UNITED DEFENSE, L.P. OPTION PLAN
1. Purpose of the Plan. This plan shall be known as United
Defense L. P. Option Plan (the Plan). The purpose of the Plan
is to provide compensation incentives to eligible employees of
United Defense, L. P. (the Employer) and to attract and retain
the highest quality employees for positions of substantial
responsibility so as to promote the success of the Employer.
2. Definitions. As used herein, the following definitions shall
(a) "Affiliated Group" shall mean (i) the Employer and (ii)
any corporation or unincorporated trade or business
(including an affiliate) in which the Employer and/or
one or more affiliates own either stock possessing at
least 80 percent of the total combined voting power of
all classes of stock entitled to vote or at least 80
percent of the total value of all shares of all classes
of stock (or in the case of an unincorporated trade or
business, or "controlling interest" as defined in
regulations under Section 414(c) of the Code).
(b) "Board" shall mean the governing board of the Employer.
(c) "Change in Control" means (1) the purchase or other
acquisition by any person, entity or group of persons,
within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 ("the Act"), or any
comparable successor provisions, of beneficial ownership
(within the meaning of Rule 13d-3 under the Act) of
thirty percent (30%) or more of either the outstanding
shares of common stock or the combined voting power of
the Employer's then outstanding voting securities
entitled to vote generally, or (2) the approval by the
stockholders of the Employer of a reorganization, merger
or consolidation, in each case with respect to which
persons who were stockholders/owners of the Employer
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power
entitled to vote generally in the election of directors
of the reorganized, merged, or consolidated entity's
then outstanding securities, or (3) a liquidation or
dissolution of the Employer, or (4) the sale of
substantially all of the Employer's assets. In the case
of a Change in Control event affecting an Employer that
is not the common law Employer of the Participant, such
event shall be deemed to constitute a Change in Control
only if the Change in Control event affects an Employer
that owns, directly or through one or more controlled
entities, the stock or other equity interests of the
Participant's common law Employer.
(d) Code" shall mean the Internal Revenue Code of 1986, as
(e) "Company Contributions" shall mean "Company Contributions,"
as defined in Section 19(k) of the Qualified Plan.
(f) "Compensation" shall mean a Participant's wages for the
Plan Year for services rendered to the Employer, as
described in Treas. Reg. 1.415-2(d)(11)(i), but
(i) including compensation deferred under the
Qualified Plan and amounts not includible in
gross income by reason of Code sections 125,
402(a)(8), 402(h), and 403(b), and
(ii) excluding all reimbursements or other expense
allowances, income from the exercise of stock
options, fringe benefits
(cash or non-cash), moving expenses and welfare
benefits (including severance benefits), even if
includible in gross income, except that short
term disability, salary continuation, and
vacation pay will not be excluded.
(g) "Employee" shall mean any employee of the Employer.
(h) "Employee Benefits Committee" or "EB Committee" shall mean
the so-named committee (i) created by the Management
Committee by resolution adopted December 31, 1997, (ii)
authorized by subsequent Management Committee resolution to
administer this Plan, and (iii) composed from time to time
of individuals designated as its members by the Management
(e) "Employee Contributions" shall mean "Employee-Elected
Company Contributions," as defined in Section 19(q) of the
Qualified Plan, and "Special Employee Contributions," as
defined in Section 19(mm) of the Qualified Plan.
(f) "Employer" shall mean United Defense, L. P. or UDLP
(g) "Employer Credit" shall mean an amount that the Employer
credits on behalf of the Participant pursuant to Section 6
of this Plan at the time an Option is granted.
(h) "Employer Matching Contribution" shall mean an amount that
the Employer will provide under this Plan to a Participant
only if and when the Participant chooses to exercise an
Option granted pursuant to this Plan.
(i) "Fair Market Value" shall mean, for any particular day, the
closing price of the share on such date, unless the
Management Committee, in its sole discretion, shall
determine otherwise in a fair and uniform manner.
(j) "Management Committee" shall mean the Management Committee
of United Defense, L. P.
(k) "Option" shall mean an option to purchase one or more
Shares granted pursuant to this Plan.
(m) "Option Agreement" means a written agreement evidencing the
award of an Option under the Plan.
(n) "Participant" shall mean any Employee who receives an
Option under the Plan, as evidenced by an Option Agreement
entered into between such Employee and the Employer.
(o) "Plan Year" shall mean the calendar year.
(p) "Prior Plan" shall mean the Amended and Restated UDLP
Supplemental Retirement and Savings Plan.
(q) "Qualified Plan" shall mean the UDLP Salaried Employees'
401(k) Plan, as amended from time to time.
(r) "Plan" shall mean the United Defense, L. P. Option Plan, as
amended from time to time.
(s) "Shares" shall mean the shares of mutual funds referenced
in the Option Agreement, but may in no way be expanded to
include units of any money market funds or other cash
(t) "Year of Service" shall mean a twelve (12) consecutive
month period during which the Employee is employed by the
Affiliated Group and paid by, or entitled to be paid by,
the Affiliated Group.
