MAXIMUS,
Inc.
INCOME
CONTINUITY PROGRAM
(As
Amended and Restated Effective November 20, 2007)
Section
1 -- Definitions. The following terms shall have the meaning
ascribed to them:
(A)
"Applicable Bonus" shall mean the higher of (i) the Target level bonus for
the
Participant or (ii) the average of the Participant’s actual bonus payments for
the previous three full years (or shorter if the Participant has been employed
by the Company less than three years).
(B)
"Base
Salary" shall mean a Participant's annual base salary in effect on the date
of
the Change of Control or the date of termination, whichever is
higher.
(C)
"Board" shall mean the board of directors of the Company.
(D)
"Cause" shall mean (i) the Participant's conviction of a felony, or (ii)
either
of the following that, in each case, results in demonstrable harm to the
Company's financial condition or business reputation (I) the Participant's
willful malfeasance or misconduct in relation to the performance of his/her
duties to the Company, or (II) the Participant's repeated willful refusal
to
perform his/her duties.
(E)
"Change of Control" shall mean the occurrence of any one or more of the
following:
(a)
The
“beneficial ownership” (as defined in Rule 13d-3 of the Exchange Act) of
securities representing more than twenty-five percent (25%) of the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Company Voting Securities”)
is accumulated, held or acquired by a Person (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan
of
the Company or an Affiliate thereof, or any corporation owned, directly or
indirectly, by the Company's stockholders in substantially the same proportions
as their ownership of stock of the Company); provided, however, that any
acquisition from the Company or any acquisition pursuant to a transaction
that
complies with clauses (i), (ii) and (iii) of subparagraph (c) of this definition
will not be a Change of Control under this subparagraph (a), and provided
further, that immediately prior to such accumulation, holding or acquisition,
such Person was not a direct or indirect beneficial owner of 25% or more
of the
Company Voting Securities; or
(b)
Individuals who, as of the effective date of this Program, constitute the
Board
of Directors (the “Incumbent Board”) cease for any reason to constitute at least
a majority of the Board; provided, however, that an individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board will be considered
as though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of
proxies or consents by or on behalf of a Person other than the Board;
or
(c)
Consummation by the Company of a reorganization, merger or consolidation,
or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets or stock of another entity (a “Business
Combination”), in each case, unless immediately following such Business
Combination: (i) more than 60% of the combined voting power of then outstanding
voting securities entitled to vote generally in the election of directors
of (A)
the corporation resulting from such Business Combination (the “Surviving
Corporation”), or (B) if applicable, a corporation that as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries (the “Parent Corporation”),
is represented, directly or indirectly, by Company Voting Securities outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Company Voting Securities, (ii)
no
Person (excluding any employee benefit plan (or related trust) of the Company
or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 25% or more of the combined voting power of the then
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
except to the extent that such ownership of the Company existed prior to
the
Business Combination, and (iii) at least a majority of the members of the
board
of directors of the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation) were members of the Incumbent Board at the time
of
the execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d)
Approval by the Company's stockholders of a complete liquidation or dissolution
of the Company.
However,
in no event will a Change of Control be deemed to have occurred, with respect
to
a Participant, if the Participant is part of a purchasing group that consummates
the Change of Control transaction. A Participant will be deemed “part
of a purchasing group” for purposes of the preceding sentence if the Participant
is an equity holder in the purchasing company or group (except: (i) passive
ownership of less than 2% of the stock of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group that
is
otherwise not significant, as determined prior to the Change of Control by
a
majority of the nonemployee continuing directors).
(F)
"Code"
shall mean the Internal Revenue Code of 1986, as amended, and, as applicable,
the regulations promulgated thereunder.
(G)
"Company" shall mean MAXIMUS, Inc., and, after a Change of Control, any
successor or successors thereto.
(H)
"Compensation" shall mean the sum of a Participant's Applicable Bonus and
Base
Salary.
