UNITED DEFENSE STOCK OPTION PLAN
United Defense Industries, Inc. (the 'Company'), a Delaware
corporation, hereby adopts this United Defense Stock Option Plan. The purposes
of this Plan are as follows:
(1) To further the growth, development, and financial success of the
Company and its Affiliates (as defined herein), by providing additional
incentives to employees and directors of the Company and employees of
its Affiliates who have been or will be given responsibility for the
management or administration of the Company's (and/or one or more of
its Affiliates') business affairs, by assisting them to become owners
of Common Stock, thereby benefiting directly from the growth,
development and financial success of the Company.
(2) To enable the Company (and its Affiliates) to obtain and retain the
services of the type of professional, technical, and managerial
employees and directors considered essential to the long-range success
of the Company by providing and offering them an opportunity to become
owners of Common Stock under Options, including, in the case of
Employees of the Company and its Subsidiaries, Options that are
intended to qualify as 'incentive stock options' under Section 422 of
the Code (as defined herein).
ARTICLE I.
DEFINITIONS
-----------
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The singular pronoun shall include the plural where the context so indicates.
Section 1.1. Affiliate
------------ ---------
'Affiliate' shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person where 'control' shall have the meaning given such term under Rule
405 of the Securities Act.
Section 1.2. Board
------------ -----
'Board' shall mean the Board of Directors of the Company.
Section 1.3. CEO
------------ ---
'CEO' shall mean Chief Executive Officer of the Company.
Section 1.4. Code
------------ ----
'Code' shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5. Committee
------------ ---------
'Committee' shall mean the Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as provided in Section
6.1.
Section 1.6. Common Stock
------------ ------------
'Common Stock' shall mean the common stock, par value $0.01 per share,
of the Company.
Section 1.7. Company
------------ -------
'Company' shall mean United Defense Industries, Inc. In addition,
'Company' shall mean any corporation assuming, or issuing new employee stock
options in substitution for, Incentive Stock Options outstanding under the Plan
in a transaction to which Section 424(a) of the Code applies.
Section 1.8. Controlled Entity
------------ -----------------
'Controlled Entity' shall mean either of (i) UDLP Holdings Corp. or
(ii) the Partnership.
Section 1.9. Corporate Event
------------ ---------------
'Corporate Event' is defined in Section 7.1(a).
Section 1.10. Director
------------- --------
'Director' shall mean a member of the Board.
Section 1.11. Eligible Representative
------------- -----------------------
'Eligible Representative' for an Optionee shall mean such Optionee's
personal representative or such other person as is empowered under the deceased
Optionee's will or the then applicable laws of descent and distribution to
represent the Optionee hereunder.
Section 1.12. Employee
------------- --------
'Employee' shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company and/or one or more of its Affiliates, whether such employee
is so employed at the time this Plan is adopted or becomes so employed
subsequent to the adoption of this Plan.
Section 1.13. Exchange Act
------------- ------------
'Exchange Act' shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.14. Incentive Stock Option
------------- ----------------------
'Incentive Stock Option' shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.
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Section 1.15. Independent Director
------------- --------------------
'Independent Director' shall mean a member of the Board who is not an
Employee of the Company.
Section 1.16. Non-Qualified Option
------------- --------------------
'Non-Qualified Option' shall mean an Option which is not an 'incentive
stock option' under Section 422 of the Code and shall include an Option which is
designated as a Non-Qualified Option by the Committee.
Section 1.17. Officer
------------- -------
'Officer' shall mean an officer of the Company, as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
Section 1.18. Option
------------- ------
'Option' shall mean an option granted under the Plan to purchase
Common Stock. 'Options' includes both Incentive Stock Options and Non-Qualified
Options.
Section 1.19. Optionee
------------- --------
'Optionee' shall mean an Employee or Independent Director to whom an
Option is granted under the Plan.
Section 1.20. Person
------------- ------
'Person' shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
Section 1.21. Plan
------------- ----
'Plan' shall mean this United Defense Stock Option Plan.
Section 1.22. Secretary
------------- ---------
'Secretary' shall mean the Secretary of the Company.
Section 1.23. Securities Act
------------- --------------
'Securities Act' shall mean the Securities Act of 1933, as amended.
