certain agreements between Jeffrey J. Steiner and Philip S. Sassower relating to
the management and ownership of Holdings LLC and the Issuer in the event the
merger and related transactions are approved by the board of directors of the
Issuer, receive requisite shareholder approval and are consummated. Pursuant to
the MOU, Jeffrey J. Steiner has agreed to cause the contribution to Holdings LLC
of 7,000,000 shares of the Issuer's Common Stock (including Class A stock and
Class B stock on an as-converted basis) or to contribute cash in lieu of any
shortfall and to vote all such shares in favor of the merger and Mr. Sassower
has agreed to contribute or cause to be contributed to Holdings LLC cash in the
amount of $30 million.
The Proposal Letter and the MOU are filed as exhibits hereto and are
incorporated by reference herein.
Item 5 INTEREST IN SECURITIES OF THE ISSUER.
Items 5(a), (b), and(c) are hereby amended to read as follows:
The percentages used herein and in the rest of Item 5 are calculated
based upon 22,604,761 shares of Class A Common stock and upon 2,621,412 shares
of Class B Common Stock, of the Issuer, which reflects in each case the shares
of Common Stock outstanding as of March 31, 2006, as reflected in the Company's
quarterly report for the quarterly period ended March 31, 2006, filed with the
Securities and Exchange Commission on May 9, 2006.
The beneficial ownership of each of the various Reporting Persons
(assuming in each case the conversion of shares of Class B Common Stock on a
share-for-share basis) is as follows:
(a) As of the date of this filing, The Steiner Group LLC, Jeffrey J.
Steiner, Eric I. Steiner and Natalia F. Hercot may be deemed the beneficial
owners of 5,727,684, 469,062, 6,017,165 and 5,826,189, or approximately 22.8%,
2.1%, 23.9% and 23.2% of shares of Class A Common Stock, respectively. As a
co-manager of The Steiner Group LLC, Eric I. Steiner may be deemed to
beneficially own the 5,727,684 shares of Common Stock beneficially owned by The
Steiner Group LLC, in addition to the 289,481 shares of Common Stock reported as
owned directly by Eric I. Steiner. As a co-manager of The Steiner Group LLC,
Natalia F. Hercot may be deemed to beneficially own the 5,727,684 shares of
Common Stock beneficially owned by The Steiner Group LLC, in addition to the
98,505 shares of Common Stock reported as owned directly by Natalia F. Hercot.
Jeffrey J. Steiner disclaims beneficial ownership of the shares of
Common Stock beneficially owned by the other Reporting Persons. Each of Eric I.
Steiner and Natalia F. Hercot disclaim beneficial ownership of the shares of
Common Stock beneficially owned by the other Reporting Persons, with the
exception of the shares of Common Stock beneficially owned by The Steiner Group
LLC.
Included in the 469,062 shares of Common Stock reported as beneficially
owned by Jeffrey J. Steiner are 38,500 shares of Class A Stock owned by Mr.
Steiner as custodian for his children, 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, 2,400 shares of Class A Stock owned by the Jeffrey
Steiner Family Foundation, and stock options to purchase 395,518 shares of Class
A Common stock exercisable within 60 days of the date hereof. Mr. Steiner
disclaims beneficial ownership of shares owned by the Jeffrey Steiner Family
Foundation, and shares owned by him as custodian for his children.
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 8 of 28 Pages
303698 20 3
------------------------ ----------------------
Included in the 6,017,165 shares of Common Stock reported as
beneficially owned by Eric I. Steiner are 80,000 shares of Class A Stock held in
The Steiner Children's Trust, and stock options to purchase 69,288 shares of
Class A Common stock exercisable within 60 days of the date hereof.
Included in the 5,826,189 shares of Common Stock reported as
beneficially owned by Natalia F. Hercot are 10,000 shares of Class A Stock held
by her husband, and stock options to purchase 31,688 shares of Class A Common
stock exercisable within 60 days of the date hereof.
The foregoing discussion excludes Deferred Compensation Units to be
paid out on February 28, 2010 in the form of one share of Class A Common Stock
for each Deferred Compensation Unit.
(b) Each of Eric I. Steiner and Natalia F. Hercot share voting and
dispositive power over The Steiner Group LLC's security holdings, in their roles
as the co-managers of The Steiner Group LLC. Each of Eric I. Steiner and Natalia
F. Hercot is deemed to have shared voting and dispositive power over the
5,727,684 shares of Class A Common Stock reported as beneficially owned by The
Steiner Group LLC by virtue of their respective co-manager positions. Jeffrey J.
Steiner disclaims voting and dispositive power over the shares of Common Stock
beneficially owned by the other Reporting Persons. Each of Eric I. Steiner and
Natalia F. Hercot disclaim voting and dispositive power over the shares of
Common Stock beneficially owned by the other Reporting Persons, with the
exception of the shares of Common Stock beneficially owned by The Steiner Group
LLC.
Of the membership interests in The Steiner Group LLC: (i) 20% is held
by Bayswater Ventures L.P., a partnership owned by four different trusts, of
which Jeffrey J. Steiner is a beneficiary; and (ii) the remaining 80% membership
interest in The Steiner Group LLC is held by The J.S. Family Trust, a trust
created for the benefit of the issue of Jeffrey J. Steiner. The members of The
Steiner Group LLC do not have the right to vote or to direct the disposition of
the Fairchild shares held by The Steiner Group LLC.
(c) No Reporting Person entered into any transactions in shares of Common
Stock in the past 60 days.
Upon information and belief, the Sassower Group, as of the date hereof,
beneficially owns 118,100 shares of Common Stock.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Item 6 is hereby amended to add the following:
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 9 of 28 Pages
303698 20 3
------------------------ ----------------------
On August 7, 2006, Holdings LLC delivered the Proposal Letter to the
Issuer. In addition, Jeffrey J. Steiner and Philip S. Sassower entered into the
MOU as of August 6, 2006. Each Reporting Person intends to vote their respective
shares of Common Stock in favor of the proposed merger, and in connection with
the proposed transaction, may grant a proxy to vote their shares of Common Stock
to Holdings LLC. See Item 4. Each of the Proposal Letter and the MOU are filed
as exhibits hereto, and are incorporated by reference herein.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Letter, dated August 7, 2006, addressed to The Fairchild
Corporation from FA Holdings I, LLC.
2. Memorandum of Understanding made and entered into as of August 6,
2006 by and between Jeffrey J. Steiner and Philip S. Sassower.
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 10 of 28 Pages
303698 20 3
------------------------ ----------------------
SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, each of the undersigned certifies that the information set forth in
this statement by or about it or him is true, complete and correct.
