Exhibit 10.4

SEPARATION AGREEMENT BETWEEN
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED AND
PATRICK W. GROSS

     THIS AGREEMENT (the “Agreement”) is made and entered into as of August 30,
2002 by and between Patrick W. Gross (“Mr. Gross”) and American Management
Systems, Incorporated (“AMS”).

     WHEREAS, Mr. Gross will be leaving the employ of AMS, and the parties wish
to set forth the terms of his departure;

     NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement, the sufficiency of which the parties
acknowledge, it is agreed as follows:

     1.     Mr. Gross’s last day as an AMS employee (the “Separation Date”)
shall be September 30, 2002, or, if his employment is terminated earlier for
cause, such earlier date. Through and including the Separation Date, Mr. Gross
shall, at the direction of AMS’s Chief Executive Officer, devote a substantial
portion of his business time and effort to providing assistance in transitioning
customer relationships to senior AMS executives.

     2.     In consideration for Mr. Gross’s promises in this Agreement,
Mr. Gross shall be entitled to each of the following:

             (a)     Through and including the Separation Date, Mr. Gross shall
continue to receive the base salary to which he was entitled as an employee of
AMS on the date of this Agreement and shall continue to be eligible for the
benefits (other than incentive compensation) to which he would have been
eligible as an employee of AMS if he had continued in his position on that date.

             (b)     No more than two (2) business days after the Separation
Date, or any other date agreed to in writing by the parties, and provided that
all necessary time sheet data and reimbursement requests have been submitted by
Mr. Gross on or before the Separation Date, Mr. Gross shall receive payment of
any unpaid portion of his salary and vacation pay (annual leave) through the
Separation Date, and reimbursement for any outstanding reasonable business

 

--------------------------------------------------------------------------------

 

expenses as approved in advance by the Chief Executive Officer of AMS that he
has incurred in performing his duties for AMS through the Separation Date.

             (c)     Mr. Gross shall be entitled to such rights and payment of
such benefits as might be provided by the terms of any employee benefit plan or
program of AMS based on his service and compensation (to the extent relevant)
through the Separation Date.

             (d)     Mr. Gross shall receive a severance benefit of $1,200,000.
One-quarter of the severance benefit ($300,000) shall be paid in a lump sum in
immediately available funds on the Separation Date, or any other date agreed to
in writing by the parties. The remaining three-quarters of the severance benefit
($900,000) shall be paid in a lump sum in immediately available funds no later
than January 15, 2003. Notwithstanding the foregoing, in no event will any
portion of the severance benefit be paid before Mr. Gross has executed a release
substantially in the form attached hereto as Attachment A (the “Release”) and
the revocation period set forth in the Release has expired.

             (e)     Mr. Gross shall be granted a nonqualified stock option for
20,000 shares of common stock of AMS (the “Option”). The Option shall be granted
as of July 31, 2002, under American Management Systems, Incorporated 1996
Amended Stock Option Plan F, and shall be fully vested and exercisable.

             (f)     Mr. Gross shall be reimbursed for any premiums for health
insurance continuation coverage charged to Mr. Gross or his beneficiaries under
any AMS health plans that is elected by Mr. Gross or his beneficiaries pursuant
to Section 4980B of the Internal Revenue Code for a maximum of twenty-four (24)
months. Such reimbursements shall be paid at a time or times mutually agreed to
by the parties, but not before Mr. Gross has executed the Release and the
revocation period set forth in the Release has expired.

             (g)     On Mr. Gross’s instructions to sell shares of AMS stock,
his broker may contact AMS. AMS will then contact Shaw Pittman LLP. Shaw Pittman
will then issue an opinion letter on AMS’s behalf in connection with the
disposition of the shares, stating that any legend can be removed from the
shares. This is a two-paragraph form letter that would be sent to AMS’s transfer
agent. The transfer agent will then contact Mr. Gross’s broker to complete the
sale.

Mr. Gross shall not be entitled to the benefits described in paragraphs (d),
(e) and (f) above if his employment is terminated for cause. All benefits under
this Agreement shall be subject to all legally required and legally permitted
withholdings and deductions.

     3.     The parties agree that AMS’s promises in Section 2 are in full,
final and complete settlement of all claims Mr. Gross may have against AMS, its
affiliates, past and present officers, directors, employees, agents, successors
and assigns, and exceed those to which Mr. Gross would be entitled absent his
promises in this Agreement.

