UNITED DEFENSE, L.P.
July 29, 1997
Xxxxx X. Xxxxxxx
Re: Executive Compensation Agreement
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Dear Xxxx:
This Letter Agreement serves to confirm the discussion between
Xxxxxx X. Xxxxxx, and you ("Executive") concerning the decision of the Board of
Directors of FMC Corporation ("FMC" or the "General Partner"), the general
partner of United Defense, L.P. (the "Company"), to (i) solicit potential
buyers for a possible sale of the outstanding general partner interests, or
outstanding general partner and limited partner interests, of the Company (a
"Sale of the Company") and (ii) to consider a spin-off of the Company in a
transaction or series of related transactions pursuant to which the stockholders
of FMC would become the holders of FMC's equity interests in the Company as a
result of a distribution of such interests (a "Spin-Off"). Each of a Sale of the
Company and a Spin-Off are referred to herein as a "Transaction." In connection
with such decision, the Company hereby agrees with Executive, effective as of
the date written above, to the following terms and conditions set forth in
this Letter Agreement.
1. Compensation Arrangements. In consideration of Executive's agreement to
cooperate with the General Partner in pursuing a Transaction and to fulfill
Executive's other obligations set forth in this Letter Agreement, Executive
shall be entitled to receive the payments and benef1ts described below:
(a) Performance Incentive. If a Transaction is consummated, Executive shall
be entitled to a bonus (the "Performance Incentive Bonus") of $100,000
payable 30 days after the consummation of such Transaction the "Final
Transaction Date"); provided, however that (i) the Performance Incentive
Bonus shall not be payable if, prior to the Final Transaction Date,
Executive's employment with the Company is voluntarily terminated
without Good Reason or is involuntarily terminated for Cause and (ii) the
Performance Incentive Bonus shall be payable if Executives employment is
voluntarily terminated with Good Reason or involuntarily terminated not
for Cause prior to the Final Transaction Date. Notwithstanding the
foregoing the Performance Incentive Bonus shall be payable if Executive
voluntarily terminates his employment prior to the Final Transaction Date
in order to accept an offer of employment from FMC.
(b) Severance Pay: Subject to consummation of a Sale of the Company (but not
a Spin-Off), if Executive is terminated by the Company not for Cause,
or if Executive voluntarily terminates his employment with the Company
with Good Reason, at any time after the Final Transaction Date up to and
including the two-year anniversary of the Final Transaction Date,
Executive shall be entitled to receive from the Company the following:
(i) An amount equal to Executive's annualized base salary in effect at
the effective time of such termination plus an amount equal to
Executive's (A) earned and unused and (B) accrued vacation pay
through the effective time of such termination.
(ii) An amount equal to the greater of (A) Executive's target bonus
established for the plan period commencing January 1, 1997 and (B)
Executive's target bonus established for the plan period
commencing in the year of such termination.
(iii) A continuation of the welfare benefits of health care (including
dental insurance coverage), life and accidental death and
dismemberment and long-term disability insurance coverage for one
full year after the effective time of such termination. These
benefits shall be provided to Executive at the same premium cost,
and at the same coverage level, as in effect as of the effective
time of such termination. However, in the event the premium cost
and/or level of coverage shall change for all employees of the
Company, or for management employees with respect to supplemental
benefits, the cost and/or coverage level, as applicable, shall
change for Executive in a corresponding manner.
(iv) Executive outplacement assistance in accordance with FMC's
customary practices for persons in Executive's employment position
from the outplacement firm employed by FMC as of the effective
time of such termination.
Executive shall also be entitled to receive severance benefits under this
paragraph 1 (b) upon voluntary termination of employment with the
Company prior to the Final Transaction Date if the buyer of partnership
interests of the Company ("Buyer") indicates in writing to FMC prior to
the Final Transaction Date that Buyer intends to cause the Company to
terminate Executive following the Final Transaction Date, unless
Executive accepts an offer of employment with FMC prior to the Final
Transaction Date. A liquidation or dissolution of the Company in
connection with a Sale of the Company or as part of the integration of
the operations of the Company and Buyer shall not be deemed to involve a
termination of Executive for purposes of this paragraph 1 (b), but in
such event this paragraph 1 (b) is intended to apply to and be binding on
the successor of the Company.