3. Establishment of Plan and Plan Year. The Plan as adopted by the
Management Committee shall become effective January 1, 2001 and
shall continue in effect until terminated pursuant to paragraph
4. Shares Subject to the Plan. The aggregate number and type of
Shares subject to Options shall be fully described in each
5. Eligibility. All Employees of the Employer who are designated
by the Management Committee or its designee are eligible to
receive Options under the Plan. The EB Committee or its designee
shall designate, prior to each Plan Year or during the Plan Year
as appropriate, which Employees are eligible to participate in
the Plan. Each Participant designated as eligible to receive
Options for any Plan Year shall
elect, prior to the start of participating in the Plan, what
portion of his or her Compensation to forego in exchange for
receiving the Option(s).
6. Grant of Options. The EB Committee shall determine in its sole
discretion the number of Shares to be offered from time to time
and grant Options under the Plan. Such determination shall
generally be made by the EB Committee in advance for options
granted prospectively on a payroll period basis, in accordance
with information provided by the Employee. Information provided
by the employee will determine when the employee actually
chooses to forego compensation and receive options.
The foregoing determination shall be evidenced by a blanket
written Option Agreement covering the grant on a payroll period
basis, approved annually by the Participant. The Plan
recordkeeper shall maintain records which reflect that
individual options that are granted each payroll period in total
make up a particular Plan Year's award. Such Option shall be
tracked on the basis of the plan year award.
Options shall granted at the Participant's election to replace
the Participant's account balance in the Prior Plan.
The grant of Options shall be evidenced by written Option
Agreements containing such terms and provisions as are approved
by the EB Committee. The Option Agreements shall be executed on
behalf of the Employer upon instructions from the EB Committee.
The actual number of Options granted and the number of Shares
associated with such Options shall generally be based upon the
Fair Market Value of the Shares and the amount of Compensation
that the Participant agrees to forego.
When any Participant enters into an Option Agreement, the
Employer shall credit an account on its books on behalf of such
Participant with an Employer Credit, in an amount equal to the
Company Contribution associated with elective contributions to
the Qualified Plan pursuant to a salary reduction agreement made
by such Participant based on the amount of Compensation which
has been foregone by such Participant in exchange for Options
under the Plan. The Employer Credit does not create a beneficial
ownership right to such amount for any Participant. The Employer
Credit shall remain within the general assets of the Employer.
The Employer Match shall not be payable to any particular
Participant unless such Participant exercises an Option and then
only to the extent that such amount is vested in accordance with
Section 7 below.
With regard to Options granted in replacement of a Participant's
Prior Plan balance, the Employer Credit shall be 25% of the Fair
Market Value of the shares optioned by such grant. The Employer
Matching Contribution, which shall be equal to the Employer
Credit in the case of such replacement Options, shall be granted
to the Participant by the Employer only upon exercise of the
Option. The vesting
provisions in Section 7 below do not apply to this Employer
Matching Contributions pertaining to such replacement Options.
Employee Contributions and Employer Credits shall be tracked as
separate sources of funds.
Prior to each Plan Year or during the Plan Year as appropriate,
each Participant shall designate how the Employer shall invest
the amounts credited to such Participant's account on the
Employer's books for the Plan Year. In making such designation,
such Participant shall choose an investment option(s) from among
mutual funds offered for the Plan by Fidelity Investments for
all amounts credited to such Participant's account on the
Employer's books, including earnings. Each Participant may
change investment designations at any time prior to exercise of
7. Vesting of Employer Credit/Employer Matching Contribution. If a
Participant does not exercise an Option, the Employer Credit in
respect thereof shall not be available to such Participant, and
such Participant shall not receive such Employer Matching
Contribution. The Employer Matching Contribution shall become
available only upon exercise and then only to the extent the (a)
amounts are vested in accordance with the following schedule or
(b) the exceptions in the subsequent paragraph apply.
Years of Service At Exercise Date Contribution Amount Vested
The only exception to the application of the foregoing vesting
schedule is that a Participant shall become fully vested in the
amount of the Employer Credit when such Participant (i) attains
age 55, (ii) becomes permanently and totally disabled as
determined by the Employer in its sole discretion on the basis
of competent medical evidence, (iii) dies, or (iv) there is a
Change in Control as defined in Section 1 above.
The Employer shall determine, upon exercise of an Option prior
to one of the events described in the previous paragraph, what
portion of the amounts credited to the books of the Employer on
behalf of the Participant shall be forfeited, if any, in
accordance with the vesting schedule of this Section 7.
8. Time of Grant of Options. The date of grant of an Option under
the Plan shall, for all purposes, be the date on which the EB
Committee awards the Option, as evidenced by the execution of an
Option Agreement. The EB Committee may delegate authority to
grant and execute Option Agreements to any one or more
9. Option Price. The option price for each Share shall be
expressed in each Option Agreement. The option price shall be
calculated as a fixed dollar amount in accordance with the
10. Exercise. Options granted under the Plan shall be vested and
exercisable in accordance with the specific Option Agreement.
