MANAGEMENT AGREEMENT
This Management Agreement (the 'AGREEMENT') is made as of the 6th
day of October, 1997, by and between United Defense Industries, Inc., a
Delaware Corporation ('UDI'), United Defense, L.P., a Delaware limited
partnership (the 'COMPANY'), and TC Group Management, L.L.C., a Delaware
limited liability company ('CARLYLE').
RECITALS:
WHEREAS, Carlyle, by and through its officers, employees, agents,
representatives and affiliates, has expertise in the areas of corporate
management, finance, product strategy, investment, acquisitions and other
matters relating to the business of the Company and UDI;
WHEREAS, UDI and a subsidiary of UDI collectively own 100% of the
outstanding partnership interests of the Company; and
WHEREAS, the Company and UDI desire to avail themselves of the
expertise of Carlyle in the aforesaid areas, in which they acknowledge the
expertise of Carlyle.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions herein set forth, the parties hereto agree as follows:
1. APPOINTMENT. The Company and UDI hereby appoint Carlyle to
render the advisory and consulting services described in Section 2 hereof for
the term of this Agreement.
2. SERVICES.
(a) Carlyle hereby agrees that during the term of this Agreement
it shall render to the Company and UDI, by and through such of Carlyle's
officers, employees, agents, representatives and affiliates as Carlyle, in its
sole discretion, shall designate from time to time, advisory, consulting and
other services (the 'OVERSIGHT SERVICES') in relation to the day-to-day
operations of the Company and UDI, strategic planning, domestic and
international marketing and financial oversight and including, without
limitation, advisory and consulting services in relation to the selection,
retention and supervision of independent auditors, the selection, retention and
supervision of outside legal counsel, and the selection, retention and
supervision of investment bankers or other financial advisors or consultants.
(b) The parties hereto acknowledge that certain events will
require Carlyle to render services beyond the scope of activities which the
parties contemplate as part
of the Oversight Services and for which Carlyle shall be entitled to
additional compensation hereunder. It is expressly agreed that the Oversight
Services shall not include Investment Banking Services and Management Equity
Consulting Services. 'INVESTMENT BANKING SERVICES' means investment banking,
financial advisory or any other services rendered by Carlyle to the Company
or UDI in connection with (i) the acquisition by UDI and its subsidiaries of
all of the outstanding partnership interests of the Company pursuant to that
certain Purchase Agreement, dated as of August 25, 1997, by and between FMC
Corporation, Harsco Corporation, Harsco UDLP Corporation and UDI and the
financing thereof (together, the 'ACQUISITION TRANSACTIONS'), (ii) any
acquisitions and divestitures by the Company or UDI or any of their
subsidiaries, including, without limitation, the sale of substantially all of
the assets of the Company, whether by a sale of assets, the capital stock of
UDI, merger or otherwise, and the acquisition or sale of any subsidiary or
division of UDI or the Company, or (iii) the public or private sale of debt
or equity securities of the Company or UDI or any similar financing
transactions. 'MANAGEMENT EQUITY CONSULTING SERVICES' means consulting
services performed by Carlyle in connection with the structuring and
implementation of an executive stock option plan or similar equity plan, an
employee stock purchase or equity purchase plan and employment agreements for
certain key executives of UDI and UDLP. The Investment Banking Services and
the Management Equity Consulting Services shall be referred to herein as
'ADDITIONAL SERVICES,' and together with the Oversight Services, the
'SERVICES.'
3. FEES.
(a) In consideration of the performance of the Oversight
Services contemplated by Section 2(a) hereof, the Company and its successors
agree to pay to Carlyle an aggregate per annum fee (the 'FEE') equal to Two
Million Dollars ($2,000,000), commencing on the date hereof and continuing
until such time as this Agreement is terminated in accordance with Section 6
or by the mutual written consent of the parties hereto. The Fee shall be
payable quarterly in advance. Fee payments shall be non-refundable.