-2-

--------------------------------------------------------------------------------

 

     4.     Nothing in this Agreement shall be construed as an admission of
liability by AMS, its affiliates, or its past and present officers, directors,
employees or agents, and AMS specifically disclaims liability to or wrongful
treatment of Mr. Gross on the part of itself, its affiliates, and its past and
present officers, directors, employees and agents.

     5.     Mr. Gross represents that he has not filed any complaints or charges
against AMS with the U.S. Department of Labor, the Equal Employment Opportunity
Commission, or with any other federal, state or local agency or court, and
covenants that he will not seek to recover on any claim released in this
Agreement. To the extent permitted by law, Mr. Gross promises that he will not
voluntarily assist any third party in pursuing any legal claim against AMS, and
he will immediately notify AMS if he is asked to provide such assistance.

     6.     Mr. Gross agrees to cooperate fully with AMS and its counsel in the
defense or prosecution of any claims or actions (including litigation,
investigation or governmental proceeding) that relate to events or occurrences
that transpired while he was employed by AMS. Such cooperation shall include
appearing from time to time at the offices of AMS or AMS’s counsel for
conferences and interviews, making himself available to testify on behalf of
AMS, and in general providing the officers of AMS and its counsel with the full
benefit of his knowledge with respect to any such matter. AMS agrees to make
reasonable efforts to schedule any cooperation at such times as will not
unreasonably interfere with Mr. Gross’s employment or other business activities,
and to reimburse Mr. Gross for his time in excess of 20 hours per year and
reasonable out-of-pocket costs and expenses that are required to provide such
cooperation. Any such time shall be reimbursed at the rate that Mr. Gross
establishes for his regular consulting services. Mr. Gross shall provide AMS
with verification of any such rate.

     7.     Mr. Gross and AMS, its directors, officers and employees agree that
neither will make any negative or disparaging statements about the other,
provided, however, that both may testify truthfully in a legal proceeding
pursuant to compulsory legal process.

     8.     AMS and Mr. Gross agree that, until the Agreement is publicly
disclosed as part of AMS’s filings with the U.S. Securities and Exchange
Commission or in AMS’s proxy statement to its shareholders, they will treat the
terms and existence of this Agreement as confidential and will not discuss the
Agreement or the negotiations and communications leading to this Agreement, with
anyone other than: (i) their counsel or tax advisor, as necessary to seek their
professional advice, (ii) as determined by AMS in good faith to be required by
law or by the rules and regulations of Nasdaq or any stock exchange on which
AMS’s stock may be traded, or (iii) in AMS’s case, members of AMS’s Board of
Directors and those persons necessary to implement the provisions contained in
this Agreement.

     9.     Mr. Gross and AMS shall agree in advance to any public and/or
internal announcement regarding Mr. Gross’s change in status. During the time he
is no longer a director or officer but still employed by AMS, his title shall be
“Senior Advisor.”

-3-

--------------------------------------------------------------------------------

 

     10.    This Agreement shall be binding on AMS and Mr. Gross and upon their
respective heirs, administrators, representatives, executors, successors and
assigns.

     11.    Mr. Gross acknowledges that all confidential information regarding
the business of AMS and its subsidiaries and affiliates is the exclusive
property of AMS. Upon or before the Separation Date, Mr. Gross shall return to
AMS all copies of any material involving such confidential information to AMS,
and Mr. Gross agrees that he will not, directly or indirectly, divulge or use
such information, whether or not such information is in written or other
tangible form. Mr. Gross also shall return to AMS, upon or before the Separation
Date any other items in his possession, custody or control that are the property
of AMS. Mr. Gross understands that he is and will remain bound by the terms of
the American Management Systems, Incorporated Intellectual Property Rights
Agreement, the AMS Employee Confidentiality Agreement, the AMS Guide for Ethical
Business Conduct after the Separation Date. This paragraph is intended to cover
confidential information of AMS that relates to the business of AMS that has not
otherwise been made public and shall not apply to employee responses that may be
required by proper governmental or judicial inquiry.

     12.    Mr. Gross acknowledges that, in the course of his employment with
AMS he has been exposed to a significant amount of highly confidential
information about AMS and its affiliates, and its and their clients, business
practices and strategies, and that even inadvertent disclosure of this
information would cause AMS great harm. Accordingly, Mr. Gross agrees that:

             (a)     Until and for twenty-four (24) months following the
Separation Date (the “Restricted Period”), he will not, on his own behalf or on
behalf of any other person or entity, directly or indirectly solicit for the
provision of or provide Competitive Products or Services to persons or entities
that are AMS’s clients at that time or persons or entities who Mr. Gross is, or
reasonably should be, aware that AMS is actively soliciting at that time to
become clients. “Competitive Products or Services” means products or services,
which are in whole or in part similar to or otherwise competitive with AMS’s
proprietary products or to or with services then available from AMS. Mr. Gross
may do corporate or personal consulting, during the Restricted Period so long as
his actions are consistent with the foregoing.