Date: August 9, 2006 /s/ Jeffrey J. Steiner
-----------------------------------
JEFFREY J. STEINER
Date: August 9, 2006 THE STEINER GROUP LLC
By: /s/ Eric I. Steiner
-------------------------------
Eric I. Steiner
Co-Manager
Date: August 9, 2006 /s/ Eric I. Steiner
-----------------------------------
ERIC I. STEINER
Date: August 9, 2006 /s/ Natalia F. Hercot
-----------------------------------
NATALIA F. HERCOT
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 11 of 28 Pages
303698 20 3
------------------------ ----------------------
Exhibit 1
FA HOLDINGS, LLC
c/o Phoenix Enterprises LLC
110 East 59th Street, Suite 1901
New York, New York 10022
August 7, 2006
The Fairchild Corporation
1750 Tysons Boulevard, Suite 1400
McLean, Virginia 22102
Gentlemen:
The purpose of this letter is to set forth a proposal by FA Holdings,
LLC, its members and their affiliates (collectively, the "Phoenix/Steiner
Group") to acquire all of the outstanding capital stock of Fairchild Corporation
("Fairchild") for $2.73 per share in cash. This price represents approximately a
25% premium over the volume-weighted average closing price of Fairchild's common
stock over the last 30 trading days, and approximately a 20% premium over
yesterday's closing price.
The acquisition would be effected by means of a merger (the "Merger")
into Fairchild of a wholly-owned Delaware subsidiary ("Acquisition") of FA
Holdings, LLC ("Holdings"), a Delaware limited liability company led by Philip
Sassower and Jeffrey J. Steiner. In the Merger, each shareholder will receive,
for each share of Fairchild common stock, $2.73 in cash.
The Steiner Group LLC has agreed to vote the shares held by it in favor
of the Merger.
A form of Agreement and Plan of Merger (the "Merger Agreement") will be
provided in the near future to counsel to the Fairchild Board of Directors and
counsel to any committee of the Fairchild Board that may consider our proposal.
The execution of the proposed Merger Agreement will not prohibit Fairchild from
subsequently entering into an agreement to sell Fairchild to another bona fide
bidder at a price which is more favorable from a financial point of view to
Fairchild's shareholders than our proposed price. Our proposal includes
customary provisions that Fairchild pay or reimburse us in cash for all expenses
incurred in connection with the transaction and to pay to Holdings a "break-up
fee" of 3% of transaction value in certain circumstances (such as if Fairchild
enters into a Merger Agreement with Holdings and thereafter accepts an
alternative transaction).
Our proposal is not subject to financing.
Our proposal is subject to the negotiation and execution of a
definitive Merger Agreement, the refinancing of any Fairchild or Fairchild
subsidiary debt that comes due as a result of the Merger, limited supplemental
due diligence (the Phoenix/Steiner Group anticipates that such investigation can
be completed within 30 days), participation by Mr. Jeffrey J. Steiner and Dr.
Eric Steiner (the "Steiner Management Group") in the management of Fairchild
after consummation of the Merger (on terms to be agreed upon), the approval of
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 12 of 28 Pages
303698 20 3
------------------------ ----------------------
The Fairchild Corporation
August 7, 2006
Page 2
the Board of Directors and the affirmative vote of a majority of the shares of
Fairchild (including in such calculation those shares held by The Steiner Group
LLC and the Steiner Management Group, but including therein any Class B shares
of common stock only on a one vote-per share basis) and the receipt of necessary
regulatory approvals.
We believe that this proposal is in the best interests of the Fairchild
stockholders and, accordingly, in light of the participation by the Steiner
Management Group we request that the Fairchild Board of Directors consider this
proposal as expeditiously as possible. This proposal will expire at 5:00 p.m.,
New York City time, on August 31, 2006.
We will be pleased to provide the Board and/or any committee of the
Board and its representatives with any information in our possession with
respect to our proposal, and we and our representatives are available to meet at
any time with the Board and/or any committee of the Board and its
representatives to discuss this proposal.
Sincerely yours,
FA HOLDINGS, LLC
By: /s/ Philip Sassower
----------------------------
Philip Sassower, Manager
By: /s/ Jeffrey J. Steiner
-----------------------------
Jeffrey J. Steiner, Manager
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 13 of 28 Pages
303698 20 3
------------------------ ----------------------
Exhibit 2
MEMORANDUM OF UNDERSTANDING
This binding Memorandum of Understanding (this "MOU") is made and
entered into as of August 6, 2006 (the "Effective Date") by and between Jeffrey
J. Steiner and Philip S. Sassower.
I. BACKGROUND AND SUMMARY
1. THE COMPANY; INITIAL MEMBERS A (i) limited liability company, to be
formed (the "Steiner FA LLC" or the
"Steiner Member"), controlled and
partially owned by Jeffrey J. Steiner
("Steiner") with other ownership interests
limited to Steiner family members or their
controlled affiliates, and (ii) a limited
liability company to be formed and to be
known as Phoenix FA Holdings, LLC (the
"Phoenix Group LLC" or the "Phoenix
Member") controlled and partially owned by
Philip S. Sassower ("Sassower"), with the
other interests in the Phoenix Group LLC
being held by certain investors described
below (each of the Steiner FA LLC and the
Phoenix Group LLC being referred to herein
as a "Member" and, collectively, as the
"Members"), propose to form a Delaware
limited liability company to be known as
FA Holdings, LLC, or another entity upon
consultation with counsel ("Holdings" or
the Company"), for the purposes described
below.
2. PURPOSE OF THE COMPANY; The purpose of Holdings is to acquire,
MEMBERS' COMMITMENT manage and hold for investment 100% of the
equity of The Fairchild Corporation, a
Delaware company ("FA"). In furtherance
thereof, Steiner and Sassower intend to
jointly propose and, through Holdings, to
execute a "going private" transaction
involving FA pursuant to which, among
other things: (a) a direct or indirect
wholly owned subsidiary of Holdings will
merge with and into FA, with FA surviving
as a direct or indirect wholly owned
subsidiary of Holdings (the "Merger"); (b)
each share of FA Common Stock not owned by
Holdings (unless otherwise agreed by
Steiner and Sassower) shall be converted
into a right to receive cash at a price
per share to be proposed by Holdings after
mutual agreement by Steiner and Sassower,
subject to subsequent negotiation with and
agreement by FA's Special Committee and
Board of Directors and, thereafter,
stockholder approval (the definitive cash
price per share being the "Merger
Consideration"); (c) FA will cease to be a
registered company under the Securities
Exchange Act of 1934 (the "Exchange Act")
and (d) its securities will no longer be
listed on the New York Stock Exchange or
Pacific Stock Exchange and transactions in
FA's common stock will not be reported or
quoted on any automated quotation system,
all in accordance with the terms of a
written proposal to be jointly prepared by
Sassower and Steiner and submitted to the
Board of Directors of FA or a designated
Special or Independent Committee thereof
(the "Transaction").
