<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                      ANNUAL REPORT PURSUANT TO SECTION 13
           [x]     OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended DECEMBER 31, 1998

                                       OR
                    TRANSITION REPORT PURSUANT TO SECTION 13
           [ ]     OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from _________ to __________

                          Commission File No. 000-22519

                            KAYNAR TECHNOLOGIES INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              DELAWARE                                           33-0591091
   --------------------------------                         -------------------
   (State or other jurisdiction of                           (I.R.S. Employer 
   incorporation or organization)                           Identification No.)

500 N. STATE COLLEGE BLVD., SUITE 1000, ORANGE, CALIFORNIA      92868-1638 
---------------------------------------------------------   -------------------
   (Address of principal executive offices)                      (Zip Code)

        Registrant's telephone number, including area code: (714)712-4900

           Securities registered pursuant to Section 12(b) of the Act:

                               TITLE OF EACH CLASS
                          ----------------------------
                          Common Stock, $.01 par value


           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
 ------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $82.1 million as of February 10, 1999 based on the
closing sales price of $27.375 of the registrant's common stock as reported on
the NASDAQ National Market as of such date.

                                       1
<PAGE>

The number of shares of common stock outstanding on February 10, 1999 was
5,092,544.

                   FORWARD-LOOKING STATEMENTS AND RISK FACTORS

         Certain statements contained in this Form 10-K, including Item 1 
"Business" and Item 7 "Management's Discussion and Analysis of Financial 
Condition and Results of Operations", are forward-looking statements within 
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 
the Securities Exchange Act of 1934. Forward-looking statements address 
activities, events or developments that Kaynar Technologies Inc. (the 
"Company") expects or anticipates will or may occur in the future, including 
future capital expenditures, expansion and growth of the Company's and its 
customers' business and operations and other such matters. Forward-looking 
statements can be identified by words including, but not limited to, 
"believes," "anticipates," "expects," "intends," "seeks," "may," "will" and 
"estimates."

         Forward-looking statements are subject to certain risks and
uncertainties, including the Company's dependence on conditions in the
commercial aircraft and defense industries, the level of commercial aircraft
build rates (primarily at Boeing and Airbus), the amount of defense spending,
competitive pricing pressures, the cost of material and labor, and other risks
described from time to time in the Company's registration statements and reports
filed with the Securities and Exchange Commission. The foregoing should not be
construed as an exhaustive list of all risks and uncertainties. Actual results
to differ materially from those expressed in forward-looking statements made by
the Company.

                                     PART I

ITEM 1.  BUSINESS

         The Company is a leading precision fabricator that designs, 
develops, and manufactures a wide range of specialty components and tooling 
systems and provides related services used primarily by original equipment 
manufacturers ("OEMs") and their subcontractors to produce aircraft and 
defense products. The Company serves virtually all major airframe and 
aircraft OEMs including Boeing, General Electric, Pratt & Whitney, Airbus, 
Lockheed Martin and Rolls Royce. In addition, the Company serves the 
automotive, electrical and other industrial markets and their associated 
after-markets. The Company was formed as a Delaware corporation on October 
20, 1993.

Recent Developments

         Recent developments of the Company are incorporated herein by reference
from "Recent Developments and Significant Business Combinations" included herein
in Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Financial Information About Industry Segments

         The Company's business segment information is incorporated herein by
reference from Note 16 of the Company's consolidated financial statements
included herein in Item 8 "Financial Statements and Supplementary Data."

Products and Services

         The Company's specialty components, tooling systems and related 
services may be divided into two general categories: those used primarily in 
the manufacture of commercial aircraft and defense products and those with 
applications in other industries. Within these two categories, the Company's 
products may also be grouped by business unit. The Company's Kaynar, Microdot,

                                       2
<PAGE>

M & M, Eagle, APS and K-FAST business units design and manufacture products 
that are sold principally to the commercial aircraft and defense industries, 
while the Company's Recoil and Marson business units design and manufacture 
products used primarily in the automotive, electrical and other non-aerospace 
industries.

     Commercial Aircraft and Defense Products

         The commercial aircraft and defense industries accounts for the vast
     majority of the Company's net sales and operating income. See Item 7
     "Management's Discussion and Analysis of Financial Conditions and Results
     of Operation--Segment Information."

         The Company's commercial aircraft sales depend substantially on
     aircraft manufacturers' production rates, which in turn depend upon orders
     of new aircraft. Historically, demand from the commercial aircraft 
     industry has been subject to cyclical fluctuations. There can be no 
     assurance that demand for new aircraft will not be adversely affected by 
     business cycle fluctuations or declines in airline profitability.

         The Company's defense sales could be adversely affected by reductions
     in defense spending and other government budgetary pressures which would
     result in reductions, delays or stretch-outs of existing and future
     programs. Some of the Company's contracts in the defense market are subject
     to termination at the convenience of the customer (as well as for default).
     In the event of termination for convenience, the customer generally is
     required to pay the costs incurred by the Company and certain other fees
     through the date of termination.

         Kaynar Products

         Kaynar is a leading producer of precision, self-locking internally
         threaded nuts used in the manufacture of commercial aircraft and
         defense aerospace products. The product line is designed principally
         for use in harsh, demanding environments and includes wrenchable nuts,
         K-FAST nuts, anchor nuts, gang channels, shank nuts, barrel nuts,
         clinch nuts and stake nuts. Kaynar produces fasteners in a wide variety
         of materials to accommodate each customer's specifications, from
         lightweight aluminum and titanium nuts for airframes, to high-strength,
         high-temperature tolerant engine nuts manufactured from materials such
         as A-286, Waspaloy(R) and Hastelloy(R). Kaynar also produces the
         commercial aircraft and defense industries' broadest line of
         lightweight, non-metallic composite fasteners, which may be configured
         as wrenchable nuts, anchor nuts, gang channels or barrel nuts. These
         composite fasteners are used primarily for military aircraft and are
         designed to reduce radar visibility, enhance resistance to lightning
         strikes and provide galvanic corrosion protection. Kaynar offers a
         variety of coatings and finishes for its fasteners, including
         anodizing, cadmium plating, silver plating, aluminum plating, solid
         film lubricants and water based cetyl and solvent free lubricants.
         Kaynar sales accounted for 75%, 81% and 83% of the Company's total
         sales for 1998, 1997 and 1996, respectively.

         Microdot Products

         Microdot designs and manufactures threaded inserts and studs used
         principally in the commercial aircraft and defense industries.
         Microdot's threaded inserts, which are made of high-grade steel and
         other high-tensile metals, are designed to be installed into softer
         metals, plastics and composite materials to create bolt-ready holes
         having strong internal self locking threads within the softer parent
         material. Once a bolt is threaded into the installed insert, overall
         strength of the fastening assembly is substantially enhanced. Microdot
         inserts can also be used for thread repairs. Microdot's K-Sert(R)
         inserts include keys that can be used to lock the insert in place and
         prevent any rotation. Microdot also manufactures Perma-Thread(R)
         inserts and Thin Wall(R) inserts which 

                                       3
<PAGE>

         are used to create a permanent thread inside a hole and to provide a
         high degree of thread protection and fastening integrity from a light
         weight fastener. Microdot also manufactures studs from steel and other
         high strength materials. Microdot sales accounted for 9%, 11% and 13%
         of the Company's total sales for 1998, 1997 and 1996, respectively.

         Other Products

         M & M specializes in precision machined structural components and
         assemblies for aircraft, including pylons, flap hinges, struts, wing
         fittings, landing gear parts, spars and many other items. Eagle
         manufactures high quality flared fluid fittings used in the hydraulic
         systems of aircraft. APS manufactures specialty machinery for
         automated assembly of structural components and subassemblies. K-FAST
         makes tools primarily designed to install Kaynar, Microdot and Recoil
         fasteners and inserts, but can also be used to attach other wrenchable
         nuts, bolts and inserts.

     Industrial Products and Services

         Recoil Products

         Recoil produces helically-wound, wire thread, self locking inserts that
         increase the strength of fastening assemblies and assist in reduction
         of thread wear, which is particularly important when components are
         assembled and disassembled frequently or where vibrations are severe.
         Recoil also supplies thread repair kits, high-speed steel taps and
         various electric and pneumatic, manual and semi-automatic insertion
         tools and related accessories.

         Marson Products

         Marson designs, manufactures and markets a broad line of blind rivets,
         threaded inserts and setting tools primarily for the industrial and
         automotive markets. Marson is the second largest US manufacturer of
         blind rivets and related tools. In addition to manufacturing, Marson
         provides many value-added services such as plating, anodizing and
         customized product painting.


Raw Materials

         The Company purchases raw materials, which include the various metals,
composites and finishes used in production, from over twenty different
suppliers. The Company believes that these raw materials would be available at
competitive prices from various other suppliers as well. However, commercial
deposits of certain metals, such as titanium and nickel, that are required for
the manufacture of several of the Company's products are only found in certain
parts of the world. The availability and prices of these metals may be
influenced by private or governmental cartels, changes in world politics,
unstable governments in exporting nations or inflation. Similarly, supplies of
steel and other less exotic metals used by the Company may also be subject to
variation in availability. Shortages of, and price increases for, certain raw
materials used by the Company have occurred in the past and may occur in the
future.

Patents

         The Company currently holds a number of U.S. and international patents,
covering a variety of products and processes. Although the Company believes
patent protection to be valuable in certain circumstances, management does not
believe that the termination, expiration or infringement of one or more of the
Company's patents would have a material adverse effect on the business or
prospects of the Company.

                                       4
<PAGE>

Major Customers

         A significant portion of the Company's business is dependent upon a 
limited number of large manufacturers of commercial aircraft and defense 
products. Direct sales to Boeing accounted for approximately 20%, 24% and 18% 
of sales during 1998, 1997 and 1996, respectively. Sales to Boeing are 
diversified over a number of different commercial and military programs. No 
other customer accounted for 10% or more of the Company's net sales during 
the past three years. In addition, the Company sells to a global network of 
independent distributors who sell the Company's products to OEMs, 
subcontractors and other customers.

Backlog

         At December 31, 1998, backlog believed to be firm was approximately
$108.8 million, compared to $92.5 million at December 31, 1997. Approximately
$97.6 million of total backlog is expected to be delivered during 1999.

Competition

         The Company's commercial aircraft and defense business units compete 
with a number of producers of aerospace fasteners and fastening systems, 
including three publicly-held companies, SPS Technologies Inc. ("SPS"), the 
Huck International Division of the Cordant Technologies ("Huck") and The 
Fairchild Corporation ("Fairchild"), all of which have greater financial 
resources than the Company. SPS manufactures high-strength wrenchable nuts, 
gang channels, plate nuts and other products for certain of the same 
customers as the Company, including Boeing, Pratt & Whitney and General 
Electric. Huck produces fasteners and fastening systems that differ 
substantially from the Company's products in design, but nevertheless often 
serve comparable functions in airframe and engine construction. Fairchild 
produces threaded inserts and studs that compete with the Microdot product 
lines, as well as various nuts used by certain of the Company's customers, 
including General Electric. The Company has recently entered into a merger 
agreement with Fairchild. See Item 7 "Management's Discussion and Analysis of 
Financial Condition and Results of Operations--Recent Developments and 
Significant Business Combinations." The Company also competes with several 
smaller, privately-owned companies, which generally have lower sales volumes 
than the Company.

         The Company believes that competition for sales of specialty components
and tooling systems to the commercial aircraft and defense industries is based
on product design and quality, turnaround time and responsiveness to customer
specifications, product availability and pricing. The Company also believes that
it competes favorably with respect to each of these factors.

         HeliCoil and POP Fastening Systems, which are both units of Black &
Decker Corp., are Recoil and Marson's primary competitors in the industrial
market. The Company believes that competition for sales of threaded inserts,
blind rivets, and setting tools to the markets served by Recoil and Marson is
based on turnaround time and responsiveness to customer specifications, product
availability and pricing. The Company also believes that it competes favorably
with respect to each of these factors.

Environmental Matters

         The Company uses perchloroethylene to clean products at various stages
of the manufacturing process in order to meet military and civilian
specifications for aircraft and aerospace parts. The Company's products must be
manufactured in strict compliance with such specifications in order to ensure
that aircraft safety and performance standards are met.

                                       5
<PAGE>

         Perchloroethylene has been detected in soil beneath the Company's main
Kaynar facility in Fullerton. Environmental consultants retained by the Company
have determined that this contamination may have been caused by former
degreasing operations on the property. The Company anticipates that remediation
of the perchloroethylene at this site will cost approximately $200,000 over the
course of two years. The Company has established reserves that management
believes are sufficient to cover this remediation.

         The Company anticipates that during the period from 1999 through 2004
it will make capital expenditures of between $1 million and $2 million to
introduce aqueous-based and/or low emission solvent cleaning technologies at its
main Kaynar facility in Fullerton. These new operations will significantly
reduce emissions of perchloroethylene and increase manufacturing efficiency.

         The Company intends to install equipment to control air emissions from
a dip coating operation in order to achieve final compliance with a South Coast
Air Quality Management District rule governing aerospace coating operations at a
cost of approximately $700,000 at its main Kaynar facility in Fullerton.

Employees

         At December 31, 1998, the Company employed approximately 1,650 people.

Financial Information About Foreign and Domestic Operations and Export Sales

         The Company's financial information about foreign and domestic
operations and export sales is incorporated herein by reference from Note 14 of
the Company's consolidated financial statements included herein in Item 8
"Financial Statements and Supplementary Data."


