e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TA05kG0QrAyjTGL9/OKfbO6tvwCuRuawqtMBHLkl7XyV+cuL8d+zEaW1DizYypow kyBIXbHVQrehaLwazQZg9Q== 0000950133-02-003794.txt : 20021114 0000950133-02-003794.hdr.sgml : 20021114 20021114145319 ACCESSION NUMBER: 0000950133-02-003794 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MANAGEMENT SYSTEMS INC CENTRAL INDEX KEY: 0000310624 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540856778 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09233 FILM NUMBER: 02824575 BUSINESS ADDRESS: STREET 1: 4050 LEGATO RD CITY: FAIRFAX STATE: VA ZIP: 22033 BUSINESS PHONE: 7032678000 10-Q 1 w65369e10vq.htm FORM 10-Q e10vq

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Quarterly Period Ended September 30, 2002


[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the Transition Period From: To:

Commission File No.: 0-9233

American Management Systems, Incorporated
(Exact name of registrant as specified in its charter)


State or other Jurisdiction of Incorporation or Organization: Delaware		I.R.S. Employer Identification No.: 54-0856778

4050 Legato Road
Fairfax, Virginia 22033
(Address of principal executive office)


Registrant’s Telephone No., Including Area Code:		(703) 267-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


YES [X]		NO [ ]

As of November 7, 2002, 42,266,248 shares of common stock were outstanding.

CONTENTS


			Page

	Part I	Financial Information

		Item 1. Unaudited Consolidated Condensed Financial Statements and Notes		1

		Item 2. Management's Discussion and Analysis of Financial Condition
		and Results of Operations		12

		Item 3. Quantitative and Qualitative Disclosures about Market Risk		21

		Item 4. Controls and Procedures		21

	Part II	Other Information

		Item 1. Legal Proceedings		22

		Item 2. Changes in Securities		23

		Item 3. Defaults Upon Senior Securities		23

		Item 4. Submission of Matters to a Vote of Security Holders		23

		Item 5. Other Information		23

		Item 6. Exhibits and Reports on Form 8-K		23

Signatures				24

Part I FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Condensed Financial Statements and Notes

American Management Systems, Incorporated
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Unaudited
(In millions, except per share data)


		For the Three Months					For the Nine Months
		Ended September 30,					Ended September 30,

		2002			2001		2002		2001

REVENUES		$	247.5		$	281.4	$	750.6	$	923.4

EXPENSES:
	Client Project		130.0			159.6		399.7		514.8
	Selling, General and Administrative		78.7			82.1		231.5		276.4
	Research and Product Support		9.6			9.5		31.6		27.7
	Depreciation and Amortization		11.8			10.5		32.8		34.3

			230.1			261.7		695.6		853.2
	Restructuring Charge		6.0			13.6		22.1		36.1
	Special Charge		—			—		—		7.4

INCOME FROM OPERATIONS			11.4			6.1		32.9		26.7

OTHER (INCOME) EXPENSE, NET:
	Interest (Income) Expense		(1.0	)		1.6		—		3.8
	Other Expense (Income)		2.4			1.0		2.8		(0.3	)
	Loss on Equity Investments		—			0.4		—		3.0

			1.4			3.0		2.8		6.5
INCOME BEFORE INCOME TAXES			10.0			3.1		30.1		20.2
INCOME TAXES			1.7			1.3		9.9		8.3

NET INCOME		$	8.3		$	1.8	$	20.2	$	11.9

WEIGHTED AVERAGE SHARES OUTSTANDING			42.2			41.7		42.0		41.6

BASIC EARNINGS PER SHARE		$	0.20		$	0.04	$	0.48	$	0.29

WEIGHTED AVERAGE SHARES AND EQUIVALENTS			42.4			41.9		42.4		42.0

DILUTED EARNINGS PER SHARE		$	0.20		$	0.04	$	0.48	$	0.28

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

American Management Systems, Incorporated
CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions)


					September 30, 2002
ASSETS					(Unaudited)		December 31, 2001

CURRENT ASSETS:
	Cash and Cash Equivalents				$	78.8	$	53.3
	Accounts Receivable, Net					233.3		246.4
	Prepaid Expenses and Other Current Assets					25.0		31.4

			Total Current Assets			337.1		331.1

NONCURRENT ASSETS:
		Property and Equipment (Net of Accumulated Depreciation and Amortization of $48.6 and $46.7)				26.2		31.0
		Purchased and Developed Computer Software (Net of Accumulated Amortization of $127.4 and $101.9)				111.8		119.6
		Goodwill, Net				24.3		24.3
		Cash Value of Life Insurance				29.3		36.4
		Other Assets				64.3		57.8

				Total Noncurrent Assets		255.9		269.1

TOTAL ASSETS					$	593.0	$	600.2

(continued)

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

American Management Systems, Incorporated
CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions, except share data)


				September 30, 2002
LIABILITIES AND STOCKHOLDERS’ EQUITY				(Unaudited)			December 31, 2001

CURRENT LIABILITIES:
	Accounts Payable			$	13.0		$	12.1
	Accrued Compensation and Related Items				50.2			50.5
	Deferred Revenues				19.8			32.9
	Accrued Liabilities				15.4			21.8
	Accrued Restructuring Charge				12.6			15.7
	Income Taxes Payable				0.3			14.2
	Deferred Income Taxes				4.0			2.0

			Total Current Liabilities		115.3			149.2

NONCURRENT LIABILITIES:
	Deferred Compensation and Other Accrued Liabilities				34.8			38.2
	Deferred Income Taxes				25.3			27.5
	Accrued Restructuring Charge				10.6			8.8

			Total Noncurrent Liabilities		70.7			74.5

TOTAL LIABILITIES					186.0			223.7

COMMITMENTS & CONTINGENCIES — See Note 7

STOCKHOLDERS’ EQUITY:
	Preferred Stock ($0.10 Par Value; 4,000,000 Shares
		Authorized, None Issued or Outstanding)			—			—
	Common Stock ($0.01 Par Value; 200,000,000 Shares
		Authorized; 51,057,214 Issued and 42,207,661 Outstanding at September 30, 2002 and 51,057,214 Issued and 41,697,554
		Outstanding at December 31, 2001)			0.5			0.5
	Capital in Excess of Par Value				82.2			90.8
	Unearned Compensation				(2.8	)		(4.5	)
	Retained Earnings				377.1			356.9
	Accumulated Other Comprehensive Loss				(18.4	)		(22.3	)
	Treasury Stock, at Cost (8,849,553 shares at September 30, 2002 and 9,359,660 shares at December 31, 2001)				(31.6	)		(44.9	)

			Total Stockholders’ Equity		407.0			376.5

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				$	593.0		$	600.2

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

American Management Systems, Incorporated
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Unaudited
(In millions)


			For the Nine Months
			Ended September 30,

			2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income		$	20.2		$	11.9
	Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
		Depreciation		5.7			6.4
		Amortization		27.1			27.9
		Stock Compensation Expense		2.4			1.9
		Loss on Equity Investments		—			3.0
		Deferred Income Taxes		0.3			(5.0	)
		Decrease in Cash Surrender Value of Life Insurance		0.8			1.2
		Provision for Doubtful Accounts		—			6.4
		Loss on Disposal of Assets		0.3			—
		Restructuring and Special Charge Asset Write-Offs		—			5.0
	Changes in Assets and Liabilities:
		Decrease in Accounts Receivable		19.3			6.8
		Decrease (Increase) in Prepaid Expenses and Other Current Assets		7.2			(3.3	)
		(Increase) Decrease in Other Assets		(3.0	)		4.4
		Decrease in Accrued Compensation and Related Items		(5.3	)		(21.6	)
		(Decrease) Increase in Accounts Payable and Other Accrued Liabilities		(5.4	)		6.7
		(Decrease) Increase in Accrued Restructuring Charge		(1.4	)		15.0
		Decrease in Deferred Revenue		(13.2	)		(19.4	)
		Decrease in Income Taxes Payable		(13.9	)		(4.3	)

	Net Cash Provided by Operating Activities			41.1			43.0

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of Property and Equipment			(1.1	)		(7.0	)
	Purchase and Development of Computer Software			(19.2	)		(24.7	)
	Other Assets			(1.1	)		(11.3	)

	Net Cash Used in Investing Activities			(21.4	)		(43.0	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from Borrowings			—			41.0
	Payments on Borrowings			—			(69.0	)
	Proceeds from Common Stock Options Exercised and Employee Stock Purchase Plan			6.9			1.9
	Payments to Acquire Treasury Stock			(2.9	)		—

	Net Cash Provided by (Used in) Financing Activities			4.0			(26.1	)
	Effect of Exchange Rate Changes on Cash			1.8			(2.4	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				25.5			(28.5	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				53.3			43.2

CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	78.8		$	14.7

NON-CASH FINANCING ACTIVITIES:
	Treasury Stock Utilized for Stock Options Exercised and Employee Stock Purchase Plan		$	9.4		$	2.2

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.

American Management Systems, Incorporated
SUPPLEMENTAL CONSOLIDATED REVENUES BY MARKET

Unaudited
(In millions)


	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,

	2002		2001			2002		2001

Federal Government Agencies	$	86.6	$	77.6		$	254.8	$	264.3
State and Local Governments and Education		68.6		74.2			210.1		222.2
Communications, Media and Entertainment		45.7		76.3			151.9		253.4
Financial Services Institutions		30.4		38.3			90.0		137.0
Other Corporate Clients		16.2		15.0			43.8		46.5

Total Revenues	$	247.5	$	281.4		$	750.6	$	923.4

Revenues by market for the three months ended September 30, 2002 reflect classification adjustments totaling $1.8 million compared to preliminary amounts previously reported in the Corporation’s earnings release dated October 17, 2002.

American Management Systems, Incorporated
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Unaudited

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements of American Management Systems, Incorporated (the “Corporation”) have been prepared pursuant to the rules and regulations of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes for the fiscal year ended December 31, 2001, included in the Corporation’s Annual Report on Form 10-K filed with the SEC on March 29, 2002. The accompanying unaudited interim consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year. Certain prior period amounts have been reclassified to conform with the current period presentation.

NOTE 2 – COMPREHENSIVE INCOME

The Corporation accounts for comprehensive income under SFAS No. 130, “Reporting Comprehensive Income.” The components of comprehensive income are as follows (in millions):


		For the Three Months					For the Nine Months
		Ended September 30,					Ended September 30,

		2002			2001		2002		2001

NET INCOME		$	8.3		$	1.8	$	20.2	$	11.9
OTHER COMPREHENSIVE (LOSS) INCOME:
	Currency Translation Adjustment		(0.4	)		1.4		3.9		(3.7	)

COMPREHENSIVE INCOME		$	7.9		$	3.2	$	24.1	$	8.2

NOTE 3 – EARNINGS PER SHARE RECONCILIATION

Basic earnings per share is computed by dividing net income by the weighted average shares outstanding during the year. Diluted earnings per share is computed similarly to basic earnings per share except that the weighted average shares outstanding is increased to include the potentially dilutive effect of outstanding options and restricted stock.

The computations for basic and dilutive EPS are as follows (in millions, except per share data):


				Three Months Ended				Nine Months Ended
				September 30,				September 30,

				2002		2001		2002		2001

Basic EPS
	Net Income (Numerator)			$	8.3	$	1.8	$	20.2	$	11.9
	Weighted Average Shares Outstanding (Denominator)				42.2		41.7		42.0		41.6

	Basic EPS			$	0.20	$	0.04	$	0.48	$	0.29

Diluted EPS
	Net Income (Numerator)			$	8.3	$	1.8	$	20.2	$	11.9
	Weighted Average Shares and Equivalents:
		Weighted Average Shares Outstanding			42.2		41.7		42.0		41.6
		Effect of Other Dilutive Securities:
			Options		—		0.1		0.1		0.1
			Nonvested Restricted Stock		0.2		0.1		0.3		0.3

	Total Weighted Average Shares and Equivalents (Denominator)				42.4		41.9		42.4		42.0

	Diluted EPS			$	0.20	$	0.04	$	0.48	$	0.28

NOTE 4 – GOODWILL — ADOPTION OF SFAS NO. 142

Effective January 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, SFAS 142 requires the Corporation to perform a transitional goodwill impairment test within six months from the date of adoption. In accordance with the standard, the Corporation completed the transitional goodwill impairment test and determined no impairment charge of goodwill is required. Under SFAS 142, goodwill is to be reviewed at least annually thereafter for impairment; the Corporation has elected to perform this review annually as of January 1.

The following table discloses the reconciliation of reported net income to net income adjusted for goodwill amortization expense (in millions, except per share data).