Each Member will have the proxy to vote in
favor of the Transaction all of the shares
of FA Common Stock to be contributed to
Holdings as described below, effective
upon contribution of such shares to
Holdings. Each Member agrees to vote such
shares and all shares of FA Common Stock
owned or controlled by it in favor of the
Transaction, provided that such agreement
shall no longer be binding upon any
Member, and the proxy referred to above
shall terminate, upon the Termination Date
(as defined below).
------------------------ ----------------------
CUSIP Nos. 303698 10 4 & 13D Page 14 of 28 Pages
303698 20 3
------------------------ ----------------------
3. CAPITAL CONTRIBUTIONS; Contemporaneously with execution and
MEMBERSHIP INTERESTS; delivery of the definitive Agreements,
DISTRIBUTIONS; ALLOCATIONS each Member will execute and deliver a
subscription agreement, which may be
incorporated within the definitive
Agreements (each a "Subscription
Agreement") with Holdings pursuant to
which each Member will subscribe for
membership interests in Holdings in
exchange for its agreement to make or
cause to be made a capital contribution in
the form of:
(a) in the case of the Steiner Member, not
less than 7,000,000 shares of FA Common
Stock (including Class A & Class B Stock,
on an as-converted basis, including (i)
5,727,684 shares held by The Steiner FA
LLC, (ii) 68,500 shares held by Jeffrey J,
Steiner as custodian and 2,400 shares held
by the Jeffrey Steiner Family Foundation,
(iii) 220,193 shares held by Eric Steiner,
(iv) 66,837 shares held by Natalia Hercot
or her spouse, and (vi) not less than
914,386 shares held by other individuals
or entities, AND INCLUDING and assuming
full conversion and contribution of all
2,621,412 shares of FA Common Stock
issuable upon conversion of 2,621,412
Class B Common Stock of FA) (all such
shares of FA Common Stock being referred
to herein as "Steiner FA Shares"), with
any shortfall in shares of contributed
Steiner FA Shares below 7,000,00 shares
being made whole by a cash capital
contribution equal to the Merger
Consideration multiplied by the share
shortfall number (collectively, the
"Steiner Capital Contribution"); and
(b) in the case of the Phoenix Member,
cash in an amount equal to $30.0 million
(the "Phoenix Capital Contribution").
The Steiner Capital Contribution and
Phoenix Capital Contribution are sometimes
referred to as that Member's "Initial
Capital Contribution."
Each Subscription Agreement shall provide
that the Member which is a signatory
thereto: (a) will be obligated to
transfer, assign and deliver its
respective Steiner FA Shares to Holdings,
free and clear of all liens, pledges and
encumbrances, no earlier than upon the
execution and delivery of a merger
agreement for the Transaction by Holdings
and FA (the "Merger Agreement") and no
later than the effective date of the
Merger, and to fund any cash Initial
Capital Contribution to Holdings no
earlier than upon the execution and
delivery of the Merger Agreement, and no
later than the effective date of the
Merger; and (b) shall not transfer,
convey, pledge or otherwise encumber any
of its respective Steiner FA Shares prior
to the Termination Date (as defined
below). Each Subscription Agreement shall
provide for the return of the Steiner FA
Shares to the respective Member who
executed it or to his or its designee, for
no consideration, promptly following the
Termination Date. If requested by the
Phoenix Member, the Steiner Member shall
execute or cause to be executed voting
proxies in favor of Holdings to permit
Holdings to vote all of the Steiner FA
Shares in favor of the Merger.
The obligations of both of the Members to
contribute, transfer, assign and deliver
their respective Initial Capital
Contributions, and not transfer, convey,
pledge or otherwise encumber any Steiner
FA Shares may, if required by any one
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Member prior to the contribution pursuant
to the prior paragraph, be secured by
their executing an escrow agreement
providing for, among other things, the
delivery of their respective Steiner FA
Shares into escrow with a mutually
agreeable nationally reputable escrow
agent, and the release of the same (x) to
Holdings no later than the consummation of
the Merger, or (y) back to the Members
following the Termination Date. Steiner
represents and warrants that the Steiner
FA Shares are held by their respective
owners free and clear of all liens,
pledges and encumbrances.
The Phoenix Group LLC shall include as
members those individuals and entities
designated by Sassower. Without limiting
the foregoing, such entities are
anticipated to include (i) Phoenix Venture
Fund LLC, and (ii) various individuals and
entities, including but not limited to
current investors in Phoenix Venture Fund
LLC. The Phoenix Group LLC shall obtain
subscription agreements and covenants from
each of its members comparable to those
entered into by the Members.
In exchange for its agreement to
contribute its respective Initial Capital
Contributions (including the Steiner FA
Shares) to Holdings (and subsequent
contribution thereof, if any), each of the
Members will initially hold, directly or
through entities controlled by them, a
membership interest (and collectively, all
of the membership interests) in Holdings
having the voting, economic and governance
rights and privileges and the obligations
set forth herein.
No Member shall be required to make any
contribution, loan or other investment in
or to Holdings in excess of its Initial
Capital Contribution without its specific
consent, and no Member shall be permitted
to make any contribution, loan or other
investment in or to Holdings without the
consent of each Member.
No Member shall be deemed to have
contributed any trade name, trademark or
other intellectual property to Holdings.
NO PRIORITY RETURN: No Member shall have any priority over any
other Member as to the return of any
Initial Capital Contribution.
DISTRIBUTIONS: VOLUNTARY DISTRIBUTIONS:
Available cash will be distributed at the
discretion of the Company's Board of
Managers (the "Board"), in a ratio (the
"Profit Sharing Ratio") of 50% to the
Steiner Member and 50% to the Phoenix
Member.
MANDATORY DISTRIBUTIONS:
TAX DISTRIBUTIONS: The Company will
distribute annually to all Members an
amount such that each Member has received
distributions in aggregate amounts for the
current fiscal year, and all prior fiscal
years, which equal not less than the sum
for the immediately preceding fiscal year,
and all prior fiscal years, of the amount
of profits allocated to such Member for
such fiscal years reduced by the amount of
losses allocated to such Member for such
year, multiplied by a percentage equal to
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the sum of the maximum individual federal,
state and local income tax rates for such
fiscal year.