The Option may be exercised in full following the Plan Year in
which the Option was awarded at any time within a specified
number of years as to be determined by the EB Committee in the
Option Agreement. In addition, all Options granted under the
Plan may only be exercised subject to any other terms specified
in the Option Agreement.
If a Participant is terminated for cause or is in violation of a
noncompete agreement with the Employer, all Options granted to
such Participant must be exercised within ninety (90) days from
the date of termination or violation, or else such Options shall
expire immediately following such 90th day.
Upon death or disability of the Participant, any of such
Participant's Options not exercised within one year after the
date of death or disability shall thereupon expire. If a
Participant dies following a termination of employment and while
the Option was still exercisable, such Participant's exercise
period shall not exceed one year after the date of his or her
Upon death of a Participant, the Employer Matching Contribution
for such Participant becomes immediately due and payable by the
Employer, and may only be used to exercise such Participant's
Options under this Plan.
Upon exercise, the Employer shall make available to the
Participant the Employer Matching Contribution, or if applicable
lend to the Participant the exercise price, which represents the
amount of the Employer Credit vested in accordance with the
requirements of Section 7 of this Plan. Notwithstanding the
provisions of Section 7 of the Plan, in the event of a
Participant's termination for cause or violation of a noncompete
agreement with the Employer, the Employer shall make available
to such Participant the Employer Matching Contribution only to
the extent vested as of the date of termination or the date of
the violation of the noncompete agreement rather than the
exercise date. The Employer Matching Contribution shall then be
applied toward the exercise price of the Option(s).
11. Withholding of Taxes. The EB Committee may make such provisions
and take such actions as it may deem necessary or appropriate
for the withholding of any
taxes which the Employer is required by any law or regulation of
any governmental authority, whether federal, state, or local,
domestic or foreign to withhold taxes in connection with any
Option, including but not limited to (i) withholding of the
issuance of all or any portion of such Shares until a Participant
reimburses the Employer for the amount the Employer is required
to withhold with respect to such taxes, (ii) canceling any
portion of such issuance in an amount sufficient to reimburse
itself for the amount it is required to so withhold, or (iii)
taking any other action reasonably required to satisfy the
Employer's withholding obligation.
12. Modification of Options. At any time, and from time to time, the
EB Committee may execute an instrument providing for
modification, extension, or renewal of any outstanding Option,
provided that no such modification, extension, or renewal shall
reduce the value or in any way impair the exercisability of the
Option without the consent of the holder of the Option.
13. Substitution of An Option. If a Participant has been granted an
Option to purchase Shares under an Option Agreement, then, except
as limited by the terms of the Option Agreement, the Participant
may direct that the Option be converted into an Option to
purchase other Shares which are mutually agreed upon between the
Management Committee and the Participant. A participant may so
substitute options on any day that the New York Stock Exchange is
in operation. All substitutions of options will be recorded by
Fidelity Investments, the recordkeeper of the Plan, and Fidelity
Investments shall provide documentation to the Participant
reflecting any substitutions. Any such substitution shall only be
allowed to the extent that, immediately following the
substitution, the difference between the Fair Market Value of the
Shares subject to the replacement Option and the exercise price
of the replacement Option is no greater than the difference which
existed immediately prior to the substitution between the Fair
Market Value of the Shares subject to the original Option and the
exercise price of the original Option.
14. Administration of the Plan. The EB Committee or its designee, in
its or such designee's sole discretion, and based on
recommendations received from time to time by appropriate
officials of the Employer, is authorized to select the Employees
who will receive Options and to determine the number of Options
and the number of Shares under each Option. The EB Committee, in
its sole discretion, is authorized to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to
the Plan and to the Options granted under the Plan, to determine
the form and content of Options to be issued under the Plan, and
to make such other determinations and exercise such other power
and authority as may be necessary or advisable for the
administration of the Plan.
15. Continued Employment Not Presumed. Nothing in this Plan or any
descriptive or related document, nor the grant of an Option via
an Option Agreement, shall give any Participant the right to
continue in employment with the Employer or affect the
right of the Employer to terminate the employment of any such
person with or without cause.
16. Amendment and Termination of the Plan. The Management Committee,
in its sole discretion, may suspend or discontinue the Plan at
any time. The Management Committee, in its sole discretion, may
alter the Plan at any time. No suspension, discontinuance, or
alteration of the Plan shall impair the rights of any
Participant except to the extent necessary to comply with any
provision of federal or applicable state laws.
17. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
18. Severability of Provisions. Should any provision of the Plan be
determined to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect the
remaining provisions of the Plan, but shall be fully severable,
and the Plan shall be construed and enforced as if such
provision had never been inserted herein.
IN WITNESS WHEREOF, the Employer has caused the Plan to be executed by
its duly authorized agent this _____ day of March, 2001.
UNITED DEFENSE, L. P.
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%