ITEM 2.  PROPERTIES

FACILITIES

         The Company utilizes 13 facilities in excess of 4,000 square feet with
a total area of approximately 575,000 square feet, including both owned and
leased properties. At December 31, 1998, the facilities were:

<TABLE>
<CAPTION>

                                                                          Approx.
                                                                          Square            Expiration
Location                         Function                                 Feet              of Lease   
---------                        ---------                                --------          -----------
<S>                            <C>                                      <C>               <C>
Fullerton, CA                    Kaynar                                   200,000           October 31, 2007
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Distribution

Stoughton, MA                    Marson                                   110,000           April 10, 2003
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Warehousing
                                 -Distribution

</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
<S>                            <C>                                      <C>               <C>
Huntington Beach, CA             M & M                                    58,000            Owned
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Distribution

Fullerton, CA                    K-Fast and APS                            57,000           August 13, 2003
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Distribution

Placentia, CA                    Microdot                                  40,000           September 30, 2001
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Distribution

Huntington Beach, CA             M & M                                     25,000           November 30, 1999
                                 -Material storage

Oakleigh, VIC, Australia         Recoil Pty                                24,000           August 1, 2000
                                 -Product Development
                                 -Engineering
                                 -Manufacturing
                                 -Distribution

Nemesuamos, Hungary              K.T.I. Femipari KFT                        21,500          Owned
                                 -Manufacturing

Adelanto, CA                     Kaynar                                     11,600          Owned
                                 -Manufacturing (to begin in 1999)
                                 -Distribution (to begin in 1999)

La Habra, CA                     Eagle                                      10,500          May 17, 1999
                                 (no longer in use as of January 1999)

Fullerton, CA                    Kaynar                                     8,300           April 7, 2000
                                 -Raw material storage

Orange, CA                       KTI                                        4,600           April 1, 2003
                                 -Corporate Headquarters
                                 -Administration

Carmel, IN                       Recoil (U.S.)                              4,300           December 31, 2003
                                 -Sales and Marketing
                                 -Distribution

</TABLE>

         While the Company believes that its facilities (including those not
mentioned in the above paragraph) are adequate to support its operations for the
foreseeable future, the Company regularly reviews its need for additional
facilities and could, in the future, lease or purchase one or more additional
facilities or seek to expand its existing facilities.

                                       7
<PAGE>

         Although the Company maintains standard property casualty insurance
covering its properties, the Company does not carry any earthquake insurance
because of the cost of such insurance. Most of Company's properties are located
in Southern California, an area subject to frequent and sometimes severe
earthquake activity.

ITEM 3.  LEGAL PROCEEDINGS

         During the ordinary course of business, the Company is threatened with,
or becomes a party to, legal actions and other proceedings. Management believes
that the outcome of legal actions and proceedings to which it is presently a
party will not, singly or in the aggregate, have a material adverse effect on
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

         Shares of the Company's common stock are traded on the NASDAQ 
National Market. The information regarding the quarterly price range of the 
Company's common stock is incorporated herein by reference from Note 17 of 
the Company's consolidated financial statements included herein in Item 8 
"Financial Statements and Supplementary Data." The Company did not pay cash 
dividends on its common stock during the last two fiscal years and has no 
present intention of paying cash dividends on its common stock in the future.

         The number of stockholders of record for the Company's common stock as
of February 10, 1999 was approximately 1,029.


                                       8
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

                           Five Year Financial Summary
                      (In thousands, except per share data)


<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                -----------------------------------------------------
                                                1998 (2,3)    1997      1996 (1)     1995      1994
                                                ----------  -------- -----------   --------  --------
<S>                                           <C>          <C>       <C>        <C>        <C>
Income statement data:
  Net sales                                      $185,512   $150,429   $ 99,023   $ 68,781   $ 55,117
  Cost of sales                                   129,223    104,390     72,924     51,940     41,117
                                                ----------  -------- -----------   --------  --------
       Gross profit                                56,289     46,039     26,099     16,841     14,000
  Selling, general and administrative expenses     27,438     21,454     13,263     10,018      9,048
                                                ----------  -------- -----------   --------  --------
       Operating income                            28,851     24,585     12,836      6,823      4,952
  Interest expense, net                             4,067      3,602      4,011      2,935      2,304
                                                ----------  -------- -----------   --------  --------
       Income before income taxes                  24,784     20,983      8,825      3,888      2,648
  Provision for income taxes                        9,914      8,393      3,530      1,577      1,129
                                                ----------  -------- -----------   --------  --------
       Net income                                $ 14,870   $ 12,590   $  5,295   $  2,311   $  1,519
                                                ----------  -------- -----------   --------  --------
                                                ----------  -------- -----------   --------  --------
  Earnings per share
         Basic                                   $   3.39   $   4.23   $   3.26   $   1.39   $   0.89
                                                ----------  -------- -----------   --------  --------
                                                ----------  -------- -----------   --------  --------
         Diluted                                 $   1.64   $   1.54   $   0.78   $   0.34   $   0.22
                                                ----------  -------- -----------   --------  --------
                                                ----------  -------- -----------   --------  --------
  Weighted average number of common stock
      and common stock equivalents

         Basic                                      4,382      2,967      1,594      1,594      1,594
         Diluted                                    9,085      8,173      6,800      6,800      6,800

Balance sheet data:

  Working capital                                $ 47,917   $ 38,700   $ 30,188   $ 18,991   $ 15,563
  Total assets                                    199,359    101,656     73,689     43,336     35,051
  Long-term obligations                            85,295     27,992     46,340     24,895     22,051
  Stockholders' equity                             72,724     49,433     10,626      5,157      2,944

</TABLE>

(1)  In August 1996, the Company purchased its Recoil business unit which has
     been accounted for under the purchase method of accounting and,
     accordingly, their operating results have been included in the results of
     operations since mid-August 1996.

(2)  In July 1998, the Company purchased its M & M business unit which has been
     accounted for under the purchase method of accounting and, accordingly,
     their operating results have been included in the results of operations
     since late-July 1998 (see Note 2 of the Company's Consolidated Financial
     Statements).

(3)  In October 1998, the Company purchased its Marson business unit which has
     been accounted for under the purchase method of accounting and,
     accordingly, their operating results have been included in the results of
     operations since late-October 1998 (see Note 2 of the Company's
     Consolidated Financial Statements).


                                       9
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

         The Company designs, develops and manufactures a wide range of
specialty components and tooling systems and provides related services primarily
used by OEMs and their subcontractors to produce aircraft and defense products.
In addition, the Company serves the automotive, electrical and other industrial
markets, and their associated after-markets.

         In the last three years, the Company's financial objectives have
focused on increasing sales and profitability. The Company's success in
achieving these objectives is due to, among other factors, its ability to take
advantage of increased demand for fasteners from rising commercial aircraft
build rates, the expansion of product lines through acquisitions and new product
development, and increases in efficiencies and productivity. The Company's
financial results over this period reflect a high degree of leverage resulting
from debt incurred to finance the formation of the Company and to finance
internal growth and subsequent acquisitions.

Recent Developments and Significant Business Combinations

         On July 28, 1998, the Company acquired all of the issued and
outstanding common stock of M & M Machine & Tool Company Co. ("M & M"). M & M,
located in Huntington Beach, California, specializes in the machining of
structural components and assemblies for aircraft which include pylons, flap
hinges, struts, wing fittings, landing gear parts, spars, and many others. As
consideration for this acquisition, the Company paid the M & M stockholders
$12.4 million in cash and 376,142 shares of the Company's common stock valued at
$8.3 million. In addition, the Company will pay additional consideration of $2
million (60% in cash and 40% in shares of KTI common stock) based on M & M's
recasted earnings before interest, taxes and transaction costs related to the
acquisition for its fiscal year ended October 31, 1998. The purchase price
exceeded the fair value of the net assets by $17.9 million, which is being
allocated as goodwill and amortized using the straight-line method over 40
years. The M & M acquisition has been accounted for under the purchase method of
accounting and, accordingly, the operating results of M & M have been included
in the Company's results of operations since late-July 1998.

         On October 27, 1998, the Company acquired all of the issued and
outstanding common stock of Marcliff Corporation which holds all of the issued
and outstanding capital stock of Marson Creative Fastener, Inc. ("Marson").
Located in Stoughton, Massachusetts, Marson designs, manufactures, and markets a
broad line of blind rivets, threaded inserts, and setting tools primarily for
industrial markets. As consideration for this acquisition, the Company paid the
Marson stockholders $34.0 million in cash (of which $9.1 million was used to pay
off Marson's outstanding debt as of the acquisition date). In addition, the
Company will pay additional consideration of $1.1 million based on Marson's
closing balance sheet as of the acquisition date. The purchase price exceeded
the fair value of the net assets by $23.2 million, which is being allocated as
goodwill and amortized using the straight-line method over 40 years. The Marson
acquisition has been accounted for under the purchase method of accounting and,
accordingly, the operating results of Marson have been included in the Company's
results of operations since late-October 1998.

         On December 26, 1998, the Company entered into a merger agreement 
with The Fairchild Corporation ("Fairchild") in which the Company will become 
a wholly owned subsidiary of Fairchild (the "Fairchild Merger" or "Fairchild 
Merger Agreement"). Upon the effectiveness of the Fairchild Merger, each 
outstanding share of the Company's common stock, with the exception of shares 
held by stockholders who properly exercise dissenters' rights under the 
Delaware General Corporation Law and shares held by Fairchild, will be 
cancelled and converted into the right to

                                       10
<PAGE>

receive $28.75 in cash. The closing of the Fairchild Merger is subject to 
certain conditions, including regulatory approval, financing and approval of 
the Company's stockholders.

Results of Operations

         The following table is derived from the Company's Condensed
Consolidated Statements of Income for the periods indicated and presents the
results of operations as a percentage of net sales:

<TABLE>
<CAPTION>

                                        Year Ended December 31, 
                                 -------------------------------------
                                   1998          1997          1996
                                 --------      --------      --------
  <S>                           <C>          <C>            <C>
     Net sales                    100.0%        100.0%        100.0%
     Cost of sales                 69.7%         69.4%         73.6%
                                 --------      --------      --------
        Gross profit               30.3%         30.6%         26.4%
     Selling, general and
      administrative expenses      14.8%         14.2%         13.4%
                                 --------      --------      --------
        Operating income           15.5%         16.4%         13.0%
     Interest expense, net          2.2%          2.4%          4.1%
     Provision for income taxes     5.3%          5.6%          3.6%
                                 --------      --------      --------
        Net income                  8.0%          8.4%          5.3%
                                 --------      --------      --------
                                 --------      --------      --------

</TABLE>

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

         NET SALES. Net sales increased 23.3% or $35.1 million, to $185.5
million in 1998 from $150.4 million in 1997. This growth was primarily the
result of $18.0 million in additional net sales from recently acquired
businesses. In addition, net sales growth was enhanced by increased customer
demand (which occurred as commercial aircraft build rates increased), the
expansion of existing product lines, the development of variations of existing
products and the introduction of new products.

         GROSS PROFIT. Gross profit increased 22.4% to $56.3 million in 1998
from $46.0 million in 1997; however, as a percentage of net sales, gross profit
decreased 0.3% to 30.3% in 1998 from 30.6% in 1997. This reduction in gross
profit as a percentage of net sales was primarily due to negative profit margins
in the Company's APS business unit which manufactures specialty automation
equipment.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 27.4% to $27.4 million in 1998 from $21.5
million in 1997, and were up 0.6% as a percentage of net sales. The $5.9 million
increase in these expenses was attributable primarily to acquisitions of
businesses as well as additional employee costs needed to support the increased
sales volume. The 0.6% increase in selling, general and administrative expenses
as a percentage of net sales was primarily due to costs incurred by the Company
relating to its evaluation of strategic alternatives which resulted in the
merger agreement with Fairchild.

         INTEREST EXPENSE. Interest expense increased 13.9% to $4.1 million in
1998 from $3.6 million in 1997, primarily as a result of additional debt
incurred during 1998 to fund the acquisitions of M & M and Marson.

                                       11
<PAGE>

         NET INCOME. The Company recorded net income of $14.9 million for 1998,
or $1.64 per share, compared to $12.6 million, or $1.54 per share, in 1997.

         BACKLOG. Backlog at December 31, 1998 increased 17.6% or $16.3 million,
to $108.8 million from $92.5 million at December 31, 1997.


Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

         NET SALES. Net sales increased 51.9%, or $51.4 million, to $150.4
million in 1997 from $99.0 million in 1996. This growth was primarily the result
of an increase in customer demand, which occurred as commercial aircraft build
rates increased. In addition, net sales growth was enhanced by the expansion of
existing product lines, the development of variations of existing products and
the introduction of new products. The Company's acquisition of Recoil accounted
for approximately $12.6 million of net sales for the year.

         GROSS PROFIT. Gross profit increased 76.3% to $46.0 million or 30.6% of
net sales in 1997 from $26.1 million or 26.4% of net sales in 1996. This
improvement in gross profit margin was primarily due to the increase in sales
volume (which resulted in a greater absorption of fixed costs) and improved
productivity.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 61.7% to $21.5 million in 1997 from $13.3
million in 1996, and were up 0.8% as a percentage of sales. The $8.2 million
increase in these expenses was attributable primarily to (i) additional employee
costs needed to support the increased sales volume and (ii) the selling, general
and administrative expenses of Recoil, which, due to the nature of its business,
tends to have higher selling, general and administrative expenses as a
percentage of net sales than the Company's other business units.

         INTEREST EXPENSE. Interest expense decreased 10.0% to $3.6 million in
1997 from $4.0 million in 1996, as a result of using proceeds received from the
initial public offering in May 1997 to decrease outstanding debt by $24.0
million.

         NET INCOME. The Company recorded net income of $12.6 million for 1997,
or $1.54 per share, compared to $5.3 million, or $0.78 per share, in 1996.

         BACKLOG. Backlog at December 31, 1997 increased 41.2% or $27.0 million,
to $92.5 million from $65.5 million at December 31, 1996.

