Exhibit 10.1
MRO SOFTWARE, INC. & SUBSIDIARIES
YEAR ENDED SEPTEMBER 30, 2002
EXECUTIVE BONUS PLAN
November 9, 2001
MRO SOFTWARE, INC.
YEAR ENDED SEPTEMBER 30, 2002
EXECUTIVE BONUS PLAN
1. PURPOSE
The purpose of the FY2002 Executive Bonus Plan ("Plan") is to provide key
management employees of MRO Software, Inc. with an incentive to make
significant and extraordinary contributions to the long-term performance
and growth of the Company, to join the common interest of the Company and
key executives, and to attract and retain executives of exceptional
ability.
2. ADMINISTRATION
2.1 The Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee
will base all decisions and awards on quarterly and annual financial
statements filed with the Securities and Exchange Commission.
2.2 By adoption of this Plan the Board has deemed eligible those
individuals named in Appendix I. The Board shall have full and
complete authority and discretion to make binding decisions on the
administration of the Plan and shall adopt such rules and regulations
and make all other determinations deemed by it necessary or desirable
for the administration of the Plan.
2.3 The Compensation Committee and Board of Directors of the Company shall
have the authority to amend or terminate the Plan, provided, however,
that if the Plan is amended or terminated, the Company shall be
required to complete payment to each Participant of the amount which
that Participant otherwise would have received based on the provisions
set forth in paragraph 7.2.
3. DEFINITIONS
3.1 PLAN YEAR means the fiscal year ended September 30, 2002.
3.2 PLAN QUARTER means each of the three-month periods ended December 31,
2001, March 31, 2002, June 30, 2002, and September 30, 2002.
3.3 PARTICIPANT means any executive of the Company who is designated in
Appendix I.
3.4 PERMANENT DISABILITY, means a Participant's inability, as a result of
illness, incapacity, disease or calamity to perform a substantial part
of his primary job responsibilities as set forth in his employment
contract or job description for any concurrent six month period.
3.5 PLAN means this FY2002 Executive Bonus Plan.
3.6 Except as otherwise indicated by the context, any masculine term used
herein also shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
3.7 COMPANY means MRO Software, Inc. and its subsidiaries included in the
consolidated financial statements.
3.8 PLAN NET INCOME means net income as disclosed in the consolidated
quarterly financial statements of the Company, before deductions and
additions of:
(i) Extraordinary items as defined under US generally accepted
accounting principles.
(ii) One time expense adjustments arising out of any acquisition
accounted for as either a pooling or purchase.
(iii) Goodwill/purchased intangible assets arising out of
acquisitions.
3.9 PLAN REVENUE means total revenues as disclosed in the consolidated
quarterly financial statements of the Company.
4. ELIGIBILITY AND PARTICIPATION
Executives eligible for bonuses under the Plan shall be those individuals
specified in Appendix I.
5. BONUS FUNDING MECHANISM
5.1 The on-target bonus Fund will be determined as follows:
(a) Each Participant will be eligible to receive up to 60% of
on-target funded bonus if the Company achieves quarterly and
annual Plan Revenues and Net Income as stated in Appendix II.
(b) The percentage of the on-target bonus described in Appendix I
earned by each Participant on achievement of the amounts stated
in Appendix II in respect of each quarter and year end is:
(i) Q1 5% based on revenue, 5% based on earnings
(ii) Q2 5% based on revenue, 5% based on earnings
(iii) Q3 5% based on revenue, 5% based on earnings
(iv) Q4 5% based on revenue, 5% based on earnings
(v) Year end 10% based on revenue, 10% based on earnings
(c) In the event that the achievement in any quarter or for the year
is less than the amounts stated in Appendix II, but is equal to
or greater than 95% of the amount in question, then a partial
bonus shall be paid to each participant. The partial bonus shall
be equal to the actual achievement divided by the amount stated
in Appendix II times the on-target bonus the participant would
otherwise have earned.
(d) In the event that the achievement in any quarter or for the year
is greater than the amounts stated in Appendix II, than an
incremental bonus shall be paid to each participant. The
incremental bonus shall be equal to the actual achievement
divided by the amount stated in Appendix II times the on-target
bonus the participant would otherwise have earned, except that
the incremental bonus in each instance shall not be greater than
125% of the on-target bonus the participant would have received
in respect of the individual quarterly or annual earnings or
revenue based component.