             (b)     During the Restricted Period he will not, directly or
indirectly, on his own behalf or in aid of another person or entity, hire or
engage or solicit for hire or engagement any individual who was an employee of
AMS or any of its affiliates then or at any time within the preceding twelve
(12) months, without the written permission of AMS.

             (c)     During the Restricted Period he will not own a five percent
or greater interest in, or be employed by or a director of, any organization
that provides Competitive Products or Services, unless he receives written
authorization from AMS to do so.

-4-

--------------------------------------------------------------------------------

 

Mr. Gross agrees that the above restrictions are reasonable including the short
length of time, and the limitation as to identified clients or prospective
clients and employees. Mr. Gross also agrees that in addition to any other
remedies, including an action for damages, AMS may seek injunctive relief
against him for violation of this Section without the need to post a bond.

     13.    AMS, on behalf of itself, its subsidiaries and affiliates, its
current and former officers and directors in their official capacities, and its
and their heirs, successors and assigns, unconditionally releases Mr. Gross and
his heirs, successors, and assigns from any and all claims, demands, actions,
and liabilities that AMS otherwise might have asserted arising out of
Mr. Gross’s employment or other association with AMS and the termination of that
employment or association, and covenants not to sue Mr. Gross or any of his
heirs, successors, or assigns based, in whole or in part, on any such claims,
demands, actions, or liabilities. The foregoing release and covenant shall not
apply to (i) any claims, demands, actions, or liabilities arising after the date
on which AMS executes this Agreement or from acts or omissions that constitute
crimes, (ii) AMS’s right to enforce the terms of this Agreement, (iii) the
rights of AMS and its current and former officers and directors to make claims
or demands against Mr. Gross in the event that claims or demands are made
against them arising out of or relating to acts or omissions of AMS, its
officers or directors, including Mr. Gross. The foregoing release and covenant
shall be effective when Mr. Gross has executed the Release and the revocation
period set forth in the Release has expired.

     14.    Any dispute or controversy arising under or in connection with this
Agreement shall, if AMS or Mr. Gross so elects, be settled by arbitration, in
accordance with the Commercial Arbitration Rules procedures of the American
Arbitration Association. Arbitration shall occur before a single arbitrator,
provided, however, that if the parties cannot agree on the selection of such
arbitrator within 30 days after the matter is referred to arbitration, each
party shall select one arbitrator and those arbitrators shall jointly designate
a third arbitrator to comprise a panel of three arbitrators. The decision of the
arbitrator shall be rendered in writing, shall be final, and may be entered as a
judgment in any court in the Commonwealth of Virginia. AMS and Mr. Gross each
irrevocably consent to the jurisdiction of the federal and state courts located
in Virginia for this purpose. The arbitrator shall be authorized to allocate the
costs of arbitration between the parties. Notwithstanding the foregoing, AMS, in
its sole discretion, may bring an action in any court of competent jurisdiction
to seek injunctive relief in order to avoid irreparable harm and such other
relief as AMS shall elect to enforce Mr. Gross’s covenants in Sections 10 and 11
hereof.

     15.    Should any provision of this Agreement be declared or be determined
by any court, administrative agency or arbitrator to be invalid or
unenforceable, and that provision cannot be modified so as to be valid and
enforceable, then that provision shall be deemed severed from the agreement and
the validity of the remaining parts, terms or provisions shall not be affected
thereby and shall be given their intended meaning and effect.

-5-

--------------------------------------------------------------------------------

 

     16.    This Agreement sets forth the entire agreement between Mr. Gross and
AMS, and fully supersedes any and all prior agreements or understandings between
them regarding its subject matter; provided, however, that nothing in this
Agreement is intended to or shall be construed to modify, impair or terminate
any obligation of Mr. Gross pursuant to any agreement with regard to the
protection of AMS’s confidential information, intellectual property rights, or
client or employee relationships, that by its terms continues after Mr. Gross’s
separation from AMS’s employment. This Agreement may only be modified by written
agreement signed by both parties. Mr. Gross acknowledges that he has not relied
upon any statement or representation, written or oral, by AMS or its affiliates,
past or present officers, directors, employees or agents that is not set forth
or referenced in this Agreement.

