STOCKHOLDERS AGREEMENT
----------------------
This Stockholders Agreement ("AGREEMENT") is entered into as
of this ___ day of ________, 1998, by and among United Defense Industries, Inc.,
a Delaware corporation (the "COMPANY"), Iron Horse Investors, L.L.C., a Delaware
corporation (the "IRON HORSE"), and the purchasers listed on the signature pages
attached hereto (individually, "PURCHASER," and collectively, "PURCHASERS").
These parties are sometimes referred to herein individually by name or as a
"PARTY" and collectively as the "PARTIES."
RECITALS:
--------
WHEREAS, each of the Purchasers is an employee or executive
officer of the Company or United Defense, L.P., a direct and indirect,
wholly-owned subsidiary of the Company;
WHEREAS, the Company has issued (or may hereafter issue) to
Purchasers shares of the common stock par value $0.01 per share, of the Company
("COMMON STOCK"), pursuant to the United Defense Industries, Inc. Employee
Equity Purchase Plan (the "STOCK PURCHASE PLAN") and/or as a result of the
exercise by Purchaser of vested options to purchase Common Stock ("VESTED
OPTIONS"), which options were issued (or may hereafter be issued) to Purchaser
pursuant to the United Defense Employee Stock Option Plan (the "STOCK OPTION
PLAN");
WHEREAS, Iron Horse is the record and beneficial holder of
17.3 Million shares of Common Stock of the Company; and
WHEREAS, the Company, Iron Horse and Purchasers desire to
enter into this Agreement to provide for certain matters with respect to the
ownership and transfer of the shares of Common Stock now or hereafter issued to
Purchaser pursuant to the Purchase Plan or issued to Purchaser as a result of
the exercise of Vested Options (collectively, the "RESTRICTED SHARES").
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the foregoing, and the
mutual agreements set forth herein and other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. RESTRICTIONS ON TRANSFER.
Purchasers shall not sell, assign, transfer, convey, pledge or
otherwise dispose of (collectively, "TRANSFER") any Restricted Shares without
the prior written consent of the Company, which consent shall have been
authorized by a majority of the members of the Board of Directors of the
Company; provided, however, that this Section 1 shall not prevent the Transfer
of any Restricted Shares by will or pursuant to laws of descent and
distribution. Each Purchaser further agrees that in connection with any Transfer
consented to by the Company, such
Purchaser shall, if requested by the Company, deliver to the Company an opinion
of counsel in form and substance reasonably satisfactory to the Company and
counsel for the Company, to the effect that such Transfer is not in violation of
this Agreement, the Securities Act of 1933, as amended, or the securities laws
of any state. Any purported Transfer in violation of the provisions of this
Section 1 shall be null and void and shall have no force or effect.
SECTION 2. RIGHTS TO REPURCHASE SHARES.
(a) For a period of six (6) months following the
later of (i) the Termination of Employment of Purchaser (as defined below) and
(ii) the expiration of all Vested Options held by Purchaser as of the time of
such Purchaser's Termination of Employment in accordance with the terms of the
Stock Option Plan, the Company shall have the option to repurchase all (but not
less than all) of the Restricted Shares held by such Purchaser or his or her
successor in interest thereunder ("CALL RIGHT"). The purchase price payable by
the Company upon exercise of the Call Right ("PURCHASE PRICE") shall be the fair
market value of the Restricted Shares subject to the Call Right on the date of
the Call Notice as determined in accordance with subsection (c) below. The Call
Right shall be exercised by written notice ("CALL NOTICE") to Purchaser given in
accordance with Section 6(g) of this Agreement on or prior to the last date on
which the Call Right may be exercised by the Company. For the purpose of this
Agreement, "TERMINATION OF EMPLOYMENT" shall mean such time as Purchaser no
longer has any employee-employer relationship with the Company or any of its
subsidiaries, without regard for the reason for such termination and whether
such termination was with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death or retirement, but
excluding a termination where there is a simultaneous reemployment by the
Company or one of its subsidiaries.
(b) The repurchase of Restricted Shares pursuant to
the exercise of a Call Right shall take place on a date specified by the
Company, but in no event later than sixty (60) days following the date of the
exercise of the Call Right or, if later, within ten (10) days following the
receipt by the Company of all necessary governmental approvals. On such date,
Purchaser shall transfer to the Restricted Shares subject to the Call Notice to
the Company, free and clear of all liens and encumbrances, by delivering to the
Company the certificates representing the Restricted Shares to be purchased,
duly endorsed for transfer to the Company or accompanied by a stock power duly
executed in blank, and the Company shall pay to Purchaser the Purchase Price in
cash or by bank or cashier's check. The Company and Purchaser each shall use his
or its reasonable efforts to expedite all proceedings contemplated hereunder to
obtain a determination of the Repurchase Price of the Restricted Shares at the
earliest practicable date.