Segment Information

         The Company currently reports in two principal industry segments:
"Commercial Aircraft and Defense" and "Industrial". The following table
illustrates the historical sales and operating income of the Company's
operations for the past three years.

                                       12
<PAGE>

<TABLE>
<CAPTION>

                                                          For the Years Ended December 31, 
                                                      ----------------------------------------
                                                        1998           1997            1996   
                                                      --------       ---------       ---------
<S>                                                  <C>           <C>             <C>
Sales by Segment:
         Commercial Aircraft and Defense              $169,401       $137,889         $95,156
         Industrial                                     16,111         12,540           3,867
                                                      --------       --------         -------
Total Sales                                           $185,512       $150,429         $99,023

Operating Income by Segment:
         Commercial Aircraft and Defense              $ 30,192       $ 25,892         $13,464
         Industrial                                      1,783          1,645             238
         Corporate Expenses                             (3,124)        (2,952)           (866)
                                                      --------       --------         -------
Total Operating Income                                $ 28,851       $ 24,585         $12,836

</TABLE>

Commercial Aircraft and Defense Segment Results

         NET SALES. Net sales in the Commercial Aircraft and Defense Segment
increased 22.8%, or $31.5 million, to $169.4 million in 1998 from $137.9 in
1997. This growth was primarily the result of additional sales from recently
acquired businesses. In addition, net sales growth was enhanced by increased
customer demand (which occurred as commercial aircraft build rates increased),
the expansion of existing product lines, the development of variations of
existing products and the introduction of new products. Net sales in the
Commercial Aircraft and Defense Segment increased 44.9%, or $42.7 million, to
$137.9 million in 1997 from $95.2 in 1996. This growth was primarily the result
of an increase in customer demand (which occurred as commercial aircraft build
rates increased), the expansion of existing product lines, the development of
variations of existing products and the introduction of new products.

         OPERATING INCOME. Operating income increased 16.6% to $30.2 million or
17.8% of net sales in 1998 from $25.9 million or 18.8% of net sales in 1997.
This reduction in operating income as a percentage of net sales was primarily
due to negative profit margins in specialty automation equipment. Operating
income increased 91.9% to $25.9 million or 18.8% of net sales in 1997 from $13.5
million or 14.2% of net sales in 1996. This improvement in operating income as a
percentage of net sales was primarily due to the increase in sales volume (which
resulted in a greater absorption of fixed costs) and improved productivity.

Industrial Segment Results

         NET SALES. Net sales in the Industrial Segment increased 28.8%, or 
$3.6 million, to $16.1 million in 1998 from $12.5 million in 1997. This 
growth was the result of additional sales from recently acquired businesses. 
Net sales in the Industrial Segment increased 220.5%, or $8.6 million, to 
$12.5 million in 1997 from $3.9 million in 1996. This growth was due to the 
fact that the Company purchased its Recoil business unit in mid-August 1996
and, accordingly, their operating results were incorporated for three and a
half months in 1996 as compared to a full year in 1997.

         OPERATING INCOME. Operating income increased 12.5% to $1.8 million or
11.1% of net sales in 1998 from $1.6 million or 12.8% of net sales in 1997. This
reduction in operating income as a percentage of net sales was primarily due to
a decrease in 1998 sales in the Company's Recoil business unit (which increased
selling, general and administrative costs as a percentage of net sales).
Operating income increased to $1.6 million or 12.8% of net sales in 1997 from
$0.2 million or 5.1% of net sales in 1996. This improvement in operating income
as a percentage of 

                                       13
<PAGE>

net sales was primarily due to the increase in sales volume (which resulted in a
greater absorption of fixed costs) and improved productivity.

Liquidity and Capital Resources

         The Company's liquidity requirements consist primarily of working
capital needs, capital expenditures and scheduled payments of interest on its
indebtedness to General Electric Capital Corporation ("GECC"), which
beneficially holds a majority of the Company's common stock. The Company's
working capital requirements have increased as a result of higher accounts
receivable and higher inventory levels needed to support its growth in net
sales. The Company's working capital was $47.9 million as of December 31, 1998,
compared to $38.7 million as of December 31, 1997.

         For the year ended December 31, 1998 net cash provided by operating 
activities was $6.8 million, as compared to net cash provided by operating 
activities of $12.2 million for the year ended December 31, 1997. The primary 
sources of cash from operations during 1998 included net income of $14.9 
million and non-cash charges for depreciation and amortization of $6.8 
million, offset by an increase in inventories of $7.2 million and a decrease 
in accounts payable and accrued expenses of $5.7 million and $3.2 million, 
respectively. The primary sources of cash from operations during 1997 
included net income of $12.6 million, non-cash charges for depreciation and 
amortization of $3.8 million, an increase in accrued expenses of $4.9 million 
and an increase in accounts payable of $3.8 million, offset by increases in 
accounts receivable and inventories of $8.0 million and $4.3 million, 
respectively.

         The Company's net cash used in investing activities in 1998 was $64.8
million, consisting primarily of $18.3 million in capital expenditures and $49.2
million related to the acquisitions of businesses, offset by $3.0 million in net
redemptions of marketable securities, as compared to net cash used in investing
activities in 1997 of $20.3 million, which consisted primarily of $17.9 million
in capital expenditures and $3.1 million in net purchases of marketable
securities.

         The Company's net cash provided by financing activities in 1998 was
$59.2 million, consisting entirely of net borrowings on debt, as compared to net
cash provided by financing activities in 1997 of $7.8 million, consisting of
$27.6 million in net proceeds from the initial public offering in May 1997,
offset by net payments of $19.8 million on debt.

         The Company believes that internally generated cash flow and amounts
that may be available under the Company's revolving line-of-credit will provide
adequate funds to meet its working capital needs, planned capital expenditures
and debt service obligations. However, the Company's ability to fund its
operations, make planned capital expenditures and make scheduled payments on,
and refinance, its indebtedness depends on its future operating performance and
cash flow. Future operating performance and cash flow are, in turn, subject to
prevailing economic conditions and to financial, business and other factors
affecting the Company, some of which are beyond the Company's control.

         During the past three years, inflation has not had a significant impact
on the Company's operations.

International Sales and Operations

         The Company generates a portion of its net sales from international
customers. The Company's direct net sales to foreign customers represents
approximately 16%, 16% and 14% of net sales for 1998, 1997 and 1996,
respectively. Although most of the Company's direct international sales are
invoiced in U.S. dollars, a portion may be invoiced in foreign currency.

                                       14
<PAGE>

         The Company does not actively manage its foreign currency exposure and
fluctuations in exchange rates which may result in quarterly variations of the
Company's net sales. The Company has historically mitigated the impact of
exchange rate fluctuations by adjusting the prices of its products, but there is
no assurance that the Company will be able to do so in the future, particularly
during periods of rapid and volatile exchange rate fluctuations.

Other Developments

         In connection with the acquisition of M & M, on July 27, 1998, the 
Company entered into the Second Restated and Amended Credit Agreement with 
GECC (the "Second Credit Agreement"). The Second Credit Agreement increased 
the size of the Company's credit facility to a maximum of $65 million, 
including $50 million in term loans and a $15 million revolving 
line-of-credit. The Second Credit Agreement contains sub-facilities for 
letters of credit and swing line loans.

         In connection with the acquisition of Marson, on October 23, 1998, 
the Company entered into the Third Restated and Amended Credit Agreement with 
GECC (the "Third Credit Agreement"), which replaced the Second Credit 
Agreement. The Third Credit Agreement increased the size of the Company's 
credit facility to a maximum of $99 million, including $74 million in term 
loans and a $25 million revolving line-of-credit. The Third Credit Agreement 
contains sub-facilities for letters of credit and swing line loans.

         During the past several years, the Company's growth in net sales has
occurred primarily as a result of increased customer demand due to the increases
in commercial aircraft build rates. Boeing, a significant customer of the
Company, has announced that it has been experiencing production difficulties
affecting build rates. There can be no assurance that such difficulties will not
affect Boeing's demand for the Company's products. Additionally, the aerospace
industry has recently experienced a flattening of commercial aircraft build
rates which have and may continue to impact incoming orders.

Year 2000 Compliance

         The Company has in place detailed programs to address Year 2000
readiness in its internal computer systems and its key customers and suppliers.
The Company's Year 2000 readiness team includes both internal personnel and
external consultants. The team's activities are designed to ensure that there
will be no material adverse effects on the Company's business operations and
that transactions with customers, suppliers, and financial institutions will be
fully supported. The specific costs of achieving Year 2000 compliance have been,
and are expected to be, immaterial.

         The Company has already converted its most significant manufacturing
facilities to new software systems which are Year 2000 compliant. The Company
expects that all other critical systems will be compliant by March 1999 and
fully tested by September 1999. The Company could be subject to liability to
customers and other third parties if its systems are not Year 2000 compliant,
resulting in possible legal actions for breach of contract, breach of warranty,
misrepresentation, unlawful trade practices and other harm.

         The Company is also in the process of ascertaining that its significant
suppliers, customers and financial institutions have appropriate plans to ensure
that they are Year 2000 compliant. If a significant business partner of the
Company fails to be Year 2000 compliant, the Company could suffer a material
loss of business or incur material expenses. Risk assessment, readiness
evaluation, action plans and contingency plans related to third parties are
expected to be completed during the first half of 1999.

         The Company is beginning to develop and evaluate contingency plans to
deal with events affecting the Company or one of its business partners arising
from significant Year 2000 

                                       15
<PAGE>

problems. These contingency plans include identifying alternative suppliers,
distribution networks, and service providers.

         While the Company believes its planning efforts are adequate to address
its Year 2000 concerns, there can be no guarantee that all internal systems, as
well as those of third parties on which the Company relies upon, will be
converted on a timely basis and will not have a material affect on the Company's
operations.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


         The following consolidated financial statements of the Company and the
report of the Company's independent public accountants with respect thereto, are
set forth below.

<TABLE>
<CAPTION>

                  Financial Statements                                        Page
                  --------------------------------------------                -----
                <S>                                                         <C>
                  Report of Independent Public Accountants                      17

                  Consolidated Statements of Income - Years
                  ended December 31, 1998, 1997 and 1996.                       18

                  Consolidated Balance Sheets - December 31,
                  1998 and 1997.                                                19-20

                  Consolidated Statements of Shareholders'
                  Equity - Years Ended December 31, 1998,
                  1997 and 1996.                                                21

                  Consolidated Statements of Cash Flows - Years
                  ended December 31, 1998, 1997 and 1996.                       22-23

                  Notes to Consolidated Financial Statements                    24-36

</TABLE>

         Supplementary information regarding "Quarterly Financial Data
(Unaudited)" is set forth under Item 8 in Note 17 to the Consolidated Financial
Statements.

                                       16
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
  Kaynar Technologies Inc.:

We have audited the accompanying consolidated balance sheets of Kaynar
Technologies Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kaynar Technologies
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.




                                               ARTHUR ANDERSEN LLP
 
Orange County, California
February 5, 1999

                                       17
<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                     (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                         1998             1997             1996
                                                                                      ----------       ----------       -----------
<S>                                                                                 <C>              <C>              <C>
Net sales (1)                                                                          $185,512         $150,429          $99,023

Cost of sales                                                                           129,223          104,390           72,924
                                                                                      ----------       ----------       -----------
    Gross profit                                                                         56,289           46,039           26,099

Selling, general and administrative expenses                                             27,438           21,454           13,263
                                                                                      ----------       ----------       -----------
    Operating income                                                                     28,851           24,585           12,836

Interest expense, net                                                                     4,067            3,602            4,011
                                                                                      ----------       ----------       -----------
    Income before provision for income taxes                                             24,784           20,983            8,825

Provision for income taxes                                                                9,914            8,393            3,530
                                                                                      ----------       ----------       -----------
    Net income                                                                         $ 14,870         $ 12,590          $ 5,295
                                                                                      ----------       ----------       -----------
                                                                                      ----------       ----------       -----------
Earnings per share
  Basic                                                                                $   3.39         $   4.23          $  3.26
  Diluted                                                                              $   1.64         $   1.54          $  0.78
                                                                                      ----------       ----------       -----------
                                                                                      ----------       ----------       -----------
Weighted average number of shares of common stock and
 common stock equivalents
  Basic                                                                                   4,382            2,967            1,594
  Diluted                                                                                 9,085            8,173            6,800
                                                                                      ----------       ----------       -----------
                                                                                      ----------       ----------       -----------

</TABLE>

(1) Including $13,038, $12,961 and $11,437 in 1998, 1997 and 1996, respectively,
to a related party (see Note 15)

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       18
<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES

                      CONSOLIDATED BALANCE SHEETS - ASSETS

                        AS OF DECEMBER 31, 1998 AND 1997
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                            1998                   1997  
                                                                                         ---------              ----------
<S>                                                                                   <C>                     <C>
Current assets:
  Cash                                                                                    $  1,893               $    675
  Marketable securities                                                                         50                  3,079
  Accounts receivable (1)                                                                   30,421                 23,293
  Inventories                                                                               52,778                 34,231
  Prepaid expenses and other current assets                                                  1,430                    647
  Deferred tax asset                                                                         2,685                  1,006
                                                                                         ---------              ----------
           Total current assets                                                             89,257                 62,931
                                                                                         ---------              ----------

Property, plant and equipment, at cost                                                      76,035                 41,048
  Less accumulated depreciation and amortization                                           (14,452)                (8,797)
                                                                                         ---------              ----------
                                                                                            61,583                 32,251
                                                                                         ---------              ----------
Intangible assets, net of accumulated amortization of $1,104 and
  $480 at December 31, 1998 and 1997, respectively                                          47,958                  6,409
Other assets                                                                                   561                     65
                                                                                         ---------              ----------
           Total assets                                                                   $199,359               $101,656
                                                                                         ---------              ----------
                                                                                         ---------              ----------