Section 1.24. Stock Option Agreement
------------- ----------------------
'Stock Option Agreement' shall mean the written Stock Option Agreement
between the Company and an Optionee evidencing an Option granted under the Plan
as described in Section 4.1.
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Section 1.25. Stockholders Agreement
------------- ----------------------
'Stockholders Agreement' shall mean the Stockholders Agreement by and
among United Defense Industries, Inc., Iron Horse Investors, L.L.C. and an
Optionee, as amended from time to time.
Section 1.26. Subsidiary
------------- ----------
'Subsidiary' of any entity shall mean any corporation in an unbroken
chain of corporations beginning with such entity if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
Section 1.27. Termination of Directorship
------------- ---------------------------
'Termination of Directorship' shall mean the time when an Optionee who
is an Independent Director ceases to be a Director for any reason, including but
not by way of limitation, a termination by resignation, failure to be elected or
appointed, death or retirement. The Board, in its sole discretion, shall
determine the effect of all matters and questions relating to Termination of
Directorship.
Section 1.28. Termination of Employment
------------- -------------------------
'Termination of Employment' shall mean the time when the
employee-employer relationship between the Optionee and the Company (and/or one
or more of its Affiliates) is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding a termination where the Optionee
is simultaneously reemployed by, or remains employed by, the Company and/or one
or more of its Affiliates or a successor entity thereto. The Committee shall
determine the effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the question of whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and to the
extent that, such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section of the Code.
ARTICLE II.
SHARES SUBJECT TO PLAN
----------------------
Section 2.1. Shares Subject to Plan
------------ ----------------------
The shares of stock subject to Options shall be shares of Common Stock.
Subject to Section 7.1, the aggregate number of such shares which may be issued
upon exercise of Options shall not exceed 1,500,000.
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Section 2.2. Unexercised Options
------------ -------------------
If any Option (or portion thereof) expires or is canceled without
having been fully exercised, the number of shares subject to such Option (or
portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
-------------------
Section 3.1. Eligibility
------------ -----------
Any executive or other key Employee of the Company and/or of one or
more of its Affiliates and any Independent Director shall be eligible to be
granted Options, except as provided in Section 3.2.
Section 3.2. Qualification of Incentive Stock Options
------------ ----------------------------------------
No Incentive Stock Option shall be granted to any person who is not an
Employee of the Company and/or one of its Subsidiaries.
Section 3.3. Granting of Options to Employees
------------ --------------------------------
(a) The Committee shall from time to time:
(i) Determine which Employees are executive or other key
Employees and select from among them (including those to whom Options
have been previously granted under the Plan) such of them as in its
opinion should be granted Options;
(ii) Determine the number of shares to be subject to such
Options granted to such Employees, and determine whether such Options
are to be Incentive Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of an executive or other key Employee to be
granted an Option pursuant to Section 3.3(a), the Committee shall instruct the
Secretary to issue such Option and may impose such conditions on the grant of
such Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may require as a condition on the grant of an
Option to an Employee that the Employee surrender for cancellation some or all
of the unexercised Options which have been previously granted to him or her. An
Option the grant of which is conditioned upon such surrender may have an Option
price lower (or higher) than the Option price of the surrendered Option, may
cover the same (or a lesser or greater) number of shares as the surrendered
Option, may contain such other terms as the Committee deems appropriate and
shall be exercisable in accordance with its terms, without regard to the number
of shares, price, period of exercisability or any other term or condition of the
surrendered Option.
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Section 3.4. Granting of Option to Independent Directors
------------ -------------------------------------------
(a) The Board shall from time to time:
(i) Select from among the Independent Directors (including
those to whom Options have previously been granted under the Plan) such
of them as in its opinion should be granted Options;
(ii) Determine the number of shares to be subject to such
Options granted to such selected Independent Directors;
(iii) Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that all Options granted
to Independent Directors shall be Non-Qualified Options.