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(c) FMC 1995 Management Incentive Plan:
(i) Bonus Performance Incentive Award. Whether or not Executive
completes the Three-Year Period (as defined in the FMC 1995
Management Incentive Plan (the "MIP") ending December 31, 1997 as
an employee of the Company, Executive shall receive a BPI Award
(as defined below) with respect to such Three-Year Period based on
the greater of the at-target performance and the actual
performance of the Company for such Three-Year Period. Such BPI
Award shall be reduced by the amount of the draw against such BPI
Award previously paid to Executive and, as so reduced, shall be
payable at the time when FMC makes payment of the BPI Awards to
other participants in the MIP. For purposes of this Letter
Agreement, the term "BPI Award" shall mean a Three-Year Incentive
Award within the meaning of the MIP.
(ii) Annual Performance Incentive Award. Whether or not Executive
completes the calendar year ending December 31, 1997 as an
employee of the Company, Executive shall receive an annual
performance incentive award with respect to such period based on
a review of Executive's performance during such period. Such
annual performance incentive award shall be payable at the time
when FMC makes payment of the annual performance incentive awards
to other participants in the MIP.
(d) Equity Incentive Awards: Notwithstanding any contrary term contained in
any applicable FMC stock option plan (the "Option Plan") or any
applicable stock option agreement, but subject to the approval of the
Compensation and Organization Committee of the Board of Directors of FMC
or any other appropriate committee, Executive shall have the right to
exercise any outstanding stock options granted to him under the Option
Plan that are vested as of the Final Transaction Date within the earlier
of (A) two years from the Final Transaction Date and (B) the scheduled
expiration date of such options under the Option Plan and the applicable
stock option agreements.
2. Obligations of Executive:
(a) Nondisclosure of Transaction Matters. Except as required by any court or
governmental entity, Executive agrees not to disclose or discuss with
any person (regardless of xxx termination of this Letter Agreement or any
determination by FMC to no longer pursue a Transaction) the existence or
terms of this Letter Agreement, the fact that a Transaction is being
considered, the terms or conditions of a Transaction or the status of any
Transaction discussions or negotiations: provided, however, that (i)
Executive shall be free to consult with the other officers of the Company
or with his or her legal counsel, accountants and financial advisors in
connection with this Letter Agreement and any Transaction; and (ii)
Executive shall be free to disclose and discuss such matters in
connection with any Transaction by FMC officials leading FMC's efforts in
connection with any such Transaction.
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(b) Executive Cooperation in Transaction Efforts. Executive agrees to
cooperate with the partners of the Company in their respective efforts to
negotiate and close a Transaction, regardless of whether Executive or any
other member of the management of the Company ("Management") becomes a
participant in such Transaction. Without limiting the generality of the
foregoing, (i) Executive shall not take any action which could be
reasonably expected to give Management or any investors who propose to
participate with Management in a Transaction an advantage over other
potential participants in such Transaction or any alternative
Transaction; (ii) Executive shall make himself available at FMC's
request from time to time to answer questions and provide information to
potential participants in a Transaction, which shall be done in a manner
consistent with the policies, procedures and guidelines established by
FMC; and (iii) Executive shall otherwise promote any Transaction
consistent with his duty to act in the best interest of the Company and
shall continue his functional responsibilities and assist FMC in
connection with the negotiation and consummation of any such Transaction,
consistent with Executive's demonstrated capabilities.
(c) Representations and Warranties Relating to any Transaction. Executive
understands that FMC and/or the limited partner of the Company may decide
to make certain representations and warranties relating to the business
and operations of the Company to participants in a Transaction under the
terms of the definitive agreements with such participants (the
"Definitive Agreements"). Executive agrees that, prior to the execution
of the Definitive Agreements and prior to the closing of any such
Transaction, Executive will (i) review all such representations and
warranties and (ii) certify in writing to FMC and/or the limited partner
of the Company (the "Certificate") (A) that Executive knows of no
material misstatement or omission contained in such representations and
warranties or (B) that Executive has identified to FMC and/or the limited
partner of the Company in writing any material misstatements or omissions
contained in such representations and warranties. Executive understands
and acknowledges that such certification is customary in connection
with transactions such as such Transaction and that FMC will rely on
such certification in executing the Definitive Agreement and in closing
such Transaction.