</TABLE>

(1)   Including $982 and $1,846 in 1998 and 1997, respectively, from a related
      party (see Note 15), net of allowance for doubtful accounts of $703 and
      $310 in 1998 and 1997, respectively



        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       19
<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES

       CONSOLIDATED BALANCE SHEETS - LIABILITIES AND STOCKHOLDERS' EQUITY

                        AS OF DECEMBER 31, 1998 AND 1997
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                             1998                   1997  
                                                                                          ----------             ---------
<S>                                                                                      <C>                   <C>
Current liabilities:
  Revolving line-of-credit, to a related party (see Note 8)                                $ 13,000               $   -
  Current portion of long-term debt                                                           4,054                  1,021
  Current portion of capital lease obligations                                                  280                    272
  Accounts payable                                                                            8,017                  9,969
  Accrued payroll and related expenses                                                        8,115                  8,546
  Other accrued expenses                                                                      7,874                  4,423
                                                                                          ----------             ---------
           Total current liabilities                                                         41,340                 24,231
                                                                                          ----------             ---------
Long-term liabilities:
  Long-term debt, primarily to a related party (see Note 8)                                  80,624                 26,372
  Capital lease obligations                                                                     194                    484
  Deferred tax liability                                                                      4,477                  1,136
                                                                                          ----------             ---------
           Total long-term liabilities                                                       85,295                 27,992
                                                                                          ----------             ---------
Commitments and contingencies (see Notes 8 and 12)

Stockholders' equity:
  Series C Convertible Preferred stock; $0.01 par value;
    Authorized--10,000,000; issued and outstanding-4,206,000 and 5,206,000
    shares at December 31, 1998 and 1997, respectively                                           42                     52
  Common stock; $0.01 par value; Authorized--20,000,000 shares; issued
    and outstanding--5,090,142 and 3,694,000 shares at December 31, 1998
    and 1997, respectively                                                                       51                     37
  Additional paid-in capital                                                                 37,821                 28,973
  Retained earnings                                                                          36,264                 21,394
  Accumulated other comprehensive income                                                     (1,454)                (1,023)
                                                                                          ----------             ---------
           Total stockholders' equity                                                        72,724                 49,433
                                                                                          ----------             ---------
           Total liabilities and stockholders' equity                                      $199,359               $101,656
                                                                                          ----------             ---------
                                                                                          ----------             ---------

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       20
<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                      Preferred Stock                       
                                         Series C         Common Stock      
                                     -----------------   -----------------
                                      Shares   Amount     Shares   Amount   
                                     -------- --------   -------- --------
<S>                                <C>       <C>       <C>      <C> 
BALANCE, December 31, 1995            5,206      $52      1,594      $16    

  Comprehensive Income:
    Net income                                                              
    Currency Translation                                                    
                                                                            
  Comprehensive Income                                                      
                                                                            

  Dividends declared                                                        
                                      -----      ---      -----      ---    
BALANCE, December 31, 1996            5,206       52      1,594       16    

  Comprehensive Income:
    Net income                                                              
    Currency Translation                                                    
                                                                            
  Comprehensive Income                                                      

  Common stock issuance                 -         -       2,100       21    

  Dividends declared                                                        
                                      -----      ---      -----      ---    
BALANCE, December 31, 1997            5,206       52      3,694       37    

  Comprehensive Income:
    Net income                                                              
    Currency Translation                                                    
                                                                            
  Comprehensive Income                                                      

  Conversion of Preferred            (1,000)     (10)     1,000       10    

  Common stock issuance                 -         -         396        4    
                                      -----      ---      -----      ---    
BALANCE, December 31, 1998            4,206      $42      5,090      $51    
                                      -----      ---      -----      ---    
                                      -----      ---      -----      ---    

</TABLE>

<TABLE>
<CAPTION>

                                                                                 Accumulated  
                                         Additional                                 Other     
                                          Paid-in    Comprehensive    Retained  Comprehensive 
                                          Capital       Income        Earnings      Income       Total
                                         ----------- -------------   ---------- --------------  ---------
<S>                                    <C>          <C>            <C>        <C>             <C>          
BALANCE, December 31, 1995               $ 1,432                      $ 3,639      $    18      $ 5,157   
                                                                                                          
  Comprehensive Income:                                                                                   
    Net income                                         $ 5,295          5,295                     5,295    
    Currency Translation                                   270                         270          270   
                                                       -------                                            
  Comprehensive Income                                 $ 5,565                                            
                                                       -------                                            
                                                       -------                                            
                                                                                                          
  Dividends declared                                                      (96)                      (96)  
                                         -------                      -------      -------      -------   
BALANCE, December 31, 1996                 1,432                        8,838          288       10,626   
                                                                                                          
  Comprehensive Income:                                                                                   
    Net income                                         $12,590         12,590                    12,590   
    Currency Translation                                (1,311)                     (1,311)      (1,311)  
                                                       -------                                            
  Comprehensive Income                                 $11,279                                            
                                                       -------                                            
                                                       -------                                            
                                                                                                          
  Common stock issuance                   27,541                                                 27,562   
                                                                                                          
  Dividends declared                                                      (34)                      (34)  
                                         -------                      -------      -------      -------   
BALANCE, December 31, 1997                28,973                       21,394       (1,023)      49,433   
                                                                                                          
  Comprehensive Income:                                                                                   
    Net income                                         $14,870         14,870                    14,870   
    Currency Translation                                  (431)                       (431)        (431)  
                                                       -------                                            
  Comprehensive Income                                 $14,439                                            
                                                       -------                                            
                                                       -------                                            
                                                                                                          
  Conversion of Preferred                   -                                                      -      
                                                                                                          
  Common stock issuance                    8,848                                                  8,852   
                                         -------                      -------      -------      -------   
BALANCE, December 31, 1998               $37,821                      $36,264      $(1,454)     $72,724   
                                         -------                      -------      -------      -------   
                                         -------                      -------      -------      -------   

</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       21
<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                            1998            1997            1996  
                                                                                          --------        --------        --------
<S>                                                                                     <C>            <C>             <C> 
Cash flows from operating activities:
  Net income                                                                               $14,870          $12,590        $ 5,295
  Adjustments to reconcile net income to net cash provided by
    operating activities-
      Depreciation and amortization                                                          6,772            3,818          2,613
      Increase (decrease) in deferred income taxes                                             680             (990)           186
      (Gain) loss on sale of property, plant and equipment                                    (124)             154             34
      Changes in operating assets and liabilities, net of acquisitions-
          (Increase) decrease in accounts receivable                                           962           (7,990)        (2,505)
          Increase in inventories                                                           (7,190)          (4,346)        (6,867)
          (Increase) decrease in prepaid expenses and other current assets                    (112)              32           (152)
          (Increase) decrease in other assets                                                 (211)             187            181
          Increase (decrease) in accounts payable                                           (5,657)           3,800          2,361
          Increase (decrease) in accrued expenses                                           (3,222)           4,946          3,172
                                                                                           -------          -------        -------
            Net cash provided by operating activities                                        6,768           12,201          4,318
                                                                                           -------          -------        -------
Cash flows from investing activities:
  Purchases of property, plant and equipment                                               (18,322)         (17,909)        (6,850)
  Proceeds from sales of property, plant and equipment                                         403               92             43
  Net redemptions (purchases) of marketable securities                                       3,029           (3,079)             -
  Acquisitions, net of acquired cash of $421 in 1998                                       (49,203)            -           (12,160)
  (Increase) decrease in intangible assets                                                    (669)             638         (1,231)
                                                                                           -------          -------        -------
            Net cash used in investing activities                                          (64,762)         (20,258)       (20,198)
                                                                                           -------          -------        -------
Cash flows from financing activities:
  Net borrowings (payments) on line-of-credit, from a related party                         13,000             (746)        (3,560)
  Borrowings on long-term debt, primarily from a related party                              52,882              501         21,245
  Payments on long-term debt, primarily from a related party                                (6,345)         (20,263)          (898)
  Net principal (payments) borrowings on capital lease obligations                            (303)             795            (55)
  Net proceeds from issuance of common stock                                                  -              27,562              -
                                                                                           -------          -------        -------
            Net cash provided by financing activities                                       59,234            7,849         16,732
                                                                                           -------          -------        -------
Effect of exchange rate changes on cash                                                        (22)             (26)             5
                                                                                           -------          -------        -------
Net increase (decrease) in cash                                                              1,218             (234)           857

Cash, beginning of period                                                                      675              909             52
                                                                                           -------          -------        -------
Cash, end of period                                                                        $ 1,893          $   675        $   909
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------

</TABLE>

                                       22
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                     <C>            <C>             <C> 
Supplemental disclosures of cash flow information: 
    Cash paid during the period for:
      Interest                                                                             $ 3,094          $ 3,943        $ 3,787
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------
      Income taxes                                                                         $12,844          $ 8,395        $ 2,841
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------
    Noncash financing activities:
      Capital lease obligations assumed for the purchase of equipment                      $   -            $   507        $   355
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------
      Borrowings on long-term debt for preferred stock dividends                           $   -            $    34        $    96
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------
      Common stock issued in connection with acquisitions of businesses                    $ 8,852          $   -          $   -
                                                                                           -------          -------        -------
                                                                                           -------          -------        -------

</TABLE>




        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       23

<PAGE>

                    KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996
                  (Dollars in thousands, except per share data)



1. NATURE OF OPERATIONS AND RECENT DEVELOPMENTS

Kaynar Technologies Inc. (the "Company") is a leading precision fabricator that
designs, develops and manufactures a wide range of specialty components and
tooling systems and provides related services used primarily by original
equipment manufacturers ("OEM's") and their subcontractors to produce aircraft
and defense products. In addition, the Company serves the automotive, electrical
and other industrial markets and their associated after-markets.

On December 26, 1998, the Company entered into a merger agreement with The 
Fairchild Corporation ("Fairchild") in which the Company will become a wholly 
owned subsidiary of Fairchild (the "Fairchild Merger"). Upon the 
effectiveness of the Fairchild Merger, each outstanding share of the 
Company's common stock, with the exception of shares held by stockholders who 
properly exercise dissenters' rights under the Delaware General Corporation 
Law and shares held by Fairchild, will be cancelled and converted into the 
right to receive $28.75 in cash. The closing of the Fairchild Merger is 
subject to certain conditions, including regulatory approval, financing and 
approval of the Company's stockholders. 

2. BUSINESS COMBINATIONS

On July 28, 1998, the Company acquired all of the issued and outstanding 
common stock of M & M Machine & Tool Company Co. ("M & M"). M & M, located in 
Huntington Beach, California, specializes in the machining of structural 
components and assemblies for aircraft which include pylons, flap hinges, 
struts, wing fittings, landing gear parts, spars, and many others. As 
consideration for this acquisition, the Company paid the M & M stockholders 
$12,441 in cash and 376,142 shares of the Company's common stock valued at 
$8,294. In addition, the Company will pay additional consideration of $2,000 
(60% in cash and 40% in shares of KTI common stock) based on M & M's recasted 
earnings before interest, taxes and transaction costs related to the 
acquisition for its fiscal year ended October 31, 1998 (which was accrued for 
and included in other accrued expenses as of December 31, 1998). The purchase 
price exceeded the fair value of the net assets by $17,850, which is being 
allocated as goodwill and amortized using the straight-line method over 40 
years. The M & M acquisition has been accounted for under the purchase method 
of accounting and, accordingly, the operating results of M & M have been 
included in the Company's results of operations since late-July 1998.

On October 27, 1998, the Company acquired all of the issued and outstanding 
common stock of Marcliff Corporation which holds all of the issued and 
outstanding capital stock of Marson Creative Fastener, Inc. ("Marson"). 
Located in Stoughton, Massachusetts, Marson designs, manufactures, and 
markets a broad line of blind rivets, threaded inserts, and setting tools 
primarily for industrial markets. As consideration for this acquisition, the 
Company paid the Marson stockholders $34,000 in cash (of which $9,058 was 
used to pay off Marson's outstanding debt as of the acquisition date). In 
addition, the Company will pay additional consideration of $1,111 based on 
Marson's closing balance sheet as of the acquisition date (which was accrued 
for and included in other accrued expenses as of December 31, 1998). The 
purchase price exceeded the 

                                       24
<PAGE>

fair value of the net assets by $23,217, which is being allocated as goodwill
and amortized using the straight-line method over 40 years. The Marson
acquisition has been accounted for under the purchase method of accounting and,
accordingly, the operating results of Marson have been included in the Company's
results of operations since late-October 1998.


3. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma consolidated statements of income information
present the results of the Company's operations for the years ended December 31,
1998 and 1997 as though the acquisitions of M & M and Marson had occurred as of
the beginning of each respective calendar year:

<TABLE>
<CAPTION>

                             1998             1997  
                        ------------     ------------
<S>                   <C>              <C> 
Net sales               $   220,374      $   195,654

Net income                   15,971           14,047

Earnings per share
  Basic                        3.42             4.16
  Diluted                      1.71             1.64

</TABLE>

The pro forma results have been prepared for comparative purposes only and are
not necessarily indicative of the actual results of operations had the
acquisitions taken place at the beginning of the fiscal year or the results that
may occur in the future. The pro forma results include additional interest on
borrowed funds, additional amortization of goodwill resulting from the
acquisitions and the change in salary and benefit costs of certain officers of
the acquired companies.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.       USE OF ESTIMATES IN FINANCIAL STATEMENTS

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

         b.       PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of Kaynar
         Technologies Inc. and its wholly owned subsidiaries. All significant
         intercompany balances and transactions have been eliminated.

         c.       REVENUE RECOGNITION

         Sales and related costs are recorded by the Company upon shipment of
         product. Revenues related to the rental of the Company's K-FAST tools,
         which are not significant, are recognized monthly over the term of the
         lease. Revenues related to the Company's APS business unit, which are
         not significant, are recognized based on percentage of completion.