		For the Three Months				For the Nine Months
		Ended September 30,				Ended September 30,

		2002		2001		2002		2001

Reported net income		$	8.3	$	1.8	$	20.2	$	11.9
Add back: Goodwill amortization, net of tax			—		0.3		—		0.9

Adjusted net income		$	8.3	$	2.1	$	20.2	$	12.8

Basic earnings per share:
	Reported earnings per share	$	0.20	$	0.04	$	0.48	$	0.29
	Goodwill amortization, net of tax		—		0.01		—		0.02

	Adjusted earnings per share	$	0.20	$	0.05	$	0.48	$	0.31

Diluted earnings per share:
	Reported earnings per share	$	0.20	$	0.04	$	0.48	$	0.28
	Goodwill amortization, net of tax		—		0.01		—		0.02

	Adjusted earnings per share	$	0.20	$	0.05	$	0.48	$	0.30

NOTE 5 – INCOME TAXES

During the nine months ended September 30, 2002, the Corporation revised its annual effective tax rate from 41% to 33%. An analysis performed by the Corporation, with the support of an outside consultant, of approximately 60 client contracts indicated the Corporation could claim additional research and experimentation tax credits on prior year Federal income tax returns. The calculation of these credits resulted from a thorough analysis of qualifying expenditures and IRS allowability of such credits. The reduced annual effective tax rate reflects the expected value of the tax refunds due from the amended Federal income tax returns.

NOTE 6 – RESTRUCTURING CHARGE

Severance & Benefits

In 2001, the Corporation implemented a restructuring plan and recorded a charge for severance and severance-related costs. As of December 31, 2001, the Corporation had a remaining severance liability of $6.3 million, all of which had been paid as of June 30, 2002. Continuing the Corporation’s efforts to align its workforce with changing market conditions and new business strategies, for the nine months ended September 30, 2002, the Corporation recorded additional charges totaling $17.6 million for severance and severance-related costs primarily as a result of identifying approximately 423 additional staff reductions. Staff reductions include individuals at all levels within the Corporation in both professional service and support functions. During the nine months ended September 30, 2002, the Corporation paid $16.7 million in severance and severance-related costs. Of the 423 additional staff reductions, approximately 338 had been terminated and separated from the Corporation at September 30, 2002. The remaining $7.2 million liability as of September 30, 2002 for severance and severance-related costs is expected to be paid within one year.

Facilities

As of December 31, 2001, the Corporation had a remaining restructuring liability of $17.8 million related to the closure and consolidation of facilities. During the nine months ended September 30, 2002, the Corporation recorded an additional charge of $4.5 million related to changes in estimates primarily attributable to current real estate market conditions and the timing of anticipated subtenant rental agreements. During the nine months ended September 30, 2002, the Corporation made cash payments of $6.1 million. Of the remaining $16.0 million liability at September 30, 2002, $10.6 million represents a noncurrent liability for costs to be incurred through 2010.

Restructuring reserve activities as of and for the nine months ended September 30, 2002 (in millions) were as follows:


			Severance & Benefits			Facilities			Software & Other			Total

Restructuring Liability as of December 31, 2001			$	6.3		$	17.8		$	0.4		$	24.5

Restructuring Charge
	First Quarter			—			—			—			—
	Second Quarter			11.6			—			—			11.6
	Second Quarter Change in Estimate			—			4.5			—			4.5
	Third Quarter			6.0			—			—			6.0

		Total Restructuring Charge		17.6			4.5			—			22.1
Leasehold amortization and related items				—			(0.2	)		—			(0.2	)
Cash Payments				(16.7	)		(6.1	)		(0.4	)		(23.2	)

	Restructuring Liability as of September 30, 2002		$	7.2		$	16.0		$	0.0		$	23.2

NOTE 7 – COMMITMENTS AND CONTINGENCIES

On July 17, 2001, the Federal Retirement Thrift Investment Board (the “Thrift Board”) gave written notice to AMS stating that the Thrift Board had terminated for default its contract with AMS for development and implementation of an automated record-keeping system for the federal employee Thrift Savings Plan. On the same date, the Thrift Board’s executive director, Roger W. Mehle, purporting to act as “managing fiduciary” of the Thrift Savings Fund, filed a companion lawsuit against AMS relating to AMS’s performance of the contract seeking compensatory damages of $50.0 million and punitive damages of $300.0 million, plus re-procurement costs, costs and expenses of litigation (including reasonable attorneys’ fees) and prejudgment interest.

AMS moved to dismiss the lawsuit filed by Mr. Mehle. On November 30, 2001, the United States District Court for the District of Columbia granted AMS’s motion to dismiss Mr. Mehle’s lawsuit for lack of jurisdiction. Mr. Mehle has appealed that order. AMS has filed both procedural and dispositive motions with the Court of Appeals. On January 25, 2002, the U.S. Department of Justice filed a motion on behalf of the U.S. Government to intervene which has been granted, and a motion to dismiss Mr. Mehle’s appeal. Both the Government’s motion to dismiss the appeal and the motion by AMS to dismiss the appeal are opposed by Mr. Mehle, and are pending. A motion by AMS, whose position is supported by the United States, to strike the appearance of private counsel representing Mr. Mehle, also is pending and is opposed by Mr. Mehle. The Court of Appeals has disposed of several other motions, largely procedural in nature. The Court of Appeals has set a briefing schedule for the appeal; oral argument is scheduled for March 7, 2003.

AMS believes that the appropriate forum for resolving its dispute over the Thrift Board contract is in the United States Court of Federal Claims (“CFC”), a court of specialized jurisdiction that ordinarily entertains all disputes relating to U.S. Government contracts. To that end, AMS filed suit in the CFC against the United States, which is the contracting party in the Thrift Board contract, seeking reversal of the Thrift Board’s decision terminating the contract for default and asking the court to convert the termination into a termination for convenience. The U.S. Department of Justice is defending the United States in this case. The United States moved to dismiss AMS’s Complaint for lack of jurisdiction, arguing that the Thrift Board is a non-appropriated fund instrumentality (“NAFI”). AMS opposed the Government’s jurisdictional motion. By written opinion and order dated August 30, 2002, the CFC denied the United States’ motion to dismiss, concluding that jurisdiction did, in fact, exist. On September 12, 2002, the United States filed its Answer to AMS’s Complaint, thereby responding to AMS’s claims in the CFC. On November 1, 2002, the United States filed a motion seeking permission from the CFC to immediately appeal the CFC’s August 30, 2002 decision, and an order staying further proceedings in the CFC pending the resolution of any such appeal. AMS intends to oppose the United States’ motion. Management is unable to predict the outcome of the litigation. At September 30, 2002, AMS had approximately $40.4 million of accounts receivable, classified as a long-term contract receivable in Other Assets outstanding under this contract.

On July 16, 2002, AMS submitted a contract termination settlement proposal and claim to the Thrift Board seeking recovery of approximately $58.5 million of unpaid costs and fees incurred in performing the contract and winding it down in accordance with the termination for convenience provisions of the contract. The proposal was submitted pursuant to the instructions given by the Thrift Board’s contracting officer at the time of termination and in accordance with the terms of the contract and the Federal Acquisition Regulation. The submission of a government contractor’s settlement proposal is a routine step in the administrative process of terminating a federal government contract. On August 16, 2002, the Thrift Board denied any liability to pay the settlement proposal and claim. AMS intends to challenge the Thrift Board’s decision with respect to these matters.

NOTE 8 – NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations,” which is effective January 1, 2003. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Corporation does not believe that the adoption of SFAS 143 will have a significant impact on its financial position or results of operations.

On January 1, 2002, the Corporation adopted SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses the financial accounting and reporting for the impairment of long-lived assets. This statement supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” SFAS 144 also supersedes Accounting Principles Board Opinion No. 30 (“APB 30”), “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” The adoption of this standard did not have a material effect on the financial statements.

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective January 1, 2003. SFAS 146 nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” This statement requires that an exit or disposal activity-related cost be recognized when the liability is incurred instead of when an entity commits

to an exit plan. The Corporation does not believe that the adoption of SFAS 146 will have a significant impact on its financial position or results of operations.

NOTE 9 – SUBSEQUENT EVENTS

On November 11, 2002, the Corporation announced plans to sell its global utilities practice to Wipro, Ltd. for approximately $26 million, as part of the Corporation’s continuing strategy to reposition for growth. The agreement includes the transfer of customers and intellectual property. The transaction, which is scheduled to close prior to year-end, has been approved by the board of directors of both companies and is subject to customary legal approvals and closing conditions.

On November 13, 2002, the Corporation replaced its former $120 million multi-currency bank credit facility with a new $160 million three year multi-currency bank credit agreement that expires on November 13, 2005. The new credit facility is available for general corporate purposes and the Corporation presently has no outstanding borrowings under the facility. The Corporation and certain subsidiaries may borrow funds under the new revolving credit agreement in the approved currencies, subject to certain minimum amounts per borrowing. Interest on such borrowings generally ranges from LIBOR plus 112.5 basis points to 175.0 basis points, depending on the debt-to-EBITDA ratio, as defined in the agreement. The Corporation is required to pay a facility fee ranging from 50 to 65 basis points per annum on the total facility based on the debt-to-EBITDA ratio. The new revolving credit agreement includes covenants relating to the maintenance of certain financial ratios, and may impose restrictions on our ability to pay dividends or make acquisitions, divestitures and investments.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated condensed financial statements and notes included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2001.

Forward-Looking Statements and Factors that May Affect Our Business

We have included in this Quarterly Report on Form 10-Q forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks, uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in these forward-looking statements. These statements are based on our current expectations, estimates and projections. Our use of words such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” and similar expressions are generally intended to identify forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements:

• A significant or prolonged economic downturn in the U.S. or internationally could have a material adverse effect on our operating results.

• Disruptions in commercial activities occasioned by actual or threatened terrorist activity or armed conflict could have a significant negative effect on our results of operations.

• Our inability to complete large projects as expected due to unanticipated delays, re-negotiations, cancellation by the customer, and changing customer requirements and project scope could result in a decline in revenues or profits, a diminution of our professional reputation or legal liability.

• Our inability to successfully recruit, retain and assimilate entry-level and experienced employees could adversely affect our operating results and our ability to effectively compete and grow our business.

• Our pricing, revenues and margins could be negatively affected if current or prospective clients decide to undertake fewer information technology systems projects or to consolidate with others in our target markets.

• We may be unable to realize revenues from benefits-funded contracts in the amounts or at the times expected if our customers are unable to achieve the amount of benefits anticipated due to factors such as economic downturns, tax base erosion or state cutbacks that result in fewer state resources being available to generate profits.

We specifically disclaim any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing our estimates or views as of any subsequent date.

Corporation Overview

AMS is an international business and information technology consulting firm whose customers have included 43 state and local governments, most federal agencies, and hundreds of companies in the Fortune 500. With deep industry experience and technical know-how in all levels of government and throughout

the private sector, AMS delivers results that dramatically impact business performance and the relationship between an organization and its customers. Founded in 1970, AMS is headquartered in Fairfax, Virginia with 50 other offices worldwide.

Our mission is to partner with customers to improve their business performance through the intelligent use of information technology. Our business approach blends deep industry knowledge with strategic services, technology innovation and project delivery expertise to manage mission-critical information technology and eBusiness initiatives. We exploit technology trends through applied research and development, best-of-breed alliances with fellow market leaders and our experienced professional staff.

We operate as one segment and focus on clients in specific industries, which we call target markets. We have the following five target markets: Federal Government Agencies; State and Local Governments and Education; Communications, Media and Entertainment (formerly New Media and Communications Firms); Financial Services Institutions; and Other Corporate Clients.

Presentation

Revenues
We derive our revenues primarily from contracts for business and information technology solutions. Revenue recognition is based on the terms of our contracts. Revenues on fixed-price contracts are recognized using the percentage-of-completion method based on the percentage of costs incurred to date in relation to total estimated costs. Revenues on cost-reimbursable contracts are recognized to the extent of costs incurred plus a proportionate amount of the fee earned. Revenues on time-and-materials contracts are recognized to the extent of billable rates times hours delivered plus expenses incurred. Revenues from benefits-funded contracts are deferred until it can be predicted with reasonable certainty that the client’s benefit stream will generate amounts sufficient to fund the contract. After that time, revenues from benefits-funded contracts are also generally recognized on a percentage-of-completion basis. Reimbursements, including those relating to travel and other out-of-pocket expenses, are included in revenues, and an equivalent amount of reimbursable expenses are included in client project expense.

Operating Expenses
Our major types of operating expenses include the following:

• Client Project expenses include direct expenses to provide services to our clients such as compensation costs, travel and out-of-pocket expenses, and costs for subcontractors.

• Selling, General and Administrative (“SG&A”) expenses include expenses not directly related to the delivery of client services such as compensation for support personnel, costs for information systems, incentive compensation, selling and marketing expenses, and recruiting and training expenses.

• Research and Product Support expenses include research and development expenses incurred as part of the software development cycle that are not capitalized as well as support/maintenance of existing software.

• Depreciation and Amortization expenses include the amortization of internally developed and purchased software and depreciation of furniture, equipment and leasehold improvements. Prior to January 1, 2002 the amortization of goodwill was also included. Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS

142”) which was adopted January 1, 2002, requires the discontinuation of goodwill amortization.

• Restructuring Charge includes expenses associated with implementing our formal restructuring plan.

• Special Charge includes significant expenses associated with the write-down of certain software assets no longer expected to provide future value and reserves in connection with certain client engagements.

