a5555115-ex101.htm


     

    Exhibit
      10.1

     

    
      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).

      


      
        
           

        

        
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      (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.

      


      
        
           

        

        
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      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.

      


      
        
           

        

        
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      (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.

      


      
        
           

        

        
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      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.

      


      
        
           

        

        
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      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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