(I)
"Employee Benefits" shall mean the employee and fringe benefits and perquisites
(including without limitation all medical, dental, life insurance, disability
and pension (including maximum matching contributions) benefits) made available
to a Participant (and his or her eligible dependents) immediately prior to
a
Change of Control (or the economic equivalent thereof where pension laws
prohibit or restrict such benefits).
(J)
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(K)
"Good
Reason" shall mean with respect to a Participant (i) a material decrease
(or
failure to increase in accordance with the terms of any employment contract)
in
the Participant's base salary, bonus opportunity or target long-term equity
awards, (ii) a material diminution in the Participant's authority, duties,
or
responsibilities, (iii) a material diminution in the authority, duties, or
responsibilities of the supervisor to whom the Participant is required to
report, (iv) a material diminution in the budget for which the Participant
retains authority, (v) a relocation of the Participant’s primary office more
than thirty-five (35) miles from its current location, or (vi) the material
breach by the Company of the agreement under which the Participant provides
services. If one or more of the above conditions exists, the
Participant must provide notice to the Company within a period not to exceed
ninety (90) days of the initial existence of the condition. Upon such
notice, the Company must be provided a period of thirty (30) days during
which
it may remedy the condition.
(L)
"Gross-Up Payment" shall have the meaning ascribed to such term in Section
4.
(M)
"Participant" shall mean an employee of the Company designated by the Board
as
an “officer” under Section 16 of the Exchange Act at the time of the Change of
Control or when terminated pursuant to Section 3(B) of the
Program. Once so designated, a Participant's rights hereunder may not
be diminished unless (i) such Participant's position is changed such that
he or
she is no longer designated as a officer under Section 16 of the Exchange
Act in
a manner that will not permit him or her to become eligible for any payments
hereunder, or (ii) such Participant’s employment with the Company is terminated
in a manner that will not permit him or her to become eligible for any payments
hereunder.
(N)
"Person" shall have the meaning ascribed to such term in Section 3(a)(9)
of the
Exchange Act and used in Sections 13(d) and 14(d) thereof.
(O)
"Program" shall mean this Income Continuity Program, as it may be amended
from
time to time.
(P)
"Severance Payments" shall have the meaning ascribed to such term in Section
4.
(Q)
"Total
Payments" shall have the meaning ascribed to such term in Section
4.
Section
2 -- Term. This Program shall be effective as of March 21, 2006
and shall continue in effect through December 31, 2009; provided, however,
that,
commencing on December 31, 2009, and on each December 31 thereafter, this
Program shall be automatically extended for one additional year unless, not
later than October 31 of such year, the Company provides written notice to
each
Participant that this Program shall not be so extended. In addition, if this
Program is in effect on the date of a Change of Control, then it shall continue
in effect for not less than three years following such Change of
Control.
Section
3 – Income Continuity. If during the term of this Program
(A)
a
Participant's employment with the Company is terminated by the Company without
Cause, or a Participant resigns for Good Reason, in each case within 36 months
following a Change of Control (or, if later, within 30 days after the lapse
of
the Company's right to cure the condition resulting in Good Reason),
or
(B)
a
Participant's employment with the Company is terminated one year prior to
a
Change of Control at the request of a party involved in such Change of Control,
or otherwise in connection with or in anticipation of a Change of
Control.
then
in
the case of each of clauses (A) and (B) such Participant shall become entitled
to the following compensation, benefits and rights, except as otherwise
specified by the Chief Executive Officer of the Company with respect to a
Participant at the time such Participant is designated as a
Participant:
(i)
A cash
lump sum, payable within ten days following the date of termination, equal
to
the sum of: (1) any unpaid Base Salary through the date of
termination, (2) any bonus earned but unpaid as of the date of termination
for
any previously completed year, (3) reimbursement for any unreimbursed expenses
incurred by such Participant prior to the date of termination, and (4) in
the
case of the Company’s Chief Executive Officer (“CEO”), an amount equal to 300%
of his or her Compensation, and in the case of other Participants, an amount
equal to 200% of such Participant’s Compensation.
(ii)
Any
unvested Company stock options, restricted stock units or similar equity
incentives held by such Participant that are outstanding on the date of
termination shall be immediately vested as further described in the terms
and
conditions applicable to such options, restricted stock units or equity
incentives.