Interest Income/Expense
Interest expense (net of interest income) is related to interest incurred on borrowings and fees on our revolving credit facility. It also includes interest expense related to our deferred compensation plan.

Other Income/Expense
Other income/expense includes activity not related to our primary business. For example, other income/expense includes gains and losses on the disposal of assets, market gains and losses and premium expense on company-owned life insurance policies, and the costs incurred in connection with amending prior year tax returns.

Loss on Equity Investments
Loss on equity investments reflects our share, as a joint venture investor, in the operating results of Competix, Inc.

Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated condensed financial statements. The preparation of these interim financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Application of these policies is particularly important to the portrayal of our financial condition and results of operations. We consider the accounting policies below to be our critical accounting policies:

• revenue recognition;

• net realizable value of software;

• income taxes; and

• restructuring.

Our significant accounting policies, including the critical policies listed above, are described in the notes to the consolidated financial statements for the year ended December 31, 2001 included in our Annual Report on Form 10-K filed with the SEC.

Historical Results of Operations

The following table sets forth the unaudited percentage of revenues represented by items in our unaudited consolidated condensed statements of operations for the periods presented.


	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,

	2002			2001			2002			2001

REVENUES		100	%		100	%		100	%		100	%

EXPENSES:
Client Project		52.5	%		56.7	%		53.3	%		55.8	%
Selling, General and Administrative		31.8	%		29.2	%		30.8	%		29.9	%
Research and Product Support		3.9	%		3.4	%		4.2	%		3.0	%
Depreciation and Amortization		4.8	%		3.7	%		4.4	%		3.7	%

		93.0	%		93.0	%		92.7	%		92.4	%
Restructuring Charge		2.4	%		4.8	%		2.9	%		3.9	%
Special Charge		—			—			—			0.8	%

INCOME FROM OPERATIONS		4.6	%		2.2	%		4.4	%		2.9	%
OTHER (INCOME) EXPENSE, NET		0.6	%		1.1	%		0.4	%		0.7	%

INCOME BEFORE INCOME TAXES		4.0	%		1.1	%		4.0	%		2.2	%
INCOME TAXES		0.7	%		0.5	%		1.3	%		0.9	%

NET INCOME		3.3	%		0.6	%		2.7	%		1.3	%

Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001

Revenues
Revenues for the three months ended September 30, 2002 were $247.5 million, a decrease of $33.9 million, or 12.0%, compared to the same period in 2001. In our Federal Government Agencies market, revenue for the three months ended September 30, 2002 increased $9.0 million compared to the same period in 2001, reflecting, in part, our ability to capitalize on the increase in fiscal year-end spending in government agencies. Revenue in our Other Corporate Clients market increased $1.2 million, compared to the same period in 2001. All other target markets declined from the same period of the prior year as clients reduced or deferred their spending on information technology and consulting services due to the slowdown in the economy and the weak information technology market. Due to the global economic weakening in the telecommunications industry, our Communications, Media and Entertainment market experienced the most significant decline, accounting for 90.3% of the $33.9 million drop in revenues. For the three months ended September 30, 2002, the proportion of our total revenue derived from the public sector was 62.7%, an increase of 8.8%, from the same period in 2001. Approximately 85% of our work continues to come from clients with whom we have performed work previously.

Compared to the same period in 2001, revenues from U.S. clients declined 9.9% to $212.2 million for the three months ended September 30, 2002, while revenues from international clients dropped 23.0% to $35.3 million. Revenues from international clients were derived from work with customers primarily in the Communications, Media and Entertainment and Financial Services Institutions target markets across Europe, Asia and the Pacific Rim. This decline internationally is consistent with the decline in those industries overall. Business with international clients represented 14.3% of our total revenues for the three months ended September 30, 2002, compared to 16.3% for the same period in 2001.

Operating Expenses
Total operating expenses before restructuring charges for the third quarter of 2002 were $230.1 million, a decrease of $31.6 million, or 12.1%, compared to operating expenses before restructuring in the same period in 2001. As a percentage of revenue, operating expenses before restructuring charges were 93.0% for both the three months ended September 30, 2002 and 2001.

Client Project
Client project expenses were $130.0 million for the three months ended September 30, 2002, a decrease of $29.6 million, or 18.5%, compared with the same period in 2001. Client project expenses declined due to the slowdown or conclusion of project work for customers. As a percentage of revenue, client project expenses decreased from 56.7% for the three months ended September 30, 2001 to 52.5% for the three months ended September 30, 2002. Approximately 2% of the 4.2% decrease is related to the recognition of approximately $6 million of revenues for the three months ended September 30, 2002, for which we had no current period client project expenses. Approximately another 1% of the 4.2% decrease in client project expenses as a percentage of revenue is related to our improved collections experience. An analysis of our accounts receivable as of September 30, 2002 concluded that the allowance for doubtful accounts was adequate to cover estimated unknown and known uncollectable accounts. Therefore, no bad debt expense was recorded in the third quarter of 2002, compared with $1.3 million in the third quarter of 2001. In addition, we estimate that our allowance for doubtful accounts is adequate to cover any potential exposure to unpaid accounts receivable relating to telecommunications companies that have seen declining financial performance since September 30, 2002.

Selling, General and Administrative
SG&A expenses were $78.7 million for the three months ended September 30, 2002, a decrease of $3.4 million, or 4.1%, compared with the same period in 2001. The decline was primarily attributable to reductions in incentive compensation and certain staff-related expenses resulting from our cost management efforts throughout 2001 and 2002. Increased business development expenses attributable to our investment in a dedicated, commission-based sales force offset the decline in other SG&A expenses. SG&A expenses as a percentage of revenue were 31.8% and 29.2% for the three month periods ended September 30, 2002 and 2001, respectively.

Depreciation and Amortization
Depreciation and amortization expense increased from $10.5 million for the three months ended September 30, 2001 to $11.8 million for the three months ended September 30, 2002. The $1.3 million increase, or 12.4%, was due to the commencement of amortization of various software assets placed into service during the third quarter of 2002 offset by a $0.5 million reduction of amortization expense related to the discontinuation of goodwill amortization, effective January 1, 2002, as a result of the adoption of SFAS 142.

Restructuring Charge
In a continuing effort to align our workforce with market conditions, primarily with respect to the telecommunications market, we incurred a $6.0 million restructuring charge for the three months ended September 30, 2002. We may incur additional restructuring charges during the remainder of 2002 as we continually re-align our workforce and cost structure to changing information technology services market conditions.

Interest Income/Expense
Interest income, net of interest expense, of $1.0 million for the three months ended September 30, 2002 included $1.4 million of interest income attributable to amended prior year Federal income tax returns claiming additional research and experimentation tax credits. The $1.4 million of interest income was offset in part by interest expense related to our deferred compensation program. For the three months ended September 30, 2001, interest expense, net of interest income, was $1.6 million due to fees on our revolving credit facility and interest on borrowings under our credit facility and term loan agreements.

Other Expense
Other expense of $2.4 million for the three months ended September 30, 2002 included $1.6 million of consulting fees related to the analysis and preparation of amended Federal income tax returns claiming additional research and experimentation tax credits. Other expense was $1.0 million for the three months ended September 30, 2001 largely due to a decrease in the cash surrender value of company-owned life insurance.

Loss on Equity Investments
In late 1998, Competix was established as a joint venture between AMS and the Bank of Montreal to provide online loan application processing services to small and mid-sized financial institutions. Our share of Competix’s losses was $0.4 million for the three months ended September 30, 2001. As of December 31, 2001, we had no remaining investment cost basis in the Competix venture.

Income Taxes
Our effective tax rate decreased from 41% for the three months ended September 30, 2001 to 17% for the three months ended September 30, 2002. The decline was attributable to expected refunds on prior year Federal income tax returns as a result of additional research and experimentation tax credits. We cannot currently estimate what impact, if any, these credits will have on our effective tax rate for 2003.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001

Revenues
Revenues for the nine months ended September 30, 2002 were $750.6 million, a decrease of $172.8 million or 18.7%, from $923.4 million for the nine months ended September 30, 2001. Revenues for the nine months ended September 30, 2002 in each of our target markets declined from the same period of the prior year as clients reduced or delayed their spending on information technology and consulting services as a result of the slowdown in the economy. The Communications, Media and Entertainment target market accounted for 58.7% of the $172.8 million decline in revenues due to the global economic weakening in the telecommunications industry. The Financial Services Institutions target market also experienced a significant decline in revenues accounting for 27.2% of the $172.8 million decrease in revenues. For the nine months ended September 30, 2002, the proportion of our total revenue derived from the public sector was 61.9%, an increase of 9.2% from the same period in 2001. Approximately 85% of our work continues to come from clients with whom we have performed work previously.

During the first nine months of 2002, business with international clients decreased 33.6% from $149.2 million in the first nine months of 2001 to $99.1 million in the first nine months of 2002. Revenues from international clients were derived from work with customers primarily in the Communications, Media and Entertainment and Financial Services Institutions target markets across Europe, Asia and the Pacific Rim. Compared to the same period in 2001, revenues from U.S. clients declined 15.8% to $651.6 million for the nine months ended September 30, 2002. Business with international clients represented 13.2% of our total revenues for the nine months ended September 30, 2002, compared to 16.2% for the same period in 2001.

Operating Expenses
Total operating expenses before restructuring charges for the first nine months of 2002 were $695.6 million, a decrease of $157.6 million, or 18.5%, compared to operating expenses before restructuring and special charges in the same period in 2001. As a percentage of revenue, operating expenses before restructuring charges were 92.7% for the first nine months of 2002 compared to operating expenses before restructuring and special charges of 92.4% for the first nine months of 2001.

Client Project
Client project expenses were $399.7 million for the nine months ended September 30, 2002, a decrease of $115.1 million, or 22.4%, compared with the same period in 2001. Client project expenses declined due to the slowdown of new and conclusion of existing project work for customers. As a percentage of revenue, client project expenses decreased from 55.8% for the nine months ended September 30, 2001, to 53.3% for the nine months ended September 30, 2002. Approximately 1% of the 2.5% decrease is related to our improved collections experience. An analysis of our accounts receivable as of September 30, 2002 concluded that the allowance for doubtful accounts was adequate to cover estimated unknown and known uncollectable accounts. Therefore, no bad debt expense was recorded in the first nine months of 2002, compared with $6.4 million in the first nine months of 2001. In addition, we estimate that our allowance for doubtful accounts is adequate to cover any potential exposure to unpaid accounts receivable relating to telecommunications companies that have seen declining financial performance since September 30, 2002. Approximately another 1% of the 2.5% decrease in client project expenses as a percentage of revenue is related to the recognition of approximately $6 million of revenues for the three months ended September 30, 2002, for which we had no current period client project expenses.

Selling, General and Administrative
SG&A expenses were $231.5 million for the nine months ended September 30, 2002, a decrease of $44.9 million, or 16.2% compared with the same period in 2001. The decline was primarily attributable to reductions in incentive compensation and certain staff-related expenses resulting from our cost management efforts throughout 2001 and 2002. The focus of these initiatives was to reduce corporate overhead costs to align them with reduced revenue projections. The specific initiatives to reduce these costs included the consolidation, during 2001, of various support functions (human resources, internal information technology, facilities management, communications and marketing) into headquarters-centered groups. These functions were previously decentralized throughout our organization. As a percentage of revenue, SG&A expenses were 30.8% for the nine months ended September 30, 2002 and 29.9% for the nine months ended September 30, 2001.

Research and Product Support
Research and product support expenses were $31.6 million for the first nine months of 2002, an increase of $3.9 million, or 14.1%, compared with the same period in 2001. The increase was primarily due to the inclusion of approximately $5.1 million in expenses, beginning in the second quarter of 2002, to support the customer care and billing software system, Tapestry®. Prior to this time, the costs were included in

client project expenses as they were incurred in support of project deliverables for a specific client engagement.

Depreciation and Amortization
Depreciation and amortization expense was $32.8 million for the nine months ended September 30, 2002, a decrease of $1.5 million, or 4.4%, compared with the same period in 2001. This decrease was due to a $1.5 million reduction in amortization expense related to the discontinuation of goodwill amortization, effective January 1, 2002, as a result of the adoption of SFAS 142.

Restructuring Charge
In a continuing effort to match our workforce with market conditions and align our personnel with new business strategies, we incurred a $22.1 million restructuring charge for the nine months ended September 30, 2002. The restructuring charge for the first nine months of 2002 included $17.6 million for severance and severance-related costs and $4.5 million related to changes in estimates, associated with the Corporation’s liability for the closure and consolidation of facilities, primarily attributable to current real estate market conditions and the timing of anticipated subtenant rental agreements.

Special Charge
We incurred no special charge for the nine months ended September 30, 2002. The $7.4 million special charge for the nine months ended September 30, 2001 represented reserves in connection with certain client engagements and the write-down of software assets not expected to provide future value.