(b) Upon the selection of an Independent Director to be granted an
Option pursuant to Section 3.4(a), the Board shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding sentence,
the Board may require as a condition on the grant of an Option to an Independent
Director that the Independent Director surrender for cancellation some or all of
the unexercised Options which have been previously granted to him or her. An
Option the grant of which is conditioned upon such surrender may have an Option
price lower (or higher) than the Option price of the surrendered Option, may
cover the same (or a lesser or greater) number of shares as the surrendered
Option, may contain such other terms as the Board deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, period of exercisability or any other term or condition of the
surrendered Option.
ARTICLE IV.
TERMS OF OPTIONS
----------------
Section 4.1. Option Agreement
------------ ----------------
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the Company
and which shall contain such terms and conditions as the Committee (or the
Board, in the case of Options granted to Independent Directors) shall determine,
consistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to qualify
such Options as 'incentive stock options' under Section 422 of the Code.
Section 4.2. Exercisability of Options
------------ -------------------------
(a) Each Option shall become exercisable according to the terms of the
applicable Stock Option Agreement; provided, however, that by a resolution
adopted after an Option is granted the Committee (or the Board, in the case of
Options granted to Independent Directors) may, on such terms and conditions as
it may determine to be appropriate and subject to Sections 4.2(b) and 4.2(c),
accelerate the time at which such Option or any portion thereof may be
exercised.
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(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Directorship shall thereafter become exercisable
unless the Committee shall determine otherwise.
(c) To the extent that the aggregate fair market value (determined as
of the date of grant of the Option granted with respect to such stock) of shares
with respect to which 'incentive stock options' (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company or any
Subsidiary thereof) exceeds $100,000, such options shall be treated and taxable
as Non-Qualified Options. The rule set forth in the preceding sentence shall be
applied by taking options into account in the order in which they were granted,
and the stock issued upon exercise of options shall designate whether such stock
was acquired upon exercise of an Incentive Stock Option.
Section 4.3. Option Price
------------ ------------
(a) The price of the shares subject to each Option shall be set by the
Committee (or the Board, in the case of Options granted to Independent
Directors) provided, however, that in the case of an Incentive Stock Option, the
price per share shall be not less than 100% of the fair market value of such
shares on the date such Option is granted; and that in the case of an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company, the
price per share shall not be less than 110% of the fair market value of such
shares on the date such Incentive Stock Option is granted.
(b) For purposes of the Plan, the fair market value of a share of the
Common Stock as of a given date shall be: (i) the closing price of a share of
the Common Stock on the principal exchange on which such shares are then
trading, if any, on the day previous to such date, or, if shares were not traded
on the day previous to such date, then on the next preceding trading day during
which a sale occurred; or (ii) if such Common Stock is not traded on an exchange
but is quoted on NASDAQ or a successor quotation system, (A) the last sales
price (if the Common Stock is then listed as a National Market Issue under the
NASD National Market System) or (B) the mean between the closing representative
bid and asked prices (in all other cases) for the Common Stock on the day
previous to such date as reported by NASDAQ or such successor quotation system;
or (iii) if such Common Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the mean between the closing
bid and asked prices for the Common Stock, on the day previous to such date, as
determined in good faith by the Committee; or (iv) if the Common Stock is not
publicly traded, the fair market value established by the Committee acting in
good faith and taking account of factors applicable to such shares such as their
status as minority or non-controlling shares and any restrictions on the shares
contained in this Plan or the Stockholders Agreement.
Section 4.4. Expiration of Options
------------ ---------------------
(a) No Option may be exercised to any extent by the Optionee or his or
her Eligible Representative after the first to occur of the following events:
(i) The expiration of ten years from the date the Option was
granted; or
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(ii) With respect to an Incentive Stock Option in the case of
an Optionee owning (within the meaning of Section 424(d) of the Code),
at the time the Incentive Stock Option was granted, more than 10% of
the total combined voting power of all classes of stock of the Company
or any subsidiary corporation, the expiration of five years from the
date the Incentive Stock Option was granted; or
(iii) Except as the Committee (or the Board, in the case of
Options granted to Independent Directors) may provide in the terms of
the applicable Stock Option Agreement or otherwise approve, for any
reason other than death or disability (as defined in Section 22(e)(3)
of the Code); or
(iv) In the case of an Optionee whose Termination of
Employment is by reason of his or her disability (within the meaning of
Section 22(e)(3) of the Code), the expiration of 12 months from the
date of the Optionee's Termination of Employment unless the Optionee
dies within said 12 month period, in which case the Option shall cease
to be exercisable upon the expiration of 180 days from the date of the
Optionee's death; or
(v) The expiration of 180 days from the date of the
Optionee's death.
