September 26, 2001
[Employee Name
& Address]
Dear _____________:
As you know, United Defense has achieved an enviable record of achievement since
its acquisition by The Carlyle Group in October 1997. We have delivered critical
developmental successes for our government in major programs such as the Bradley
A3 and the Crusader; we repaid much of the 1997 acquisition debt years ahead of
schedule; and the profits and cash generated by our business have consistently
exceeded our projections.
At the same time, our Company faces new and difficult challenges. The corporate
refinancing which we accomplished in August has created a substantial new debt
burden. In the new Administration and elsewhere, influential policy makers are
calling for the redirection of defense expenditures into areas in which UDLP has
not participated, such as missile defense and homeland defense. We have every
reason to expect that this new environment will require the continued retention,
dedication, and creativity of our key personnel, if United Defense is to
continue its record of success.
Accordingly, the Board of Directors has adopted a new retention incentive
program for key United Defense personnel. I am pleased to inform you that you
have been selected to participate in this program, which will operate as
follows:
(1) As an inducement for your continuing as a full-time, key
employee of United Defense (by which we mean United Defense, L.P. and
any parent, subsidiary, or affiliate entity for which you may work)
until a Corporate Transaction (as defined below) is concluded, and in
consideration for your so doing, United Defense hereby promises to pay
you a special retention bonus (the "Bonus") in the amount of
__________ dollars ($________), less applicable tax withholdings. As
used in this commitment letter, a Corporate Transaction means the
acquisition (i.e., whether by merger, or by stock or asset purchase)
of all or substantially all of United Defense (whether accomplished at
the parent level, United Defense Industries, Inc., or at the operating
company level, United Defense, L.P.) by a corporate or other entity
not theretofore affiliated with United Defense or its shareholders.
(2) The Bonus will be paid as and when the owners of United
Defense are paid in any Corporate Transaction. Thus, for example, in a
transaction where the entire purchase price is paid on the
transaction's closing date, the entire
[Employee Name]
September 26, 2001
Page 2
Bonus would be paid out at that time. By contrast, if the terms of the
transaction were to provide that the purchase price would be paid 75%
on the closing date and 25% one year later, the Bonus would be paid in
like proportions on those two dates. Also, the Bonus would be fully
payable regardless of any contingent or so-called earnout provisions in
the Corporate Transaction. Finally, the Bonus would be paid in whatever
form - cash, securities, or a mixture of the two - UDLP's owners
received payment in the Corporate Transaction, except that the Bonus
payment would in any event include a cash component to assist in paying
applicable taxes.
The retention incentive undertaken by this letter is in addition to, and does
not replace or in any way reduce, any other UDLP compensation, bonus, stock or
option program, or other compensation arrangement in which you may already
participate. Also, please note that this letter does not constitute an agreement
or guarantee of continued employment, or employment in any particular position
or capacity. It does, however, express the company's firm commitment to pay the
Bonus so long as you remain continuously employed by United Defense until the
completion of a Corporate Transaction.
Please accept my congratulations on your inclusion in this special and important
program. We look forward to United Defense's best years which, with your help,
continue to lie ahead.
Sincerely,
Thomas W. Rabaut
President and Chief
Executive Officer
Retention Incentive Agreement - United Defense Industries Inc.
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