Interest Expense
Interest expense was approximately equal to interest income for the nine months ended September 30, 2002. During the same period in 2001, net interest expense increased $3.8 million. During the first nine months of 2002, we accrued $1.4 million of interest income on prior year Federal income tax returns filed with the Internal Revenue Service claiming additional research and experimentation tax credits. The $1.4 million of interest income was offset by the cost of interest related to our deferred compensation program. During the first nine months of 2001, interest expense of $3.8 million included interest on borrowings under the credit facility and term loan agreements, revolving credit facility fees and interest in connection with our deferred compensation program.

Other Expense/Income
Other expense of $2.8 million for the nine months ended September 30, 2002, included consulting fees of $1.6 million for assistance with the analysis and preparation of amended Federal income tax returns claiming additional research and experimentation tax credits. Other expense for the nine months ended September 30, 2002 also included premium expense and a decrease in the cash surrender value of company-owned life insurance. Other income of $0.3 million for the nine months ended September 30, 2001 was related to an insurance benefit associated with company-owned life insurance offset in part by premium expense and a decrease in the cash surrender value of company-owned life insurance.

Loss on Equity Investments
In late 1998, Competix was established as a joint venture between AMS and the Bank of Montreal to provide online loan application processing services to small and mid-sized financial institutions. Our share of Competix’s losses was $3.0 million for the nine months ended September 30, 2001. As of December 31, 2001, we had no remaining investment cost basis in the Competix venture.

Income Taxes
Our effective tax rate decreased from 41% for the nine months ended September 30, 2001 to 33% for the nine months ended September 30, 2002. The decline in our 2002 annual effective tax rate to 33% was attributable to expected refunds on prior year Federal income tax returns as a result of additional research and experimentation tax credits. We cannot currently estimate what impact, if any, these credits will have on our effective tax rate for 2003.

Liquidity and Capital Resources

We provide for our operating cash requirements primarily through cash flow from operations. During the nine months ended September 30, 2002, we had a loan agreement with a group of lenders that provided a multi-currency revolving credit facility not to exceed $120 million, under which there were no borrowings outstanding at September 30, 2002. This bank credit facility was available for general corporate purposes, including working capital borrowings, capital investments and other obligations. During the nine months ended September 30, 2002 we complied with all covenants included in the credit facility.

On November 13, 2002, we signed a new three year unsecured bank credit agreement with a group of lenders that provides a multi-currency revolving credit facility not to exceed $160 million. This credit facility is available for working capital borrowings, capital expenditures, acquisitions, and other corporate purposes. There are presently no borrowings outstanding under this new credit agreement that replaced our previous $120 million multi-currency credit facility mentioned above.

The Corporation and certain subsidiaries may borrow funds under the new revolving credit agreement in the approved currencies, subject to certain minimum amounts per borrowing. Interest on such borrowings will generally range from LIBOR plus 112.5 basis points to 175.0 basis points, depending on the debt-to-EBITDA ratio, as defined in the agreement. The Corporation is required to pay a facility fee ranging from 50 to 65 basis points per annum on the total facility based on the debt-to-EBITDA ratio.

The new revolving credit agreement includes covenants relating to the maintenance of certain financial ratios, and may impose restrictions on our ability to pay dividends or make acquisitions, divestitures and investments. The new revolving credit agreement expires on November 13, 2005.

Our total cash and cash equivalents increased $25.5 million, or 47.8%, to $78.8 million at September 30, 2002 when compared with December 31, 2001. The increase in cash and cash equivalents was due to $41.1 million in cash provided by operating activities, $4.0 million in cash provided by financing activities and $1.8 million related to the positive effect of exchange rate changes. These increases were offset by $21.4 million of cash used in investing activities during the nine months ended September 30, 2002, predominantly related to investments in the development of computer software and investments to expand our strategic alliances in the financial services market.

Net cash provided by operating activities was $41.1 million during the nine months ended September 30, 2002, a decrease of $1.9 million from the nine months ended September 30, 2001. Net cash used in investing activities was $21.4 million for the nine months ended September 30, 2002, compared to $43.0 million for the nine months ended September 30, 2001. The decline primarily was due to reduced investments in the purchase and development of computer software and reduced investments in strategic alliances in the financial services market. Net cash provided by financing activities was $4.0 million for the nine months ended September 30, 2002, compared to net cash used in financing activities of $26.1 million for the nine months ended September 30, 2001. The increase in cash provided by financing

activities was due to the elimination of payments on borrowings and increased cash from stock option exercises and the Employee Stock Purchase Plan.

We enter into large, long-term contracts and, as a result, periodically maintain individually significant receivable balances with certain major clients. At September 30, 2002, we had approximately $40.4 million in accounts receivable, classified as a long-term contract receivable in Other Assets, under a predominantly cost-plus incentive fee contract with the Thrift Board. See Part II, Item 1, Legal Proceedings, for a discussion of pending litigation involving the Thrift Board. Also, we had approximately $23.6 million of accounts receivable under a benefits-funded contract with a single customer. No other single customer represents greater than 10% of outstanding receivables.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is hereby incorporated by reference to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002. There have been no material changes in our market risk from that disclosed in our 2001 Form 10-K.

Item 4. Controls and Procedures

Within the 90-day period prior to the date of this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s filings under the Securities Exchange Act of 1934, as amended.

There have been no significant changes in the Corporation’s internal controls, or in other factors that could significantly affect internal controls, subsequent to the date the Corporation carried out its evaluation.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

Mehle v. American Management Systems, Inc., No. 1:01CV01544 (United States District Court for the District of Columbia), appeal filed. As previously reported in the Corporation’s 2001 Annual Report on Form 10-K, on July 17, 2001, the Federal Retirement Thrift Investment Board (the “Thrift Board”) gave written notice to AMS stating that the Thrift Board had terminated for default its contract with AMS for development and implementation of an automated record-keeping system for the federal employee Thrift Savings Plan. On the same date, the Thrift Board’s executive director, Roger W. Mehle, purporting to act as “managing fiduciary” of the Thrift Savings Fund, filed a companion lawsuit against AMS relating to AMS’s performance of the contract seeking compensatory damages of $50 million and punitive damages of $300 million, plus re-procurement costs, costs and expenses of litigation (including reasonable attorneys’ fees) and prejudgment interest.

AMS moved to dismiss the lawsuit filed by Mr. Mehle. On November 30, 2001, the United States District Court for the District of Columbia issued an order granting AMS’s motion to dismiss Mr. Mehle’s lawsuit for lack of jurisdiction. Mr. Mehle has appealed that order. AMS has filed both procedural and dispositive motions with the Court of Appeals. On January 25, 2002, the U.S. Department of Justice filed a motion on behalf of the U.S. Government to intervene which has been granted, and a motion to dismiss Mr. Mehle’s appeal. Both the Government’s motion to dismiss the appeal and the motion by AMS to dismiss the appeal are opposed by Mr. Mehle, and are pending. A motion by AMS, whose position is supported by the United States, to strike the appearance of private counsel representing Mr. Mehle, also is pending and is opposed by Mr. Mehle. The Court of Appeals has disposed of several other motions, largely procedural in nature. The Court of Appeals has set a briefing schedule for the appeal; oral argument is scheduled for March 7, 2003.

American Management Systems, Inc. v. United States, No. 01-586 (Fed. Cl.). AMS believes that the appropriate forum for resolving its dispute over the Thrift Board contract is in the United States Court of Federal Claims (“CFC”), a court of specialized jurisdiction that ordinarily entertains all disputes relating to U.S. government contracts. To that end, AMS filed suit in the CFC against the United States, which is the contracting party in the Thrift Board contract, seeking reversal of the Thrift Board’s decision terminating the contract for default and asking the court to convert the termination into a termination for convenience. The U.S. Department of Justice is defending the United States in this case. The United States moved to dismiss AMS’s Complaint for lack of jurisdiction, arguing that the Thrift Board is a non-appropriated fund instrumentality (“NAFI”). AMS opposed the Government’s jurisdictional motion. By written opinion and order dated August 30, 2002, the CFC denied the United States’ motion to dismiss, concluding that jurisdiction did, in fact, exist. On September 12, 2002, the United States filed its Answer to AMS’s Complaint, thereby responding to AMS’s claims in the CFC. On November 1, 2002, the United States filed a motion seeking permission from the CFC to immediately appeal the CFC’s August 30, 2002 decision, and an order staying further proceedings in the CFC pending the resolution of any such appeal. AMS intends to oppose the United States’ motion.

Other Procedural Matters Relating to the Thrift Board. On July 16, 2002, AMS submitted a contract termination settlement proposal and claim to the Thrift Board seeking recovery of approximately $58.5 million of unpaid costs and fees incurred in performing the contract and winding it down in accordance with the termination for convenience provisions of the contract. The proposal was submitted pursuant to the instructions given by the Thrift Board’s contracting officer at the time of termination and in accordance with the terms of the contract and the Federal Acquisition Regulation. The submission of a government contractor’s settlement proposal is a routine step in the administrative process of terminating a federal

government contract. On August 16, 2002, the Thrift Board denied any liability to pay the settlement proposal and claim. AMS intends to challenge the Thrift Board’s decision with respect to these matters.

Item 2. Changes in Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

On November 8, 2002, the Corporation announced that it was awarded a $156 million/seven year contract by the New York City Department of Finance to operate and maintain the City’s parking violation data processing system. A copy of the press release announcing the contract is attached hereto as Exhibit 99.3.

On November 13, 2002, the Corporation replaced its former $120 million multi-currency bank credit facility with a new $160 million three year multi-currency bank credit agreement that expires on November 13, 2005. The new credit facility is available for general corporate purposes and the Corporation presently has no outstanding borrowings under the facility. The Corporation and certain subsidiaries may borrow funds under the new revolving credit agreement in the approved currencies, subject to certain minimum amounts per borrowing. Interest on such borrowings will generally range from LIBOR plus 112.5 basis points to 175.0 basis points, depending on the debt-to-EBITDA ratio, as defined in the agreement. The Corporation is required to pay a facility fee ranging from 50 to 65 basis points per annum on the total facility based on the debt-to-EBITDA ratio. The new revolving credit agreement includes covenants relating to the maintenance of certain financial ratios, and may impose restrictions on our ability to pay dividends or make acquisitions, divestitures and investments.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The Exhibits set forth in the Exhibit Index are filed as part of this Quarterly Report on Form 10-Q.

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICAN MANAGEMENT SYSTEMS, INCORPORATED


Date: 11/13/02		/s/ Alfred T. Mockett Alfred T. Mockett Chairman and Chief Executive Officer


Date: 11/13/02		/s/ John S. Brittain, Jr. John S. Brittain, Jr. Executive Vice President, Chief Financial Officer and Treasurer

CERTIFICATIONS

I, Alfred T. Mockett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Management Systems, Incorporated;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



Date: 11/13/02		/s/ Alfred T. Mockett Alfred T. Mockett Chairman and Chief Executive Officer

I, John S. Brittain, Jr., certify that:

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:



Date: 11/13/02		/s/ John S. Brittain, Jr. John S. Brittain, Jr. Executive Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX


Exhibit
Number	Description


10.	Material Contracts

	10.1	Employment Agreement, dated as of July 1, 2002, between the Corporation and Larry R. Seidel (filed herewith).

	10.2	Employment Agreement, dated as of August 5, 2002, between the Corporation and Richard C. Lottie (filed herewith).

	10.3	Retirement Agreement, dated as of October 16, 2002, between the Corporation and William M. Purdy (filed herewith).

	10.4	Separation Agreement, dated as of August 30, 2002, between the Corporation and Patrick W. Gross (filed herewith).


99.	Additional Exhibits

	99.1	Certification of Chief Executive Officer (filed herewith).

	99.2	Certification of Chief Financial Officer (filed herewith).

	99.3	Press Release (filed herewith).

	99.4	Press Release (filed herewith).

27 EX-10.1 3 w65369exv10w1.htm EXHIBIT 10.1 exv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT
Larry R. Seidel

This EMPLOYMENT AGREEMENT (the “Agreement”) is made effective July 1, 2002 between American Management Systems, Incorporated, a corporation formed under the laws of the State of Delaware with its principal place of business at 4000 and 4050 Legato Road, Fairfax, VA 22033 (“AMS”), and Larry R. Seidel, residing at 4431 Dittmar Road, Arlington, VA 22207 (the “Employee”).

WHEREAS, AMS desires to engage the services of the Employee as Executive Vice President, and the Employee is willing to render such services to AMS in consideration of the terms and conditions agreed to by the parties; and

WHEREAS, AMS has approved the employment of the Employee on the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, AMS agrees to employ the Employee, and the Employee agrees to perform services for AMS as an employee, effective as of July 1, 2002 upon the terms and conditions set forth herein.

1. Term.

The initial term of this Agreement shall end on June 30, 2004, unless it is terminated earlier as provided herein. Beginning on that date, and on each anniversary thereafter, unless it is terminated earlier as provided herein or AMS delivers written notice to the Employee of its intention not to extend the Agreement at least 90 days before such anniversary date, the term of this Agreement shall automatically be extended for one additional year. The restrictive covenants in Sections 10 and 11 hereof shall survive the termination of this Agreement.

2. Title and Duties.

The Employee shall be employed as Executive Vice President of AMS. The Employee shall perform such services consistent with his position as might be assigned to him from time to time and are consistent with the bylaws of AMS.

