EXECUTIVE MANAGEMENT
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ____________, 19__, is made by and among Federal
Data Corporation, a Delaware corporation ("FDC") and _________________________,
an employee of FDC (or one of its Subsidiaries, as defined herein), hereinafter
referred to as "Optionee":
WHEREAS, FDC wishes to afford the Optionee the opportunity to purchase
shares of its $.01 par value Voting Common Stock; and
WHEREAS, FDC wishes to carry out the Stock Option Plan for Executive
and other Key Employees of Federal Data Corporation and its Subsidiaries (the
"Plan") (the terms of which are hereby incorporated by reference and made a part
of this Agreement); and
WHEREAS, the Committee appointed to administer the Plan has determined
that it would be to the advantage and best interest of FDC and its shareholders
and Subsidiaries to grant the Incentive Stock Option provided for herein to the
Optionee as an inducement to enter into or remain in the service of FDC (or one
of its Subsidiaries) and as an incentive for increased efforts during such
service, and has advised FDC thereof and instructed the undersigned officers to
issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to the
contrary. Capitalized terms used in this Agreement and not defined below shall
have the meaning given such terms in the Plan. The singular pronoun shall
include the plural, where the context so indicates.
SECTION 1.1 - CASH FLOW FOR DEBT AMORTIZATION; CUMULATIVE CASH FLOW FOR DEBT
AMORTIZATION;
"Cash Flow for Debt Amortization" for a given period shall mean the
consolidated free cash flow of FDC available for, or used for, principal
repayments of debt,
1
excluding the proceeds of lease or debt financings entered into without the
creation of an offsetting lease or receivable asset. "Cumulative Cash Flow
for Debt Amortization" as of a given date means the total of Cash Flow for
Debt Amortization from and after January 1, 1996 through that date.
SECTION 1.2 - CASH FLOW FOR DEBT AMORTIZATION TARGET; CUMULATIVE CASH FLOW FOR
DEBT AMORTIZATION TARGET
"Cash Flow for Debt Amortization Target" and "Cumulative Cash Flow for
Debt Amortization Target" for a period shall be as set forth in Appendix A to
this Agreement, subject to the provisions of Section 4.6.
SECTION 1.3 - EBITDA; CUMULATIVE EBITDA
"EBITDA" for a given period shall mean earnings before interest on
recourse debt, taxes, depreciation, amortization expenses and the
compensation expense related to the grant or exercise of Options, as
reflected on FDC's audited consolidated financial statements for such period.
"Cumulative EBITDA" as of a given date means the total of EBITDA from and
after January 1, 1996 through that date.
SECTION 1.4 - EBITDA TARGET; CUMULATIVE EBITDA TARGET
"EBITDA Target" and "Cumulative EBITDA Target" for a period shall be
as set forth in Appendix A of this Agreement, subject to the provisions of
Section 4.6.
SECTION 1.5 - OPTION
"Option" shall mean the Incentive Stock Option to purchase Voting
Common Stock granted under this Agreement.
SECTION 1.6 - PLAN
"Plan" shall mean the Stock Option Plan for Executive and Other Key
Employees of Federal Data Corporation and its Subsidiaries.
ARTICLE II
GRANT OF OPTION
2
SECTION 2.1 - GRANT OF OPTION
In consideration of the Optionee's agreement to remain in the employ
of FDC or one of its Subsidiaries and for other good and valuable consideration,
on the date hereof FDC irrevocably grants to the Optionee the option to purchase
any part or all of an aggregate of ________ shares of Voting Common Stock upon
the terms and conditions set forth in the Plan and this Agreement.
SECTION 2.2 - OPTION SUBJECT TO PLAN
The Option granted hereunder is subject to the terms and provisions of
the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3
thereof.
SECTION 2.3 - OPTION PRICE
The purchase price of the shares of Voting Common Stock covered by the
Option shall be [$10.00] per share without commission or other charge.
ARTICLE III
EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
Subject to Section 3.3,
(a) 30% of the Option shall become exercisable in five equal and
cumulative installments as follows:
(i) The first installment shall consist of six percent of the
shares covered by such Option and shall become exercisable on December 31,
1996;
(ii) The second installment shall consist of six percent of
the shares covered by such Option and shall become exercisable on
December 31, 1997;
(iii) The third installment shall consist of six percent
of the shares covered by such Option and shall become exercisable on
December 31, 1998;
3
(iv) The fourth installment shall consist of six percent of
the shares covered by such Option and shall become exercisable on
December 31, 1999; and
(v) The fifth installment shall consist of six percent of
the shares covered by such Option and shall become exercisable on
December 31, 2000.