ARTICLE V.
EXERCISE OF OPTIONS
-------------------
Section 5.1. Person Eligible to Exercise
------------ ---------------------------
During the lifetime of the Optionee, only he or she may exercise an
Option (or any portion thereof) granted to him or her; provided, however, that
the Optionee's Eligible Representative may exercise the Optionee's Option during
the period of the Optionee's disability (as defined in Section 22(e)(3) of the
Code) notwithstanding that an Option so exercised will not qualify as an
Incentive Stock Option. After the death of the Optionee, any exercisable portion
of an Option may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Stock Option Agreement, be exercised by the
Optionee's Eligible Representative.
Section 5.2. Partial Exercise
------------ ----------------
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee (or
the Board, in the case of Options granted to Independent Directors) may, by the
terms of the Option, require any partial exercise to be with respect to a
specified minimum number of shares.
Section 5.3. Manner of Exercise
------------ ------------------
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of all of the following prior to
the time when such Option or such portion becomes unexercisable under the Plan
or the applicable Stock Option Agreement:
8
(a) Notice in writing signed by the Optionee or his or her Eligible
Representative, stating that such Option or portion is exercised, and
specifically stating the number of shares with respect to which the Option is
being exercised;
(b) A copy of the Stockholders Agreement signed by the Optionee or
Eligible Representative, as applicable;
(c) (i) Full payment (in cash or by personal, certified or bank
cashier check) for the shares with respect to which such Option or
portion is thereby exercised; or
(ii) With the consent of the Committee (or the Board, in the case
of Options granted to Independent Directors), (A) shares of Common
Stock owned by the Optionee duly endorsed for transfer to the Company
or (B) except with respect to Incentive Stock Options, shares of the
Common Stock issuable to the Optionee upon exercise of the Option, with
a fair market value (as determined under Section 4.3(b)) on the date of
Option exercise equal to the aggregate Option price of the shares with
respect to which such Option or portion is thereby exercised; or
(iii) With the consent of the Committee (or the Board, in the case
of Options granted to Independent Directors), any combination of the
consideration provided in the foregoing subsections (i) and (ii);
(d) The payment to the Company of all amounts necessary to satisfy any
and all federal, state and local tax withholding requirements arising in
connection with the exercise of the Option;
(e) Such representations and documents as the Committee (or the Board,
in the case of Options granted to Independent Directors) deems necessary or
advisable to effect compliance with all applicable provisions of the Securities
Act and any other federal or state securities laws or regulations. The Committee
(or the Board, in the case of Options granted to Independent Directors) may, in
its sole discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
(f) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof.
Section 5.4. Conditions to Issuance of Stock Certificates
------------ --------------------------------------------
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. A
certificate of shares will be delivered to the Optionee at the Company's
principal place of business within ten days of receipt by the Company of the
written notice and payment, unless an earlier date is agreed upon or required by
law or other ruling or regulation. Notwithstanding the above, the Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
9
(a) The admission of such shares to listing on any and all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in its sole discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or the Board, in the case of
Options granted to Independent Directors) shall, in its sole discretion,
determine to be necessary or advisable; and
(d) The payment to the Company of all amounts which it is required to
withhold under federal, state or local law in connection with the exercise of
the Option.
Section 5.5. Rights as Stockholders
------------ ----------------------
The holder of an Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until such holder has
signed a Stockholders Agreement and certificates representing such shares have
been issued by the Company to such holder.
Section 5.6. Transfer Restrictions
------------ ---------------------
Shares acquired upon exercise of an Option shall be subject to the
terms and conditions of a Stockholders Agreement. In addition, the Committee (or
the Board, in the case of Options granted to Independent Directors), in its sole
discretion, may impose further restrictions on the transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of stock acquired by exercise of an Incentive Stock Option within two
years from the date of granting such Option or one year after the transfer of
such shares to such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such requirement.
ARTICLE VI.