(e) 20% of the on-target bonus described in Appendix I earned by each
participant shall be based on a 100% share price appreciation.
The calculation for this portion of the year end bonus shall be
as follows: an amount equal to .20% of the on-target year end
bonus shall be earned by each participant for each 1% increase in
the share price. The increase in share price shall be the
difference between the share price at the beginning of FY2002 and
the share price at the end of FY2002, adjusted for any future
stock splits, as further defined in this paragraph. The share
price at the beginning of FY2002 shall be $10.20, which is the
share price as of the close of trading on September 28, 2001, the
last day of the previous fiscal year. The share price at the end
of FY2002 shall be the average of the closing share price on each
of the ten trading days commencing on September 24, 2002 and
ending on October 7, 2002.
By way of example, if the share price at the end of FY2002 is
calculated to be $20.40, (a 100% increase over the share price
close on September 28, 2001 of $10.20) each participant would
earn 100 times .20 or 20% of the specified on-target bonus as set
forth in Appendix I on account of share price appreciation. In no
event shall the amount earned by each participant on account of
share price appreciation be greater than 60% of on-target bonus.
In the event an individual is not employed at the beginning of a
fiscal year, the closing price on their first day of employment
shall be used as the starting share price for the purpose of
calculating share price appreciation during the balance of the
fiscal year and the maximum 60% of on-target award shall be
prorated to an amount proportional to the number of days
remaining in the fiscal year. The share price appreciation
component of on-target bonus shall be determined subsequent to
the close of the fiscal year.
(f) 20% of the on-target bonus shall be at the discretion of the
Compensation Committee in the case of the Chairman and the CEO
and in the case of the participants in Appendix I, Section II,
based upon an evaluation of the individual goals agreed to
between the CEO and the participant as evaluated by the CEO and
the Chairman. The discretionary component of on-target bonus
shall be determined subsequent to the close of FY2002.
6. PAYMENT OF BONUSES
Funded bonus will be payable not later than sixty days after the end of the
period in which the bonus was earned provided that the results for the
period have been issued to the public.
7. TERMINATION OF EMPLOYEE
7.1 If a Participant's employment is terminated prior to the conclusion of
any Plan Quarter or, following the conclusion of a Plan Year, or prior
to any payment being made:
(a) By reason of (i) any deliberate material breach by the
Participant of his employment obligations with the Company,
which, if curable, is not cured within ten (10) days after the
Company shall have notified the Participant in writing describing
to Participant all material facts concerning such breach, (ii)
any deliberate material breach by the Participant of his
employment obligations with the Company, which is not curable
according to notice from the Company, or (iii) the conviction of
a felony or the commission of a material, fraudulent act by the
Participant against the Company;
(b) Voluntarily by Participant other than for a "Reason Constituting
Good Cause." Reasons Constituting Good Cause are limited to: (i)
a significant change in the nature and scope of Participant's
duties combined with a change in the Participant's title
resulting in a position of materially lesser authority, or (ii) a
reduction in the Participant's base compensation.
Then, Participant shall cease to have any rights to any amounts unpaid
on the date of termination of employment.
7.2 If a Participant's employment is terminated:
(a) By reason of Death, Permanent Disability; or
(b) By the Company for a reason other than one described at
subparagraph 7.1(a);
If such a termination occurs prior to the conclusion of any Plan
Quarter or Year, the Participant shall receive the amount which the
Participant otherwise would have been entitled to receive had he
remained in the employ of the Company through the end of the Plan
Year, but pro-rated based on the number of complete months of
employment with the Company during such Plan Year. The amount earned
shall be paid according to the Plan rules.
8. BENEFICIARY DESIGNATIONS
8.1 If a Participant's employment with the Company is terminated by his
death or if he dies after termination of his employment but prior to
the distribution to him of all amounts payable to him under the Plan,
any amounts otherwise payable to him hereunder shall be distributed to
his designated beneficiary or beneficiaries. For the purposes of this
plan a Participant's beneficiary will be the beneficiary designated
under Company provided life insurance coverage. However, a Participant
may from time to time revoke or change any beneficiary designation on
file with the Company.
