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EXHIBIT 10.11
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED
1996 INCENTIVE COMPENSATION PLAN
FOR
EXECUTIVE OFFICERS
This American Management Systems, Incorporated 1996 Incentive Compensation
Plan for Executive Officers (the "Plan") is adopted by AMERICAN MANAGEMENT
SYSTEMS, INCORPORATED (the "Corporation") in order to attract, motivate and
retain eligible officers. The Plan is intended to promote the interests of the
Corporation and its shareholders by providing eligible officers with the
opportunity to earn incentive compensation that is linked to the financial
performance of the Corporation.
Incentive compensation provided under the Plan is intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the Plan shall be interpreted consistently with such
intent. Existence of this Plan is not intended to preclude the Corporation from
providing additional incentive compensation to eligible officers or incentive
compensation under other plans, agreements or arrangements to an officer,
whether such officer is eligible to participate in the Plan or actually
participates in the Plan.
I. Definitions
A. "Annual Profit Targets" mean the specified levels of pre-tax profits of
the Corporation that are set forth in an IC Agreement and are used to determine
whether the Participant will receive an Award and the amount of the Award under
the Plan.
B. "Award" means the amount of money payable to a Participant who has
received an IC Agreement.
C. "Board" means the Board of Directors of the Corporation.
D. "Code" means the Internal Revenue Code of 1986, as amended.
E. "Committee" means the committee appointed pursuant to Article II to
administer the Plan.
F. "Corporation" means American Management Systems, Incorporated.
G. "Fiscal Year" means the fiscal year of the Corporation.
H. "IC Agreement" means the incentive compensation agreement evidencing
the terms of a Participant's participation in the Plan.
I. "Interim Award" means with respect to an IC Agreement with a
Performance Period of more than one Fiscal Year, the interim payments made
pursuant to Article V prior to the end of the Performance Period.
J. "Outlook Year" means with respect to an IC Agreement, the Fiscal Year
immediately following the last Fiscal Year included in the Performance Period
for the IC Agreement.
K. "Participant" means an eligible executive officer of the Corporation
that has received an IC Agreement under the Plan.
L. "Percentage of Target Achieved" or "Target Achievement" means the
percentage determined in Step 4 of Article IV, Paragraph C, that reflects the
degree to which all of the Annual Profit Targets applicable to an IC Agreement
have been achieved or exceeded.
M. "Performance Factor" or "Cumulative Performance Factor" means the
multiplicative factor that is used in determining the amount of an Award or
Interim Award, that is based on the Performance Period for an IC Agreement and
the Percentage of Target Achievement, and that is determined under Article IV,
Paragraph C, Step 4 or Article V.
N. "Performance Goal" means one or more preestablished, objective
performance goals stated in a Participant's IC Agreement.
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O. "Performance Period" means the fiscal years of the Corporation that are
included in an IC Agreement, exclusive of the Outlook Year, for purposes of
determining attainment of the Performance Goals, all as provided in Article IV,
Paragraph A of the Plan.
P. "Performance Share" means with respect to an IC Agreement, a percentage
not in excess of 200% that is specified in a Participant's IC Agreement and that
is used in computing the Award with respect to the IC Agreement.
Q. "Plan" means this Incentive Compensation Plan for Executive Officers.
R. "Salary" means with respect to an IC Agreement, $350,000.00 for 1996,
and for each subsequent year Salary shall equal the preceding year's limit
increased by 10%; provided however, that the Committee may use its discretion to
reduce the amount of an Award to no more than the amount that would be payable
based on the Participant's annual base salary for the last Fiscal Year in the
Performance Period, or the only Fiscal Year in the case of an IC Agreement with
a Performance Period of one year.
II. Administration
The regularly appointed compensation committee of the Board shall serve as
the Committee that administers the Plan unless the Board shall appoint another
compensation committee of members of the Board to administer the Plan. In all
cases, the Committee shall have at least three (3) members and no member of the
Board may serve on the Committee unless such person is an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Code, and applicable
guidance issued thereunder.