3. Location.

The Employee’s place of employment shall be within a 25-mile radius of the location of the offices described above as AMS shall reasonably direct, or at any other location that may be mutually agreed upon in the future.

4. Extent of Services.

a. General.

The Employee agrees not to engage in any business activities during the term of this Agreement except those that are for the benefit of AMS, and to devote his entire business time, attention, skill and effort to the performance of his duties under this Agreement. Notwithstanding the foregoing, the Employee may engage in charitable, professional and civic activities that do not impair the performance of his duties to AMS, as the same may be changed from time to time, or otherwise adversely affect AMS’s interest, reputation, business or welfare. Nothing contained herein shall prevent the Employee from managing his own personal investments and affairs, including but not limited to investing his assets in the securities of publicly traded companies; provided, however, that the Employee’s activities do not constitute a conflict of interest, violate securities laws, or otherwise interfere with the performance of his duties and responsibilities as described herein. The Employee agrees to adhere to AMS’s published policies and procedures affecting directors, officers, employees, and agents and shall use his best efforts to promote AMS’s interest, reputation, business and welfare.

b. Corporate Opportunities.

The Employee agrees that he will not take personal advantage of any AMS business opportunities that arise during his employment with AMS and that might be of benefit to AMS. All material facts regarding such opportunities must be promptly reported to the Board for consideration by AMS.

5. Compensation and Benefits.

a. Base Salary.

The Employee’s initial annualized base salary shall be $400,000. The base salary shall be payable in accordance with AMS’s standard payroll practices. The Employee’s annual base salary shall be reviewed no less frequently than annually by the AMS Compensation Committee and/or Board; provided, however, that at no time during the term of this Agreement shall the Employee’s base salary be decreased from the base salary then in effect except as part of a general program of salary adjustment by AMS applicable to all similarly-situated employees.

b. Incentive Compensation.

(i) The Employee shall be eligible for an annual cash bonus having a value of

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from 0% to 120% of his annual base salary for the relevant year, depending on AMS’s and the Employee’s performance with a target percentage of 60% (“Target Annual Bonus”). Such annual cash bonuses shall be paid at the usual times for the payment of annual cash bonuses by AMS. If the Employee’s employment terminates before the end of a fiscal year for any reason other than Cause, as defined herein, the Employee shall be entitled to the annual cash bonus for that year, based on actual results for the entire year but prorated for the period of actual employment, at the time that the annual cash bonus otherwise would have been paid.

(ii) The Employee shall be eligible to participate in all long term incentive plans in which other executive vice presidents are eligible to participate.

c. Other Benefits.

The Employee shall be entitled to paid compensatory leave and vacation, sick leave, and holiday pay in accordance with AMS’s policies in effect from time to time, and to participate in such life, health, and disability insurance, pension, deferred compensation and incentive compensation plans, stock options and awards, performance bonuses and other benefits as AMS extends, as a matter of policy, to its executive vice presidents.

d. Special Retiree Health Benefit.

On the date that the Employee’s employment terminates for any reason, regardless of the Employee’s actual age he shall be treated as satisfying the requirements under the AMS Retiree Medical Program that he must be at least age 55 and that his age plus years of AMS service must equal at least 65; provided, however, that if the Employee is precluded from participating in the Program as described, for any reason, he shall be provided with the after-tax economic equivalent of the benefits he would have received under the Program. The economic equivalent of the benefits he would have received under the Program shall be the lowest cost that would be incurred by the Employee in obtaining health insurance coverage for himself and his eligible dependents that will provide benefits comparable to the benefits offered under the AMS Retiree Medical Program, as AMS shall modify the Program from time to time, less any required contributions under the Program.

e. Supplemental Disability Benefit.

Subject to the Employee’s provision of evidence of insurability reasonably acceptable to AMS, AMS shall make available to the Employee during the term of this Agreement a disability benefit, paid by AMS, that is supplemental to the disability benefits provided under its existing group long term disability policy and under which benefits are not payable unless the Employee is disabled as defined in the existing policy, and that will be sufficient to ensure that the benefits otherwise payable to the Employee under the terms of the existing policy, together with the supplemental benefit and any compensation or benefits from other sources that are

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taken into account in determining the amount of benefits payable under the existing policy, are at least 60% of his base pay at the time he became disabled and continue, during the term of this Agreement, for as long as he remains disabled, up to age 65.

6. Termination of Employment.

a. In General.

Except as specifically provided below or elsewhere in this Agreement, the Employee’s employment may be terminated by either party at any time with or without Cause. In any event, the Employee’s employment shall terminate immediately upon his death.

Except as specifically provided below or elsewhere in this Agreement, in the event that the Employee’s employment is terminated, this Agreement shall terminate and the Employee shall be entitled only to such rights and payment of such benefits as might be provided by the terms of any employee benefit plan or program of AMS, or any other agreement between AMS and the Employee.

Except as specifically provided below or elsewhere in this Agreement, constructive termination of the Employee’s employment by AMS shall be treated the same as actual termination for purposes of this Agreement. Constructive termination shall mean a termination of the Employee’s employment at his own initiative following the occurrence, without the Employee’s prior written consent, of one or more of the following events:

(i) a significant diminution in the nature or scope of the Employee’s authority or the duties that the Employee performs, unless the Employee is given new authority or assigned new duties (whichever is applicable) that are substantially comparable to his previous authority and duties;

(ii) a significant reduction in the Employee’s then current base salary, a significant reduction in his opportunities for earnings under his incentive compensation plans, or a significant reduction in his employee benefits as a whole (in each case except as part of a general reduction that applies to other similarly-situated employees); or

(iii) the relocation of the Employee’s office from its location at the time of the change to a location more than 25 miles away without his prior written consent.

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perform this Agreement is assigned or transferred to a successor employer pursuant to Section 17 hereof or if the Employee otherwise becomes employed without a significant period of unemployment under substantially similar terms and conditions by a successor to some or all of the business of AMS.

b. Voluntary Termination.

The Employee’s voluntary termination of employment shall be effective upon 30 days’ prior written notice to AMS, unless the parties mutually agree to advance or delay the effective date.

c. Termination Without Cause.

AMS’s termination of the Employee’s employment (or taking of any action or actions resulting in constructive termination of employment) without Cause shall be effective upon 30 days’ prior written notice to the Employee, unless the parties mutually agree to advance or delay the effective date.

If the Employee’s employment is terminated without Cause and not on account of Disability, the Employee shall be entitled to receive from AMS the following benefits in addition to any other benefits to which he might be entitled:

(i) a severance benefit in an amount equal to 100% of the Employee’s annual base salary in effect immediately preceding such termination, but only if (1) the Employee executes a release substantially identical to the release attached hereto, (2) the period for revoking such release has expired, and (3) the Employee has complied with the requirements of Sections 10 and 11 hereof;

(ii) full vesting of any unexercised stock options; and

(iii) payment of amounts equal (before reduction for taxes) to any premiums for health and dental insurance continuation coverage under any AMS health plans that is elected by the Employee or his beneficiaries pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), at a time or times mutually agreed to by the parties, but only so long as the Employee is not eligible for coverage under a health plan of another employer (whether or not he elects to receive coverage under that plan).

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For purposes of this Agreement, “Cause” shall mean: (1) the conviction of the Employee of, or the entry of a plea of guilty or nolo contendere by the Employee to, any felony or misdemeanor involving moral turpitude; (2) fraud, misappropriation or embezzlement by the Employee; (3) the Employee’s willful failure, gross negligence or gross misconduct in the performance of his assigned duties for AMS; (4) the Employee’s breach of a fiduciary duty to AMS; (5) any act or omission of the Employee not at the express direction of the board or other appropriate authority that reflects adversely on the integrity and reputation for honesty and fair dealing of AMS or has a material detrimental effect on AMS’s financial condition, position or business; or (6) the breach by the Employee of any material term of this Agreement. For purposes of this Agreement, “Disability” shall mean disability as defined in AMS’s existing long term disability policy.

7. Effect of Change in Control.

a. Additional Benefits.

If the Employee’s employment is terminated within twelve (12) months following a Change of Control of AMS, and a severance benefit is payable pursuant to Section 6.c.(i) hereof, (i) the amount of the severance benefit shall be increased to 200% of the sum of the Employee’s base salary and Target Annual Bonus, (ii) the 25% hold-back of the severance benefit shall not apply, and (iii) the Employee shall be entitled to the Gross-up Payment, if any, described in subsection c below.

b. Definition of Change of Control.

A “Change of Control” shall mean the first of the following events to occur:

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(iv) During any period of two (2) consecutive years, individuals who, at the beginning of the period, constituted the Board cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by AMS’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period (either by a specific vote or by approval of the proxy statement of AMS in which such person is named as a nominee for director, without objection to such nomination).

However, no Change of Control shall be deemed to have occurred by reason of (1) any event involving a transaction in which the Employee or a group of persons or entities with whom or with which the Employee acts in concert, acquires, directly or indirectly, 50% or more of the combined voting power of AMS’s then-outstanding voting securities or the business or assets of AMS, (2) any event involving or arising out of a proceeding under Title 11 of the United States Code or the provisions of any future United States bankruptcy law, an assignment for the benefit of creditors or an insolvency proceeding under state or local law.

c. Effect of Section 280G.

The benefit provided under this Section 7 or Section 6 hereof, if applicable, shall be provided without regard to any limitations imposed by Section 280G or 4999 of the Code.

(i) In the event that the Employee becomes entitled to the benefits (including the acceleration of certain benefits) provided under this Section 7 or Section 6 hereof, if applicable (the “Benefits”), if any of the Benefits will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), AMS shall pay to the Employee an additional amount (the “Gross-up Payment”) such that the net amount retained by the Employee, after deduction of any Excise Tax on the Total Benefits (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this subparagraph (i), but before deduction for any federal, state or local income tax on the Benefits, shall be equal to the “Total Benefits,” as defined below.

(ii) For purposes of determining whether any of the Benefits will be subject to the Excise Tax and the amount of such Excise Tax:

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280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by AMS’s independent auditors such other payments or benefits (in whole or in part) will 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(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, and such tax counsel shall provide such opinion in writing to the Employee such that he and his tax advisors can rely on it,

(2) The amount of the Total Benefits which shall be treated as subject to the Excise Tax shall be equal to the lesser of (I) the total amount of the Total Benefits and (II) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying paragraph (1), above), and

(3) The value of any non-cash benefits or any deferred payment or benefit shall be determined by AMS’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

(iii) For purposes of determining the amount of the Gross-up Payment, the Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, 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 subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Employee shall repay to AMS at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the portion of the Gross-up Payment being repaid by the Employee if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), AMS shall make an additional gross-up payment in respect of

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such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined.

d. Effect on Pre-existing Change in Control Retention Agreement.

The American Management Systems, Incorporated Change in Control Executive Retention Agreement between AMS and the Employee shall be cancelled and all rights granted to the Employee under that agreement shall become null and void upon the effective date of this Agreement.

8. Mitigation and Offset.

If the Employee’s employment is terminated during the term of this Agreement without Cause, the Employee shall be under no duty or obligation to seek or accept other employment, and no payment or benefits of any kind due him under this Agreement shall be reduced, suspended or in any way offset by any subsequent employment.

9. Entitlement to Other Benefits.

Except as expressly provided herein, this Agreement shall not be construed as limiting in any way any rights or benefits the Employee, his spouse, dependents or beneficiaries may have pursuant to any other employee benefits plans or programs.

10. Confidentiality.

The Employee acknowledges that all confidential information regarding the business of AMS and its subsidiaries and affiliates is the exclusive property of AMS. On or before the date that his employment with AMS terminates, the Employee shall return to AMS all copies of any material involving such confidential information to AMS, and the Employee 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. The Employee also shall return to AMS by that date any other items in his possession, custody or control that are the property of AMS. The Employee understands that even after the date that his employment with AMS terminates he will remain bound by the terms of the American Management Systems, Incorporated Confidentiality and Intellectual Property Rights Agreement, the AMS Ethical Business Conduct policy statement, and the restrictive covenants contained in this Section 10 and Section 11 hereof. This Section 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. No breach of this Section shall be deemed to have occurred unless AMS provides written notice to the Employee of the breach within 90 days after AMS becomes aware of it.

11. Non-Solicitation.

Effective on the date that his employment with AMS terminates and for a period of 12 months thereafter, the Employee shall not directly (a) employ or solicit for employment, or

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assist in any way in solicitation for employment, any person employed by AMS or any of its affiliates then or at any time within the preceding 12 months; or (b) solicit, or assist in any way in the solicitation of business from any of AMS’s or its affiliates’ clients or prospective clients, either for the Employee’s own benefit or the benefit of anyone other than AMS, unless the business being solicited is not competitive with the services or products provided by AMS or its affiliates. Clause (b) shall not apply unless the business being solicited is in a line of business in which AMS was already engaged or already had under active consideration while the Employee was employed by AMS or is a natural extension of such a line business with a client that was an existing client of AMS during that time.