                                       25
<PAGE>

         d.       CURRENCY TRANSLATION ADJUSTMENT

         Assets and liabilities of the Company's foreign subsidiaries are
         translated into United States dollars at the year-end rate of exchange.
         Income and expense items are translated at the average rates of
         exchange for the period. Gains and losses resulting from translating
         foreign currency financial statements are accumulated in a separate
         component of stockholders' equity. Foreign currency transaction gains
         and losses are included in the consolidated statements of income.

         e.       MARKETABLE SECURITIES

         The Company invests excess cash in a money market fund that invests in
         short term (maturities of 397 days or less) direct obligations of the
         U.S. Treasury.

         f.       INVENTORIES

         Inventories are stated at the lower of cost or market, with cost
         determined on a first-in, first-out (FIFO) method and market based upon
         the lower of replacement cost or estimated realizable value. Inventory
         costs include material, labor and factory overhead.

         g.       PROPERTY, PLANT AND EQUIPMENT

         Depreciation is computed principally on the straight-line method over
         the estimated useful lives of the depreciable assets (ranging from five
         to ten years). Cost and accumulated depreciation for property retired
         or disposed of are removed from the accounts and any gains or losses
         are reflected in operations. Major renewals and betterments that extend
         the useful life of an asset are capitalized.

         h.       INTANGIBLE ASSETS

         Intangible assets primarily represent the excess of purchase price over
         fair value of net assets acquired and related acquisition costs
         incurred in the acquisitions of Recoil, M & M and Marson. Intangibles
         are amortized using the straight-line method from the date of
         acquisition over the expected period to be benefited, currently
         estimated between 20 and 40 years. The Company assesses the
         recoverability of intangible assets in accordance with Statement of
         Financial Accounting Standards (SFAS) No. 121 "Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed Of."

         i.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of cash, marketable securities, accounts
         receivable and accounts payable approximate their fair value as of
         December 31, 1998 and 1997. The carrying amounts of the line-of-credit
         and long-term debt approximate fair value as the obligations bear
         interest at rates that fluctuate with the market rate. The carrying
         amount of the term loans approximates fair value as the obligation
         compares favorably with fixed rate obligations that would be currently
         available to the Company.

         j.       INCOME TAXES

         The Company accounts for income taxes under SFAS No. 109 "Accounting
         for Income Taxes," which requires an asset and liability approach in
         accounting for income taxes payable or refundable at the date of the
         financial statements as a result of all events that have been
         recognized in the financial statements and as measured by the
         provisions of enacted laws.

                                       26
<PAGE>

         k.       EARNINGS PER SHARE

         Basic earnings per share is computed by dividing net income available
         to common stockholders by the weighted average number of common shares
         outstanding. Diluted earnings per share is computed by dividing net
         income by the weighted average number of common shares outstanding plus
         the dilutive effect of other securities. The Company's other securities
         are (i) Series C Convertible Preferred stock and (ii) outstanding
         common stock options.

         The table below details the components of the basic and diluted
         earnings per share ("EPS") calculations:

<TABLE>
<CAPTION>

                                                                 Years ended December 31,
                                                 1998                      1997                        1996
                                        ---------------------      ---------------------        -------------------
                                         Income        Shares       Income       Shares          Income     Shares
                                        ----------   --------      ---------   ---------        ---------  --------
                                                                  (Amounts in thousands)
     <S>                              <C>          <C>           <C>         <C>              <C>        <C>
         Basic EPS
              Net income                 $14,870        4,382       $12,590       2,967          $5,295      1,594
              Less: dividends on
                previously issued
                preferred stock              -            -             (34)        -               (96)       -
                                        ----------   --------      ---------   ---------        ---------  --------
              Income available to
                common stockholders       14,870        4,382        12,556       2,967           5,199      1,594

         Effect of Dilutive
           Securities
              Series C Convertible
                Preferred stock              -          4,688            34       5,206              96      5,206
              Options and other              -             15           -           -               -          -
                                        ----------   --------      ---------   ---------        ---------  --------
         Diluted EPS                     $14,870        9,085       $12,590       8,173          $5,295      6,800
                                        ----------   --------      ---------   ---------        ---------  --------
                                        ----------   --------      ---------   ---------        ---------  --------

</TABLE>

         l.       NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued Statement of Financial Accounting
         Standards No. 133, "Accounting for Derivative Instruments and Hedging
         Activities," effective for fiscal years beginning after June 15, 1999.
         The Company does not believe the adoption of this standard will have a
         material impact on the Company's results of operations.

                                       27
<PAGE>

5. INVENTORIES

Inventories consist of the following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                               1998                  1997  
                                                                            --------              --------
     <S>                                                                  <C>                    <C>
         Raw materials                                                       $ 3,772               $ 2,593
         Work in progress                                                     14,245                11,012
         Components                                                            8,611                 5,325
         Finished goods                                                       18,901                 9,550
         Supplies and small tools                                              7,249                 5,751
                                                                            --------              --------
                                                                             $52,778               $34,231
                                                                            --------              --------
                                                                            --------              --------
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31, 1998 and
1997:

<TABLE>
<CAPTION>

                                                            Years of
                                                            Estimated
                                                           Useful Life                 1998                  1997  
                                                          -------------              --------              --------
       <S>                                               <C>                     <C>                   <C>
         Land                                                    -                    $ 1,787              $    32
         Buildings                                              20                      1,799                  -
         Machinery and equipment                                5 to 10                49,911               20,083
         Equipment rented to others                              7                      8,534                8,581
         Leasehold improvements                              Lease term                 5,432                1,315
         Construction in progress                                -                      8,572               11,037
                                                                                      -------              -------
                                                                                       76,035               41,048
         Accumulated depreciation and amortization                                    (14,452)              (8,797)
                                                                                      -------              -------
                                                                                      $61,583              $32,251
                                                                                      -------              -------
                                                                                      -------              -------

</TABLE>

7. INCOME TAXES

The components of the net accumulated deferred income tax (asset) liability at
December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>

                                                                                  1998               1997 
                                                                               ---------          ---------
       <S>                                                                   <C>                <C>
         Current deferred tax (asset) liability:
           Inventory reserves                                                   $(1,369)           $   (87)
           Accrued vacation                                                        (706)              (449)
           Other                                                                   (610)              (470)
                                                                               ---------          ---------
                                                                                $(2,685)           $(1,006)
                                                                               ---------          ---------
                                                                               ---------          ---------
         Long-term deferred tax (asset) liability:
           Depreciation                                                         $ 4,477            $ 1,136
                                                                               ---------          ---------
                                                                               ---------          ---------

</TABLE>

                                       28
<PAGE>

The provision for income taxes includes income taxes currently payable and those
deferred due to temporary differences between the financial statements and tax
basis of assets and liabilities. The provision differs from the statutory rates
primarily due to permanent differences. The provision for income taxes for the
years ended December 31, 1998, 1997 and 1996, consists of the following:

<TABLE>
<CAPTION>

                                                                1998               1997              1996  
                                                              --------          ---------          --------
      <S>                                                  <C>               <C>                  <C>
         Current provision:
           Federal                                             $7,083            $7,716             $2,590
           State                                                1,500             1,400                720
           Foreign                                                 33               267                  -
         Deferred provision:
           Federal                                              1,061              (707)                69
           State                                                  237              (283)               151
                                                              --------          ---------          --------
                                                               $9,914            $8,393             $3,530
                                                              --------          ---------          --------
                                                              --------          ---------          --------

</TABLE>

Variations from the federal statutory rate for the years ended December 31,
1998, 1997 and 1996, are as follows:

<TABLE>
<CAPTION>

                                                  1998                      1997                      1996
                                       -------------------------  ------------------------  ----------------------
                                           Amount      Percent       Amount      Percent       Amount     Percent
                                       ------------- -----------  ----------- ------------  ----------- ----------
<S>                                  <C>            <C>         <C>          <C>          <C>         <C>
Federal statutory rate                     $8,675       35.0%        $7,344       35.0%        $3,001       34.0%
State income taxes,
  net of federal benefit                    1,129        4.5            726        3.5            485        5.5
Foreign sales
  corporation benefit                        (552)      (2.2)          (220)      (1.0)          (141)      (1.6)
Foreign losses not currently
  benefited                                   161        0.6            115        0.5            -          -
Utilization of foreign losses                 (26)      (0.1)          (114)      (0.5)           -          -
Non-deductible expenses                       212        0.9            173        0.8             94        1.1
Other                                         315        1.3            369        1.7             91        1.0
                                       ------------- -----------  ----------- ------------  ----------- ----------
                                           $9,914       40.0%        $8,393       40.0%        $3,530       40.0%
                                       ------------- -----------  ----------- ------------  ----------- ----------
                                       ------------- -----------  ----------- ------------  ----------- ----------

</TABLE>

8. DEBT ARRANGEMENTS

The Company entered into a Third Restated and Amended Credit Agreement on 
October 23, 1998 (the "Third Credit Agreement") with its primary lender 
General Electric Capital Corporation ("GECC") which has a wholly owned 
subsidiary, CFE, Inc. ("CFE"), that owned all of the outstanding shares of 
the Company's Series C Preferred stock and one million shares of the 
Company's common stock as of December 31, 1998. The Third Credit Agreement 
contains significant financial and operating covenants, including limitations 
on the ability of the Company to incur additional indebtedness and 
restrictions on, among other things, the Company's ability to pay dividends 
or take certain other corporate actions. The Third Credit Agreement also 
requires the Company to be in compliance with certain financial ratios. In 
addition to the Term Loan under the Third Credit Agreement ("Term Loan"), the 
Company has entered into promissory notes with other lenders for the purchase 
of property, machinery and equipment ("The Notes").

                                       29
<PAGE>

The following schedule summarizes the future annual minimum principal payments
due under the Term Loan and The Notes as of December 31, 1998:

<TABLE>
<CAPTION>

                                  Term                 The
                                  Loan                Notes               Total 
                                --------             --------           ---------
       <S>                    <S>                  <S>                 <S>
         1999                   $ 1,700              $ 2,354             $ 4,054
         2000                     1,700                2,178               3,878
         2001                     1,700                1,495               3,195
         2002                     1,700                1,177               2,877
         2003                    67,200                  789              67,989
        Thereafter                  -                  2,685               2,685
                                --------             --------           ---------
                                $74,000              $10,678             $84,678
                                --------             --------           ---------
                                --------             --------           ---------

</TABLE>

Debt arrangements are described as follows:

         a.       TERM LOAN

         On October 23, 1998, the Company entered into the Third Credit
         Agreement which amended its existing Term Loan with GECC, increasing
         the borrowing capacity of the Term Loan to $74,000. The Term Loan bears
         interest, payable every 30 to 90 days, at LIBOR rate plus one and
         one-half percent (which was 6.8 percent at December 31, 1998).
         Principal payments of $425 are due quarterly through October 1, 2002,
         with a final payment of $67,200 due January 3, 2003. At December 31,
         1998 and 1997, outstanding principal under the Term Loan totaled
         $74,000 and $25,525, respectively. Interest expense on the Term Loan
         for the years ended December 31, 1998, 1997 and 1996 was approximately
         $2,712, $2,498 and $2,400, respectively. The Term Loan is secured by
         substantially all of the Company's assets.

         b.       THE NOTES

         The Company has promissory notes with financing institutions, which are
         secured by certain property, machinery and equipment. At December 31,
         1998 and 1997, the outstanding principal under the Notes was $10,678
         and $1,868, respectively. The Notes bear interest at interest rates
         ranging from 4.9 percent to 10.5 percent per annum.
         Monthly payments are payable through June 1, 2008.

         c.       LINE-OF-CREDIT

         The line-of-credit with GECC (the "LOC") is a $25,000 revolving credit
         facility, limited by the lesser of the sum of specified portions of
         qualified accounts receivable and inventory, and $25,000.

         Interest is payable every 30 to 90 days at LIBOR rate plus one and
         one-half percent (which was 7.1 percent at December 31, 1998). The LOC,
         which expires January 3, 2003, had $13,000 outstanding at December 31,
         1998 and had no borrowings at December 31, 1997. Interest expense on
         LOC for the years ended December 31, 1998, 1997 and 1996 was
         approximately $497, $129 and $682, respectively.

                                       30
<PAGE>

9. SERIES C CONVERTIBLE PREFERRED STOCK

Each share of the Series C Preferred stock is convertible at any time into one
share of common stock. The conversion rate is subject to certain anti-dilutive
adjustments. The Series C Preferred stock will participate in any dividends paid
on the common stock as if the Series C Preferred stock had been converted into
common stock.

In the event of liquidation, dissolution or winding up of the Company, the
holders of the Series C Preferred stock will be entitled to receive a
liquidation preference out of the assets available for distribution in an amount
equal to $0.22 per share, plus any accrued and unpaid dividends, before any
distribution is made to the holders of the common stock.

On June 26, 1998, CFE elected to convert one million such shares into one 
million shares of common stock of the Company in accordance with the terms of 
the Series C preferred stock.

10. STOCK INCENTIVE PLAN

In 1997, the Company adopted the Kaynar Technologies Inc. 1997 Stock Incentive
Plan (the "Plan") which authorized 500,000 stock option grants to purchase the
Company's common stock.