LIQUIDATION: Upon liquidation, after
payment of all liabilities of the Company
and expenses of liquidation, and
establishment of reasonable reserves for
actual or contingent liabilities, the
Company will distribute its remaining cash
and other assets in accordance with the
formula set forth above under the heading
"Voluntary Distributions." Liquidation
shall include (a) a sale of all or
substantially all of the assets of the
Company, (b) a merger, or (c) a
consolidation, recapitalization or similar
transaction involving the Company, as a
result of which the existing Members will
own less than 50% of the membership
interests in the Company or in any
surviving entity in a merger (each, a
"Company Liquidation Event").
The parties acknowledge that any
distributions, dividends or other payments
from FA or its subsidiaries to Holdings
may only be made subject to and in
compliance with existing agreements of,
and restrictions applicable to, FA.
ALLOCATION OF LOSSES: Losses will be allocated among the Members
first PRO RATA in proportion to and up to
the amounts of their positive capital
accounts, and thereafter in accordance
with the Profit Sharing Ratio then in
effect.
4. DEBT FINANCING The Members will use their commercial best
efforts to mutually agree on the scope and
terms of any additional debt financing
required to (a) finance the payment of the
aggregate Merger Consideration to be paid
in the Transaction and for Transaction
expenses, plus (b) provide adequate
minimum working capital level for FA going
forward (collectively, the "Required
Financing"). Any Required Financing shall
require the consent of both Members.
II. MANAGEMENT
1. HOLDINGS BOARD OF MANAGERS The Board will consist initially solely of
Steiner and Sassower, or their respective
designees. One additional Steiner Manager
and one additional Phoenix Manager may be
added to the Board at any time. The
unanimous vote or written consent of the
Board shall be required for the taking of
any action provided, however, that Steiner
will have day-to-day control over and
responsibility for the operations of FA as
described in Section II.3 below. Except as
otherwise specifically provided herein,
the Board will be vested with the
authority customarily or by statute
reserved for the managers of a Delaware
limited liability company. The Board will
meet at least quarterly (in parallel with
FA board meetings) to review FA's and
Holdings' operations and performance.
No manager of Holdings may be removed or
replaced, and no vacancy on the Board may
be filled except in accordance with the
following:
RESIGNATION. Any manager of Holdings may
resign at any time by giving written
notice to the Members and the remaining
manager(s).
REMOVAL. A manager of Holdings who is a
Steiner Manager (as defined below) may be
removed at any time, with or without
cause, by Steiner, and a manager who is a
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Phoenix Manager (as defined below) may be
removed at any time, with or without
consent, by the Phoenix Group LLC.
VACANCIES. Upon the vacancy of any manager
of Holdings for any reason (including,
without limitation, resignation or removal
as set forth above), a successor shall be
appointed by Steiner, if the prior manager
was Steiner or a Steiner FA LLC designee
(a "Steiner Manager"), or the Phoenix
Group LLC, if the prior manager was
Sassower or a Phoenix Group LLC designee
(a "Phoenix Manager").
2. FA BOARD OF DIRECTORS Holdings shall at all times vote its
shares of FA for the election of a board
of directors of FA of which 50% shall be
designees of the Steiner FA LLC and 50%
shall be designees of the Phoenix Group
LLC.
No FA director may be removed or replaced,
and no vacancy on the FA board of
directors may be filled except in
accordance with the following:
RESIGNATION. Any director may resign at
any time by giving written notice to the
FA board of directors.
REMOVAL. A director who is a Steiner
designee may be removed at any time, with
or without cause, by the Steiner FA LLC,
and a director who is a Phoenix designee
may be removed at any time, with or
without consent, by the Phoenix Group LLC.
VACANCIES. Upon the vacancy of any
director for any reason (including,
without limitation, resignation or removal
as set forth above), a successor shall be
appointed by the Steiner FA LLC, if the
prior director was a Steiner designee, or
the Phoenix Group LLC if the prior
director was a Phoenix Group LLC designee.
Upon consummation of the Transaction, the
bylaws of FA shall be amended to conform
to the foregoing.
3. RESPONSIBILITIES OF HOLDINGS The Board will have complete control and
BOARD OF MANAGERS; FA BOARD responsibility for, and will manage all
OF DIRECTORS; FA CHIEF aspects of, the day-to-day operations of
EXECUTIVE OFFICER Holdings and will exercise control over
Holdings' investment in FA.
Except as otherwise specifically provided
herein, the board of directors of FA shall
continue to be vested with the authority
customarily or by statute reserved for the
board of directors of a Delaware
corporation, provided, however, that (a)
Steiner will have day-to-day control over
and responsibility for the operations of
FA (including decisions such as to opening
or closing a store or decisions as to
hiring or dismissing any non-executive
employee) and shall continue to report to
and consult with the board of directors of
FA in a manner consistent with past
practice and the terms of his current
employment agreement with FA, and (b)
Steiner and Sassower shall have joint
oversight and joint overall responsibility
for investment banking and sourcing and
supervising of financing and refinancing
of all debt, subject to review by and
consultation with the FA board of
directors.
Holdings will not have employees, unless
otherwise determined by the Board.
Holdings shall cause FA to employ or
otherwise retain Steiner as its Chief
Executive Officer in accordance with, and
subject to, the terms of a new employment
agreement or consulting agreement with
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Steiner or an affiliated entity, on terms
to be determined and mutually agreed upon
by Steiner and Sassower.
Steiner agrees that, in view of Steiner's
dual role as acting as Chief Executive
Officer and as a control person of
Holdings and FA exercising control over
50% of the FA board, any rights FA has
under and employment or consulting
agreement with Steiner or a Steiner
affiliate may be exercised by the FA board
without Steiner's vote or consent (except
as required by the express terms of such
agreement), and Sassower agrees that he
shall cause the FA board to exercise any
such rights only in accordance with the
other terms of this MOU, the employment or
consulting agreement and applicable law.
FA shall provide Holdings with monthly,
quarterly and annual financial
information, with scope of reporting
packages to be determined.