ADMINISTRATION
--------------
Section 6.1. Committee
------------ ---------
The Committee shall consist of two or more Directors, appointed by and
holding office at the pleasure of the Board. Appointment of Committee members
shall be effective upon acceptance of appointment. Committee members may resign
at any time by delivering written notice to the Board. Vacancies in the
Committee shall be filled by the Board.
Section 6.2. Delegation by Committee
------------ -----------------------
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The Committee may delegate to the CEO any of its rights, powers and
duties under the Plan (except those granted pursuant to Sections 3.3, 4.3,
5.3(c) and (e), 5.6 and Article VII).
Section 6.3. Duties and Powers of CEO and the Committee
------------ ------------------------------------------
It shall be the duty of the Committee (and/or the CEO, as applicable)
to conduct the general administration of the Plan in accordance with its
provisions. Except with respect to Options granted to Independent Directors, the
Committee shall have the authority to grant Options and to specify the terms and
conditions, including, without limitation, performance targets, of Options in
accordance with the Plan. The Committee (and/or the CEO, as applicable) shall
also have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such interpretations
and rules in regard to Incentive Stock Options shall be consistent with the
terms and conditions applicable to 'incentive stock options' within the meaning
of Section 422 of the Code. All determinations and decisions made by the
Committee (and/or the CEO, as applicable) under any provision of the Plan or of
any Option granted thereunder shall be final, conclusive and binding on all
persons.
Section 6.4. Compensation; Professional Assistance; Good Faith Actions
------------ ---------------------------------------------------------
The members of the Committee shall receive such compensation for their
services hereunder as may be determined by the Board. All expenses and
liabilities incurred by the members of the Committee or the Board in connection
with the administration of the Plan shall be borne by the Company. The Committee
or the Board may employ attorneys, consultants, accountants, appraisers, brokers
or other persons. The Committee, the Company and its Officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the CEO, the Committee and the Board in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Board shall be fully protected by the Company in respect to
any such action, determination or interpretation.
ARTICLE VII.
OTHER PROVISIONS
----------------
Section 7.1. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.
------------ ---------------------------------------------------------
(a) Subject to Section 7.1(d) and the terms of outstanding Options, in
the event that the Committee (or the Board, in the case of Options granted to
Independent Directors) determines, in its sole discretion, that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities
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of the Company, issuance of warrants or other rights to purchase Common Stock or
other securities of the Company, public offering of Common Stock, or other
similar corporate transaction or event (each such transaction or event being
referred to herein as a 'Corporate Event'), affects the Common Stock such that
an adjustment is determined by the Committee (or the Board, in the case of
Options granted to Independent Directors) to be appropriate in order to prevent
dilution, reduction or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Option, then
the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in good faith and in such manner as it may deem equitable in
order to prevent such dilution, reduction or enlargement, adjust any or all of
(i) The number and kind of shares of Common Stock (or other
securities or property) with respect to which Options may be granted
under the Plan (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares
which may be issued);
(ii) The number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options;
(iii) The exercise price with respect to any Option; and
(iv) The financial or other 'targets' specified in each Stock
Option Agreement for determining the exercisability of Options.
(b) Subject to Section 7.1(d) and the terms of outstanding Options,
upon the occurrence of any Corporate Event or any unusual or nonrecurring
transaction or event affecting the Company or any Affiliate of the Company or
the financial statements of the Company or any Affiliate, or changes in
applicable laws, regulations, or accounting principles, the Committee (or the
Board, in the case of Options granted to Independent Directors), in its sole
discretion, is hereby authorized to take any one or more of the following
actions, either by the terms of the applicable Stock Option Agreement or by
action taken prior to the occurrence of such event, whenever the Committee (or
the Board, in the case of Options granted to Independent Directors) determines,
in good faith, that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option under this Plan, to facilitate such
event or to give effect to such changes in laws, regulations or principles:
(i) provide, either automatically or upon the Optionee's
request, that on or following the effective time of such event the
Option shall be exercisable only for (A) the aggregate consideration
(whether in the form of cash or otherwise) into which shares of Common
Stock issuable upon the exercise of such Option would have been
converted (or for which such shares would have been exercisable) if
such Option had been exercised immediately prior to the event, or (B)
the amount of cash equal to the value of the consideration described in
(A);
(ii) provide, either automatically or upon the Optionee's
request, for the replacement of such Option with other rights or
property selected by the Committee (or the Board, in the case of
Options granted to Independent Directors) in its sole discretion;
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(iii) provide, that the Option cannot be exercised after such
event;
(iv) provide that for a specified period of time prior to
such event, such Option shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in (A) Section 4.2 or
(B) the provisions of the applicable Stock Option Agreement;
(v) provide that upon such event such Option be assumed by
the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices; and
(vi) make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to outstanding
Options and/or in the terms and conditions of (including the exercise
price), and the criteria included in, outstanding Options and Options
which may be granted in the future.
