Exhibit 10.1
MRO SOFTWARE, INC.
YEAR ENDED SEPTEMBER 30, 2004
EXECUTIVE BONUS PLAN
1. PURPOSE
The purpose of the FY2004 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 promote the common interest of the Company,
its stockholders and key executives, and to attract and retain executives
of exceptional ability.
2. ADMINISTRATION
2.1 The Plan shall be adopted and 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 The Committee 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 Committee and the 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, 2004.
3.2 Plan Quarter means each of the three-month periods ended December
31, 2003, March 31, 2004, June 30, 2004, and September 30, 2004.
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 FY 2004 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
its consolidated financial statements.
3.8 Earnings and EPS mean pro-forma earnings per share as disclosed by
the Company, consisting of earnings per share determined under GAAP,
adjusted for the amortization of goodwill and other intangibles on
an after-tax basis in accordance with past practice of the Company.
Earnings may also be adjusted to reflect such deductions and
additions of extraordinary items and one-time expenses as may be
approved by the Committee for purposes of administering this Plan.
Earnings and EPS are calculated after giving effect to any bonus
that is paid or proposed to be paid under this Plan.
3.9 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 MECHANISM
5.1 The amount of on-target bonus that is paid will be determined as
follows:
(a) Each participant is eligible to earn forty (40%) percent of
the on-target bonus based on the achievement of quarterly
goals and sixty (60%) percent based on the achievement of
annual goals. The quarterly and annual Revenue and EPS goals
are 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 Plan Quarter 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
40% in total
In the event that the achievement for Revenue in any quarter is less
than the amount stated in Appendix II for that quarter, but is equal
to or greater than 97.5% of such amount, then a partial bonus shall
be paid to each Participant. The partial bonus shall be equal to the
actual amount of Revenue achieved for the quarter divided by the
amount of the Revenue goal for the quarter as stated in Appendix II
times the on-target bonus the participant would otherwise have
earned for the Revenue component (i.e. 5% of total on-target bonus).
Achievement for Earnings must be at 100% to be eligible for payout
on that component. No incremental bonus is payable to any
participant for achievement above 100% in any quarter.
(c) 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 year end performance is:
(i) 24% based on revenue
(ii) 36% based on earnings
60% in total
As stated in Appendix II, there is a minimum, target and maximum
achievement level for payout based on annual performance, for both
the Revenue and the Earnings component, subject to the following:
(i) No annual bonus payments will be made for either
component if the minimum Earnings number is not
achieved (for fiscal 2004 this is .43); and
(ii) Actual payment for performance between minimum,
target and maximum achievement will be prorated
accordingly.
(iii) The total amount of the year end bonus will be
paid to the participants as follows:
a. 75% of the bonus will be paid in cash; and
b. 25% of the bonus will be will be paid in the
form of common stock, on a net after-tax
basis applying the statutory withholding
rate, valued at the closing price on the
second day after the day that the Company
issues its fiscal 2004 fourth quarter and
year-end results, subject to the agreement
of each recipient to restrictions on
transfer (other than for estate planning
purposes) that expire two years from the
valuation date (or upon termination of
employment, if earlier). No fractional
shares will be issued.
6. PAYMENT OF BONUSES
Funded bonus will be payable (and restricted stock issued) 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.
The foregoing notwithstanding, if a participant's employment by the
Company is terminated for any reason prior to the actual issuance of
stock, the Company may in its discretion elect to make such payment in
cash in lieu of stock. All shares of Company stock issued hereunder shall
be issued pursuant and subject to the terms and conditions of the
Company's Amended and Restated 1999 Equity Incentive Plan.
7. TERMINATION OF EMPLOYMENT
If a Participant's employment by the Company is terminated, the
participant's entitlement to payment under this Plan shall be as
determined under the terms of the Company's Severance Pay Plan, as amended
to and in effect as of the date of termination.
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.