12. Employee Representation.

The Employee represents and warrants to AMS that he is not now under any obligation of a contractual or other nature to any person, business or other entity that is inconsistent or in conflict with this Agreement or that would prevent him from performing his obligations under this Agreement.

13. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall, if AMS or the Employee 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 the Employee 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 the Employee’s covenants in Sections 10 and 11 hereof.

14. Legal Expenses.

Except as provided in Section 13 hereof, if any dispute or controversy arises under or in connection with this agreement, AMS shall promptly pay all the Employee’s legal fees and expenses relating to the dispute or controversy, including, by way of example rather than limitation, reasonable attorneys’ fees incurred by the Employee in seeking to obtain or enforce any right or benefit under this Agreement, provided, however, that this obligation of AMS shall not apply unless the Employee prevails in whole or in part on the dispute or controversy. This obligation shall apply irrespective of whether the dispute or controversy is resolved by arbitration, litigation, or a settlement thereof.

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15. Interest.

AMS shall pay to the Employee interest at the prime lending rate as announced from time to time by Citibank, N.A. or its successors or another substantially similar rate on all or any part of any amount to be paid to the Employee hereunder that is not paid when due or that is deferred under an express obligation to pay interest.

16. Indemnification.

a. AMS agrees that if the Employee is made a party, or, is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of AMS, or is or was serving at the request of AMS as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Employee’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Employee shall be indemnified and held harmless by AMS to the fullest extent permitted or authorized by AMS’s certificate of incorporation and by-laws. To the extent consistent with the foregoing, this obligation to indemnify the Employee and hold him harmless shall continue even if he has ceased to be a director, officer, member, employee or agent of AMS or other such entity described above, and shall inure to the benefit of the Employee’s heirs, executors and administrators. AMS shall advance to the Employee all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by AMS of a written request for such advance. Such request shall include an undertaking by the Employee to repay the amount of such advance if it shall ultimately be determined that the Employee is not entitled to be indemnified against such costs and expenses.

b. Neither the failure of AMS (including its Board, independent legal counsel or stockholders) to have made a determination before such Proceeding concerning payment of amounts claimed by the Employee under subsection a above that indemnification of the Employee is proper because he has met the applicable standards of conduct, nor a determination by AMS (including its Board, independent legal counsel or stockholders) that the Employee has not met such applicable standards of conduct, shall create a presumption that the Employee has not met the applicable standards of conduct.

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the assets of AMS and such assignee or transferee assumes the liabilities, obligations, and duties of AMS, as contained in this Agreement, either contractually, or as a matter of law. AMS further agrees, that in the event of a sale of assets or liquidation as described in the foregoing sentence, it shall take whatever action it is legally entitled to take in order to cause the assignee or transferee to expressly assume the liabilities, obligations, and duties of AMS under this Agreement. Notwithstanding any such assignment, AMS shall not be relieved from liability under this Agreement. No rights or obligations of the Employee under this Agreement may be assigned or transferred by the Employee other than his right to receive compensation and benefits, provided such assignment or transfer is otherwise permitted by law.

18. Notices.

All notices required or permitted hereunder shall be in writing and shall be deemed effective: (a) upon personal delivery; (b) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid; or (c) in the case of delivery by nationally recognized overnight delivery service, when received, addressed as follows:

If to AMS to:
American Management Systems, Incorporated
4050 Legato Road
Fairfax, VA 22033
Attention: Garry Griffiths, Chief Human Resources Officer
With a copy (which shall not constitute notice) to:
Shaw Pittman LLP
2300 N Street, N.W.
Washington, DC 20037
Attention: Barbara M. Rossotti, Esq.
If to the Employee, to:
Larry R. Seidel
4431 Dittmar Road
Arlington, VA 22207

or to such other address or addresses as either party shall designate to the other in writing from time to time by like notice. At AMS’s sole discretion it may substitute, for any advance notification otherwise required in this Agreement (including the right to a delayed effective date provided in Section 6 hereof in lieu of advance notice), continued payment of regular salary and benefits during the otherwise required advance notification period.

19. Amendment.

This agreement may be amended or modified only by a written instrument executed by both AMS and the Employee.

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20. Captions.

The captions appearing herein are for convenience of reference only and in no way define, limit or affect the scope or substance of any section hereof.

21. Time.

All reference herein to periods of days are to calendar days, unless expressly provided otherwise. Where the time period specified herein would end on a weekend or holiday, the time period shall be deemed to end on the next business day.

22. Entire Agreement.

Except for other agreements specifically referenced herein, this Agreement constitutes the entire agreement between AMS and the Employee and supersedes all prior agreements and understandings, whether written or oral relating to the subject matter hereof.

23. Severability.

In case any provision hereof shall be held by a court or arbitrator with jurisdiction over AMS or the Employee to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of AMS and the Employee in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in not way be affected or impaired thereby.

24. Waiver.

No delays or omission by AMS or the Employee in exercising any right hereunder shall operate as a waiver of that or any other right. A waiver or consent given by AMS or the Employee or any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

25. Governing Law.

This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia, without regard to its conflicts of laws principles.

26. Withholding.

AMS may make any appropriate arrangements to deduct from all benefits provided hereunder any taxes reasonably determined to be required to be withheld by any government or government agency. The Employee shall bear all taxes on benefits provided hereunder to the extent that no taxes are withheld, irrespective of whether withholding is required.

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27. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instruments.

IN WITNESS WHEREOF, AMS and the Employee have executed this Agreement effective as of July 1, 2002.



EMPLOYEE		AMERICAN MANAGEMENT
		SYSTEMS, INCORPORATED


/s/ Larry R. Seidel		By: Garry Griffiths
Larry R. Seidel		Garry Griffiths

Date: 9/06/02		Date: 7/25/02

- 14 - EX-10.2 4 w65369exv10w2.htm EXHIBIT 10.2 exv10w2

Exhibit 10.2

EMPLOYMENT AGREEMENT
Richard C. Lottie

This EMPLOYMENT AGREEMENT (the “Agreement”) is made effective August 5, 2002 between American Management Systems, Incorporated, a corporation formed under the laws of the State of Delaware with its principal place of business at 4000 and 4050 Legato Road, Fairfax, VA 22033 (“AMS”), and Richard C. Lottie, residing at 3805 Silver Falls Court, Plano, TX 75093 (the “Employee”).

WHEREAS, AMS has approved the employment of the Employee on the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, AMS agrees to employ the Employee, and the Employee agrees to perform services for AMS as an employee, effective as of August 5, 2002 upon the terms and conditions set forth herein.

1. Term.

The initial term of this Agreement shall end on August 4, 2004, unless it is terminated earlier as provided herein. Beginning on that date, and on each anniversary thereafter, unless it is terminated earlier as provided herein or AMS delivers written notice to the Employee of its intention not to extend the Agreement at least 90 days before such anniversary date, the term of this Agreement shall automatically be extended for one additional year. The restrictive covenants in Sections 10 and 11 hereof shall survive the termination of this Agreement.

2. Title and Duties.

The Employee shall be employed as Executive Vice President of AMS. The Employee shall perform such services consistent with his position as might be assigned to him from time to time and are consistent with the bylaws of AMS.

3. Location.

The Employee’s place of employment shall be within a 25-mile radius of the Dallas office (except that, as business needs require, AMS may change that office to the offices described above), or at any other location that may be mutually agreed upon in the future.

4. Extent of Services.

5. Compensation and Benefits.

a. Base Salary.

The Employee’s initial annualized base salary shall be $320,000. The base salary shall be payable in accordance with AMS’s standard payroll practices. The Employee’s annual base salary shall be reviewed no less frequently than annually by the AMS Compensation Committee and/or Board; provided, however, that at no time during the term of this Agreement shall the Employee’s base salary be decreased from the base salary then in effect except as part of a general program of salary adjustment by AMS applicable to all similarly-situated employees.

b. Incentive Compensation.

(i) The Employee shall be eligible for an annual cash bonus having a value of

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c. Hiring Grants.

(i) As of August 5, 2002, the Employee shall be granted the right, in the form of deferred stock units, to receive 5,000 shares of common stock of AMS that are subject to vesting and other restrictions. The stock shall be granted, to the extent possible, under the American Management Systems Restricted Stock and Stock Bonus Plan (the “Restricted Stock Plan”), and, in any event, the grant shall have terms substantially similar to the terms of Discretionary Awards made under the Restricted Stock Plan. If the Employee’s employment is terminated without Cause and not on account of Disability (as defined below), the deferred stock units shall become fully vested. The shares will vest over three years in equal increments on the anniversary of the grant date.

(ii) The Employee shall be granted a nonqualified stock option for 25,000 shares of common stock of AMS at the closing market price on August 5, 2002. The option shall be granted, to the extent possible, under American Management Systems, Incorporated 1996 Amended Stock Option Plan F (“Plan F”), and in any event shall have terms substantially similar to the terms of nonqualified stock options granted under Plan F. The options will vest over four years in increments of twenty-five percent on the anniversary of the grant date.

d. Other Benefits.

The Employee shall be entitled to paid compensatory leave and vacation, sick leave, and holiday pay in accordance with AMS’s policies in effect from time to time, and to participate in such life, health, and disability insurance, pension, deferred compensation and incentive compensation plans, stock options and awards, performance bonuses and other benefits as AMS extends, as a matter of policy, to its executive vice presidents.

6. Termination of Employment.

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Except as specifically provided below or elsewhere in this Agreement, in the event that the Employee’s employment is terminated, this Agreement shall terminate and the Employee shall be entitled only to such rights and payment of such benefits as might be provided by the terms of any employee benefit plan or program of AMS, or any other agreement between AMS and the Employee.

Except as specifically provided below or elsewhere in this Agreement, constructive termination of the Employee’s employment by AMS shall be treated the same as actual termination for purposes of this Agreement. Constructive termination shall mean a termination of the Employee’s employment at his own initiative following the occurrence, without the Employee’s prior written consent, of one or more of the following events:

The mere failure of AMS to extend (or notice of its intention not to extend) the Agreement shall not result in actual or constructive termination; provided, however, that if AMS fails to extend the Agreement its obligation to provide the benefits set forth in Section 6.c. hereof, on the terms and conditions set forth in that section, and without regard to any other section hereof, shall survive the termination of the Agreement. Under no circumstances shall a termination or constructive termination be deemed to occur for purposes of Section 6.c. hereof, if AMS’s obligation to perform this Agreement is assigned or transferred to a successor employer pursuant to Section 17 hereof or if the Employee otherwise becomes employed without a significant period of unemployment under substantially similar terms and conditions by a successor to some or all of the business of AMS.

b. Voluntary Termination.

The Employee’s voluntary termination of employment shall be effective upon 30 days’ prior written notice to AMS, unless the parties mutually agree to advance or delay the effective date.

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c. Termination Without Cause.

AMS’s termination of the Employee’s employment (or taking of any action or actions resulting in constructive termination of employment) without Cause shall be effective upon 30 days’ prior written notice to the Employee, unless the parties mutually agree to advance or delay the effective date.

If the Employee’s employment is terminated without Cause and not on account of Disability, the Employee shall be entitled to receive from AMS the following benefits in addition to any other benefits to which he might be entitled:

(i) a severance benefit in an amount equal to 100% of the Employee’s annual base salary in effect immediately preceding such termination, but only if (1) the Employee executes a release substantially identical to the release attached hereto, (2) the period for revoking such release has expired, and (3) the Employee has complied with the requirements of Sections 10 and 11 hereof;

(ii) full vesting of any unexercised stock options; and

(iii) payment of amounts equal to any premiums for health and dental insurance continuation coverage under any AMS health plans that is elected by the Employee or his beneficiaries pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), other than the employee portion of such premiums, at a time or times mutually agreed to by the parties.

AMS shall pay 75% of the severance benefit in paragraph (i) within 30 days after all of the applicable conditions are satisfied. AMS shall pay the other 25% of the severance benefit with interest 12 months after all of the applicable conditions are satisfied, provided that the Employee complies with the covenants in Sections 10 and 11 hereof throughout that period. If the Employee does not comply with the requirements of Sections 10 and 11 hereof at any time during that period, the other 25% of the severance benefit shall not be paid to the Employee. All severance benefits paid to the Employee shall be paid subject to all legally required payroll deductions and withholdings for sums owed by the Employee to AMS.

For purposes of this Agreement, “Cause” shall mean: (1) the conviction of the Employee of, or the entry of a plea of guilty or nolo contendere by the Employee to, any felony or misdemeanor involving moral turpitude; (2) fraud, misappropriation or embezzlement by the Employee; (3) the Employee’s willful failure, gross negligence or gross misconduct in the performance of his assigned duties for AMS; (4) the Employee’s breach of a fiduciary duty to AMS; (5) any act or omission of the Employee not at the express direction of the board or other appropriate authority that reflects adversely on the integrity and reputation for honesty and fair dealing of AMS or has a material detrimental effect on AMS’s financial condition, position or business; or (6) the breach by the Employee of any material term of this Agreement.

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For purposes of this Agreement, “Disability” shall mean disability as defined in AMS’s existing long term disability policy.