The Company has granted 115,400 options in 1997 and 147,900 options in 1998 with
a weighted average exercise price of $24.77 and $11.71, respectively, under the
Plan (of which 9,200 options with an exercise price of $25.00 were cancelled
during 1998). These options were issued at fair market value at the time of
grant. Option grants are made at the discretion of the Board of Directors.
Options vest at 25 percent per year (beginning one year from the grant date),
may be exercisable in whole or in installments, and expire five years from the
grant date. The weighted average exercise price of options outstanding as of
December 31, 1998 is $17.16. The weighted average contractual life of options
outstanding as of December 31, 1998 is 4.3 years. The weighted average exercise
price of options exercisable as of December 31, 1998 is $24.75.

Characteristics of options outstanding at December 31, 1998 are presented in the
table below:

<TABLE>
<CAPTION>

         Exercise            Contractual                 Options               Options
          Price                 Life                   Outstanding            Exercisable
         --------            -----------               -----------            -----------
       <S>                <C>                         <C>                   <C>
         $ 9.25               4.8 years                   119,000                   -
         $14.50               3.3 years                     3,000                   750
         $15.88               4.8 years                    12,000                   -
         $19.00               4.6 years                     3,000                   -
         $25.00               3.7 years                   102,000                25,500
         $26.75               4.1 years                     1,500                   -
         $27.75               4.2 years                    12,400                   -
         $29.50               3.8 years                     1,200                   300
                                                          -------                ------
                                                          254,100                26,550

</TABLE>

The Company accounts for the Plan under APB Opinion No. 25. SFAS No. 123
"Accounting for Stock-Based Compensation" was issued by the FASB in 1995 and, if
fully adopted, changes the methods for recognition of cost on plans similar to
those of the Company. Adoption of SFAS No. 123 is optional, however pro forma
disclosures as if the Company had adopted the cost recognition method

                                       31
<PAGE>

are required. Had compensation cost for stock options awarded under the Plan
been determined consistent with SFAS No. 123, the Company's net income would
have reflected the following pro forma amounts as of December 31, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                           1998                   1997    
                                                                         --------              ----------
   <S>                                  <C>                            <C>                  <C>
      Net Income:                           As Reported                   $14,870               $12,590
                                            Pro Forma                     $14,417               $12,439

      Basic EPS:                            As Reported                     $3.39                 $4.23
                                            Pro Forma                       $3.29                 $4.18

      Diluted EPS:                          As Reported                     $1.64                 $1.54
                                            Pro Forma                       $1.59                 $1.52

</TABLE>

For the above pro forma disclosures, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: weighted average risk-free interest rate of 5.0
percent; a weighted average volatility of 56.5 percent; estimated option life of
4 years; and no expected dividend yield. The weighted average fair value of the
Company's stock options granted in 1998 and 1997 was $5.68 and $12.02,
respectively.

11. SAVINGS AND RETIREMENT PLAN

The Company sponsors a defined contribution plan (the "Retirement Plan"), which
provides benefits to all employees who have completed six months of service.
Employees may make contributions between one and 21 percent of their annual
compensation. The Company may make contributions to the Retirement Plan at 
its discretion.

The Company contributed approximately $1,461, $988 and $577 to the Retirement
Plan in the years ended December 31, 1998, 1997 and 1996, respectively.

12. COMMITMENTS AND CONTINGENCIES

         a.       OPERATING LEASES

         The Company leases certain facilities and equipment under long-term
         operating leases with varying terms. The leases generally provide that
         the Company pay taxes, maintenance and insurance costs, and some leases
         contain renewal and/or purchase options. Total rental expense under
         operating leases totaled approximately $1,975, $1,231 and $1,187 in the
         years ended December 31, 1998, 1997 and 1996, respectively. Minimum
         rental expenses on commitments for the years subsequent to December 31,
         1998, are as follows:

<TABLE>
<CAPTION>

                    Year ending December 31,
                   <S>                                                            <C>
                      1999                                                                $ 2,125
                      2000                                                                  1,927
                      2001                                                                  1,696
                      2002                                                                  1,519
                      2003                                                                  1,006
                       Thereafter                                                           2,108
                                                                                          -------
                                                                                          $10,381
                                                                                          -------
                                                                                          -------

</TABLE>

                                       32
<PAGE>

         b.       CAPITAL LEASES

         The Company has entered into capital lease agreements for equipment.
         Future lease payments due under the agreements are as follows:

<TABLE>
<CAPTION>

                  Year ending December 31,
                <S>                                                                    <C>
                    1999                                                                     $307
                    2000                                                                      163
                    2001                                                                       36
                                                                                           ------
                                                                                              506
                    Amounts representing interest                                             (32)
                                                                                           ------
                                                                                              474
                    Current portion                                                          (280)
                                                                                           ------
                                                                                             $194
                                                                                           ------
                                                                                           ------

</TABLE>

         c.       PURCHASE COMMITMENTS

         The Company has certain one-year purchase commitments which require
         that all purchases of particular raw materials be purchased from
         various vendors at a fixed price, none of which exceeded fair market
         value as of December 31, 1998.

         d.       CONTINGENCIES

         The Company is, from time to time, subject to claims and disputes for
         legal, environmental and other matters in the normal course of its
         business. While the results of such matters cannot be predicted with
         certainty, management does not believe that the final outcome of any
         pending matters will have a material effect on the consolidated
         financial position and results of operations.

13. SIGNIFICANT CUSTOMERS

For the years ended December 31, 1998, 1997 and 1996, two customers accounted
for approximately 20 and 7 percent, 24 and 9 percent and 18 and 12 percent of
net sales, respectively. No other customer accounted for 10 percent or more of
net sales in any of the three years ended December 31, 1998. Accounts receivable
balances from these same two customers accounted for approximately 10 and 7
percent of accounts receivable at December 31, 1998 and 14 and 8 percent of
accounts receivable at December 31, 1997. No other customer represents 10
percent or more of the Company's gross accounts receivable at December 31, 1998
and 1997.

                                       33
<PAGE>

14. GEOGRAPHIC SALES INFORMATION

Net sales for the years ended December 31, 1998, 1997 and 1996 were made to
geographic regions as follows:

<TABLE>
<CAPTION>

                                                1998                        1997                        1996
                                       ---------------------       ---------------------        --------------------
                                       Amount        Percent        Amount       Percent         Amount     Percent
                                      ----------   ---------       ---------   ---------        ---------  ---------
<S>                                  <C>          <C>            <C>         <C>             <C>         <C>
United States                          $156,834       84.5%        $126,845       84.4%          $85,069      85.9%
Europe                                   16,487        8.9           13,255        8.8             8,378       8.5
Pacific Rim                               6,683        3.6            5,219        3.4             2,256       2.3
Other                                     5,508        3.0            5,110        3.4             3,320       3.3
                                      ----------   ---------       ---------   ---------        ---------  ---------
                                       $185,512      100.0%        $150,429      100.0%          $99,023     100.0%
                                      ----------   ---------       ---------   ---------        ---------  ---------
                                      ----------   ---------       ---------   ---------        ---------  ---------

</TABLE>

Sales for the Company's foreign operations represented less than 10 percent of
net sales during each of the years ended December 31, 1998, 1997 and 1996.

15. RELATED PARTY MATTERS

As discussed in Note 8, the primary lender to the Company is GECC which has a
wholly-owned subsidiary CFE. CFE owns 100 percent of the outstanding Series C
Convertible Preferred Stock and one million shares of the Company's common
stock.

GECC is also an affiliated entity to a customer (the Aircraft Engines Division
of General Electric Co.) that accounted for approximately 7, 9 and 12 percent of
1998, 1997 and 1996 net sales, respectively, and 7 and 8 percent of accounts
receivable at December 31, 1998 and 1997, respectively.

                                       34
<PAGE>

16. INDUSTRY SEGMENT INFORMATION

The Company is currently segmented into eight business units. The Company's
Kaynar, Microdot, M & M, Eagle, APS and K-FAST business units design and
manufacture products that are sold principally to the commercial aircraft and
defense industries. The Company's Recoil and Marson business units design and
manufacture inserts, blind rivets and related installation tools used primarily
in the automotive, electrical and other non-aerospace industries. The following
table illustrates the Company's financial data by industry segment for the past
three years.

<TABLE>
<CAPTION>

                                                             For the Years Ended December 31,  
                                                            1998            1997             1996  
                                                          --------        ----------      ---------
<S>                                                     <C>             <C>             <C>
Sales by Segment:
         Commercial Aircraft and Defense (2)              $169,401         $137,889        $95,156
         Industrial (1)(3)                                  16,111           12,540          3,867
                                                          --------        ----------      ---------
Total Sales                                               $185,512         $150,429        $99,023

Operating Income by Segment:
         Commercial Aircraft and Defense (2)              $ 30,192         $ 25,892        $13,464
         Industrial (1)(3)                                   1,783            1,645            238
         Corporate Expenses                                 (3,124)          (2,952)          (866)
                                                          --------        ----------      ---------
Total Operating Income                                    $ 28,851         $ 24,585        $12,836

Depreciation and Amortization by Segment:
         Commercial Aircraft and Defense (2)              $  5,822         $  3,209        $ 2,304
         Industrial (1)(3)                                     950              609            309
                                                          --------        ----------      ---------
Total Depreciation and Amortization                       $  6,772         $  3,818        $ 2,613

Total Assets by Segment:
         Commercial Aircraft and Defense (2)              $144,817         $ 86,571        $58,429
         Industrial (1)(3)                                  54,542           15,085         15,260
                                                          --------        ----------      ---------
Total Assets                                              $199,359         $101,656        $73,689

</TABLE>

(1)  In August 1996, the Company purchased its Recoil business unit which has
     been accounted for under the purchase method of accounting and, 
     accordingly, their operating results have been included in the results 
     of operations since mid-August 1996.

(2)  In July 1998, the Company purchased its M & M business unit which has been
     accounted for under the purchase method of accounting and, accordingly,
     their operating results have been included in the results of operations
     since late-July 1998.

(3)  In October 1998, the Company purchased its Marson business unit which has
     been accounted for under the purchase method of accounting and, 
     accordingly, their operating results have been included in the results 
     of operations since late-October 1998.

                                       35
<PAGE>

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                                   Three months ended                              
                                               ----------------------------------------------------------------
1998                                           March 29          June 28        September 27        December 31
                                               --------          -------        ------------        -----------
<S>                                          <C>               <C>            <C>                <C>
Net sales                                       $45,355           $46,824          $45,293           $48,040

Gross profit                                     13,881            14,630           13,458            14,320

Net income                                        4,275             4,351            3,402             2,842

Basic earnings per share                           1.15              1.16             0.69              0.56

Diluted earnings per share                         0.48              0.49             0.37              0.31

Stock price per share
  High                                            29.50             34.50            24.00             27.50
  Low                                             24.00             22.25            11.50              8.00

</TABLE>

<TABLE>
<CAPTION>

                                                                   Three months ended                              
                                               ----------------------------------------------------------------
1997                                           March 30          June 29        September 28        December 31
                                               --------          -------        ------------        -----------
<S>                                          <C>               <C>            <C>                 <C>
Net sales                                       $32,202           $37,250          $37,884           $43,093

Gross profit                                      9,233            11,036           11,903            13,867

Net income                                        2,169             2,933            3,388             4,100

Basic earnings per share                           1.35              1.03             0.92              1.11

Diluted earnings per share                         0.32              0.36             0.38              0.46

Stock price per share
  High                                              -               19.87            30.25             34.12
  Low                                               -               14.50            18.50             24.50

</TABLE>

                                       36
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant

         Pursuant to the Company's Certificate of Incorporation, the members of
the Board of Directors are elected at each annual meeting of stockholders and
hold office until their successors have been duly elected and qualified. The
Board of Directors consists of five members.

<TABLE>
<CAPTION>

                                       Director
Name (1)                        Age(2)   Since       Experience and Position Held                         
--------------------------     ------  --------      -----------------------------------------------------
<S>                          <C>      <C>          <C>
Norman A. Barkeley (3)           68       1997       Director

Burton J. Kloster, Jr. (4)       67       1997       Director

Jordan A. Law (5)                56       1993       Chairman of the Board of Directors, President and Chief Executive
                                                     Officer

Richard P. Strubel (6)           59       1997       Director

David A. Werner (7)              46       1993       Executive Vice President and Director

</TABLE>

----------------------

(1)  Pursuant to a Stockholders Agreement dated May 6, 1997, GECC designated
     Burton J. Kloster, Jr. and Richard P. Strubel as individuals to be
     nominated for elections to the Board of Directors.

(2)  as of December 31, 1998

(3)  Norman A. Barkeley has been retired since December 1998. Until his
     retirement, Mr. Barkeley had been chairman since July 1988, chief executive
     officer from July 1988 to December 1996, and president from July 1988 to
     December 1995 of Ducommun Incorporated, an aerospace equipment
     manufacturer.

(4)  Burton J. Kloster, Jr. has been retired since September 1995. Until his
     retirement, Mr. Kloster was a director of GECC since September 1989, senior
     vice president of GECC since October 1984 and vice president, general
     counsel and secretary of GECC since March 1976.

(5)  Jordan A. Law has served as President and Chief Executive Officer of the
     Company since October 1993. Mr. Law also serves as Chairman of the Board of
     Directors.

(6)  Richard P. Strubel has been managing director since June 1990 of Tandem
     Partners, Inc., a management services firm. Mr. Strubel was president and
     chief executive officer of Microdot, Inc. from January 1984 to October
     1994. Mr. Strubel is a director of Children's Memorial Medical Center
     located in Chicago and is a trustee of the University of Chicago. Mr.
     Strubel also is a trustee of numerous institutional and retail mutual funds
     managed by Goldman, Sachs 

                                       37
<PAGE>

     & Co. and a trustee of the Benchmark Funds, a family of institutional
     mutual funds managed by The Northern Trust Company.