(b) In consideration of the Investment Banking Services provided
to UDI and the Company in connection with the Acquisition Transactions, the
Company shall pay to Carlyle Four Million Five Hundred Thousand Dollars
($4,500,000) in cash, payable at such time as the Acquisition Transactions are
consummated.
(c) In consideration of the performance of the Management Equity
Consulting Services to be provided to UDI and the Company, the Company shall pay
to Carlyle Two Million Dollars ($2,000,000) in cash, payable after Carlyle has
completed performance of the Management Equity Consulting Services. Performance
of the Management Equity Consulting Services shall be deemed to be complete when
each of the following conditions has been satisfied: (i) the Board of Directors
of UDI adopts UDI's initial employee stock option plan (or similar management
equity incentive compensation program) or determines that no such plan should be
adopted, (ii) UDI completes the
currently contemplated employee stock offering or the Board of Directors of
UDI determines that UDI should not effect such an offering and (iii) Carlyle
(on behalf of UDI and the Company) completes negotiation of definitive
employment agreements between UDI and the key management employees (if any)
designated by the Board of Directors of UDI.
(d) In consideration of the Additional Services provided to the
Company or UDI in connection with the events described in clauses (ii) and (iii)
of the definition of Investment Banking Services, Carlyle shall be entitled to
receive additional reasonable compensation as agreed upon by the parties hereto
and approved by the majority of the disinterested members of the Board of
Directors of UDI.
4. REIMBURSEMENTS. In addition to the compensation payable to
Carlyle pursuant to Section 3 hereof, the Company shall, at the direction of
Carlyle, pay directly, or reimburse Carlyle for, its reasonable Out-of-Pocket
Expenses. For the purposes of this Agreement, the term 'OUT-OF-POCKET EXPENSES'
shall mean the amounts actually paid by Carlyle in cash in connection with its
performance of the Services, including, without limitation, reasonable (i) fees
and disbursements (including, without limitation, underwriting fees) of any
independent professionals and organizations, including, without limitation,
independent auditors, outside legal counsel, consultants, investment bankers or
financial advisors, (ii) costs of any outside services or independent
contractors such as financial printers, couriers, business publications or
similar services and (iii) transportation, per diem, telephone calls, word
processing expenses or any similar expense not associated with its ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made
promptly upon or as soon as practicable after presentation by Carlyle to the
Company of the statement in connection therewith.
5. INDEMNIFICATION. The Company and UDI will jointly and
severally indemnify and hold harmless Carlyle and its officers, employees,
agents, representatives, members and affiliates (each being an 'INDEMNIFIED
PARTY') from and against any and all losses, costs, expenses, claims, damages
and liabilities (the 'LIABILITIES') to which such Indemnified Party may
become subject under any applicable federal or state law, or any claim made
by any third party, or otherwise, to the extent they relate to or arise out
of the performance of the Services contemplated by this Agreement or the
engagement of Carlyle pursuant to, and the performance by Carlyle of the
Services contemplated by, this Agreement. The Company will reimburse any
Indemnified Party for all reasonable costs and expenses (including reasonable
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened
claim for which the Indemnified Party would be entitled to indemnification
under the terms of the previous sentence, or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party hereto, provided
that, subject to the following sentence, the Company and UDI shall be
entitled to jointly assume the defense thereof at their own expense, with
counsel satisfactory to such Indemnified Party in its reasonable judgment.