4. ACTIONS REQUIRING FA BOARD In addition to any Member approvals
APPROVAL; ACTIONS REQUIRING required by law, the following actions
STEINER AND PHOENIX MANAGER ("Material Actions") can be put into
APPROVAL effect with, and only with, the approval
of (a) as to Material Actions relating to
FA, a majority of the board of FA,
including at least one designee of Steiner
and one designee of the Phoenix Group LLC;
and (b) as to Material Actions relating to
Holdings, (a) the consent of at least one
Steiner Manager and at least one Phoenix
Manager or (b) both Members:
(i) Approving any Operating Plans
and Budget (as defined below)
commencing with the FA fiscal
year commencing October 1,
2007, or making material
changes to or material
deviations from any Operating
Plan and Budget for any FA
fiscal year commencing with
the FA fiscal year commencing
October 1, 2006;
(ii) Engaging in any material
transactions or activities not
in the ordinary course of
Holdings' or FA's business;
(iii) Selling or otherwise disposing
of all or substantially all of
the assets of Holdings or FA
or any subsidiary;
(iv) merging or consolidating
Holdings or FA or any
subsidiary with each other or
with or into any other entity;
(v) amending the certificate of
formation or operating
agreement or other
organizational documents of
Holdings or the certificate of
incorporation or bylaws of FA;
(vi) dissolving Holdings or FA or
any subsidiary of FA, or
filing any petition for
bankruptcy or consenting to
the entry of an order for
relief in an involuntary
bankruptcy case or making any
assignment for the benefit of
creditors with respect to
Holdings or FA or any
subsidiary of FA;
(vii) the incurrence of any liens,
security interests or
encumbrances on, or the
pledging of, any of the assets
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of Holdings or FA or any
subsidiary of FA, or granting
any guarantees, indemnities or
letters of credit, other than
(a) customary permitted liens
in the ordinary course of
business, (b) in accordance
with the current Operating
Plan and Budget, or (c) in
connection with the Required
Financing or a refinancing
thereof, but only if the
Members' approval thereof has
been obtained as set forth
above under "Debt Financing";
(viii) the incurrence of debt
(including guarantees, leases
and assumption of liabilities)
including (a) the Required
Financing or a refinancing
thereof, but only if the
Members' approval thereof has
been obtained as set forth
above under "Debt Financing",
(b) trade payables in the
ordinary course of business of
FA, (c) other ordinary course
accounts payable that
individually and in the
aggregate are not material to
FA, and (d) debt specifically
contemplated and approved in
the then current Operating
Plan and Budget;
(ix) the establishment of any plan
for the granting of equity
options, restricted stock,
profit participation or other
interests in Holdings, any
Holdings subsidiary holding
100% of FA or FA, to employees
of FA ("Incentive Interests"),
and the granting of Incentive
Interests under any such plan;
(x) the sale or issuance of
additional membership
interests or equity securities
(including options, warrants
or other convertible
interests) by or contribution
of additional capital to,
Holdings;
(xi) the acquisition of a business
or the assets comprising a
business;
(xii) the selection and retention of
counsel for material
transactions or material
litigation and of accountants
for Holdings and FA and its
subsidiaries;
(xiii) entering into or amending any
agreement between Holdings and
a Member or its affiliates;
(xiv) Hiring or firing of any
officer of FA and/or any FA
executive at the Vice
President level and above, and
entering into any employment
agreement with executives or
key personnel; or
(xv) taking any action that would
materially alter the
partnership tax status of
Holdings.
5. BOOKS AND RECORDS The Board will cause Holdings to establish
and maintain full, true and accurate
books, accounts and records of Holdings.
Holdings will provide each Member with
reports of its operations in the form and
for the period reported in accordance with
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Holdings' regular business practices, but
in any event no less frequently than
quarterly. Such reports may consist of a
"pass-through" of FA's reports to
Holdings.
Each Member shall have access to the books
and records of Holdings in accordance with
applicable Delaware law and shall also
have the right, at such Member's own
expense, to audit Holdings' books and
records no more frequently than once each
calendar year.
6. TAX MATTERS Phoenix Group LLC shall be the tax matters
partner of Holdings as provided in the
Internal Revenue Code Section 6231(a)(7)
and the regulations thereunder (the "Tax
Matters Partner") until its resignation
from such position. Upon any such
resignation, the Board shall designate a
successor. The Tax Matters Partner shall
be indemnified and reimbursed for all
costs and expenses incurred thereby in
connection with such role, including all
legal costs and expenses, accounting fees
and expenses, claims, liabilities and
damages, but shall not receive any
additional compensation for performance of
his duties. The Tax Matters Partner shall
not cause or permit Holdings to take any
action or make any decision that would
have an adverse impact on Holdings or any
Member without the consent of the Board.
Holdings shall not elect to be treated as
an association taxable as a corporation
for U.S. federal, state or local income
tax purposes under the Internal Revenue
Code, regulations promulgated thereunder
or any corresponding state or local
statute or regulations.
III. BUSINESS AND OPERATIONS
1. OPERATING PLANS & BUDGETS FA will conduct its operations materially
in accordance with an operating plan, an
operating budget and a capital budget for
FA (collectively, the "Operating Plan and
Budget"). The initial Operating Plan and
Budget for FA for the remainder of 2006
and the first nine months of 2007 shall be
FA's current operating plan and budget for
its fiscal years 2006 and 2007,
respectively, subject to such changes as
may be agreed upon by the Members as being
required by the Transaction.
At least 60 days before the end of each
fiscal year, Steiner, as Chief Executive
Officer of FA, shall prepare and propose
to the FA board of directors a revised
Operating Plan and Budget for the
following fiscal year. As set forth above,
such proposed Operating Plan and Budget
will become effective upon, and only upon,
approval by a majority of FA's board of
directors. If the proposed Operating Plan
and Budget are not so approved, then the
then-current Operating Plan and Budget
will remain in effect for the next fiscal
year, provided that (a) expenses governed
by contract will be adjusted to the
then-current contractual amounts, and (b)
the capital requirements of FA and any
required capital contributions will be
adjusted accordingly.
Debt financing of Holdings and/or FA will
be permitted within limits established by,
and only by, (a) in the case of FA, a
majority of the members of FA's board of
directors, and (b) in the case of
Holdings, the Board. Debt financing in
excess of pre-established limits will
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again require the approval of (a) in the
case of FA, a majority of the members of
FA's board of directors, and (b) in the
case of Holdings, the Board.
It is not anticipated that Holdings will
have any significant operating expenses,
or need for annual operating plan,
operating budget or capital budget. The
Board will cooperate in good faith to
determine, and make provision for, any
operating expenses. Following the closing
of the Merger, the Members shall cause any
reasonable expenses previously or
thereafter incurred by Holdings to be
promptly reimbursed or paid by FA.
2. LOCATION OF OFFICE Holdings shall establish and maintain a
principal office in New York City and may
establish and maintain offices at such
other locations as the Board may
determine.
In the event that Holdings shares office
space with FA or Sassower, Holdings shall
pay FA or Sassower, as the case may be,
rental for such space and reimbursement
for related expenses consistent with
Section VII.1 hereof.