(7)  David A. Werner has served as Executive Vice President of the Company since
     December 1996. Mr. Werner served as Secretary of the Company from October
     1993 to April 1998. Mr. Werner served as Vice President and Treasurer of
     the Company from October 1993 to December 1996. Mr. Werner is also a
     director of Lumber Yard Supply, a privately-held corporation, and is a
     certified public accountant.

Executive Officers of the Registrant

         All executive officers of the Company are named below and are appointed
by the Board of Directors. The date that each officer was first appointed to the
position is indicated. No officer listed was appointed as a result of any
arrangement between him and any other person as that phrase is understood under
the Securities Exchange Act regulations. No family relationship exists among the
executive officers of the Company.

<TABLE>
<CAPTION>

Name                          Age(1)                 Experience and Position Held                                    
----------------------       -------                 ---------------------------------------------
<S>                         <C>                    <C>
Jordan A. Law                  56                    Chairman of the Board of Directors, President and Chief Executive
                                                     Officer (1993).

David A. Werner                46                    Executive Vice President (1996) and Director (1993).  Previously
                                                     Secretary, Vice President and Treasurer (1993).

LeRoy A. Dack                  54                    President, Aerospace Components Group (1998). Previously President,
                                                     Kaynar and K-FAST business units (1996). Previously Vice President and
                                                     General Manager, Kaynar business unit (1994).

Robert L. Beers                52                    President, Tooling Group (1998).  Previously Senior Vice President,
                                                     Marketing and Business Development (1996), Vice President, Sales and
                                                     Marketing (1994).

</TABLE>

-------------------------

(1)  as of December 31, 1998


ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

         The following table sets forth a summary of the aggregate indicated
compensation awarded to, earned by, or paid to the executive officers of the
Company as of December 31, 1998 for the years ended December 31, 1998, 1997 and
1996.

                                       38
<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                  Annual Compensation                 Shares of
                                                    ----------------------------------------------  Common Stock
                                                                                      Other Annual   Subject to
Name and Position                                   Year      Salary      Bonus       Compensation     Options  
---------------------                               ----     --------    --------     ------------  ------------
<S>                                               <C>      <C>         <C>           <C>           <C>
Jordan A. Law                                       1998     $225,000    $275,000           -          20,000
PRESIDENT AND CHIEF EXECUTIVE OFFICER               1997     $190,000    $250,000           -          13,000
                                                    1996     $175,000    $181,000           -             -

David A. Werner                                     1998     $184,000    $210,000           -          15,000
EXECUTIVE VICE PRESIDENT                            1997     $170,000    $202,000           -          12,000
                                                    1996     $150,000    $144,000           -             -

LeRoy A. Dack                                       1998     $170,000    $158,000           -          15,000
PRESIDENT, AEROSPACE COMPONENTS GROUP               1997     $137,000    $158,000           -          11,000
                                                    1996     $122,000    $ 80,000           -             -

Robert L. Beers                                     1998     $147,000    $100,000           -           7,000
PRESIDENT, TOOLING GROUP                            1997     $136,000    $115,000           -           7,000
                                                    1996     $124,000    $ 77,000       $4,796 (1)        -

</TABLE>

---------------------------

(1) This amount compensated Mr. Beers for vacation time not taken.


Option Grants

           The following table sets forth grants of options during 1998 to 
the executive officers of the Company as of December 31, 1998. No stock 
appreciation rights were granted to, and no options were exercised by, any 
executive officer during 1998.

                        OPTION GRANTS IN FISCAL YEAR 1998

<TABLE>
<CAPTION>

                                                      Individual Grants               Potential Realizable
                                        -------------------------------------------      Value at Assumed
                           No. of        % of Total                                    Annual Rates of Stock
                           Shares          Options                                     Price Appreciation for
                         Underlying      Granted to       Per Share                        Option Term (1)    
                           Option       Employees in      Exercise      Expiration    ------------------------
Name                     Granted(2)       1998 (3)        Price(4)         Date           5% ($)     10% ($)  
---------------          ----------     ------------      --------      -----------      ---------  ----------
<S>                     <C>           <C>               <C>           <C>             <C>         <C>
Jordan A. Law              20,000          13.7%             9.25       Oct. 2003         51,000     113,000
David A. Werner            15,000          10.3%             9.25       Oct. 2003         38,000      85,000
LeRoy A. Dack              15,000          10.3%             9.25       Oct. 2003         38,000      85,000
Robert L. Beers             7,000           4.8%             9.25       Oct. 2003         18,000      40,000

</TABLE>

------------------------

(1)  Potential realizable value is based on the assumption that the common stock
     price appreciates at the annual rate shown (compounded annually) from the
     date of grant until the end of the option term. Such assumptions are
     prescribed by certain rules promulgated by the Securities and Exchange 
     Commission ("SEC") and are not intended to forecast future appreciation, 
     if any, in the price of the common stock. The actual value, if any, an 
     executive may realize will

                                       39
<PAGE>

     depend on the excess of the stock price over the exercise price on the date
     the option is exercised (if the executive were to sell the shares on the 
     date of exercise); there is no assurance that the value realized will be 
     at or near the potential realizable value as calculated in this table.

(2)  Stock options were granted under the Company's 1997 Stock Incentive Plan 
     (the "Plan") on October 20, 1998 with an exercise price equal to $9.25 
     per share, for a term (subject to earlier termination following a 
     termination of employment or a change in control) of five years, and are 
     exercisable no earlier than the first anniversary of the date of grant. 
     The options vest in four equal annual installments. Options under the 
     Plan may result in payments following the resignation or other 
     termination of employment with the Company or as a result of a change in 
     control. Vested options under the Plan generally must be exercised 
     within a period of twelve months following a termination by reason of 
     death or disability and three months following a termination for other 
     reasons except for cause, unless the Compensation Committee otherwise 
     provides. The Plan permits the Compensation Committee, which administers 
     the Plan, to accelerate, extend or otherwise modify benefits payable 
     under the applicable awards in various circumstances as the Compensation 
     Committee shall determine, including a change in control, but an option 
     generally will not be accelerated to a date less than six months after 
     its grant date.

(3)  During fiscal year 1998, the Company granted options to 69 employees to
     purchase an aggregate of 146,400 shares of its common stock. All grants
     were made at exercise prices equal to the market price on the grant date.

(4)  The exercise price may be paid in any combination of cash, promissory notes
     and shares of common stock or pursuant to certain cashless exercise
     procedures, in each case as permitted under the Plan. In addition, holders
     may be permitted to offset or surrender shares or deliver already owned
     shares in satisfaction of applicable tax withholding requirements.


                       FISCAL YEAR END 1998 OPTION VALUES

<TABLE>
<CAPTION>

                                            Number of
                                             Shares                         Value of
                                           Underlying                     Unexercised
                                           Unexercised                    in-the-Money
                                           Options at                      Options at
                                        December 31, 1998             December 31, 1998 (1)
                                        ------------------            ---------------------
                                           Exercisable/                    Exercisable/
                                          Unexercisable                   Unexercisable       
                                        ------------------            ---------------------
<S>                                    <C>                           <C>
Jordan A. Law                             3,250 / 29,750                $7,313 / $381,938
David A. Werner                           3,000 / 24,000                $6,750 / $290,250
LeRoy A. Dack                             2,750 / 23,250                $6,188 / $288,563
Robert L. Beers                           1,750 / 12,250                $3,938 / $137,813

</TABLE>

-----------------------

(1)  This amount represents solely the difference between the market value on
     December 31, 1998 ($27.25) of those unexercised options which had an
     exercise price below such market price (i.e., "in-the-money" options") and
     the respective exercise prices of the options. No assumptions or
     representations regarding the "value" of such options are made or intended.

                                       40
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain Five Percent Beneficial Owners

         Except for executive officers of the Company, the following table sets
forth the stock ownership of all persons known by the Company to be the
beneficial owners of more than 5% of the outstanding shares of the Company
common stock as of February 10, 1999, based upon Schedule 13D or 13G reports
filed with the SEC.

  SHARES OF COMMON STOCK OR COMMON STOCK EQUIVALENTS BENEFICIALLY OWNED (1)(2)

<TABLE>
<CAPTION>

                                                                          Common Stock           Fully Diluted
Name and Address of Beneficial Owner                      Number           Percentage (3)       Percentage (3)(4)
------------------------------------                    ----------       ----------------       -----------------
<S>                                                   <S>               <C>                   <C>
CFE, Inc.(5)                                              5,206,000               19.6%                 55.8%
201 High Ridge Road
Stamford, Connecticut 06927

The Fairchild Corporation (5)                              720,100                14.1%                  7.7%
45025 Aviation Drive, Suite 400
Dulles, Virginia 20166-7516

Chartwell Investment Partners (6)                          332,300                6.5%                   3.6%
1235 Westlake Drive, Suite 330
Berwyn, Pennsylvania 19312

</TABLE>

-----------------------
(1)  Shares of Series C preferred stock are treated as common stock equivalents
     because they are convertible at any time into common stock at a one-to-one
     conversion rate, subject to adjustment in certain circumstances.

(2)  The number of shares beneficially owned by each stockholder is determined
     under rules promulgated by the SEC, and the information is not necessarily
     indicative of beneficial ownership for any other purpose. Under such rules,
     beneficial ownership includes any shares as to which the individual has
     sole or shared voting power or investment power and also any shares which
     the individual has the right to acquire within 60 days after February 10,
     1999. The inclusion herein of such shares, however, does not constitute an
     admission that the named stockholder is a direct or indirect beneficial
     owner of such shares. Except as provided under applicable state marital
     property laws or as otherwise noted, each person or entity named in the
     table has sole voting power and investment with respect to all shares of
     capital stock listed as owned by such person or entity.

(3)  Does not include common stock which may be issued pursuant to the Agreement
     and Plan of Merger among the Company, KTIC Acquisition Corp. and M & M
     Machine & Tool Co. dated as of July 27, 1998, where the Company may be
     obligated to pay up to $2 million as part of the second contingent
     adjustment to the former stockholders of M & M Machine & Tool Co., of which
     $800,000 will be in the form of the Company common stock. The value of each
     share of the Company common stock shall equal the average closing price for
     the twenty trading days preceding the second contingent adjustment date,
     which shall be no later than February 28, 1999.

(4)  "Fully Diluted Percentage" means, as of the Record Date, the number of
     shares of common stock and common stock equivalents held by such person,
     divided by the sum of (1) the number of shares of common stock outstanding
     and (2) the number of shares of common stock issuable upon conversion or
     exercise of all outstanding convertible securities, option and warrants

                                       41
<PAGE>

     convertible into, or exercisable for, common stock at that time or within
     sixty days thereafter.

(5)  CFE, Inc., a wholly-owned subsidiary of GECC, holds 1,000,000 shares of
     common stock and 4,206,000 shares of Series C preferred stock. GECC and CFE
     have entered into a voting and option agreement with Fairchild pursuant to
     which CFE has agreed to vote its share in favor of the Fairchild Merger
     Agreement and against any competing proposal. CFE has also granted to
     Fairchild an option to purchase CFE's shares that becomes exercisable 60
     days after the Fairchild Merger Agreement is terminated (subject to certain
     conditions). Beneficial ownership of CFE's shares has not been attributed
     to Fairchild for purposes of this table.

(6)  A Schedule 13G filed April 13, 1998 indicates that the reporting entity is
     a registered investment adviser, which has sole voting power with respect
     to 196,200 shares and sole disposition power with respect to all of the
     shares.

Beneficial Ownership of Directors and Officers

         The following table sets forth the beneficial ownership of the Company
common stock by each director and each executive officer so indicated and all
executive officers and directors as a group as of February 10, 1999.

  SHARES OF COMMON STOCK OR COMMON STOCK EQUIVALENTS BENEFICIALLY OWNED (1)(2)

<TABLE>
<CAPTION>

                                                                            Common Stock          Fully Diluted
Name of Beneficial Owner                                  Number            Percentage (3)       Percentage (3)(4)
------------------------------                          ----------         --------------        -----------------
<S>                                                   <C>                <C>                  <C>
Jordan A. Law (5)                                         335,394                 6.6%                   3.6%

David A. Werner (6)                                       344,564                 6.8%                   3.7%

Robert L. Beers (7)                                       201,750                 4.0%                   2.2%

LeRoy A. Dack (8)                                         202,726                 4.0%                   2.2%

Norman A. Barkeley (9)                                     5,875                    *                     *

Burton J. Kloster, Jr.(9)                                 10,375                    *                     *

Richard P. Strubel (9)                                     3,375                    *                     *

All directors and executive officers as a group          1,104,009                21.6%                 11.8%
(7 people) (5)(6)(7)(8)(9)

</TABLE>

-----------------------
* Less than 1%.

(1)  Shares of Series C preferred stock are treated as common stock equivalents
     because they are convertible at any time into common stock at a one-to-one
     conversion rate, subject to adjustment in certain circumstances.

(2)  The number of shares beneficially owned by each stockholder is determined
     under rules promulgated by the SEC, and the information is not necessarily
     indicative of beneficial ownership for any other purpose. Under such rules,
     beneficial ownership includes any shares as to which the individual has
     sole or shared voting power or investment power and also any shares which
     the individual has the right to acquire within 60 days after February 10,
     1999. The inclusion herein of such shares, however, does not constitute an
     admission that the named 

                                       42
<PAGE>

     stockholder is a direct or indirect beneficial owner of such shares. Except
     as provided under applicable state marital property laws or as otherwise
     noted, each person or entity named in the table has sole voting power and
     investment with respect to all shares of capital stock listed as owned by
     such person or entity.

(3)  Does not include common stock which may be issued pursuant to the Agreement
     and Plan of Merger among the Company, the KTIC Acquisition Corp. and M & M
     Machine and Tool Co. dated as of July 27, 1998, where the Company may be
     obligated to pay up to $2 million as part of the second contingent
     adjustment to the former stockholders of M & M Machine and Tool Co., of
     which $800,000 will be in the form of the Company common stock. The value
     of each share of the Company common stock shall equal the average closing
     price for the twenty trading days preceding the second contingent
     adjustment date, which shall be no later than February 28, 1999.