(b) (i) An installment consisting of 7% of the shares covered by the
Option shall be eligible to become exercisable within 90 days following the
December 31 of each year 1996 through 2000 and shall in fact become
exercisable if (i) the Cash Flow for Debt Amortization for the fiscal year
ending on such December 31 equals or exceeds 50% of the Cash Flow for Debt
Amortization Target for such fiscal year, and (ii) the Cumulative Cash Flow
for Debt Amortization for the fiscal year ending on such December 31 equals
or exceeds the Cumulative Cash Flow for Debt Amortization Target for such
fiscal year.
(ii) If the Cash Flow for Debt Amortization for any fiscal year
is at least 75% of the Cash Flow for Debt Amortization Target for such
fiscal year but the Cumulative Cash Flow for Debt Amortization for such
fiscal year is less than the Cumulative Cash Flow for Debt Amortization
Target for such fiscal year, the portion of the Option that did not become
exercisable pursuant to the provisions of Sections 3.1(b)(i) on the date
first eligible shall become exercisable within 90 days of the first
December 31 thereafter as of which the Cumulative Cash Flow for Debt
Amortization equals or exceeds the Cumulative Cash Flow for Debt
Amortization Target, provided that no portion of the Option shall become
exercisable after [March 31/April 30, 2001].
(iii) Any installment which does not become exercisable
pursuant to Section 3.1(b)(i) and which is not eligible to become
exercisable pursuant to Section 3.1(b)(ii) shall be cancelled and expire as
of the first date on which such installment was eligible to become
exercisable.
(c) (i) An installment consisting of 7% of the shares covered by the
Option shall be eligible to become exercisable within 90 days following the
December 31 of each year 1996 through 2000 and shall in fact become
exercisable if (i) the EBITDA for the fiscal year ending on such December
31 equals or exceeds 50% of the EBITDA Target for such fiscal year, and
(ii) the Cumulative EBITDA for the fiscal year ending on such December 31
equals or exceeds the Cumulative EBITDA Target for such fiscal year.
4
(ii) If the EBITDA for any fiscal year is at least 75% of the
EBITDA Target for such fiscal year but the Cumulative EBITDA for such
fiscal year is less than the Cumulative EBITDA Target for such fiscal year,
the portion of the Option that did not become exercisable pursuant to the
provisions of Sections 3.1(c)(i) on the date first eligible shall become
exercisable within 90 days of the first December 31 thereafter as of which
the Cumulative EBITDA equals or exceeds the Cumulative EBITDA Target,
provided that no portion of the Option shall become exercisable after
[March 31/April 30, 2001].
(iii) Any installment which does not become exercisable
pursuant to Section 3.1(c)(i) and which is not eligible to become
exercisable pursuant to Section 3.1(c)(ii) shall be cancelled and expire as
of the first date on which such installment was eligible to become
exercisable.
(d) Within 90 days of each December 31, the Committee shall certify
whether the respective Cash Flow for Debt Amortization Targets, Cumulative Cash
Flow for Debt Amortization Targets, EBITDA Targets and Cumulative EBITDA Targets
have been met, and shall determine the extent to which the Option has become
exercisable.
(e) Any installment that does not become exercisable on or prior to
[March 31/April 30, 2001] shall thereupon be cancelled and expire.
(f) No portion of the Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
SECTION 3.2 - DURATION OF EXERCISABILITY
The installments provided for in Section 3.1 are cumulative. Each
such installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable.
SECTION 3.3 - EXPIRATION OF OPTION
(a) The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option was
granted; or
(ii) 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
5
10% of the total combined voting power of all classes of stock of FDC or
any Subsidiary corporation, the expiration of five years from the date
the Incentive Stock Option was granted; or
(iii) Except as the Committee may approve, the date of the
Optionee's Termination of Employment 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.
SECTION 3.4 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable; provided,
however, that each partial exercise shall be for not less than ____________ (__)
shares (or the minimum installment set forth in Section 3.1, if a smaller number
of shares) and shall be for whole shares only.
SECTION 3.5 - EXERCISE OF OPTION
The exercise of the Option shall be governed by the terms of this
Agreement and the terms of the Plan, including, without limitation, the
provisions of Article V of the Plan.