3. NON-COMPETITION No Member shall operate or invest in, or
be employed as an executive officer,
employee of or consultant to, any
production, marketing or distribution
enterprise that produces or distributes
products or services that compete with
those of FA, other than through Holdings
or through FA while it is owned by
Holdings; provided, however, that no
Member shall be prohibited from making
passive investments in any class of
publicly traded securities of any such
enterprise, so long as (a) such investment
represents less than 5% of the outstanding
securities in such class, and (b) such
Member does not advise, consult on or
participate in any way in the management
or affairs of such enterprise. The
foregoing non-compete restrictions will
remain in effect until one year after the
sale or other disposition of (x) Holdings'
interest in FA or (y) substantially all of
the assets of FA, unless and to the extent
released or waived by the purchaser
thereof.
IV. TRANSFERS; RIGHT OF FIRST OFFER; BUY/SELL
1. TRANSFERS Each Member will agree not to directly or
indirectly transfer, pledge, assign or
encumber, in whole or in part, its
membership interest in Holdings to any
person without the Board's consent, except
to a family member of such Member, whether
or not for purposes of estate planning (an
"Estate Planning/Family Transfer"), for a
period of two years from the closing of
the Transaction (such period, the "Lock-Up
Period"). No permitted transfer will
relieve a Member of any of its obligations
under the operating agreement of Holdings,
any other organizational documents or any
related agreements between the Members.
Following the Lock-Up Period, each Member
may, subject to compliance with the right
of first offer set forth below, transfer
all (but not less than all) of its
respective membership interest in Holdings
to any person, other than a competitor of
FA; provided, however, that a sale of all
of the membership interests in Holdings
pursuant to the drag-along provisions set
forth herein may be made to a competitor
of FA.
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Notwithstanding the foregoing or anything
to the contrary herein, no transfer or
assignment shall be permitted (a) without
compliance with applicable Federal and
state securities laws, or (b) if such
transfer would cause the number of holders
of Holding's securities to exceed 100 or
such other number as may be permitted for
purposes of determining if Holdings is
exempt from the Investment Company Act of
1940, as amended, or for determining
whether Holdings is a "publicly traded
partnership" within the meaning of Section
7704 of the Internal Revenue Code.
2. RIGHT OF FIRST OFFER; At any time following the Lock-Up Period,
DRAG-ALONG AND TAG-ALONG any Member (the "Selling Member") may
RIGHTS offer its membership interests in Holdings
to the other Member (the "Receiving
Member"), at a price and on the terms
specified in the notice (the "Offer
Notice") to the Receiving Member. The
Receiving Member may, within 90 days of
receipt of the Offer Notice, notify the
Selling Member whether they wish to
purchase all (but not less than all) of
the Selling Member's interest in Holdings
at such price and on such terms (such
notice, the "Exercise Notice"), which
purchase shall be completed within 90 days
of receipt by the Selling Member of the
Exercise Notice.
If the Receiving Member does not deliver
an Exercise Notice or consummate the
purchase within the period specified in
the preceding sentence (other than by
reason of a failure of the Selling Member
to consummate such sale), the Selling
Member may offer and sell either (a) all
(but not less than all) of its interest in
Holdings, (b) all of the shares in FA held
by Holdings, or (c) all of the assets of
FA and its subsidiaries, in each case to
one or more third parties (which may
include competitors of FA provided (x) the
offer and sale of its interest in Holdings
includes a sale of all of the membership
interests in Holdings pursuant to the
"drag-along" provisions below or (y) if
structured as a sale of all of the shares
in FA held by Holdings, or a sale of all
of the assets of FA and its subsidiaries,
is followed immediately by a distribution
by Holdings of all net proceeds of sale),
at a price not less than and on terms no
less favorable to the selling party than
specified in the Offer Notice (adjusted in
the case of a sale of all of the shares in
FA held by Holdings or all of the assets
of FA and its subsidiaries to reflect the
application of the distribution provisions
of this MOU as if Holdings had disposed of
its entire interest in FA and had then
distributed the proceeds to the Members in
a liquidating distribution).
The Selling Member may exercise
"drag-along" rights with respect to all
(but not less than all) of the Receiving
Member's membership interest in Holdings
and all other membership interests in
Holding at the same price per membership
interest paid by such selling parties and
on the same terms (but in no event may
"drag-along rights" be exercised in a sale
(x) at a price per membership interest
less than the equivalent of the cash price
per share of FA Common Stock paid in the
Transaction or (y) to an affiliate of the
Selling Member without the consent of both
of the Members). Such drag-along rights
shall include the right to require the
Receiving Member to vote in favor of or
consent to a merger or sale of assets of
FA or Holdings to the extent the sale is
so structured.
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The Receiving Member shall have
"tag-along" right with respect to all (but
not less than all) of its membership
interests at the same price per membership
interest paid by such selling parties and
on the same terms as the Selling Member.
Any such sale to a third party must be
completed within 240 days of receipt by
the Receiving Member of the Offer Notice.
If any proposed sale to a third party is
not completed within such 240 day period,
the Selling Member shall be required to
deliver a further Offer Notice to the
Receiving Member.
For purposes of the drag-along provisions,
Phoenix Enterprises LLC, any member of
Phoenix Enterprises LLC or any member of
the Phoenix Group LLC shall be deemed an
affiliate of the Phoenix Group LLC.
The foregoing right of first offer,
drag-along and tag-along rights shall not
apply to any Estate Planning/Family
Transfer.
3. INCENTIVE INTERESTS The Board may grant Incentive Interests in
Holdings or any subsidiary of Holdings or
similar incentive compensation to officers
and employees of FA.
V. RESTRICTIONS ON MEMBERS; REPRESENTATIONS AND WARRANTIES
1. NO-SHOP RESTRICTIONS From the Effective Date until the close of
business on the date (the "Termination
Date") which is the first to occur of:
(A) consummation of the Transaction;
(B) the 180th day after the date of the
execution and delivery of the definitive
merger agreement or other agreements
between the Company and FA for the
Transaction (the "Transaction Documents");
(C) August 31, 2007 (such date only if the
Transaction Documents have not been
executed and delivered by December 31,
2006);
(D) the date by which both (x) the FA
board of directors or any committee of the
FA board publicly announces that it is
recommending that the FA shareholders do
not adopt the merger agreement relating to
the Transaction, and (y) the merger
agreement has been terminated in
accordance with its terms by FA; or
(E) the FA board of directors or any
committee of the FA board of directors has
advised Holdings or any of its Members in
writing after discussions with
representatives of Holdings that it has
rejected an offer by Holdings with respect
to a Transaction, and no substantive
progress has occurred with respect to
agreement on a proposed Transaction for a
period of 90 days despite best efforts by
Holdings representatives to pursue such
discussions;
Steiner, Sassower, the Steiner FA LLC and
the Phoenix Group LLC shall not (and shall
use their respective best efforts to cause
their directors, officers, employees,
advisors, consultants, attorneys, members,
partners, trustees, agents and affiliates
not to), directly or indirectly:
(a) solicit, initiate or engage in any
discussions or negotiations with,
irrespective of the person performing such
solicitation, initiation or engagement, or
provide any information to, or take any
other action with the intent to facilitate
the efforts of, any third party relating
to any possible agreement (whether binding
or in principle) or other arrangement
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involving (i) the acquisition of all or
substantially all of FA (whether by way of
merger, purchase of capital stock or other
securities, purchase of assets or
otherwise), (ii) any equity investment in
FA or any of its subsidiaries (exclusive
of any non-equity profit participation
provisions which may be required to be
offered to third-party lenders as an
inducement to provide Required Financing
for the Transaction), (iii) any other
action or transaction inconsistent with,
or that could reasonably be expected to
delay or prevent the consummation of, or
render impractical, the Transaction
(collectively, a "FA Prohibited
Transaction"); or
(b) authorize, execute, consummate or
enter into any agreement or commitment
with respect to, a FA Prohibited
Transaction.