(iii)
Continued Employee Benefits, at the Company's expense, for such Participant
and
his/her eligible dependents for a period of 36 months in the case of the
CEO and
for a period of 24 months in the case of all other Participants following
such
Participant's date of termination, except where the provision of such Employee
Benefits would result in a duplication of benefits provided by any subsequent
employer. To the extent that these payments are not exempt from
Section 409A under the COBRA, reimbursement, in-kind benefit, or other
applicable exceptions thereunder, such payments shall be made at the time
and in
the amount required under the documents governing each Employee
Benefit.
(iv)
A
lump sum, payable within ten days following the date of termination, equal
to
$50,000, which is intended for outplacement and financial planning
services.
(v)
The
amounts specified in Section 4.
(vi)
All
rights such Participant has to indemnification from the Company immediately
prior to the Change of Control shall be retained for the maximum period
permitted by applicable law, and any director's and officer's liability
insurance covering such Participant immediately prior to the Change of Control
shall be continued throughout the period of any applicable statute of
limitations.
(vii)
The
Company shall reimburse a Participant for all costs and expenses, including
all
attorneys' fees and disbursements, incurred by such Participant in connection
with any legal proceedings (including arbitration), which relate to the
termination of employment or the interpretation or enforcement of any provision
of this Program, where such Participant prevails in such proceeding with
respect
to at least one material issue. Notwithstanding the foregoing, the
Company shall not be obligated to reimburse a Participant for any such costs
and
expenses in excess of $500,000. Such reimbursements shall be made no
later than the two and one-half months following the end of the calendar
year,
or if later the Company's fiscal year, during which such Participant prevails
in
such proceeding with respect to at least one material issue.
(C) In
no event will the eligibility, compensation, benefits, and rights described
above be decreased within one year before or thirty-six months after a Change
of
Control.
(D) Each
payment made under this Program shall be considered a separate payment for
purposes of Section 409A of the Code.
Section
4 -- Excise Tax Gross-Up. In the event a Participant becomes
entitled to any amounts or benefits payable in connection with a Change of
Control (whether or not such amounts are payable pursuant to this Program)
(the
"Severance Payments"), if any of such Severance Payments are subject to the
tax
(the "Excise Tax") imposed by Section 4999 of the Code (or any similar federal,
state or local tax that may hereafter be imposed), the Company shall pay
to such
Participant within ten days following the date of his/her termination of
employment an additional amount (the "Gross-Up Payment") such that the net
amount retained by such Participant, after deduction of any Excise Tax on
the
Total Payments (as hereinafter defined) and any federal, state and local
income
tax and Excise Tax upon the payment provided for by this Section, shall be
equal
to the Total Payments. For purposes of determining whether any of the Severance
Payments will be subject to the Excise Tax and the amount of such Excise
Tax: (a) any other payments or benefits received or to be received by
such Participant in connection with a Change of Control or such Participant's
termination of employment (whether pursuant to the terms of this Program
or any
other plan, arrangement or agreement with the Company, any entity whose actions
result in a Change of Control or any entity affiliated with the Company,
or such
entity) (which, together with the Severance Payments, constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
Section 280G of the Code, and all "excess parachute payments" within the
meaning
of Section 280G of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of a nationally-recognized tax counsel selected by
such
Participant such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole
or in
part) represent reasonable compensation for services actually rendered within
the meaning of Section 280G of the Code, or are otherwise not subject to
the
Excise Tax, (b) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the total amount
of the Total Payments and (ii) the amount of excess parachute payments within
the meaning of section 280G of the Code, and (c) the value of any non-cash
benefits or any deferred payments or benefits shall be determined by a
nationally-recognized accounting firm selected by such Participant in accordance
with the principles of Sections 280G of the Code. For purposes of determining
the amount of the Gross-Up Payment, such Participant shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state
and
locality of such Participant's residence on his/her date of termination,
net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax
is
determined to exceed the amount taken into account hereunder at the time
of the
termination of such Participant's employment (including by reason of any
payment
or benefit the existence or amount of which cannot be determined at the time
of
the Gross-Up Payment), the Company shall make an additional gross-up payment
in
respect of such excess within ten days after the time that the amount of
such
excess is finally determined.