SECTION 3.6 - SPECIAL TAX CONSEQUENCES
The Optionee acknowledges that, to the extent that the aggregate fair
market value of stock 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), including the Option, are exercisable for the first time by the
Optionee during any calendar year (under the Plan and all other stock option
plans of FDC, any Subsidiary and any parent corporation) exceeds $100,000, such
options shall be treated as not qualifying under Section 422 of the Code but
rather shall be treated and taxable as non-qualified options. The Optionee
further acknowledges that the rule set forth in the preceding sentence shall be
applied by taking
6
options into account in the order in which they were granted, and the stock
certificate issued upon exercise of options shall designate whether such
stock was acquired upon exercise of an Incentive Stock Option. For purposes
of these rules, the fair market value of stock shall be determined as of the
date of grant of the applicable option covering such stock.
ARTICLE IV
OTHER PROVISIONS
SECTION 4.1 - NOT A CONTRACT OF EMPLOYMENT
Nothing in this Agreement or in the Plan shall confer upon the
Optionee any right to continue in the employ of FDC or any of its Subsidiaries
or shall interfere with or restrict in any way the rights of FDC or its
Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at
any time for any reason whatsoever, with or without cause.
SECTION 4.2 - SHARES SUBJECT TO PLAN AND HOLDERS' AGREEMENT
The Optionee acknowledges that any shares acquired upon exercise of
the Option are subject to the terms of the Plan and the Holders' Agreement
including without limitation, the restrictions set forth in Sections 5.5, 5.6
and 5.7 of the Plan.
SECTION 4.3 - CONSTRUCTION
This Agreement shall be administered, interpreted and enforced under
the laws of the State of Delaware.
SECTION 4.4 - CONFORMITY TO SECURITIES LAWS
The Optionee acknowledges that 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 thereunder by the Securities
and Exchange Commission, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is 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 this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
SECTION 4.5 - SHAREHOLDER APPROVAL
7
The Plan will be submitted for approval by FDC's shareholders within
twelve months after the date the Plan was initially adopted by the Board. This
Option may not be exercised to any extent by anyone prior to the time when the
Plan is approved by the shareholders, and if such approval has not been obtained
by the end of said twelve-month period, this Option shall thereupon be cancelled
and become null and void. FDC shall take such actions as may be necessary to
satisfy any applicable requirements of Rule 16b-3(b).
SECTION 4.6 - ADJUSTMENTS IN CASH FLOW FOR DEBT AMORTIZATION AND EBITDA TARGETS
The Cash Flow for Debt Amortization Targets and EBITDA Targets
(including the Cumulative Cash Flow for Debt Amortization Targets and Cumulative
EBITDA Targets) specified in Appendix A are based upon certain revenue and
expense assumptions about the future business of FDC and its Subsidiaries as of
the date the Option is granted. Accordingly, in the event that, after such
date, the Committee determines, in its sole discretion, that any dividend or
other distribution (whether in the form of cash, Voting Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Voting Common Stock or other securities
of FDC, issuance of warrants or other rights to purchase Voting Common Stock or
other securities of FDC, any unusual or nonrecurring transactions or events
affecting FDC, any affiliate of FDC, or the financial statements of FDC or any
affiliate, or change in applicable laws, regulations, or accounting principles
occurs such that an adjustment is determined by the Committee to be 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 the
Option, then the Committee shall, in good faith and in such manner as it may
deem equitable, adjust the financial targets set forth on Appendix A to reflect
the projected effect of such transaction(s) or event(s) on Cash Flow for Debt
Amortization and/or EBITDA, subject to Sections 7.1(e) and 7.2 of the Plan.
[signature page follows]
8
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
Federal Data Corporation
By
---------------------------
President
By
---------------------------
Secretary
----------------------------
Optionee
----------------------------
----------------------------
Address
Optionee's Taxpayer
Identification Number:
----------------------------
9
APPENDIX A
INCENTIVE STOCK OPTION AGREEMENT
CASH FLOW AND EBITDA TARGETS
($ Millions)
Fiscal Year Ending December 31
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Cash Flow for Debt Amortization
Target $9.1 $10.6 $14.0 $16.9 $19.7
Cumulative Cash Flow for Debt
Amortization Target $9.1 $19.7 $33.7 $50.6 $70.3
EBITDA Target $18.8 $21.2 $26.6 $30.0 $30.0
Cumulative EBITDA Target $18.8 $40.0 $66.6 $96.6 $126.6
10