Notwithstanding the foregoing, nothing
herein shall prevent Steiner from (a)
taking any actions to comply with his
fiduciary duties as an officer and
director of FA upon the advice of counsel,
or (b) soliciting, initiating or engaging
in any discussions or negotiations with,
or providing any information to, or taking
any other action with the intent to
facilitate the efforts of, GECC or any
other third party relating to any possible
agreement (whether binding or in
principle) or other arrangement involving
the refinancing or recapitalization of FA,
or authorizing, executing, consummating or
entering into any agreement or commitment
with respect to the foregoing.
In furtherance of the foregoing agreements
and restrictions, except as specifically
contemplated herein, each Member agrees
not to (x) transfer, convey, pledge or
otherwise encumber any shares of FA common
stock held by it, or (y) permit the
transfer, conveyance, pledge or
encumbrance of any shares of FA common
stock controlled by it, in each case,
until the Termination Date, other than (a)
with respect to Steiner, Estate
Planning/Family Transfers to family
members who agree to be subject to such
transfer restrictions and to contribute
the shares received to the Steiner FA LLC
for contribution by the Steiner FA LLC to
the Company, and, (b) with respect to
Phoenix, Estate Planning/Family Transfers
to family members who agree to be subject
to such transfer restrictions and to
contribute the shares received to the
Phoenix Group LLC for contribution by the
Phoenix Group LLC to the Company.
The Phoenix Group LLC shall use its
commercial best efforts to obtain
covenants from each of its members
reasonably comparable in nature and scope
to those set forth above.
2. BREAK-UP FEE AND EXPENSE In the event a transaction involving FA or
REIMBURSEMENT the FA Shares other than the Transaction
contemplated hereby with the Phoenix
Member (a "Competitive Transaction") is
consummated while this MOU is in effect or
within 12 months of the Termination Date,
then, to the extent agreed to by FA, the
Phoenix Member shall receive from FA (or,
if paid by FA to Holdings, from Holdings):
(i) reimbursement of all reasonable
out-of-pocket legal, accounting and due
diligence expenses incurred by Phoenix or
its affiliates in pursuing the
Transaction, and (ii) a break-up fee in an
amount equal to 3% of the value of the
Competitive Transaction (regardless of the
characterization of such Competitive
Transaction as a merger, purchase of
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CUSIP Nos. 303698 10 4 & 13D Page 25 of 28 Pages
303698 20 3
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shares, sale of assets, recapitalization
or otherwise). Steiner and Sassower agree
that they shall use their respective best
efforts to cause the Merger Agreement to
include provisions for such expense
reimbursement and break-up fee as
obligations payable by FA and, that
without limiting any other rights of the
Phoenix Member with respect to approval of
the Merger Agreement, the Phoenix Member
shall not be required to approve any
Merger Agreement that does not include
such provisions.
Notwithstanding the foregoing, if the
Competitive Transaction occurs and the
Transaction contemplated hereby with the
Phoenix Member was not approved by the FA
Board of Directors or otherwise subject to
a definitive binding agreement of FA, the
provision for expense reimbursement and
payment of the break-up fee shall not be
payable by FA but shall be a Steiner
personal obligation to the Phoenix Member,
but the break-up fee payable to the
Phoenix Member shall then be $900,000,
regardless of the value of the Competitive
Transaction.
Neither Steiner nor any affiliate of
Steiner shall have any direct or indirect
share, whether by reason of ownership in
Holdings or otherwise, in the benefits of
any break-up fee.
3. CONFIDENTIALITY The Members shall keep confidential, and
not use or disclose to any person or
entity any Confidential Information (as
defined below) for any reason or purpose
whatsoever, nor shall they make use of any
Confidential Information for their own
purposes or for the benefit of any other
person or entity except (a) in order to
facilitate the fulfillment of such
Member's obligations hereunder, (b) as
required by law or judicial process, (c)
as required to fulfill legal and
regulatory obligations, if any, (d) to
such Member's attorneys, accountants,
other advisors, officers, employees and
directors in connection with the proposed
Transaction and in furtherance of this
MOU, and (e) by Sassower to his existing
and prospective members and associated
investors in connection with the proposed
Transaction and in furtherance of this
MOU, provided that such third party agrees
to be bound by confidentiality provisions
at least as restrictive as those set forth
herein. For purposes of this MOU,
"Confidential Information" shall mean and
include the existence and terms of this
MOU, all prior and subsequent discussions
and negotiations regarding Holdings and
the Transaction (including the status
thereof), all non-public information
regarding the business, operations,
assets, liabilities and prospects of FA,
and all information that any Member shall
acquire from any other Member regarding
such other Member and which is not of a
public nature.
This covenant shall survive the
consummation of the Transaction and shall
continue until the last to occur of (a)
five years after the sale of FA, of
Holdings, or of Holdings' interest in FA,
unless and to the extent released or
waived by the purchaser thereof, or (y)
the dissolution of FA and/or the Company.