     17.    This Agreement shall be governed in all respects by Virginia law,
without regard to its conflict of laws principles.

          Dated:   9/30/02      

--------------------------------------------------------------------------------

  /s/ Patrick W. Gross       

--------------------------------------------------------------------------------

        Patrick W. Gross                               Dated:   9/30/02  
AMERICAN MANAGEMENT SYSTEMS,  

--------------------------------------------------------------------------------

  INCORPORATED                                     By: /s/ Garry Griffiths     
   

--------------------------------------------------------------------------------

-6-

--------------------------------------------------------------------------------

 

ATTACHMENT A

GENERAL RELEASE AND COVENANT NOT TO SUE

     In consideration of the receipt of specified benefits under my Separation
Agreement (the “Agreement”) with American Management Systems, Incorporated
(“AMS”), which Agreement hereby is incorporated by reference in this general
release and covenant not to sue (the “Release”), I, Patrick W. Gross, on behalf
of myself, and on behalf of my heirs, successors and assigns, hereby release
unconditionally AMS, all of its past, present and future subsidiaries,
affiliates, directors, officers, employees; and all of its and their respective
heirs, successors, and assigns from any and all claims, demands, actions, and
liabilities that I otherwise might have asserted, including but not limited to
those arising out of my employment or other association with AMS and the
termination of that employment or association; and covenant not to sue AMS, any
of its past, present and future subsidiaries, affiliates, directors, officers,
employees, agents, and representatives; or any of its or their respective heirs,
successors, and assigns based, in whole or in part, on any such claims, demands,
actions, or liabilities.

     The foregoing release and covenant do not apply to (1) any claims that
arise after the date on which I sign this Release, (2) my right to enforce the
terms of the Agreement, (3) any rights that I might have to benefits under the
American Management Systems, Inc. 401(k) Plan, the American Management Systems,
Inc. Simplified Employee Pension Plan, or any successor to either, (4) any
rights that I might have to benefits under any other employee benefit plan or
arrangement, to the extent those benefits are subject to sections 203 and 204 of
the Employee Retirement Income Security Act of 1974, as amended, (5) any rights
that I might have to benefits or other compensation under any other employee
benefit plan or arrangement, to the extent those benefits or compensation were
accrued and vested before my termination of employment under the terms of the
plan or arrangement as in effect at that time, or (6) my right to make claims or
demands against AMS and its current and former officers and directors in the
event that claims or demands are made against me arising out of or relating to
acts or omissions of AMS, its officers or directors. Those rights, and only
those rights, survive unaffected by this Release.

     I understand that as a consequence of my signing this Release I am giving
up, with respect to my AMS employment and the termination of that employment,
any and all rights I otherwise might have under the Age Discrimination in
Employment Act of 1967, as amended and the Older Workers Benefit Protection Act
of 1990 and any and all other federal, state or municipal laws prohibiting
discrimination in employment on the basis of age.

     I acknowledge and agree that (1) the consideration described in the
Agreement constitutes consideration in addition to the regular severance and
other benefits I would be entitled to receive from AMS upon leaving its
employment, (2) I was and am hereby advised by AMS to consult with an attorney
before signing this Release, (3) I was given a period of at least

-7-

--------------------------------------------------------------------------------

 

21 days within which to consider whether to sign this Release, and (4) I was and
am hereby advised by AMS of my statutory right to revoke this Release within
seven (7) days of my signing this Release and advised that the Release will not
become effective or enforceable until the revocation period has expired.

     I warrant and represent that my decision to enter into this Release was
(1) entirely voluntary on my part; (2) not made in reliance on any inducement,
promise or representation, whether express or implied, other than the
inducements, representations and promises expressly set forth in the Agreement;
and (3) not influenced by any threats or other coercive activities to induce
acceptance of this Release.

     I further warrant and represent that I fully understand and appreciate the
consequences of my signing this Release.

* * * *

     IN WITNESS WHEREOF, I hereby acknowledge receipt of consideration and
execute the foregoing Release this      30      day of      September     ,
2002.

  /s/ Patrick W. Gross

--------------------------------------------------------------------------------

Patrick W. Gross

Witnessed by           /s/ Garry Griffiths           on this      30      day of
     September     , 2002.

  Garry Griffiths

--------------------------------------------------------------------------------

WITNESS

-8-