(c) Subject to Sections 7.1(d), the Committee (or the Board, in the
case of Options granted to Independent Directors) may, in its sole discretion,
include such further provisions and limitations in any Stock Option Agreement as
it may deem equitable and in the best interests of the Company and its
Affiliates.
(d) With respect to Incentive Stock Options, no adjustment or action
described in this Section 7.1 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or any successor provisions thereto,
unless the Committee determines that the Plan and/or the Options are not to
comply with Section 422(b)(1) of the Code. The number of shares of Common Stock
subject to any Option shall always be rounded up to the next higher whole
number.
Section 7.2. Options Not Transferable
------------ ------------------------
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his or her successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law, by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.2 shall
prevent transfers by will or by the applicable laws of descent and distribution.
Section 7.3. Amendment, Suspension or Termination of the Plan
------------ ------------------------------------------------
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or the
Committee. However, without the approval of stockholders given within twelve
months before or after such action, no action of the Board or the Committee may,
except as provided in Section 7.1, change the class of employees eligible to
receive options under the Plan, increase any limit imposed in Section 2.1 on the
maximum number of shares which may be issued on exercise of Options, reduce the
minimum Option price requirements of Section 4.3(a), or extend the limit
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imposed in this Section 7.3 on the period during which options may be granted.
Except as provided by Section 7.1, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair any rights or obligations under any Option theretofore granted.
No Option may be granted during any period of suspension nor after termination
of the Plan, and in no event may any Option be granted under this Plan after the
expiration of ten years from the date the Plan is adopted by the Board.
Section 7.4. Effect of Plan Upon Other Option and Compensation Plans
------------ -------------------------------------------------------
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Affiliate. Nothing in this Plan
shall be construed to limit the right of the Company or any Affiliate (a) to
establish any other forms of incentives or compensation for directors or
employees of the Company (or any Affiliate) or (b) to grant or assume options
otherwise than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
Section 7.5. Approval of Plan by Stockholders
------------ --------------------------------
This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial adoption
of this Plan and the Plan and the Options granted hereunder shall be effective
upon approval by such stockholders as provided in Section 280G(b)(5)(A)(ii) of
the Code and regulations thereunder. No Option may be exercised to any extent by
anyone unless and until the Plan is so approved by the stockholders, and if such
approval has not been obtained by the end of said twelve-month period, the Plan
and all Options theretofore granted shall thereupon be canceled and become null
and void.
Section 7.6. Titles
------------ ------
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.
Section 7.7. Conformity to Securities Laws
------------ -----------------------------
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder to the extent the Company and its employees are subject to the
provisions thereof. Notwithstanding anything herein to the contrary, the Plan
shall be administered, and Options shall be granted and may be exercised, only
in such a manner as to conform to such laws, rules and regulations. To the
extent permitted by applicable law, the Plan and Options granted hereunder shall
be deemed amended to the extent necessary to conform to such laws, rules and
regulations.
Section 7.8. Governing Law
------------ -------------
To the extent not preempted by federal law, the Plan shall be construed
in accordance with and governed by the laws of the State of Delaware.
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Section 7.9. Severability
------------ ------------
In the event any portion of the Plan or any action taken pursuant
thereto shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid provisions had not been
included, and the illegal or invalid action shall be null and void.
* * * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of United Defense Industries, Inc. on _______________ _____, 1998.
Executed on this ____ day of ____________, 1998.
-----------------------------
Secretary
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Stock Option Plan - United Defense Industries Inc.
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