Any Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense, and in any action, claim or proceeding in which
the Company and UDI, on the one
hand, and an Indemnified Party, on the other hand, is, or is reasonably
likely to become, a party, such Indemnified Party shall have the right to
employ separate counsel at the Company's and UDI's expense and to control its
own defense of such action, claim or proceeding if, in the reasonable opinion
of counsel to such Indemnified Party, a conflict or potential conflict exists
between the Company, on the one hand, and such Indemnified Party, on the
other hand, that would make such separate representation advisable. The
Company and UDI agree that neither the Company nor UDI will, without the
prior written consent of the applicable Indemnified Party, settle, compromise
or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be
made a party thereto) unless such settlement, compromise or consent includes
an unconditional release of the applicable Indemnified Party and each other
Indemnified Party from all liability arising or that may arise out of such
claim, action or proceeding. Provided that the Company or UDI are not in
breach of its indemnification obligations hereunder, no Indemnified Party
shall settle or compromise any claim subject to indemnification hereunder
without the consent of the Company and UDI. The Company and UDI will not be
liable under the foregoing indemnification provision to the extent that any
loss, claim, damage, liability, cost or expense is determined by a court, in
a final judgment from which no further appeal may be taken, to have resulted
solely from the gross negligence or willful misconduct of Carlyle. If an
Indemnified Party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Liabilities in question resulted solely from
the gross negligence or willful misconduct of Carlyle.
6. TERM. This Agreement shall be in effect on the date hereof and
shall continue until such time as Carlyle or one or more of its affiliates
collectively control, in the aggregate, less than 10% of the outstanding shares
of voting common stock of UDI. The provisions of Sections 5, 7 and 8 and
otherwise as the context so requires shall survive the termination of this
Agreement.
7. PERMISSIBLE ACTIVITIES. Nothing herein shall in any way
preclude Carlyle or its officers, employees, agents, representatives, members
or affiliates from engaging in any business activities or from performing
services for its or their own account or for the account of others, including
for companies that may be in competition with the business conducted by the
Company.
8. GENERAL.
(a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such
provision, shall be effective unless the same shall be in writing and signed
by the parties to this Agreement, and, in any case, such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) This Agreement and the rights of the parties hereunder may
not be assigned without the prior written consent of the parties hereto;
PROVIDED, HOWEVER, Carlyle may assign or transfer its duties or interests
hereunder to a Carlyle affiliate at the sole discretion of Carlyle.
(c) Any and all notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when mailed, if the same shall be
sent by registered or certified mail, return receipt requested, and the mailing
date shall be deemed the date from which all time periods pertaining to a date
of notice shall run. Notices shall be addressed to the parties at the following
addresses:
If to Carlyle: TC Group Management, L.L.C.
c/o The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004
Attention: Allan M. Holt
If to UDI: United Defense Industries, Inc.
c/o The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004
Attention: Allan M. Holt
If to UDLP United Defense, L.P.
1525 Wilson Boulevard
Suite 700
Arlington, VA 22209
Attention: Thomas Rabaut
(d) This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(e) This Agreement shall be governed by, and enforced in
accordance with, the laws of the State of Delaware (excluding the choice of
law principles thereof). The parties to this Agreement hereby agree to
submit to the non-exclusive jurisdiction of the federal and state courts
located in the state of Delaware in any action or proceeding arising out of
or relating to this Agreement. This Agreement shall inure to the benefit of,
and be binding upon, Carlyle, UDI and the Company (including any present or
future subsidiaries of the Company and UDI that are not signatories hereto),
and their respective successors and assigns.
(f) This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts. Each set of
counterparts showing execution by all parties shall be deemed an original,
and shall constitute one and the same instrument.
(g) The waiver by any party of any breach of this Agreement
shall not operate as or be construed to be a waiver by such party of any
subsequent breach.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers or agents as set forth
below.
TC GROUP MANAGEMENT, L.L.C.
By: TCG Holdings, L.L.C.
Its: Managing Member
By: /s/ Allan M. Holt
Name: Allan M. Holt
Title: Managing Director
UNITED DEFENSE INDUSTRIES, INC.
By: /s/ Allan M. Holt
Name: Allan M. Holt
Title: President
UNITED DEFENSE, L.P.
By: UDLP Holdings Corp.
Its: General Partner
By: /s/ Allan M. Holt
Name: Allan M. Holt
Title: President
Management Agreement - United Defense Industries Inc, United Defense LP and TC Group Management LLC
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