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THE FAIRCHILD CORPORATION
STOCK OPTION DEFERRAL PLAN
FEBRUARY 9, 1998
ARTICLE I
BACKGROUND, PURPOSE, AND EFFECTIVE DATE
The Fairchild Corporation, a Delaware corporation (the
"Corporation"), by resolution of its Board of Directors,
adopted The Fairchild Corporation Stock Option Deferral Plan
(the "Plan"), effective as of February 9, 1998.
1.1 BACKGROUND AND PURPOSE OF THE PLAN. The Corporation
wishes to provide certain Participants with the
opportunity to defer payment of all of the compensation
they receive in a particular year or years from the
exercise of options to purchase stock in the
Corporation.
1.2 EFFECTIVE DATE AND TERM. The Plan shall become
effective as of February 9, 1998, and shall continue
until such time as it is terminated by resolution of
the Board of Directors in accordance with Article V.
ARTICLE II
DEFINITIONS
The following terms have the following meanings unless the
context clearly indicates otherwise:
2.1 "Beneficiary" is defined in Section 6.1.
2.2 "Benefit" is defined in Section 5.1.
2.3 "Board" means the Board of Directors of the
Corporation.
2.4 "Compensation" means the excess value of a Stock Option
(determined by the Fair Market Value of the shares of
Stock issuable to a Participant upon exercise of a
Stock Option, less the Option Price payable by the
Participant pursuant to such Stock Option), where such
excess value has been deferred pursuant to the terms of
this Plan.
2.5 "Committee" means the Compensation and Stock Option
Committee of the Board, which Committee shall
administer the Plan.
2.6 "Corporation" means The Fairchild Corporation and its
corporate successors.
2.7 "Deferral Date" means the date on which any deferred
Compensation with respect to a Stock Option would have
been received by a Participant if no Stock Option
Deferral Election had been made.
2.8 "Deferred Compensation Account," "Account," or
"Subaccount" means the accounts maintained on the books
of the Corporation for each Participant pursuant to
this Plan.
2.9 "Deferred Compensation Unit" is defined in Section 4.2.
2.10 "Deferred Stock Option Election Form" means the form by
which an eligible person elects to become a Stock
Option Deferral Participant, in the form attached
hereto or as adopted by the Corporation from time to
time.
2.11 "Designation of Beneficiary Form" means the form by
which a Participant designates a beneficiary or
beneficiaries or modifies a prior designation of a
beneficiary or beneficiaries, in the form attached
hereto or as adopted by the Corporation from time to
time.
2.12 "Distribution Date" means the date designated by a
Participant for the commencement of payment of amounts
credited to his Account.
2.13 "Dividend Equivalents" is defined in Section 4.3.
2.14 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
2.15 "Fair Market Value" is defined in Section 4.2.
2.16 "Option Price" is the price at which Stock Options may
be exercised, as per the terms of each Stock Option.
2.17 "Participant" means a person who (i) has been
designated by the Committee to be entitled to
participate in this Plan and (ii) is deemed to be an
"Accredited Investor" (as defined under Federal
Securities Laws). A Participant need not be an
employee of the Corporation. Participants
participating in the Plan shall provide such
certifications and other evidence as the Corporation
may reasonably require to establish that they are
Accredited Investors.
2.18 "Plan" means this Stock Option Deferral Plan and any
amendments thereto.
2.19 "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations under the Exchange Act as promulgated by
the Securities Exchange Commission or its successor, as
amended and in effect from time to time.
2.20 "Stock" means the Corporation's Class A Common Stock,
$.10 par value.
2.21 "Stock Option" means options to purchase stock in the
Corporation, approved by the Corporation's Board, a
committee of non-employee directors, or stockholders of
the Corporation in compliance with Rule 16b-3.
2.22 "Stock Option Deferral Election" means an election to
defer payment of Compensation on the exercise of a
Stock Option until a date specified by the Participant.
2.23 "Stock Option Deferral Participant" means a Participant
who has made a Stock Option Deferral Election and who
has been designated by the Committee as eligible to
participate in the Plan.
ARTICLE III
CONTRIBUTIONS
3.1 ELIGIBILITY. Participation in the Plan shall be
limited to eligible Participants (as defined in Section
2.17 hereof). The Committee shall have full discretion
in determining such eligibility.
3.2 DEFERRED COMPENSATION.
During the period in which this Plan remains in effect,
each Participant may elect to defer Compensation from
the exercise of Stock Options by completing a Deferred
Stock Option Election Form and providing same to the
Corporation prior to the exercise of such Stock Option.