7. Effect of Change in Control.

a. Additional Benefits.

If the Employee’s employment is terminated within twelve (12) months following a Change of Control of AMS, and a severance benefit is payable pursuant to Section 6.c.(i) hereof, (i) the amount of the severance benefit shall be increased to 200% of the sum of the Employee’s base salary and target annual bonus, (ii) the 25% hold-back of the severance benefit shall not apply, and (iii) the Employee shall be entitled to the Gross-up Payment, if any, described in subsection c below.

b. Definition of Change of Control.

A “Change of Control” shall mean the first of the following events to occur:

(i) Any person or group (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Act”)), other than AMS or a trustee or other fiduciary holding securities under an employee benefit plan of AMS or a corporation owned directly or indirectly by the stockholders of AMS in substantially the same proportions as their ownership of stock of AMS, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Act), directly or indirectly, of securities representing 50% or more of the combined voting power of AMS’s then-outstanding securities entitled generally to vote for the election of directors;

(ii) AMS’s stockholders approve an agreement to merge or consolidate with another corporation unless AMS’s stockholders immediately before the merger or consolidation are to own more than two-thirds (66-2/3%) of the combined voting power of the resulting entity’s voting securities entitled generally to vote for the election of directors;

(iii) AMS’s stockholders approve an agreement (including, without limitation, an agreement of liquidation) to sell or otherwise dispose of all or substantially all of the business or assets of AMS; or

(iv) During any period of two (2) consecutive years, individuals who, at the beginning of the period, constituted the Board cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by AMS’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period (either by a specific vote or by approval of the proxy statement of AMS in which such person is named as a nominee for director, without objection to such nomination).

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c. Effect of Section 280G.

The benefit provided under this Section 7 or Section 6 hereof, if applicable, shall be provided without regard to any limitations imposed by Section 280G or 4999 of the Code.

(1) Any other payments or benefits received or to be received by the Employee in connection with a change of control of AMS or the Employee’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with AMS, any person whose actions result in a change of control of AMS, or any person affiliated with AMS or such person) (which, together with the Benefits, shall constitute the “Total Benefits”) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by AMS’s independent auditors such other payments or benefits (in whole or in part) will 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(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are

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otherwise not subject to the Excise Tax, and such tax counsel shall provide such opinion in writing to the Employee such that he and his tax advisors can rely on it,

(2) The amount of the Total Benefits which shall be treated as subject to the Excise Tax shall be equal to the lesser of (I) the total amount of the Total Benefits and (II) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying paragraph (1), above), and

(3) The value of any non-cash benefits or any deferred payment or benefit shall be determined by AMS’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

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9. Entitlement to Other Benefits.

Except as expressly provided herein, this Agreement shall not be construed as limiting in any way any rights or benefits the Employee, his spouse, dependents or beneficiaries may have pursuant to any other employee benefits plans or programs.

10. Confidentiality.

The Employee acknowledges that all confidential information regarding the business of AMS and its subsidiaries and affiliates is the exclusive property of AMS. On or before the date that his employment with AMS terminates, the Employee shall return to AMS all copies of any material involving such confidential information to AMS, and the Employee 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. The Employee also shall return to AMS by that date any other items in his possession, custody or control that are the property of AMS. The Employee understands that even after the date that his employment with AMS terminates he will remain bound by the terms of the American Management Systems, Incorporated Confidentiality and Intellectual Property Rights Agreement, the AMS Ethical Business Conduct policy statement, and the restrictive covenants contained in this Section 10 and Section 11 hereof. This Section 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. No breach of this Section shall be deemed to have occurred unless AMS provides written notice to the Employee of the breach within 90 days after AMS becomes aware of it.

11. Non-Solicitation.

Effective on the date that his employment with AMS terminates and for a period of 12 months thereafter, the Employee shall not directly (a) employ or solicit for employment, or assist in any way in solicitation for employment, any person employed by AMS or any of its affiliates then or at any time within the preceding 12 months; or (b) solicit, or assist in any way in the solicitation of business from any of AMS’s or its affiliates’ clients or prospective clients, either for the Employee’s own benefit or the benefit of anyone other than AMS, unless the business being solicited is not competitive with the services or products provided by AMS or its affiliates. Clause (b) shall not apply unless the business being solicited is in a line of business in which AMS was already engaged or already had under active consideration while the Employee was employed by AMS or is a natural extension of such a line business with a client that was an existing client of AMS during that time.

12. Employee Representation.

The Employee represents and warrants to AMS that he is not now under any obligation of a contractual or other nature to any person, business or other entity that is inconsistent or in conflict with this Agreement or that would prevent him from performing his obligations under this Agreement.

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13. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall, if AMS or the Employee 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 the Employee 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 the Employee’s covenants in Sections 10 and 11 hereof.

14. Legal Expenses.

Except as provided in Section 13 hereof, if any dispute or controversy arises under or in connection with this agreement, AMS shall promptly pay all the Employee’s legal fees and expenses relating to the dispute or controversy, including, by way of example rather than limitation, reasonable attorneys’ fees incurred by the Employee in seeking to obtain or enforce any right or benefit under this Agreement, provided, however, that this obligation of AMS shall not apply unless the Employee prevails in whole or in part on the dispute or controversy. This obligation shall apply irrespective of whether the dispute or controversy is resolved by arbitration, litigation, or a settlement thereof.

15. Interest.

AMS shall pay to the Employee interest at the prime lending rate as announced from time to time by Citibank, N.A. or its successors or another substantially similar rate on all or any part of any amount to be paid to the Employee hereunder that is not paid when due or that is deferred under an express obligation to pay interest.

16. Indemnification.

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fullest extent permitted or authorized by AMS’s certificate of incorporation and by-laws. To the extent consistent with the foregoing, this obligation to indemnify the Employee and hold him harmless shall continue even if he has ceased to be a director, officer, member, employee or agent of AMS or other such entity described above, and shall inure to the benefit of the Employee’s heirs, executors and administrators. AMS shall advance to the Employee all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by AMS of a written request for such advance. Such request shall include an undertaking by the Employee to repay the amount of such advance if it shall ultimately be determined that the Employee is not entitled to be indemnified against such costs and expenses.

b. Neither the failure of AMS (including its Board, independent legal counsel or stockholders) to have made a determination before such Proceeding concerning payment of amounts claimed by the Employee under subsection a above that indemnification of the Employee is proper because he has met the applicable standards of conduct, nor a determination by AMS (including its Board, independent legal counsel or stockholders) that the Employee has not met such applicable standards of conduct, shall create a presumption that the Employee has not met the applicable standards of conduct.

17. Assignability and Binding Nature.

This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs (in the case of the Employee) and assigns. No rights or obligations may be assigned or transferred by AMS except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which AMS is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of AMS, provided that the assignee or transferee is the successor to all or substantially all of the assets of AMS and such assignee or transferee assumes the liabilities, obligations, and duties of AMS, as contained in this Agreement, either contractually, or as a matter of law. AMS further agrees, that in the event of a sale of assets or liquidation as described in the foregoing sentence, it shall take whatever action it is legally entitled to take in order to cause the assignee or transferee to expressly assume the liabilities, obligations, and duties of AMS under this Agreement. Notwithstanding any such assignment, AMS shall not be relieved from liability under this Agreement. No rights or obligations of the Employee under this Agreement may be assigned or transferred by the Employee other than his right to receive compensation and benefits, provided such assignment or transfer is otherwise permitted by law.

18. Notices.

All notices required or permitted hereunder shall be in writing and shall be deemed effective: (a) upon personal delivery; (b) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid; or (c) in the case of delivery by nationally recognized overnight delivery service, when received, addressed as follows:

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If to AMS to:
American Management Systems, Incorporated
4050 Legato Road
Fairfax, VA 22033
Attention: Garry Griffiths, Chief Human Resources Officer
With a copy (which shall not constitute notice) to:
Shaw Pittman LLP
2300 N Street, N.W.
Washington, DC 20037
Attention: Barbara M. Rossotti, Esq.
If to the Employee, to:
Richard C. Lottie
3805 Silver Falls Court
Plano, TX 75093
or to such other address or addresses as either party shall designate to the other in writing from time to time by like notice. At AMS’s sole discretion it may substitute, for any advance notification otherwise required in this Agreement (including the right to a delayed effective date provided in Section 6 hereof in lieu of advance notice), continued payment of regular salary and benefits during the otherwise required advance notification period.

19. Amendment.

This agreement may be amended or modified only by a written instrument executed by both AMS and the Employee.

20. Captions.

The captions appearing herein are for convenience of reference only and in no way define, limit or affect the scope or substance of any section hereof.

21. Time.

All reference herein to periods of days are to calendar days, unless expressly provided otherwise. Where the time period specified herein would end on a weekend or holiday, the time period shall be deemed to end on the next business day.

22. Entire Agreement.

Except for other agreements specifically referenced herein, this Agreement constitutes the entire agreement between AMS and the Employee and supersedes all prior agreements and understandings, whether written or oral relating to the subject matter hereof.

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23. Severability.

In case any provision hereof shall be held by a court or arbitrator with jurisdiction over AMS or the Employee to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of AMS and the Employee in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in not way be affected or impaired thereby.

24. Waiver.

No delays or omission by AMS or the Employee in exercising any right hereunder shall operate as a waiver of that or any other right. A waiver or consent given by AMS or the Employee or any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

25. Governing Law.

This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia, without regard to its conflicts of laws principles.

26. Withholding.

AMS may make any appropriate arrangements to deduct from all benefits provided hereunder any taxes reasonably determined to be required to be withheld by any government or government agency. The Employee shall bear all taxes on benefits provided hereunder to the extent that no taxes are withheld, irrespective of whether withholding is required.

27. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instruments.

IN WITNESS WHEREOF, AMS and the Employee have executed this Agreement effective as of August 5, 2002.



EMPLOYEE		AMERICAN MANAGEMENT
		SYSTEMS, INCORPORATED


/s/ Richard C. Lottie		By: Garry Griffiths
Richard C. Lottie		Garry Griffiths

Date: 8/12/2002		Date: 8/6/02

- 13 - EX-10.3 5 w65369exv10w3.htm EXHIBIT 10.3 exv10w3

Exhibit 10.3

October 16, 2002

William M. Purdy
2804 North Harrison Street
Arlington, VA 22207

Dear Bill,

This letter serves to confirm the terms and conditions associated with your pending retirement from AMS.

Your current employment arrangements will continue through your last day of work which will be Friday, December 27, 2002.

Beginning January 2003, you will receive payments of $25,000 per month, payable on the 15th of each month, and subject to applicable withholdings, for a period of 12 months; thereafter, subject to review between us. This will take the form of an unfunded, unsecured promise to pay on the part of the Company. This payment will be made to your estate in the event of your death. Your COBRA rights and rights under the AMS Retiree Health Plan will be explained in a separate letter. In addition, you will receive an on target bonus payment on December 30, 2002 of $360,000.

The payments are in consideration of your agreement to provide consulting services to the CEO and the Board, not to exceed 100 days per year following retirement. Appropriate office space and administrative support will be made available to you during the period of your consulting services. We will also reimburse against receipts for reasonable expenses incurred on behalf of the Company.

You may use the title of Director Emeritus, should you so choose. The use of this title does not carry Executive Authority, nor confer any decision-making authority on behalf of AMS.

In addition, you agree to resign from the Board of Directors of AMS effective December 9, 2002.

This agreement shall be binding on AMS and you and upon their respective heirs, representatives, successors and assigns. If a person or entity will become a successor to substantially all of the assets of AMS as a result of a transaction of any kind, and AMS does not obtain an assumption in writing of its obligations under this agreement from the successor, all remaining payments will be paid to you immediately before the transaction occurs. AMS also will make you whole for any golden parachute excise tax due as a result of the accelerated payment.

Bill, your years of loyal and dedicated service to the Company are very much appreciated. I particularly appreciate your assistance to me during this past year. Continue access to your knowledge, guidance and advice is vital to our success as we transition to a new management team and a new AMS and return AMS to a growth path.

I am very pleased with these arrangements and wish you well in your retirement. Please indicate your acceptance of the foregoing by signing the acceptance copy of this letter and returning it to my attention.

Yours sincerely,

/s/ Alfred T. Mockett

Alfred T. Mockett
Chairman and Chief Executive Officer


Accepted this day,	10/16/02	/s/ William M. Purdy

		William M. Purdy

EX-10.4 6 w65369exv10w4.htm EXHIBIT 10.4 exv10w4

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.

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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.”

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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- EX-99.1 7 w65369exv99w1.htm EXHIBIT 99.1 exv99w1

EXHIBIT 99.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Alfred T. Mockett, Chairman and Chief Executive Officer of American Management Systems, Incorporated (the “Corporation”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the “Report”). The undersigned hereby certifies that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.



Date: 11/13/02		/s/ Alfred T. Mockett Name: Alfred T. Mockett Title: Chairman and Chief Executive Officer

EX-99.2 8 w65369exv99w2.htm EXHIBIT 99.2 exv99w2

EXHIBIT 99.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, John S. Brittain, Jr., Executive Vice President, Chief Financial Officer and Treasurer of American Management Systems, Incorporated (the “Corporation”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the “Report”). The undersigned hereby certifies that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.