3. No Contract of Employment. This Letter Agreement is not a contract of
employment. Nothing expressed or implied in this Letter Agreement shall
create any right or duty of Executive's continued employment by FMC or the
Company, and the Company reserves all rights to terminate Executive's
employment at any time for or not for Cause, subject to the provisions
hereof.
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4. Certain Definitions.
(a) The term "Cause" as used herein shall mean (i) Executive's willful and
continued failure to substantially perform his duties with the Company
(other than any such failure resulting from disability or occurring after
issuance by Executive of a notice of termination with Good Reason), after
a written demand for substantial performance is delivered to Executive
that specifically identifies the manner in which the Company believes
that Executive has willfully failed to substantially perform his duties,
and after Executive has failed to resume substantial performance of his
duties on a continuous basis within thirty (30) calendar days of
receiving such demand, (ii) the commission by Executive of an act of
fraud, misappropriation, embezzlement or any other act involving moral
turpitude or constituting a felony, or (iii) the commission by Executive
of any act of dishonesty which injures the Company, any partner of the
Company or Buyer, as the case may be.
(b) The term "Good Reason" as used herein shall mean the occurrence of one or
more of the following events without Executive's consent: (i) Executive's
base salary as of the date hereof is reduced for any reason by more than
5% other than as a result of the termination of Executive's employment;
or (ii) after the Final Transaction Date, Executive's employment with the
Company is not on terms comparable to Executive's employment with the
Company as of the date hereof in terms of compensation, responsibility,
authority. Executive shall notify the Company within 15 days after
Executive knows of the occurrence of any event within the meaning of
clauses (i) or (ii) above and the Company may cure any such event and
notify Executive thereof within 15 days of the Company's receipt of
Executive's notice. Within 15 days after expiration of such 15-day
period, Executive must voluntarily terminate his employment with the
Company in order to be entitled to benefits hereunder.
5. General Provisions: It is expressly understood and agreed: (i) that all of
the terms and conditions of the compensation plans described in paragraph l
above are to remain in full force and effect as applied to Executive and (ii)
that, except as specifically modified by this Letter Agreement, any payments
and distributions made pursuant to paragraph 1 above are in lieu of any other
payments which would otherwise be due under the same compensation plan for
the same relevant time period. It is further understood and agreed that the
following provisions shall apply to this Letter Agreement:
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(a) Irreparable Harm. Executive acknowledges and agrees that the failure of
Executive to comply with any of the terms of paragraph 2 will irreparably
harm the Company and that money damages would not adequately compensate
them for such harm. Thus, Executive agrees that in addition to any other
remedies that the Company may have hereunder or otherwise, the Company
shall be entitled to injunctive or other equitable relief to restrain any
breach by Executive of such terms, and further that the Company shall be
entitled to apply for such relief in any court of competent jurisdiction
without the posting of a bond or any other security.
(b) Assignment. Neither this Letter Agreement nor any of the rights,
interests or obligations hereunder may be assigned by Executive. This
Letter Agreement may be assigned by the Company and is intended to be
binding on any successor to the Company.
(c) Governing Law. This Letter Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois without reference to
the choice of law principles thereof.
(d) Parol Integration. The rights and benefits granted pursuant to this
Letter Agreement are in addition to, and not in lieu of, any rights and
other benefits to which Executive may be entitled.
(e) Arbitration. Each of Executive and the Company hereby irrevocably agree
that, except as provided in paragraph 5(a), any dispute arising out of or
relating in any way to this Letter Agreement shall be settled solely by
arbitration in the City of Chicago, Illinois to be administered by the
American Arbitration Association in accordance with its then prevailing
rules.
(f) Status of Payments. No payments made to Executive by the Company pursuant
to this Letter Agreement (other than with respect to the MIP) shall be
deemed to be pensionable income or compensation for purposes of
Executive's rights under the FMC and/or Company pension plan applicable
to Executive.
* * * * * *
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If you agree that the foregoing correctly sets forth the agreement
between us, please sign the enclosed copy of this Letter Agreement in the space
indicated below and return it to the Company.
Very truly yours,
UNITED DEFENSE, L.P.
By: FMC Corporation
Its: General Partner
By: /s/ Xxxxxx X. Xxxxxx
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Its: Vice President
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Agreed to as of the day and
year first written above:
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
April 1, 1997
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Date of Signature