Upon a Participant's election to defer Compensation,
the Corporation shall (in lieu of issuing Stock to such
Participant upon exercise of the applicable Stock
Option) credit the Participant's Deferred Compensation
Account with Deferred Compensation Units, as further
provided in Article IV.
ARTICLE IV
ACCOUNTS AND INVESTMENT
4.1 DEFERRED COMPENSATION ACCOUNTS. The Corporation shall
establish on its books the necessary accounts to
reflect accurately the Corporation's liability to each
Participant who has deferred Compensation under the
Plan. To each Deferred Compensation Account shall be
credited, as applicable, Deferred Compensation Units
(as provided in Section 4.2 below) and Dividend
Equivalents (as provided in Section 4.3 below).
Payments to the Participant under the Plan shall be
debited to the appropriate Accounts.
4.2 DEFERRED COMPENSATION UNITS.
A Participant who has elected to defer Compensation on
the exercise of a Stock Option shall have the amount of
such Compensation credited to his or her Deferred
Compensation Account in the form of Deferred
Compensation Units.
As used herein, "Deferred Compensation Units" means the
right to receive a specified number of shares of Stock,
determined by dividing the deferred Compensation by the
Fair Market Value of the Corporation's Stock as of the
Deferral Date.
For purposes of the Plan, "Fair Market Value" shall
mean the fair market value of a share of the Stock as
of a given date measured as (i) the closing price of a
share of the Stock on the principal exchange on which
shares of Stock are then trading, if any, on such date,
or, if shares were not traded on such date, then on the
next preceding trading day during which a sale
occurred; or (ii) if such Stock is not publicly traded
on an exchange or a successor quotation system, the
mean between the closing bid and asked prices for the
Stock on the trading date closest to the Deferral Date
as determined in good faith by the Committee; or (iii)
if the Stock is not publicly traded, the fair market
value established by the Committee acting in good
faith.
4.3 DIVIDEND EQUIVALENTS.
If Deferred Compensation Units exist in a Participant's
Deferred Compensation Account on a dividend record date
for the Stock, Dividend Equivalents shall be credited
to the Participant's Account on the corresponding
dividend payment date.
As used herein, "Dividend Equivalents" means the right
of a Participant to receive a specified number of
shares of Stock, equal to (i) (a) the per share cash
dividends declared by the Corporation from time to
time, multiplied by (b) the number of Deferred
Compensation Units credited to the Account of the
Participant as of each applicable dividend record date,
divided by (ii) the Fair Market Value on the related
dividend payment date.
4.4 RECAPITALIZATION. In the event of any change in the
Corporation's Stock outstanding, by reason of any stock
split or dividend, recapitalization, merger,
consolidation, combination, or exchange of stock or
similar corporate change, such equitable adjustments,
if any, by reason of any such change, shall be made in
the number of Deferred Compensation Units credited to
each Participant's Deferred Compensation Account.
4.5 VESTING. At all times a Participant shall have a 100%
nonforfeitable right to the amounts credited to his or
her accounts, irrespective of any continuing
relationship between the Participant and the
Corporation.
4.6 STOCK OWNERSHIP. Until such time as shares of Stock
which a Participant is entitled to receive pursuant to
Deferred Compensation Units and Dividend Equivalents
are distributed to the Participant as per Article V
hereof, the Participant shall not be entitled to vote
such shares, receive dividend with respect to such
shares (except in the form of Dividend Equivalents, as
provided in Section 4.3), or have other ownership
interest in such shares.
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 DISTRIBUTION PURSUANT TO DEFERRED STOCK OPTION ELECTION
FORM. The number of shares of Stock equal to the
number of Deferred Compensation Units and Dividend
Equivalents (in each case, rounded down to the nearest
whole unit) credited to each Participant's Deferred
Compensation Account (collectively, the "Benefit"),
shall be distributed to the Participant on the date(s)
selected by the Participant pursuant to his or her
Deferred Stock Option Election Form. The date of
distribution selected by the Participant must be no
earlier than seven (7) months from the Deferral Date.
5.2 DISTRIBUTION UPON DEATH. In the event of a
Participant's death, the Corporation shall pay the
entire remaining Benefit, in a lump sum (or, in the
event of a Participant's death after commencement of
the payment of the Benefit under Section 5.1, the
remaining balance of the Benefit, in a lump sum) to the
Participant's Beneficiary as selected by the
Participant pursuant to his or her Designation of
Beneficiary Form.
