EXHIBIT 10.26
UNITED DEFENSE, L.P.
June 30, 1997
Xxxxxx Xxxxxx
Re: Executive Compensation Agreement Dear Xxxxxx:
This Letter Agreement serves to confirm the discussion between Xxxxx
X. Xxxxx 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 benefits described
below:
(a) Performance Incentive: If a Transaction is consummated, Executive
shall be entitled to a bonus (the "Performance Incentive Bonus") of
$150,000 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 Executive's employment is voluntarily terminated with
Good Reason or involuntarily terminated not for Cause prior to the
Final Transaction Date. Notwithstanding the foregoing and paragraph
1(b) below, both the Performance Incentive Bonus and the Premium
Incentive Bonus (as defined in such paragraph 1(b)) 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) Premium Incentive: If a Sale of the Company is consummated (but not
a Spin-Off), Executive shall be entitled to a bonus (the "Premium
Incentive Bonus") in an amount ranging from $0 to $150,000 based on
the price obtained for such Sale of the Company and Executive's
contribution to the process of consummating such Sale of
the Company, as determined by Xxxxx X. Xxxxx and Xxxxxx X. Xxxxxx in
their sole discretion. Any Premium Incentive Bonus shall be payable
30 days after the Final Transaction Date; provided, however, that
(i) the Premium 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 Premium Incentive Bonus shall be
payable if Executive is voluntarily terminated with Good Reason or
involuntarily terminated not for Cause prior to the Final
Transaction Date.
(c) 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(c) 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(c), but in such event this paragraph
1(c) is intended to apply to and be binding on the successor of the
Company.
(d) 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.
(e) 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 any 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 their 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 as
authorized by FMC officials leading FMC's efforts in connection with
any such Transaction.
(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.
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 and 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
1 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:
(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.
* * * * *
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
----------------------------------
Its: Vice President
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Agreed to as of the day and
year first written above:
/s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx Xxxxxx
2 July 1997
---------------------------------
Date of Signature
To: Xxxxxx X. Xxxxxx
Re: Amendment to Executive Compensation Agreement
Dear Xxxxxx:
In connection with the Letter Agreement dated as of June 30, 1997, between you
("Executive") and United Defense L.P. (the "Company"), the Company desires, in
order to more fully realize the objectives of the Letter Agreement, to amend the
same to clarify certain additional aspects of your compensation not addressed or
only partially addressed therein, as follows:
FMC Stock Option Plan: Certain options have been granted to you in connection
with such plan (the "Option Plan") under one or more stock option agreements
which, among other things, ordinarily subject the right of exercise to the
condition precedent that Executive shall have been continuously employed by the
Company or one of its affiliates between the grant date for such options and
December 31, 1997. Regarding such options, the condition regarding such period
of continuous employment shall be deemed fully satisfied if Executive remains
continuously employed from the grant date until the earlier of December 31, 1997
or the Final Transaction Date.
Any terms not separately defined above shall have the same definitions set forth
in the Letter Agreement.
If you are in agreement with the foregoing, please execute both originals of
this Amendment, keep one original for your records, and return the other
original to the Company, whereupon the Letter Agreement shall become amended in
the manner set forth above.
Very truly yours,
UNITED DEFENSE, L.P.
By FMC Corporation, acting as
General Partner of United
Defense, L.P., and acting for
itself regarding the Option Plan
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Its: Vice President
--------------------
Accepted and agreed to as of the
date and year first written above
/s/ Xxxxxx X. Xxxxxx
--------------------------------
Xxxxxx X. Xxxxxx
28 Jul 97
--------------------------------
Date of Signature