If there is no effective beneficiary designation on file with the
Company at the time of a Participant's death, distribution of amounts
otherwise payable to the deceased Participant under this Plan shall be
made to the Participant's estate. If a beneficiary designated by the
Participant to receive his benefits shall survive the Participant but
die before receiving all distributions hereunder, the balance thereof
shall be paid to such deceased beneficiary's estate, unless the
deceased beneficiary designation provides otherwise.
8.2 The Company shall deduct from the distributions to be made to a
Participant or his designated beneficiary or beneficiaries under this
Plan any federal, state or local withholding or other taxes or charges
which the Company is from time to time required to deduct under
applicable law and all amounts distributable under this Plan are
stated herein before any such deductions. The Company may rely on a
written opinion from its legal counsel regarding any questions which
may arise in connection with any such deductions.
9. RIGHTS, PRIVILEGES AND DUTIES OF PARTICIPATION
9.1 No participant or other person shall have any interest in any fund or
in any specific asset or assets of the Company and its Subsidiaries by
reason of being a
Participant under this Plan nor any right to receive any distributions
under the Plan except as and to the extent expressly provided in the
Plan.
9.2 The Company shall have the right, but shall be under no obligation, to
segregate cash to fund bonuses payable under the Plan. However, any
such segregated amounts shall at all times remain Company assets,
subject to the claims of its creditors.
9.3 Each Participant shall be entitled to receive a current copy of the
Plan upon his designation as a Participant if a written request for a
copy of the Plan is provided to the Chief Executive Officer or the
Chairman of the Board. Thereafter, as long as he remains a
Participant, he shall be entitled to receive copies of any amendments
to the Plan within sixty (60) days after their adoption.
9.4 The designation of any employee as a Participant under this Plan shall
not be construed as conferring upon such employee any right to remain
in the employ of the Company and each such Participant shall remain an
employee at will. The right of the Company to discipline or discharge
an employee shall not be affected in any manner by reason of such
employee's designation as a Participant under this Plan.
9.5 To the extent permitted by law, the right of any Participant or any
beneficiary to receive any payment hereunder shall not be subject to
alienation, transfer, sale, assignment, pledge, attachment,
garnishment or encumbrance of any kind. Any attempt to alienate,
transfer, sell, assign, pledge or otherwise encumber any such payment
whether presently or thereafter payable, shall be void. Any payment
due hereunder shall not in any manner be subject to any debts or
liabilities of any Participant or his beneficiary.
APPENDIX I
MRO SOFTWARE, INC.
EXECUTIVE BONUS PLAN
ELIGIBLE PARTICIPANTS
ON-TARGET BONUS
AS A % OF ON-TARGET
BASE SALARY BASE SALARY BONUS
----------- ----------- -----
SECTION I:
CHIP DRAPEAU 350,000 125% 437,500
ROBERT DANIELS 350,000 125% 437,500
SECTION II:
PETER RICE 215,000 100% 215,000
BILL SAWYER 215,000 100% 215,000
JACK YOUNG 215,000 100% 215,000
TED WILLIAMS 215,000 100% 215,000
PATTI FOYE 215,000 100% 215,000
CRAIG NEWFIELD 150,000 50% 75,000
Footnotes:
* Salaries to be effective January 1, 2002.
* Mr. Williams will be entitled to an incremental year end bonus equal to .2%
of the amount by which worldwide software revenues exceed $75,000,000.
APPENDIX II
MRO SOFTWARE, INC.
EXECUTIVE BONUS PLAN
ON-TARGET REVENUE & EARNINGS
TARGET FY2001 FY2002 FY2002
YR OVER YR ACTUAL ON-TARGET ON-TARGET
REV % GROWTH REVENUE REVENUE EARNINGS*
Q1 FY2002 9.9% $ 41,468,000 45,578,000 652,000
Q2 FY2002 8.6% 45,742,000 49,697,000 1,392,000
Q3 FY2002 16.8% 47,316,000 55,278,000 1,895,000
Q4 FY2002 17.1% 50,924,000 59,607,000 2,597,000
----------------------------- ----------
FY2002 13.3% $185,450,000 $210,160,000 $6,536,000
</Table>
* ON-TARGET EARNINGS is net income plus add back of Amortization and includes
the Bonus provision.