5.3 DISTRIBUTION IN THE EVENT OF CHANGE OF CONTROL.
In the event of a Change of Control (as defined below),
the Corporation shall pay the Benefit to the
Participant in one lump sum. If the transaction giving
rise to a Change of Control was approved in advance by
a majority of the Board, payment of the Benefit shall
be made at the closing of such transaction. If the
transaction giving rise to a Change of Control was not
approved in advance by a majority of the Board, payment
of the Benefit shall be made immediately upon the
occurrence of the event or transaction giving rise to
the Change of Control.
For purpose of this Section, a "Change of Control"
means the occurrence of any of the following events:
(i) Any Person (as defined below), other than one or
more Permitted Holders (as defined below), is or
becomes the Beneficial Owner (as defined below),
directly or indirectly, of more than 20% of the
total voting power (the "Vote") of the Voting
Stock (as defined below) of the Corporation, and
the Permitted Holders "beneficially own", directly
or indirectly, in the aggregate a lesser
percentage of the Vote of all the Voting Stock of
the Corporation than such other Person; provided,
however, such other Person shall be deemed to
beneficially own all Voting Stock of a corporation
held by any other corporation (the "parent
corporation"), if such other Person "beneficially
owns", directly or indirectly, more than 20% of
the Vote of the Voting Stock of such parent
corporation, and the Permitted Holders
"beneficially own", directly or indirectly, in the
aggregate a lesser percentage of the Vote of the
Voting Stock of such parent corporation;
(ii) During any period of two consecutive years,
individuals who at the beginning of any such
period constituted the Board of Directors of the
Corporation (together with any new directors whose
election by such Board or whose nomination for
election by the shareholders of the Corporation
was approved by a vote of a majority of the
directors of the Corporation then still in office
who were either directors at the beginning of such
period or whose election or nomination for
election was previously so approved) cease for any
reason to constitute a majority of the Board of
Directors of the Corporation then in office;
(iii) The Corporation consolidates with or merges
with or into another Person, pursuant to a
transaction (a) in which the outstanding Voting
Stock of the Corporation is changed into or
exchanged for cash, securities or other property
(other than any such transaction where the
outstanding Voting Stock of the Corporation is
changed into or exchanged for Voting Stock of the
surviving corporation), and (b) in which the
holders of the Vote of the Voting Stock of the
Corporation immediately prior to such transaction
own, directly or indirectly, less than a majority
of the Vote of the Voting Stock of the surviving
Person immediately after such transaction, and (c)
by which an event described in Section 5.3(i)
shall have occurred; or
(iv) The Corporation is liquidated or dissolved, or all
or substantially all of its directly or indirectly
held assets are sold or otherwise conveyed to a
third party other than one or more Permitted
Holders.
"Beneficial Owner" has the meaning set forth in Rules
13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to be the Beneficial Owner of
all shares that any such Person has the right to
acquire, whether such right is exercisable immediately
or only after the passage of time; and the terms
"beneficial ownership" and "beneficially owns" have
meanings correlative to the foregoing;
"Permitted Holders" means Jeffrey J. Steiner and his
"associates" (as defined in Rule 12b-2 under the
Exchange Act) or any other person directly or
indirectly controlled by Jeffrey J. Steiner.
"Person" shall be as defined in Section 13(d) and 14(d)
of the Exchange Act.
"Voting Stock" means, with respect to a corporation,
(i) all classes of capital stock then outstanding of
such corporation entitled to vote in elections of
directors, and (ii) any security which may, at the
option of the holder, be converted into or exchanged
for Voting Stock.
5.4 DISTRIBUTION IN THE EVENT OF EMPLOYMENT TERMINATION
In the event a Participant's employment with the
Corporation (or any of its subsidiaries) is terminated
other than by the Participant's own election, the
Corporation shall pay the entire remaining Benefit to
the Participant in one lump sum, within thirty days
after such employment termination.
ARTICLE VI
AMENDMENT, SUSPENSION, OR TERMINATION
6.1 BENEFICIARY. "Beneficiary" shall mean any one or more
persons, corporations, trusts, estates, or any
combination thereof, last designated by a Participant
to receive the Benefit provided under this Plan. Any
designation made hereunder shall be revocable, shall be
in writing, either on a facsimile of the form annexed
hereto and shall be effective when delivered to the
Committee at its principal office. If the Committee,
in its sole discretion, determines that there is not a
valid designation, the Beneficiary shall be the
executor or administrator of the Participant's estate.
6.2 NON-ASSIGNABILITY. The interest of any Participant and
Beneficiary under this Plan (other than the
Corporation) shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment,
pledge, attachment or encumbrance, or to the claims of
creditors of such person, and any attempt to effectuate
any such actions shall be void; nor shall any such
amount be in any manner subject to the debts,
contracts, liabilities, engagements, or torts of the
Participant.