The Committee shall have the full power and authority, subject to
provisions of the Plan, to select executive officers to receive IC Agreements,
determine the terms of IC Agreements, promulgate rules and regulations as it
deems appropriate for the proper administration of the Plan, interpret the terms
of the Plan, certify whether the Performance Goals and the material terms of an
IC Agreement are met prior to payment of any amount under the Plan, and to
otherwise take any and all action as it deems to be necessary or appropriate in
connection with the operation of the Plan. Decisions and selections of the
Committee shall be made by a majority of its members, and if made pursuant to
the terms of the Plan shall be final.
Action of the Committee may be evidenced by approved minutes of a meeting
of the Committee, or a document executed by any member of the Committee or an
officer of the Corporation authorized by the Committee to execute documents on
the Committee's behalf.
III. Participation
A. Eligibility. Only those officers of the Corporation classified as
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executive officers of the Corporation shall be eligible to participate in the
Plan and receive an IC Agreement under the Plan.
B. Designation of Participants. The Committee shall select those eligible
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officers who shall receive an IC Agreement under the Plan. The IC Agreement
shall be in writing, shall specify the Performance Period to which the IC
Agreement relates, and shall include a description of the Performance Share,
Annual Profit Targets, and any other material terms of the IC Agreement.
IV. Incentive Compensation Agreement
A. Performance Periods. IC Agreements under the Plan shall be for
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Performance Periods of at least one Fiscal Year and for no more than three (3)
consecutive Fiscal Years. The Committee shall specify the Performance Period
applicable to each IC Agreement, and the special weighting to be given to
performance for each Fiscal Year in the Performance Period and the Outlook Year.
An IC Agreement for a Performance Period must be established not later than
ninety (90) days after the beginning of the first day of the first Fiscal Year
in the Performance Period covered by the IC Agreement.
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A Participant may receive multiple IC Agreements, provided that IC
Agreements that are outstanding at the same time may not have Performance
Periods that cover the same Fiscal Years. The inclusion of the Outlook Year in
determining an Award shall not be treated as part of a Performance Period.
Furthermore, if an IC Agreement is terminated prior to the end of the
Performance Period, the Participant may receive a new IC Agreement that includes
Fiscal Years covered by the original IC Agreement, provided that the Participant
receives no Award for such Fiscal Years.
B. Performance Goals. The right to receive an Award and amount of an Award
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is conditioned on the Corporation's performance relative to Annual Profit
Targets established with respect to pre-tax earnings of the Corporation for the
Fiscal Years in the Performance Period and the Outlook Year. Pre-tax earnings
means earnings before income taxes as reported or to be reported on the
Corporation's consolidated financial statements, or in the case of an Outlook
Year, the earnings before income taxes that are projected to be reported by the
Corporation.
C. Calculation of Award. The Award to a Participant is determined based on
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Participant's Salary, the Participant's Performance Share, and the Performance
Factor resulting from the Corporation's attainment of the Annual Profit Targets
specified in the Participant's IC Agreement for the Fiscal Years in the
Performance Period and the Outlook Year. A Participant's Award for the entire
period covered by an IC Agreement is determined in accordance with the following
steps:
Step 1 - Multiply the Annual Profit Target for each Fiscal Year in the
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Performance Period and the Outlook Year by the weighting given to the Annual
Profit Target for that Fiscal Year or Outlook Year.
Step 2 - Multiply the actual pre-tax earnings for each Fiscal Year in the
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Performance Period and 110% of the Annual Profit Target for the Outlook Year by
the weighting given to the Annual Profit Target for that Fiscal Year or Outlook
Year.
Step 3 - Divide the sum of each of the amounts determined in Step 2 by the
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sum of each of the amounts determined in Step 1 to determine the Percentage of
Target Achieved.
