Exhibit 10.1

 

HMS HOLDINGS CORP.

ANNUAL INCENTIVE COMPENSATION PLAN

 

As Amended and Restated

 

 

HMS Holdings Corp. (the “Company”), a Delaware corporation, hereby establishes
and adopts the amended and restated Annual Incentive Compensation Plan (the
“Plan”) to provide incentive awards that are intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended.

1.PURPOSES OF THE PLAN

The purposes of the Plan are to advance the interests of the Company and its
shareholders and assist the Company in attracting and retaining executive
officers of the Company and its Affiliates who, because of the extent of their
responsibilities can make significant contributions to the Company’s success by
their ability, industry, loyalty and exceptional services, by providing
incentives and financial rewards to such executive officers.

2.DEFINITIONS

2.1. “Affiliate” shall mean any corporation, partnership or other organization
of which the Company owns or controls, directly or indirectly, not less than 50%
of the total combined voting power of all classes of stock or other equity
interests.

2.2.            “Award” shall mean any amount granted to a Participant under the
Plan.

2.3.            “Board” shall mean the board of directors of the Company.

2.4.            “Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.

2.5.            “Committee” shall mean the Compensation Committee of the Board
or any subcommittee thereof formed by the Compensation Committee to act as the
Committee hereunder. For purposes of satisfying the requirements of Section
162(m) of the Code and the regulations thereunder, the Committee is intended to
consist solely of “outside directors” as such term is defined in Section 162(m)
of the Code.

2.6.            “Disability” means any physical or mental condition of a
Participant that in the opinion of the Committee renders the Participant
incapable of continuing to be an employee of the Company and its Affiliates.

2.7.            “Participant” shall have the meaning set forth in Section 3.1.

2.8.            “Performance Criteria” shall mean any of the following, as
determined under generally accepted accounting principles (“GAAP”) (where
applicable for matters subject to GAAP) or as otherwise adjusted and reported by
the Company as non-GAAP measures: net sales; revenue; revenue growth or product
revenue growth; operating income (before or after taxes); pre- or after-tax
income (before or after allocation of corporate overhead and bonus); earnings
per share; net income (before or after taxes); return on equity; total
shareholder return; return on assets or net assets; appreciation in and/or
maintenance of the price of the Shares or any other publicly-traded securities
of the Company; market share; gross profits; earnings (including earnings or
losses before taxes, before interest and taxes, or before interest, taxes,
depreciation and amortization); economic value-added models or equivalent
metrics; comparisons with various stock market indices; reductions in costs;
cash flow or cash flow per share (before or after dividends); return on capital
(including return on total capital or return on invested capital); cash flow
return on investment; improvement in or attainment of expense levels or working
capital levels, including cash, and accounts receivable; operating margin; gross
margin; year-end cash; cash margin; debt reduction; shareholders equity;
operating efficiencies; and, client growth.

 
 

2.9.            “Performance Period” shall mean the Company’s fiscal year or
such other period that the Committee, in its sole discretion, may establish.

3.ELIGIBILITY AND ADMINISTRATION

3.1.            Eligibility. The individuals eligible to participate in the Plan
shall be the Company’s Chief Executive Officer and any other executive officer
of the Company or any other person selected by the Committee to participate in
the Plan (each, a “Participant”). Where the Committee determines it appropriate,
a Performance Period can have one or can have more than one Participant.