(4)  "Fully Diluted Percentage" means, as of the Record Date, the number of
     shares of common stock and common stock equivalents held by such person,
     divided by the sum of (i) the number of shares of common stock outstanding
     and (ii) the number of shares of common stock issuable upon conversion or
     exercise of all outstanding convertible securities, option and warrants
     convertible into, or exercisable for, common stock at that time or within
     sixty days thereafter.

(5)  For Mr. Law the amount listed includes options exercisable within 60 days
     of February 10, 1999 to purchase 3,250 shares of common stock. Mr. Law has
     entered into a voting agreement with Fairchild with respect to his shares
     and options. See "Changes in Control" below.

(6)  For Mr. Werner the amount listed includes options exercisable within 60
     days of February 10, 1999 to purchase 3,000 shares of common stock. Mr.
     Werner has entered into a voting agreement with Fairchild with respect to
     his shares and options. See "Changes in Control" below.

(7)  For Mr. Beers the amount listed includes options exercisable within 60 days
     of February 10, 1999 to purchase 1,750 shares of common stock. Mr. Beers
     has entered into a voting agreement with Fairchild with respect to his
     shares and options. See "Changes in Control" below.

(8)  For Mr. Dack, the amount listed includes options exercisable within 60 days
     of February 10, 1999 to purchase 2,750 shares of common stock. Mr. Dack has
     entered into a voting agreement with Fairchild with respect to his shares
     and options. See "Changes in Control" below.

(9)  For each of Messrs. Barkeley, Kloster and Strubel, the amount listed
     includes options exercisable within 60 days of February 10, 1999 to
     purchase 375 shares of common stock.

Changes in Control

         Pursuant to their voting agreements with Fairchild, each of CFE and
Messrs. Law, Werner, Beers and Dack has agreed to vote all of their shares in
favor of the adoption of the Fairchild Merger Agreement. The GECC voting
agreement and management stockholder voting agreements, plus Fairchild's own
holdings of approximately 720,100 shares of common stock as of the date of this
proxy statement, are expected to result in 100% of the outstanding Series C
Preferred Stock and 54.9% of the outstanding common stock being voted in favor
of adoption of the Fairchild Merger Agreement. Thus, it is expected that the
Fairchild Merger Agreement will be adopted at a special meeting of shareholders,
which would effect a change in control of the Company. Under its voting
agreement, CFE has granted Fairchild an option to purchase CFE's shares which,
if exercised, could also effect a change in control of the Company.

                                       43
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information from Note 15 of the Company's consolidated financial
statements included in Item 8 "Financial Statements and Supplementary Data" is
incorporated herein by reference.

         The Company officers and directors own the Company common stock. To 
that extent, their interest in the Fairchild Merger may be considered to be 
the same as other the Company stockholders. For information concerning such 
ownership, see Item 12 "Security Ownership of Certain Beneficial Owners and 
Management." However, a number of the Company officers and directors have 
interests in the Fairchild Merger that are, or may be, different from other 
the Company stockholders.

         Under the terms of the Fairchild Merger Agreement, all outstanding 
the Company stock options issued pursuant to the Company's 1997 Stock 
Incentive Plan will become vested and fully exercisable at the effective time 
and will be converted into the right to receive from the Company for each 
share subject to the option an amount in cash equal to the excess of $28.75 
over the exercise price per share of the option, net of withholding taxes. In 
addition, completion of the Fairchild Merger will constitute a change of 
control of the Company under the employment agreements of certain the Company 
executive officers, triggering certain rights of those officers, including 
the right to receive certain payments if their employment is terminated.

         Fairchild also has agreed to indemnify each the Company officer and
director against losses arising from his or her service as a director or officer
of the Company and will continue to maintain directors' and officers' liability
insurance for them.

         Messrs. Law, Werner, Beers and Dack have entered into voting agreements
with Fairchild that, among other things, require them to vote their shares in
favor of adopting the Fairchild Merger Agreement.

         Two members of the Company Board of Directors, Burton J. Kloster, Jr.
and Richard P. Strubel, were designated by GECC to be nominated by the Company
for election to the Board pursuant to a stockholders agreement. Prior to joining
the Board, Mr. Kloster served as a director and a senior executive officer of
GECC. GECC and CFE have entered into a voting and option agreement with
Fairchild which, among other things, provides that:

                  -        CFE will vote its shares of Series C preferred stock
                           and common stock in favor of adopting the Fairchild
                           Merger Agreement;

                  -        CFE will, at Fairchild's option, sell its shares of
                           Series C preferred stock and common stock to
                           Fairchild at a price of $28.75 per share if the
                           Fairchild Merger Agreement is terminated (subject to
                           certain conditions); and

                  -        GECC's Commercial Finance Division will not engage in
                           the fastener business for a period of ten years in
                           exchange for a payment of $28 million to CFE.

         If Fairchild were to exercise its option to purchase CFE's shares of
Series C preferred stock, those shares would automatically be converted into
shares of common stock. In addition, GECC is the Company's primary lender
through a credit agreement under which, as of December 31, 1998, the Company
owed GECC approximately $87 million. The Fairchild Merger Agreement requires the
repayment of all of the Company's indebtedness at the effective time, including
all indebtedness under the GECC credit agreement. GECC's interests in the 
Fairchild Merger may not necessarily coincide with those of other Company 
stockholders.

                                       44
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)      1.  Financial Statements

                  All financial statements of the Company are set forth under
                  Item 8 of this report on Form 10-K.

                  2.  Financial Statement Schedules

                  Financial statement schedules not filed have been omitted for
                  the reason that the required information is shown in the
                  financial statements or notes thereto, the amounts involved
                  are not significant, or the required matter is not present.

                  3.  Exhibits and Index to Exhibits

<TABLE>
<CAPTION>

                  Number        Description
                  ------        ----------------------------------------------------
                <S>           <C>
                  2.1(a)        Australian Asset Sale Agreement, dated August 9,
                                1996, among the Vendors (as defined therein),
                                Recoil Inc., RCL Pty. and Operating Company (1)

                  2.1(b)        US Asset Sale Agreement, dated August 9, 1996, among Recoil 
                                Inc., Operating Company, Recoil Pty. Ltd., the Advent Group 
                                and the Price Interests (1)

                  2.2           Recapitalization Agreement with General Electric Capital 
                                Corporation ("GECC"), dated May 5, 1997 (4)

                  2.3           Agreement and Plan of Merger among Kaynar Technologies Inc., 
                                KTIC Acquisition Corp. and M & M Machine & Tool Co. dated as 
                                of July 27, 1998 (the "M & M Merger Agreement") (6)

                  2.4           List of Schedules omitted from the M & M Merger Agreement (6)

                  2.5           Stock Purchase Agreement among Kaynar Technologies Inc. and the
                                Stockholders of Marcliff Corporation dated as of October 27, 1998

                  2.6           Agreement and Plan of Reorganization dated as of December 26, 1998
                                by and among The Fairchild Corporation, Dah Dah, Inc., and Kaynar 
                                Technologies Inc. (7)

                  3.1           Amended and Restated Certificate of Incorporation of the Company (2)

                  3.2           Amended and Restated By-laws of the Company (2)

                  4.1           Specimen of Common Stock Certificate (2)

                  4.2           Kaynar Technologies Inc. 1997 Stock Incentive Plan (formerly known 
                                as the Kaynar Holdings Inc. 1997 Stock Incentive Plan), including 
                                the Form of Eligible Director Nonqualified Stock Option Agreement (5)

                  4.3           Form of Incentive Stock Option Agreement (5)

</TABLE>

                                       45
<PAGE>
<TABLE>
<CAPTION>
                <S>           <C>
                  4.4           Form of Nonqualified Stock Option Agreement (5)

                  4.5           Registration Rights Agreement among Kaynar Technologies Inc. and 
                                the Stockholders dated as of July 27, 1998 (6)

                 10.2(a)        Third Amended and Restated Credit Agreement,
                                Dated October 23, 1998, among the Company, the
                                other Credit Parties Signatory thereto, the
                                Lenders Signatory thereto from time to time, and
                                GECC as Agent and Lender (the "Third Credit
                                Agreement")

                 10.2(b)        First Amendment and Limited Waiver to the Third Credit Agreement dated
                                as of December 14, 1998

                 10.2(c)        Second Amendment and Limited Waiver to the Third Credit Agreement 
                                dated as of December 31, 1998

                 10.3           Lease with The Prudential Insurance Co. of America regarding the 
                                Fullerton, California facility (1)

                 10.4(a)        Lease with West L.A. Properties regarding the Placentia, 
                                California facility (1)

                 10.4(b)        Amendment to Lease with West L.A. Properties dated August 21, 1996 (4)

                 10.5           Lease with Enfield View Pty. Ltd. regarding the Oakleigh, VIC, 
                                Australia facility (1)

                 10.6(a)        General Terms Agreement, dated September 20, 1996, between the Company
                                and Boeing (1)

                 10.6(b)        Special Business Provisions, dated September 20,
                                1996, between the Company and Boeing (portions
                                omitted and filed separately with Commission
                                pursuant to an application for confidential
                                treatment) (3)

                 10.6(c)        Letter Agreement dated January 13, 1999 with Boeing

                 10.7(a)        Contract Award Letter of Agreement, dated April
                                28, 1994, between the Company and Boeing
                                (portions omitted and filed separately with
                                Commission pursuant to an application for
                                confidential treatment) (3)

                 10.7(b)        Boeing Commercial Airplane Group Purchase Order Terms and 
                                Conditions (2)

                 10.8           Stockholders Agreement, dated as of May 6, 1997 (2)

                 10.9(a)        Form of Employment Agreement for Messrs. Law and Werner (1)

                 10.9(b)        Form of Amended Employment Agreement for Messrs. Law and Werner

                 10.10          Form of Employment Agreement for Messrs. Beers, Dack, Berecz and Varholick (1)

                 21.1           List of Subsidiaries
</TABLE>

                                       46
<PAGE>
<TABLE>
<CAPTION>
                <S>           <C>
                 23.1           Consent of Independent Public Accountants

                 27.1           Financial Data Schedule

                 99.1           Form of Director Indemnification Agreement (1)

                 99.2           Indemnification and Contribution Agreement with GECC, dated May 5, 1997 (4)

                 99.3           Voting Agreement dated as of December 26, 1998 between The Fairchild Corporation and Jordan
                                A. Law (7)

                 99.4           Voting Agreement dated as of December 26, 1998 between The Fairchild Corporation and David A.
                                Werner (7)

                 99.5           Voting Agreement dated as of December 26, 1998 between The Fairchild Corporation and Robert
                                L. Beers. (7)

                 99.6           Voting Agreement dated as of December 26, 1998 between The Fairchild Corporation and LeRoy A.
                                Dack (7)

                 99.7           Voting and Option Agreement dated as of December 26, 1998 by and among The Fairchild
                                Corporation, Dah Dah, Inc., CFE Inc., and General Electric Capital Corporation (7)

</TABLE>

                 --------------------------
<TABLE>
<CAPTION>

                <S>           <C>
                 (1)            Incorporated by reference from the Initial Registration Statement on Form S-1 of the
                                Registrant filed on February 26, 1997 (SEC file No. 333-22345).

                 (2)            Incorporated by reference from Pre-Effective Amendment No. 4 to the Registration Statement
                                filed on May 5, 1997 (SEC file No. 333-22345).

                 (3)            Incorporated by reference from Pre-Effective Amendment No. 6 to the Registration Statement
                                filed on May 6, 1997 (SEC file No. 333-22345).

                 (4)            Incorporated by reference from the Registrants Form 10-Q for the period ended June 29, 1997
                                filed on August 6, 1997 (SEC file No. 000-22519).

                 (5)            Incorporated by reference from the Registrant's Form S-8 filed on January 29, 1997 (SEC file
                                No. 333-45185).

                 (6)            Incorporated by reference from the Registrants Form 8-K filed on August 12, 1998 (SEC file
                                No. 000-22519).

                 (7)            Incorporated by reference from the Registrants Form 8-K filed on January 5, 1999 (SEC file
                                No. 000-22519).

</TABLE>

         (b)      Reports on Form 8-K

                  During the last quarter of 1998, no reports on Form 8-K were
filed.

                                       47
<PAGE>

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Orange, State of
California on this 12th day of February, 1998.


                                     KAYNAR TECHNOLOGIES INC.

                                     By: /s/ Jordan A. Law
                                     --------------------------------------
                                     Jordan A. Law
                                     Chief Executive Officer


    Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities and on the dates
indicated:

<TABLE>
<CAPTION>

      SIGNATURE                                     TITLE                                            DATE
--------------------------              ------------------------------------                  -----------------
<S>                                 <C>                                                    <C>
/s/ Jordan A. Law                       Chief Executive Officer and                           February 12, 1999
--------------------------              Chairman of the Board
Jordan A. Law                           (Principal Executive Officer)

/s/ David A. Werner                     Executive Vice President and Director                 February 12, 1999
--------------------------              (Principal Financial Officer)
David A. Werner

/s/ Robert M. Nelson                    Controller                                            February 12, 1999
--------------------------              (Principal Accounting Officer)
Robert M. Nelson

/s/ Norman A. Barkeley                  Director                                              February 12, 1999
--------------------------
Norman A. Barkeley

/s/ Burton J. Kloster, Jr.              Director                                              February 12, 1999
--------------------------
Burton J. Kloster, Jr.

/s/ Richard P. Strubel                  Director                                              February 12, 1999
--------------------------
Richard P. Strubel

</TABLE>






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