Step 4 - Based on the Percentage of Target Achieved, determine a
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Participant's Cumulative Performance Factor under the following table:
Cumulative Performance Factor
Based on
Length of Performance Period
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For a For a For a
Percentage of Target 1-Year 2-Year 3-Year
Achieved IC Agreement IC Agreement IC Agreement
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115% or more* (see below)
110% but less than 115% 1.50 6.00 9.00
105% but less than 110% 1.25 5.00 7.50
100% but less than 105% 1.00 4.00 6.00
95% but less than 100% 0.75 3.00 4.50
90% but less than 95% 0.50 2.00 3.00
85% but less than 90% 0.25 1.00 1.50
less than 85% 0.00 0.00 0.00
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* If the Percentage of Target Achieved is 115% or more, the applicable
Performance Factor is determined by adding an additional 25% of the Performance
Factor for 100% of Target Achievement for each additional 5% increment by which
100% of Target Acheivement is exceeded. For example, if the Percentage of Target
Achieved is 115% for an IC Agreement with a Performance Period of 2 years, the
Cumulative Performance Factor is 7.0 (i.e., 6.0, plus 25% of 4.0).
Step 5 - Determine the Participant's Award, if any, under the following
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formula: Salary x Performance Share x Cumulative Performance Factor = Award
D. Adjustment of Award. The Committee reserves the right to reduce the
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amount of the Award (including an Interim Award under Article V) to a
Participant. Such reduction, if any, shall be based on the Committee's
determination of the projected pre-tax earnings for the Outlook Year if such
projected amount is less than the assumed amount of 110% of the Annual Profit
Target for the Outlook Year used in Article IV, Paragraph C, Step 2; on the
Participant's annual base salary as provided in Article I, Paragraph R; and on
such additional factors as are specified in the Participant's IC Agreement,
which factors shall be determined by the Committee in its sole discretion. In
reaching its determination of the projected pre-tax earnings for the Outlook
Year, the Committee shall consider, but shall not be bound by, the amount that
the Corporation projects will be reported for such year, as contained in the
Corporation's business plan for the Outlook Year. The Committee may not increase
the Award under the Plan to any Participant in excess of the Award calculated
under the preceding Paragraph C.
V. Payment of Awards and Interim Awards
A. Certification and Payment. No payment of any Award, including an
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Interim Award, shall be made to a Participant until the Committee has certified
in writing that the Performance Goals and other material terms of an IC
Agreement have been met and the Participant is entitled to payment.
Unless an IC Agreement provides otherwise, in the case of an IC Agreement
covering a Performance Period of more than one Fiscal Year, Interim Awards
shall, if earned, be made following the end of each Fiscal Year (other than the
last Fiscal Year) included in the Performance Period. Unless the IC Agreement
provides for no Interim Awards or lower levels of Interim Awards, the Interim
Awards shall be determined under the method for determining an Award under
Article IV, Paragraphs C and D with the following modifications. For purposes of
determining the amount of pre-tax earnings for a Fiscal Year for which financial
results have not yet been reported and the amount of pre-tax earnings for the
Outlook Year, each of which is necessary to apply Step 2 or Article IV,
Paragraph C, the pre-tax earnings will be 110% of the Annual Profit Target for
such Fiscal Year or Outlook Year. The Committee may, in its discretion, reduce
the amount of the Interim Award payable by reducing the amount of pre-tax
earnings used in computing an Interim Award to the Committee's determination
regarding the amount of pre-tax earnings for such Fiscal Year or Outlook Year.
In reaching its determination regarding such pre-tax earnings, the Committee
shall consider, but shall not be bound by, the amount that the Corporation
projects will be reported for each of such years, as contained in the
Corporation's business plan prepared for the year in which payment will occur.
Also, in lieu of the Performance Factors provided in Article IV, the Performance
Factors set forth in the following schedule shall be used:
Cumulative*
Projected Percent of Interim* Interim
Target Achieved for the Performance Performance
Performance Period Factor Factor
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115% or more** (see below)
110% but less than 115% 1.50 3.00
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105% but less than 110% 1.25 2.50
100% but less than 105% 1.00 2.00
95% but less than 100% 0.75 1.50
90% but less than 95% 0.50 1.00
85% but less than 90% 0.25 0.50
less than 85% 0.00 0.00
* The column "Interim Performance Factor" applies to an Interim Award after
the first Fiscal Year of an IC Agreement with a Performance Period of two
(2) or three (3) years. The column "Cumulative Interim Performance Factor"
applies to an Interim Award after the second Fiscal Year of an IC Agreement
with a Performance Period of three (3) years.