3.2.            Administration.

(a) The Plan shall be administered by the Committee. The Committee shall have
full power and authority, subject to the provisions of the Plan and subject to
such orders or resolutions not inconsistent with the provisions of the Plan as
may from time to time be adopted by the Board, to: (i) select the Participants
to whom Awards may from time to time be granted hereunder; (ii) determine the
terms and conditions, not inconsistent with the provisions of the Plan, of each
Award; (iii) determine the time when Awards will be granted and paid and the
Performance Period to which they relate; (iv) determine the performance goals
for Awards for each Participant in respect of each Performance Period based on
the Performance Criteria and certify the calculation of the amount of the Award
payable to each Participant in respect of each Performance Period; (v) determine
whether payment of Awards may be deferred by Participants in a manner consistent
with Section 409A of the Code; (vi) interpret and administer the Plan and any
instrument or agreement entered into in connection with the Plan; (vii) correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award in the manner and to the extent that the Committee shall deem
desirable to carry it into effect; (viii) establish such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for administration
of the Plan. The Committee may delegate any ministerial matters to officers or
employees of the Company but may not delegate authority or responsibilities
described in the preceding sentence except to the extent ministerial.

(b) Decisions of the Committee shall be final, conclusive and binding on all
persons or entities, including the Company, any Affiliate, any Participant and
any person claiming any benefit or right under an Award or under the Plan.

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4.AWARDS

4.1.            Performance Period; Performance Goals.

(a) Not later than the earlier of (i) 90 days after the commencement of a
Performance Period and (ii) the expiration of 25% of the Performance Period, the
Committee shall, in writing, designate (x) the Participants for the Performance
Period and (y) the performance goals for determining the Award for each
Participant for each Performance Period based on attainment of specified levels
of one or any combination of the Performance Criteria. Within such time period
the Committee shall also specify the inclusion or exclusion for charges or
adjustments related to an event or occurrence that the Committee determines
should appropriately be included or excluded because it involves (a)
restructurings, discontinued operations, or items that are unusual in nature or
infrequently occurring, (b) the cumulative effects of tax or accounting changes
in accordance with GAAP, or (c) foreign exchange gains and losses. The
performance goals designated by the Committee may be based solely by reference
to the Company’s performance or the performance of an Affiliate, division,
business segment or business unit of the Company, or based upon the relative
performance of other companies or upon comparisons of any of the indicators of
performance relative to other companies. Such performance goals shall otherwise
comply with the requirements of Section 162(m) of the Code and the regulations
thereunder.

(b) If a person becomes eligible to participate in the Plan after the Committee
has made its initial designation of Participants, such individual may become a
Participant if so designated in writing by the Committee.

4.2.            Certification. At such time as it shall determine appropriate
following the conclusion of each Performance Period, the Committee shall
certify, in writing, the amount of the Award for each Participant for such
Performance Period.

4.3.            Payment of Awards. The amount of the Award actually paid to a
Participant may, in the sole discretion of the Committee, be less than the
amount otherwise payable to the Participant based on attainment of the
performance goals for the Performance Period as determined in accordance with
Section 4.1. The Committee may not waive the achievement of the applicable
performance goals except in the case of the death or disability of the
Participant or a change in control of the Company. The actual amount of the
Award determined by the Committee for a Performance Period shall be paid in the
Committee’s discretion in cash or, to the extent permissible under a
shareholder-approved stock plan of the Company, stock based awards under such
plan. Payment to each Participant shall be made no later than the fifteenth day
of the third month following the end of the fiscal year of the Company in which
the applicable Performance Period ends, unless payment is deferred pursuant to a
plan or arrangement satisfying the requirements of Section 409A of the Code.

4.4.            Maximum Award. The maximum dollar value of an Award made to any
Participant in any 12-month period is $5,000,000. This limit is in addition to,
and not in replacement of or counted into, the individual grant limit under the
Company’s Fourth Amended and Restated 2006 Stock Plan or any successor plan.

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5.MISCELLANEOUS

5.1.            Amendment and Termination of the Plan. The Board may, from time
to time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable law,
including Section 162(m) of the Code, or by the NASDAQ Stock Market (or such
other principal securities market on which the Company’s securities are listed
or qualified for trading). No amendments to, or termination of, the Plan shall
in any way materially impair the rights of a Participant under any Award
previously granted without such Participant’s consent.