(c) The fair market value of the Restricted Shares to
be repurchased shall be determined as of the date of the Call Notice by the
Board of Directors of the Company as follows:
(i) if the Common Stock is listed on one or
more National Securities Exchanges (within the meaning of the
Securities Exchange Act of 1934, as amended), each share of
the Common Stock to be repurchased shall be valued
2
at the closing price of a share of the Common Stock on the
principal exchange on which such shares are then trading, on
the day previous to such date, or, if such shares were not
traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred;
(ii) if the Common Stock is not traded on a
National Securities Exchange but is quoted on NASDAQ or a
successor quotation system, each share of the Common Stock to
be repurchased shall be valued at the last sales price on the
day previous to such date as reported by NASDAQ or such
successor quotation system or, if no shares were sold on the
day previous to such date, then on the next preceding day on
which a sale occurred; or
(iii) if the Common Stock is not publicly
traded on a National Securities Exchange and is not quoted on
NASDAQ or a successor quotation system, the fair market value
as determined in good faith by the Board of Directors.
SECTION 3. BRING-ALONG RIGHTS.
(a) If Iron Horse or any successor to all or any
portion of the shares of Common Stock held by Iron Horse at any time, or from
time to time, in one transaction or a series of related transactions, proposes
to Transfer a number of shares of Common Stock equal to more than twenty percent
(20%) of the aggregate number of shares of Common Stock then outstanding to one
or more persons not affiliated with Iron Horse or such successors (a "THIRD
PARTY"), then Iron Horse (or such successors) shall have the right (a
"BRING-ALONG RIGHT"), but not the obligation, to cause each of the Purchasers to
tender for purchase to the Third Party, on the same terms and conditions as
apply to Iron Horse, a number of shares of Common Stock equaling the lesser of
(x) the number derived by multiplying (i) the total number of shares to be
purchased by the Third Party, as specified in the Bring-Along Notice, by (ii) a
fraction, the numerator of which is the total number of shares of Common Stock
owned by such Purchaser and the denominator of which is the total number of the
then outstanding shares of Common Stock, or (y) such lesser number of shares as
Iron Horse shall designate in the Bring-Along Notice (defined below).
(b) If Iron Horse elects to exercise its Bring-Along
Right under this Section 3, then it shall so notify the Purchaser ("BRING-ALONG
NOTICE"). Each Bring-Along Notice shall set forth: (i) the name of the Third
Party or Third Parties and the number of shares of Common Stock proposed to be
purchased by such Third Party or Third Parties, (ii) the proposed amount and
form of consideration and terms and conditions of payment offered by the Third
Party and a summary of any other material terms pertaining to the Transfer
("THIRD PARTY TERMS") and (iii) the number of shares of Common Stock that Iron
Horse elects such Purchaser to sell in such Transfer. The Bring-Along Notice
shall be given at least ten (10) days before the closing of the proposed
Transfer.
3
(c) Upon the giving of a Bring-Along Notice, each
Purchaser shall be obligated to sell the number of shares of Common Stock
required to be sold by Purchaser as set forth in the Bring-Along Notice on the
Third Party Terms.
(d) At the closing of the Transfer to any Third Party
pursuant to this Section 3, the Third Party shall remit to each Party the
consideration for the total sales price of the Common Stock of such Party sold
pursuant hereto (less any such consideration to be escrowed or otherwise held
back in accordance with the Third Party Terms), against delivery by such Party
of certificates for such Common Stock, duly endorsed for Transfer or with duly
executed stock powers, and the compliance by such Party with any other
conditions to closing generally applicable to Iron Horse and all Purchasers
selling shares in such transaction.
Notwithstanding the foregoing, the Bring-Along Rights
provided by this Section 3 shall terminate on the date on which a number of
shares of Common Stock equal to at least twenty-five percent (25%) of the
aggregate number of the then outstanding shares of Common Stock on a fully
diluted basis have been distributed to the public pursuant to one or more
effective registration statements under the Securities Act and/or pursuant to
Rule 144 promulgated thereunder; provided, however, that the Common Stock is
then publicly traded.
SECTION 4. COMPANY SALE.
(a) If the Board of Directors of the Company and the
holders of a majority of the outstanding shares of Common Stock approve a
Company Sale (as defined below), each Purchaser agrees that he or she shall
consent to and raise no objections against such Company Sale, and if the Company
Sale is structured as a sale of stock, each Purchaser shall sell all or any
portion of the Restricted Shares in connection with such Company Sale on the
terms and conditions approved by the Board of Directors and the holders of a
majority of the outstanding shares of Common Stock. Each Purchaser hereby agrees
to take all actions that the Board of Directors and the holders of a majority of
the outstanding shares of Common Stock reasonably deem necessary or desirable in
connection with the consummation of such Company Sale, including, without
limitation, voting the Restricted Shares in favor of such Company Sale and
refraining from the exercise of dissenters' appraisal rights with respect to
such Company Sale.