4. PUBLIC ANNOUNCEMENTS; SEC FILINGS Steiner and Sassower shall consult with
each other before issuing any press
release or otherwise making any public
statements or filing with respect to this
MOU, the transactions contemplated hereby
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CUSIP Nos. 303698 10 4 & 13D Page 26 of 28 Pages
303698 20 3
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or thereby (including the Transaction) or
any prior or subsequent discussions and
negotiations regarding the same, and shall
not issue any such press release or make
any such public statement or filing
without the prior consent of Steiner, in
the case of Sassower, or Sassower, in the
case of Steiner, which consent shall not
be unreasonably withheld or delayed;
provided, however, that Steiner and
Sassower may, without the prior consent
specified above, issue such a press
release or make such a public statement or
filing as may be required by law if he has
used reasonable efforts to consult with
Steiner, in the case of Sassower, or
Sassower, in the case of Steiner, and to
obtain such consent but has been unable to
do so prior to the time such press release
or public statement is required to be made
or filed pursuant to such law. In
furtherance of the foregoing, the Members
shall cooperate in making any Schedule 13D
filings which may be required, and shall
make a joint public announcement of the
Transaction promptly following the
execution and delivery of the merger
agreement relating to the Transaction.
5. REPRESENTATIONS AND WARRANTIES Each of the parties hereto represents and
warrants to the other party that, except
for Golden Tree, it: (a) is not party to
any other agreement or arrangement that
could reasonably be expected to materially
interfere with such party's full, due,
timely and complete performance of this
MOU and the transactions contemplated
hereby; (b) is not, nor shall it be in,
violation of any applicable law or
contractual obligation by entering into
and undertaking performance of this MOU
and the transactions contemplated hereby;
and (c) is not a party to any agreement,
or currently in any discussions or
negotiations, relating to a FA Prohibited
Transaction.
The Phoenix Group LLC shall obtain
comparable representations and warranties
from each of its members.
VI. DISSOLUTION/LIQUIDATION
Holdings will be dissolved upon the
occurrence of any of the following events:
(i) the vote of both Members;
(ii) a Company Liquidation Event;
(iii) a sale of all or substantially
all of the assets of FA, or a
merger of FA with or into
another entity or a
consolidation, recapitalization
or similar transaction involving
FA, as a result of which
Holdings will own less than 50%
of the equity in FA or in any
surviving entity (each, a "FA
Liquidation Event");
(iv) the conversion of Holdings into
another entity; or
(v) a judicial dissolution under
Delaware law.
During a reasonable period following the
dissolution of Holdings, in accordance
with Delaware law the Board will liquidate
and wind-up the operations of Holdings.
VII. MISCELLANEOUS
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CUSIP Nos. 303698 10 4 & 13D Page 27 of 28 Pages
303698 20 3
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1. CONTRACTS WITH AFFILIATES; Holdings or FA will be permitted to engage
INVESTMENT BANKING SERVICES the services or use of facilities of the
Members or of affiliates of the Members,
provided that the cost and other terms of
such services or facilities to Holdings or
FA are no less favorable to Holdings or
FA, as the case may be, than could be
obtained in arm's length transactions with
third parties. The foregoing shall not
restrict or prohibit continuation of
relationships with FA existing as of the
date hereof which have been specifically
disclosed (including all material terms
and conditions) in FA's existing filings
with the Securities and Exchange
Commission, provided that any
relationships which include a compensatory
element shall be subject to prior approval
by the Phoenix Member.
The Members agree that Phoenix Enterprises
LLC may provide investment banking
services to Holdings and FA (including
future financings and prospective FA
Liquidation Events) on a basis consistent
with the foregoing, with any compensation
to be transaction or success-based, and on
terms no less favorable to Holdings than
could be obtained in arm's length
transactions with third parties.
2. COSTS Regardless of whether the Transaction is
consummated, the parties shall share
equally and shall be equally responsible
for the payment of all legal fees and
expenses, including respective attorneys'
fees and expenses, whether incurred by
Steiner, Sassower or the Company (but
excluding expenses paid by third parties,
including those incurred by or on behalf
of FA, which shall be obligations only of
FA), in connection with any proposal
presented to the FA board of directors,
the negotiation, execution and delivery of
this MOU, the Agreements described below
and the Transaction Documents and the
transactions contemplated herein and
therein. If the Transaction is
consummated, the parties shall cause such
expenses to be paid or reimbursed by the
Company or FA. Without limiting the
expense reimbursement obligation of
Steiner or FA, as the case may be, set
forth or contemplated, as the case may be,
in Section V.2, if the Transaction is not
consummated, each of the parties shall pay
or reimburse the party that has advanced,
or cause the Company to pay or reimburse
the party that has advanced, for 50% of
all such expenses. Such payments or
reimbursements shall be funded from the
expense reimbursement obligation of
Steiner or FA, as the case may be, set
forth or contemplated in Section V.2, and
not by capital contributions from the
Phoenix Member.
3. SPECIFIC PERFORMANCE The transactions contemplated hereby are
unique and the Members acknowledge that
the breach or threatened breach of the
provisions of this MOU would cause
irreparable harm to the nonbreaching
Member for which an award of monetary
damages would be inadequate. Accordingly,
in addition to and not in limitation of
any other remedies available for a breach
or threatened breach by a Member of any of
the binding provisions of this MOU, the
aggrieved Member shall be entitled to an
injunction restraining the breaching
Member from continuing such breach or
threatened breach and requiring specific
performance of the terms of this MOU.
4. GOVERNING LAW; JURISDICTION This MOU, the definitive operating
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CUSIP Nos. 303698 10 4 & 13D Page 28 of 28 Pages
303698 20 3
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agreement of Holdings, and any documents
contemplated under any of the foregoing
shall be governed by the laws of the State
of Delaware, without reference to
conflicts of law principles thereof. Each
Member irrevocably consents to the
exclusive jurisdiction of the federal
and/or state courts located in the State
of New York in connection with any action
arising from this MOU.
It is the parties' mutual intention to incorporate these terms and
conditions and other customary mutually agreeable terms and conditions into a
definitive operating and other agreements ("Agreements"), as soon as
practicable. Promptly following the execution and delivery of this MOU, each of
the parties hereto shall use its commercially reasonable efforts and negotiate
in good faith the form, terms and provisions of the definitive Agreements, which
shall be based on the terms and conditions set forth in this MOU, and shall also
include other standard and customary terms and provisions for agreements of such
kind to the extent consistent with this MOU, with a view toward forming Holdings
and executing the Agreements as soon as reasonably practicable.
However, until completion and execution of such Agreements, this MOU is
intended to, and shall serve as the binding legal agreement between the parties
with respect to the matters set forth in this MOU, with intended binding legal
effect from the date hereof. Notwithstanding the foregoing, if the Transaction
has not been consummated by the Termination Date, this MOU shall then terminate
and no longer be in effect.
EXECUTED ON AND AS OF THE EFFECTIVE DATE SET FORTH ABOVE.
/s/ Jeffrey J. Steiner
----------------------
JEFFREY J. STEINER
/s/ Philip S. Sassower
----------------------
PHILIP S. SASSOWER
16