** If the Projected Percentage of Target Achieved is 115% or more, the
Performance Factor is determined by adding an additional 25% of the
Performance Factor for 100% of Target Achievement for each additional 5%
increment by which 100% Target Achievement is exceeded. For example, if the
Projected Percentage of Target Achieved is 115% after the end of the first
Fiscal Year of an IC Agreement that includes two (2) Fiscal Years, the
Performance Factor is 1.75 (i.e., 1.5, plus 25% of 1.0).
Interim Awards for a Fiscal Year in a Performance Period shall be made not
later than the last day of February following the end of the Fiscal Year for
which the Interim Award is made. When determining the amount of the Interim
Award after the second year for an IC Agreement with a Performance Period of
three (3) years, the Interim Award, if any, made with respect to such IC
Agreement after the first Fiscal Year shall be subtracted from the amount
determined using the Cumulative Interim Performance Factor for the second Fiscal
Year. Interim Awards shall be subtracted from the total Award for the
Performance Period. Interim Awards once made are not refundable to the
Corporation.
The final or remaining amount of an Award to a Participant for a Performance
Period shall be determined not later than the last day of February following the
end of the last Fiscal Year included in the Performance Period. If the IC
Agreement is for only one Fiscal Year, the full amount shall be payable not
later than such determination date. Otherwise, not later than such determination
date, an amount equal to X less Y shall be paid, where X is the Award multiplied
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by a fraction, the numerator of which is the number of months in the Performance
Period reduced by four (4) and the denominator of which is the number of months
in the Performance Period and Y is the total amount of Interim Awards made with
respect to such IC Agreement. The remaining amount of the Award shall be paid in
four (4) equal installments on the last day of each succeeding month.
B. Employment on Payment Date Generally Required. Except as provided in
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this paragraph, no Participant shall receive payment of an amount with respect
to an Award (including an Interim Award unless such Participant is an active
employee of the Corporation (or a subsidiary) as of the scheduled payment date
for such amount). A Participant who dies or is disabled during the Performance
Period may continue to receive amounts payable under an IC Agreement, if the
Committee, in its discretion, determines to make such payments. For purposes of
this paragraph, a Participant shall be disabled if the participant is determined
to be disabled under the Corporation's long-term disability plan in which the
Participant participates.
C. Acceleration of Payment. An Award or portion of an Award otherwise
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payable by the last day of February may be accelerated by the Committee so that
such Award or portion of Award is paid as early as the preceding December 1st.
The Committee may accelerate payment of an Award only to the extent it certifies
the earnings before taxes and other material terms of the IC Agreement have been
met, the Award made is discounted for early payment to the extent required by
Section 162(m) and the accelerated payment does not affect Awards under the Plan
from qualifying as "performance-based compensation" under Section 162(m)(4) of
the Code.
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VI. Amendment or Termination
The Board reserves the right to amend, suspend, or terminate the Plan or
adopt a new plan at any time; provided that no such amendment shall without the
consent of the Participant affect the payment of any IC Agreement to the such
Participant. In case any one or more of the provisions contained in the Plan
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of the Plan.
VII. Miscellaneous
A. Nonassignment. The interest of any Participant under the Plan shall not
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be assignable either by voluntary or involuntary assignment or by operation of
law, except by will or the laws of descent and distribution.
B. Interpretation. This Plan is intended to provide Participants with the
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opportunity to receive incentive compensation that is deductible by the
Corporation without regard to the limitations of Section 162(m)(1) of the Code
and shall be construed accordingly. The Plan shall otherwise be governed by the
laws of the State of Delaware and construed in accordance therewith.
C. No Employment Right. The granting of an IC Agreement confers on no
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employee the right to employment or continued employment by the Corporation. The
right of the Corporation to terminate the employment of a Participant shall not
be diminished or affected by reason of receipt of an IC Agreement under the
Plan.
VIII. Effective Date
This Plan is adopted effective as of January 1, 1996, provided that no
payment of an Award shall be made under the Plan unless the Plan is approved by
the shareholders of the Corporation at its 1996 annual meeting of shareholders.
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