6.3 INTEREST OF PARTICIPANT. The Participant and any
Beneficiary shall, in respect to Accounts and any
Benefit to be paid, be and remain simply a general
unsecured creditor of the Corporation in the same
manner as any other creditor having a general claim
against the Corporation. At no time shall the
Participant be deemed to have any right, title or
interest, legal or equitable, in any asset of the
Corporation, including, but not limited to, any Stock.
6.4 WITHHOLDING. The participants and their Beneficiaries,
distributees, and personal representatives, will bear
all Federal, foreign, state, local, or other income or
other taxes imposed on amounts paid under this Plan.
All such taxes shall be computed by, and remitted to,
the Corporation at each Payment Date, for deposit by
the Corporation with the appropriate taxing
jurisdiction.
6.5 CONSENT. By electing to become a Participant, each
Participant shall be deemed conclusively to have
accepted and consented to all the terms of this Plan
and all actions or decisions made by the Corporation or
the Committee with regard to the Plan. Such terms and
consent shall also apply to and be binding upon the
Beneficiaries, distributees, and personal
representatives and other successors in interest of
each Participant.
6.6 SEVERABILITY. In the event any provision of this Plan
would serve to invalidate the Plan, that provision
shall be deemed to be null and void, and the Plan shall
be construed as if it did not contain the particular
provision that would make it invalid.
6.7 FUNDING. This Plan shall not be a funded plan. The
Corporation shall not set aside any funds, or make any
investments or set aside stock, for the specific
purpose of making payments under the Plan. All
Benefits paid under the Plan shall be paid from the
general assets of the Corporation. Benefits payable
under the Plan may be reflected on the accounting
records of the Corporation, but such accounting shall
not be construed to create or require the creation of a
trust, custodial or escrow account. Notwithstanding
the foregoing, the Corporation shall at all times
maintain a sufficient number of shares of authorized
Stock to distribute in satisfaction of all Deferred
Compensation Units.
6.8 EXCLUSIVITY OF PLAN. This Plan is intended solely for
the purpose of deferring compensation to the
Participants to the mutual advantage of the parties.
Nothing contained in this Plan shall in any way affect
or interfere with the right of a Participant to
participate in any other benefit plan in which he or
she may be entitled to participate.
6.9 NO RIGHT TO CONTINUED SERVICE. This Plan shall not
confer any right to continued service of a Participant
with the Corporation.
6.10 NOTICE. Each notice and other communication to be
given pursuant to this Plan shall be in writing and
shall be deemed given only when (a) delivered by hand,
(b) transmitted by telex or telecopier (provided that a
copy is sent at approximately the same time by
registered or certified mail, return receipt
requested), (c) received by the addressee, if sent by
registered or certified mail, return receipt requested,
or by Express Mail, Federal Express, or other overnight
delivery service, to the Corporation at its principal
office and to a Participant at the last known address
of such Participant (or to such other address or
telecopier number as a party may specify by notice
given to the other party pursuant to this Section).
6.11 CLAIMS PROCEDURES. If a Participant or a Participant's
Beneficiary does not receive benefits to which he or
she believes he or she is entitled, such person may
file a claim in writing with the Committee. The
Committee shall establish a claims procedure under
which:
(a) the Committee shall be required to provide
adequate notice in writing to the Participant or
the Beneficiary whose claim for benefits has been
denied, setting forth specific reasons for such
denial, written in a manner calculated to be
understood by the Participant or the Beneficiary;
and
(b) the Committee shall afford a reasonable
opportunity to the Participant or the Beneficiary
whose claim for Benefits has been denied for a
full and fair review by the Committee of the
decision denying the claim.
6.12 DELAWARE LAW CONTROLLING. This Plan shall be construed
in accordance with the laws of the State of Delaware.
6.13 BINDING ON SUCCESSORS. This Plan shall be binding upon
the Participant and the Corporation, their heirs,
successors, legal representatives, and assigns.
ARTICLE VII
ADMINISTRATION
7.1 The Plan shall be administered by the Committee. The
Committee shall act by vote of a majority of its
members or by unanimous written consent. The Plan may
be amended, modified, or terminated by the Committee,
except that no such action shall (without the consent
of the Participant, or, if the Participant has
deceased, any Beneficiary or Beneficiaries,
distributees, or personal representative) alter the
rights of a Participant with respect to the Deferred
Account established pursuant to this Plan prior to the
date of such amendment, modification, or termination.