Executive Compensation Agreement - United Defense LP and David V. Kolovat


                              UNITED DEFENSE, L.P.
                                 July 29, 1997

David V. Kolovat

         Re: Executive Compensation Agreement
             --------------------------------

Dear Dave:

         This Letter Agreement serves to confirm the discussion between
Thomas W. Rabaut, 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.

                                       2




   (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 ann 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.

                                       3




   (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




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:

                                       5




   (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.

                                  * * * * * *

                                       6



         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/ Thomas W. Rabaut
      --------------------

Its:  Vice President
      --------------------

Agreed to as of the day and
year first written above:

  /s/ David V. Kolovat
----------------------------
David V. Kolovat

      April 1, 1997
----------------------------
Date of Signature