(b) If the Company or the holders of the Company's
securities enter into any negotiation with respect to a Company Sale which
involves the issuance of Securities to the holders of shares of Common Stock for
which Rule 506 (or any similar rule then in effect) promulgated under the Act
may be available, each Purchaser shall, if requested by the Company, appoint a
purchaser representative (as such term is defined in Rule 501 of the Act)
reasonably acceptable to the Company to advise Purchaser in connection with such
Company Sale. If such purchaser representative was designated by the Company,
the Company shall pay the fees of such purchaser representative, but if
Purchaser appoints another purchaser representative Purchaser shall be
responsible for the fees of the purchaser representative so appointed.
(c) Purchasers shall bear their pro-rata share (based
upon the number of shares held by Purchaser that are sold in such Company Stock)
of the costs of any sale of Common Stock pursuant to a Company Sale to the
extent such costs are incurred for the benefit of all holders of Common Stock
and are not otherwise paid by the Company or the acquiring party.
(d) For the purpose hereof, "COMPANY SALE" shall mean
the consummation of any transaction or series of transactions pursuant to which
one or more persons
4
or entities or group of persons or entities (other than Iron Horse) acquires (i)
capital stock of the Company possessing the voting power sufficient to elect a
majority of the members of the Board of Directors of the Company or its
successor(s) (whether such transaction is effected by merger, consolidation,
sale or transfer of the Company's capital stock or otherwise) or (ii) all or
substantially all of the assets of the Company and its subsidiaries.
SECTION 5. MISCELLANEOUS.
(a) Legends. Each certificate representing the
Restricted Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SAID LAWS OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF."
In addition to the foregoing, each certificate
representing Restricted Shares shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN A STOCKHOLDERS AGREEMENT BETWEEN THE ISSUER AND THE
INITIAL HOLDER HEREOF DATED AS OF ___________________, 199__.
A COPY OF SUCH AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY
THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
Purchasers hereby agree that Purchasers shall not Transfer any Restricted Shares
without complying with each of the restrictions set forth herein and agree that
in connection with any such Transfer Purchasers shall, if requested by the
Company, deliver to the Company an opinion of counsel in form and substance
reasonably satisfactory to the Company and counsel for the Company, to the
effect that such Transfer is not in violation of this Agreement or the
securities laws of the United States of America or any state thereof.
(b) Successors, Assigns and Transferees. This
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective legal representatives, heirs, legatees, successors, and
assigns and any other transferee of the Restricted Shares and shall also apply
to any Restricted Shares acquired by Purchasers after the date hereof.
(c) Specific Performance, Etc. The Company, Iron
Horse and Purchasers, in addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, shall be
entitled to specific performance of Purchasers' obligations under this
Agreement. The Company, Iron Horse and Purchasers agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by either of the provisions of this Agreement and each hereby agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(d) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
5
(e) Interpretation. The headings of the Sections
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the Parties and shall not affect the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and shall be deemed to
have been duly given and received when delivered by overnight courier or hand
delivery, when sent by telecopy, or five days after mailing if sent by
registered or certified mail (return receipt requested) postage prepaid, to the
Parties at the following addresses (or at such other address for any Party as
shall be specified by like notices, provided that notices of a change of address
shall be effective only upon receipt thereof).
(i) If to the Company, at:
United Defense Industries, Inc.
1525 Wilson Blvd.
Suite 700
Arlington, VA 22209
Attention: David V. Kolovat
with copies to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Daniel T. Lennon
(ii) If to Iron Horse, at:
c/o TC Group, LLC
1001 Pennsylvania Avenue, NW
Suite 200S
Washington, D.C. 20004
Attention: Allan M. Holt
with copies to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Daniel T. Lennon
(iii) If to Purchaser, to the addresses
set forth on the
6
signature pages hereto.
(g) Recapitalization, Exchange, Etc. Affecting the
Company's Stock. The provisions of this Agreement shall apply, to the full
extent set forth herein, with respect to any and all shares of capital stock of
the Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets, or otherwise) that may be issued in respect of,
in exchange for, or in substitution of, the Restricted Shares and shall be
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations, and the like occurring after the date hereof.
(h) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to constitute one and the same agreement.
(i) Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, the successful party shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal, or unenforceable in any respect for any
reason, the validity, legality, and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby.
(k) Amendment. This Agreement may be amended only by
written agreement signed by the parties holding a number of shares of Common
Stock equal to more than sixty-six and two-thirds percent (66 2/3%) of the
aggregate number of shares of Common Stock then outstanding on a fully diluted
basis.
(l) Tax Withholding. The Company shall be entitled
to require payment in cash or deduction from other compensation payable to
Purchaser of any sums required by federal, state, or local tax law to be
withheld with respect to the issuance, vesting, exercise, repurchase, or
cancellation of any Restricted Share or any option to purchase Restricted
Shares.
(m) Entire Agreement. This writing constitutes the
entire agreement of the Parties with respect to the subject matter hereof.
7
IN WITNESS WHEREOF, the Parties have executed this Agreement
on the date first written above.
IRON HORSE INVESTORS, L.L.C.
By: _________________________
Name:
Title:
UNITED DEFENSE INDUSTRIES, INC.
By: _________________________
Name:
Title:
Accepted and agreed to:
_____________________________
Purchaser
_____________________________
_____________________________
_____________________________
Address
8