Section
5 -- No Mitigation or Offset. Except as provided in Section 3(iii), a
Participant shall not be required to mitigate the amount of any payment or
benefit provided for under this Program by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for hereunder
be reduced by any compensation or benefits earned or received by such
Participant as the result of employment by a subsequent employer, by retirement
benefits, by offset against any amount claimed to be owed by such Participant
to
the Company or otherwise.
Section
6 -- Validity. The invalidity or unenforceability of any provision of this
Program shall not affect the validity or enforceability of any other provision
of this Program, which other provision shall remain in full force and
effect.
Section
7 -- Withholding. All payments hereunder shall be reduced by any applicable
taxes required by applicable law to be withheld by the Company.
Section
8 -- Modification or Waiver. No provision of this Program may be modified,
waived or discharged, unless such waiver, modification, or discharge is agreed
to in writing and signed by any Participant whose rights hereunder would
be
adversely affected thereby.
Section
9 -- Applicable Law. This Program shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without regard
to
conflicts of laws principles thereof.
Section
10 -- No Liability. Neither the Board nor any officer of the Company shall
have any liability for any decision made in good faith in interpreting,
implementing or operating this Program, including without limitation, any
changes made to the definition Good Reason or in identifying the Participants.
The Company hereby agrees to indemnify and hold harmless each member of the
Board and each officer, for (and in each case, advance) any and all costs
and
expenses incurred in connection with the administration, operation and
implementation of the Program, including without limitation any changes made
to
the definition Good Reason or in identifying the Participants. No amounts
paid
under this Section 10 for or on account of any of the foregoing officers
or
directors shall be included in Compensation under this Program.
Section
11 – Arbitration. A Participant and the Company shall attempt to
settle amicably through negotiation any controversy, claim or dispute between
the parties arising out of or relating to this Program (a
“Dispute”). If a Dispute cannot be settled by such means, the parties
agree that it will be submitted to final and binding arbitration before an
arbitration tribunal which is, and pursuant to arbitration procedures which
are,
acceptable to all parties. If the parties cannot or do not otherwise
agree within 30 days of the date on which notice of a Dispute is given, any
such
claim shall be submitted for arbitration by the American Arbitration Association
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association then in effect. Any arbitration shall be conducted in
Virginia. Notice of demand for arbitration shall be provided in
writing to the other party. The parties further intend and agree that
the final decision or award of the arbitration tribunal shall be binding
on the
parties and their successors and fully enforceable by any court of competent
jurisdiction. The facts and other information relating to any
arbitration arising out of or in connection with this Agreement shall be
kept
confidential to the fullest extent permitted by law. In addition,
each party shall bear its own expenses in connection with such arbitration
unless otherwise ordered by the arbitrator.
Section
12 – Distributions to Specified Employees. Notwithstanding
any provision to the contrary, to the extent the Participant is considered
a
specified employee under Section 409A of the Code and would be entitled to
a
payment during the six month period beginning on the Participant's date of
termination that is not otherwise excluded under Section 409A of the Code
under
the exceptions for short-term deferrals, separation pay arrangements,
reimbursements, in-kind distributions, or an otherwise applicable exemption,
the
payment will not be made to the Participant until the earlier of the six
month
anniversary of the Participant's date of termination or the Participant's
death.
Section
13 – Section 409A of the Code. This Program is intended to comply
and shall be administered in a manner that is intended to comply with Section
409A of the Code and the interpretive guidance thereunder, including the
exceptions for short-term deferrals, separation pay arrangements,
reimbursements, and in-kind distributions. The Program shall be
construed and interpreted in accordance with such intent. To the
extent potential payments could become subject to Section 409A of the Code,
the
Company shall amend this Program with the goal of providing Participants
with
the economic benefits described herein in a manner that does not result in
such
tax being imposed.
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