5.2.            Section 162(m) of the Code. Unless otherwise determined by the
Committee, the provisions of this Plan shall be administered and interpreted in
accordance with Section 162(m) of the Code to ensure the deductibility by the
Company of the payment of Awards.

5.3.            Tax Withholding. The Company or an Affiliate shall have the
right to make all payments or distributions pursuant to the Plan to a
Participant, net of any applicable federal, state and local taxes required to be
paid or withheld. The Company or an Affiliate shall have the right to withhold
from wages, Awards or other amounts otherwise payable to such Participant such
withholding taxes as may be required by law, or to otherwise require the
Participant to pay such withholding taxes. If the Participant shall fail to make
such tax payments as are required, the Company or an Affiliate shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Participant or to take such other
action as may be necessary to satisfy such withholding obligations.

5.4.            Right of Discharge Reserved; Claims to Awards. Nothing in this
Plan shall provide any Participant a right to receive any Award or payment under
the Plan with respect to a Performance Period. Nothing in the Plan nor the grant
of an Award hereunder shall confer upon any Participant the right to continue in
the employment of the Company or an Affiliate or affect any right that the
Company or an Affiliate may have to terminate the employment of (or to demote or
to exclude from future Awards under the Plan) any such Participant at any time
for any reason. Except as specifically provided by the Committee, the Company
shall not be liable for the loss of existing or potential profit from an Award
granted in the event of the termination of employment of any Participant. No
Participant shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants under the
Plan.

5.5.            Recoupment. All Awards will be subject to deduction, forfeiture,
recoupment or similar requirement in accordance with any clawback policy that
may be implemented by the Company from time to time, including such policies
that may be implemented after the date an Award is granted, pursuant to the
listing standards of any national securities exchange or association on which
the Company’s securities are listed or as is otherwise required by the
Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable
law, or other agreement or arrangement with a Participant.

5.6.            Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or an
Affiliate, division or business unit of the Company. Any income or gain realized
pursuant to Awards under the Plan constitute a special incentive payment to the
Participant and shall not be taken into account, to the extent permissible under
applicable law, as compensation for purposes of any of the employee benefit
plans of the Company or an Affiliate except as may be determined by the
Committee or by the Board or board of directors of the applicable Affiliate.

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5.7.            Other Plans. Nothing contained in the Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

5.8.            Severability. If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part by a court of
competent jurisdiction, such provision shall (a) be deemed limited to the extent
that such court of competent jurisdiction deems it lawful, valid and/or
enforceable and as so limited shall remain in full force and effect, and (b) not
affect any other provision of the Plan or part thereof, each of which shall
remain in full force and effect. If the making of any payment or the provision
of any other benefit required under the Plan shall be held unlawful or otherwise
invalid or unenforceable by a court of competent jurisdiction, such
unlawfulness, invalidity or unenforceability shall not prevent any other payment
or benefit from being made or provided under the Plan, and if the making of any
payment in full or the provision of any other benefit required under the Plan in
full would be unlawful or otherwise invalid or unenforceable, then such
unlawfulness, invalidity or unenforceability shall not prevent such payment or
benefit from being made or provided in part, to the extent that it would not be
unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
the Plan.

5.9.            Construction. As used in the Plan, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words “without
limitation.”

5.10.        Unfunded Status of the Plan. The Plan is intended to constitute an
“unfunded” plan for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.

5.11.        Governing Law. The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware
without reference to principles of conflict of laws that might result in the
application of the laws of another jurisdiction, and shall be construed
accordingly.

5.12.        Effective Date of Plan. The original Plan was established in March
2011 and approved by shareholders at the Company’s 2011 Annual Meeting. The
Plan, as amended and restated herein, is being resubmitted for shareholder
approval at the Company’s 2016 Annual Meeting and shall be effective on the date
of the approval of the Plan by the holders of the then outstanding securities of
the Company entitled to vote generally in the election of directors. The Plan
shall be null and void and of no effect if the foregoing condition is not
fulfilled.

5.13.        Captions. The captions in the Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.

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