Date: 11/13/02		/s/ John S. Brittain, Jr. Name: John S. Brittain, Jr.
		Title: Executive Vice President, Chief Financial Officer and Treasurer

EX-99.3 9 w65369exv99w3.htm EXHIBIT 99.3 exv99w3

EXHIBIT 99.3

New York City Department of Finance Contracts AMS to
Operate Parking Violation System

Business Process Outsourcing project will enhance service and effectiveness of revenue collection

FAIRFAX, Va, November 8, 2002 — American Management Systems (NASDAQ: AMSY), a global business and IT consulting firm, today announced it was awarded a $156 million/seven year contract by the New York City Department of Finance (DOF) to operate and maintain the Summons Tracking and Accounts Receivable System (STARS), NYC’s parking violation data processing system. Under the contract, AMS will manage the complete end-to-end NYC parking violation process, while remotely hosting the STARS application. AMS will also support the integration and maintenance of certain other NYC systems. The ultimate goal of the project is to support the complex processes necessary to identify and collect financial obligations to enhance the working environment of the City’s employees, while making it easier and more efficient for organizations and individuals to do business with the City.

“This system helps us realize our goal of leveraging the power of technology to provide world-class service to our citizens,” said Martha E. Stark, Esq., commissioner of the Department of Finance. “From clerks at our more than 400 Neighborhood Payment Centers, to Deputy Sheriffs on the streets, to respondents at home using the Internet to satisfy summonses, New Yorkers can rely on the accuracy and responsiveness of STARS.”

The project will have AMS personnel located both in NYC, and Fairfax, Virginia, perform all software design, development, and maintenance to both STARS and some other NYC systems. In addition, all operational tasks related to STARS will be managed by AMS, including interfacing with a data entry vendor to ensure timely updating of all ticket information; working with the bank responsible for lockbox transactions to ensure daily payment updates; and coordinating with all 51 Departments of Motor Vehicles for timely vehicle owner identification.

“Outsourcing the STARS system, and tapping AMS technical expertise to manage and upgrade other systems, will enable DOF to efficiently and effectively enhance service to its citizens by offering easy and accessible means to deal with financial transactions between themselves and NYC,” said Donna Morea, executive vice president and general manager of AMS Public Sector. “We are proud to have the opportunity to continue the work of the past 15 years supporting the complex processes necessary to identify and collect financial obligations while improving the working environment of the City’s employees.”

The DOF processes nearly 9 million parking tickets annually and is the largest operation of its kind in the United States. These tickets are issued by employees of 14 different City agencies, and generate in excess of $375 million annually in revenue for the City. The current STARS system processes over 200,000 transactions daily, nearly one million new summonses monthly, and generates nearly one million pieces of mail each month.

About AMS

AMS is a $1 billion global business and IT consulting firm whose customers have included 38 state and provincial governments, most federal agencies, and hundreds of companies in the Fortune 500. With deep industry experience and technical know-how in all levels of government and throughout the private sector, the company delivers results that measurably impact business performance and the relationship between an organization and its customers. Founded in 1970, AMS is headquartered in Fairfax, Va. with 47 offices worldwide. The company is traded on the NASDAQ under the symbol AMSY. For detailed information about AMS, visit www.ams.com.

This release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to risks, uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “expect,” “estimate,” “intends” and similar expressions are generally intended to identify forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: risks in project delivery and staffing, risk of revenues not being realized when expected, risk of increased competition in the markets, and the effects of economic uncertainty on client expenditures as well as other factors described in item 7 of AMS’s Annual Report on Form 10-K for the year ended 2001. The Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s (estimates or) views as of any subsequent date.

Contacts: Matt Guilfoyle
AMS
(703) 267-2239
matt.guilfoyle@ams.com

Ken Jones
AMS
(703) 449-2089
ken.jones@ams.com

EX-99.4 10 w65369exv99w4.htm EXHIBIT 99.4 exv99w4

EXHIBIT 99.4

AMS Divests Utilities Practice to Wipro, Ltd.

Company Continues Repositioning for Growth

FAIRFAX, Va, November 11, 2002 — American Management Systems (NASDAQ: AMSY), a global business and IT consulting firm, announced today that it will sell its global utilities practice to Wipro, Ltd. (NYSE:WIT) of Bangalore, India for approximately $26 million. Upon close of the sale, the AMS utilities practice will become part of the Wipro global technology services division, which has operations across India, North America, Europe and Japan. The agreement includes the transfer of customer relationships and intellectual property, and Wipro will extend offers of employment to the utilities practice employees of AMS in the U.S. and Europe.

“This activity is part of AMS’s strategy to reposition for growth,” said AMS Chairman and CEO Alfred T. Mockett. “The divestiture allows us to exit a non-core business and adds to our capital base to focus on key areas of opportunity. AMS is moving steadily toward its objective to be the leading player in chosen market segments.”

Mockett added that this action takes place in the context of several initiatives implemented in the past year to aggressively transform the company to one driven by results, sales and customer satisfaction. Primary accomplishments have included the installation of a world-class executive management team; integration of cross-company horizontal services lines; appointment of a new risk management officer accountable to the CEO; strengthened financial position; and implementation of a customer-centric sales orientation with a sales force of more than 100 commission-based salespeople.

“Further, in pursuing our corporate strategy, we are pleased to have found an industry leader in Wipro for the global utilities practice that is committed to the business and supporting its future growth initiatives,” Mockett added.

According to Sudip Banerjee, President, Wipro Technologies Enterprise Solutions, “We are pleased to welcome the AMS global utilities practice’s team into the Wipro family. This acquisition enhances our ability to deliver end-to-end IT solutions for players in the energy and utilities space, bolstered by a global delivery model. The cultural fit for us is tremendous, as we share the same commitment to excellence in solution delivery and providing world class solutions.”

The transaction, which is scheduled to close at the end of the month, has been approved by the board of directors of both companies and is subject to customary legal approvals and closing conditions.

About AMS

About Wipro Limited

Wipro provides comprehensive IT solutions and services, including systems integration, information systems outsourcing, IT enabled services, package implementation, software application development and maintenance, and research and development services to corporations globally. Wipro Limited is the first P CMM Level 5 and SEI CMM Level 5 certified IT Services Company globally. In the Indian market, Wipro is a leader in providing IT solutions and services for the corporate segment in India offering system integration, network integration, software solutions and IT services. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro also has profitable presence in niche market segments in consumer products and lighting. Wipro ADS are listed on the New York Stock Exchange, and its equity shares are listed in India on the Stock Exchange – Mumbai, and the National Stock Exchange, among others.

Contacts:

AMS
Anne Burt
(703) 267-8142
mobile (703) 362-9869
anne.burt@ams.com

Wipro, Ltd.
Sridhar Ramasbbu
(408) 557-4402

-----END PRIVACY-ENHANCED MESSAGE-----

	•		A significant or prolonged economic downturn in the U.S. or internationally could have a material adverse effect on our operating results.

	•		Disruptions in commercial activities occasioned by actual or threatened terrorist activity or armed conflict could have a significant negative effect on our results of operations.

	•		Our inability to complete large projects as expected due to unanticipated delays, re-negotiations, cancellation by the customer, and changing customer requirements and project scope could result in a decline in revenues or profits, a diminution of our professional reputation or legal liability.

	•		Our inability to successfully recruit, retain and assimilate entry-level and experienced employees could adversely affect our operating results and our ability to effectively compete and grow our business.

	•		Our pricing, revenues and margins could be negatively affected if current or prospective clients decide to undertake fewer information technology systems projects or to consolidate with others in our target markets.

	•		We may be unable to realize revenues from benefits-funded contracts in the amounts or at the times expected if our customers are unable to achieve the amount of benefits anticipated due to factors such as economic downturns, tax base erosion or state cutbacks that result in fewer state resources being available to generate profits.

	•		Client Project expenses include direct expenses to provide services to our clients such as compensation costs, travel and out-of-pocket expenses, and costs for subcontractors.

	•		Selling, General and Administrative (“SG&A”) expenses include expenses not directly related to the delivery of client services such as compensation for support personnel, costs for information systems, incentive compensation, selling and marketing expenses, and recruiting and training expenses.

	•		Research and Product Support expenses include research and development expenses incurred as part of the software development cycle that are not capitalized as well as support/maintenance of existing software.

	•		Depreciation and Amortization expenses include the amortization of internally developed and purchased software and depreciation of furniture, equipment and leasehold improvements. Prior to January 1, 2002 the amortization of goodwill was also included. Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS

			142”) which was adopted January 1, 2002, requires the discontinuation of goodwill amortization.

	•		Restructuring Charge includes expenses associated with implementing our formal restructuring plan.

	•		Special Charge includes significant expenses associated with the write-down of certain software assets no longer expected to provide future value and reserves in connection with certain client engagements.

	•		revenue recognition;

	•		net realizable value of software;

	•		income taxes; and

	•		restructuring.

1.		I have reviewed this quarterly report on Form 10-Q of American Management Systems, Incorporated;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

1.		Term.

		The initial term of this Agreement shall end on June 30, 2004, unless it is terminated earlier as provided herein. Beginning on that date, and on each anniversary thereafter, unless it is terminated earlier as provided herein or AMS delivers written notice to the Employee of its intention not to extend the Agreement at least 90 days before such anniversary date, the term of this Agreement shall automatically be extended for one additional year. The restrictive covenants in Sections 10 and 11 hereof shall survive the termination of this Agreement.

2.		Title and Duties.

		The Employee shall be employed as Executive Vice President of AMS. The Employee shall perform such services consistent with his position as might be assigned to him from time to time and are consistent with the bylaws of AMS.

3.		Location.

		The Employee’s place of employment shall be within a 25-mile radius of the location of the offices described above as AMS shall reasonably direct, or at any other location that may be mutually agreed upon in the future.

4.		Extent of Services.

	a.		General.

			The Employee agrees not to engage in any business activities during the term of this Agreement except those that are for the benefit of AMS, and to devote his entire business time, attention, skill and effort to the performance of his duties under this Agreement. Notwithstanding the foregoing, the Employee may engage in charitable, professional and civic activities that do not impair the performance of his duties to AMS, as the same may be changed from time to time, or otherwise adversely affect AMS’s interest, reputation, business or welfare. Nothing contained herein shall prevent the Employee from managing his own personal investments and affairs, including but not limited to investing his assets in the securities of publicly traded companies; provided, however, that the Employee’s activities do not constitute a conflict of interest, violate securities laws, or otherwise interfere with the performance of his duties and responsibilities as described herein. The Employee agrees to adhere to AMS’s published policies and procedures affecting directors, officers, employees, and agents and shall use his best efforts to promote AMS’s interest, reputation, business and welfare.

	b.		Corporate Opportunities.

			The Employee agrees that he will not take personal advantage of any AMS business opportunities that arise during his employment with AMS and that might be of benefit to AMS. All material facts regarding such opportunities must be promptly reported to the Board for consideration by AMS.

	a.		Base Salary.

			The Employee’s initial annualized base salary shall be $400,000. The base salary shall be payable in accordance with AMS’s standard payroll practices. The Employee’s annual base salary shall be reviewed no less frequently than annually by the AMS Compensation Committee and/or Board; provided, however, that at no time during the term of this Agreement shall the Employee’s base salary be decreased from the base salary then in effect except as part of a general program of salary adjustment by AMS applicable to all similarly-situated employees.

	b.		Incentive Compensation.

			from 0% to 120% of his annual base salary for the relevant year, depending on AMS’s and the Employee’s performance with a target percentage of 60% (“Target Annual Bonus”). Such annual cash bonuses shall be paid at the usual times for the payment of annual cash bonuses by AMS. If the Employee’s employment terminates before the end of a fiscal year for any reason other than Cause, as defined herein, the Employee shall be entitled to the annual cash bonus for that year, based on actual results for the entire year but prorated for the period of actual employment, at the time that the annual cash bonus otherwise would have been paid.

	(ii)		The Employee shall be eligible to participate in all long term incentive plans in which other executive vice presidents are eligible to participate.

	c.		Other Benefits.

			The Employee shall be entitled to paid compensatory leave and vacation, sick leave, and holiday pay in accordance with AMS’s policies in effect from time to time, and to participate in such life, health, and disability insurance, pension, deferred compensation and incentive compensation plans, stock options and awards, performance bonuses and other benefits as AMS extends, as a matter of policy, to its executive vice presidents.

	d.		Special Retiree Health Benefit.

			On the date that the Employee’s employment terminates for any reason, regardless of the Employee’s actual age he shall be treated as satisfying the requirements under the AMS Retiree Medical Program that he must be at least age 55 and that his age plus years of AMS service must equal at least 65; provided, however, that if the Employee is precluded from participating in the Program as described, for any reason, he shall be provided with the after-tax economic equivalent of the benefits he would have received under the Program. The economic equivalent of the benefits he would have received under the Program shall be the lowest cost that would be incurred by the Employee in obtaining health insurance coverage for himself and his eligible dependents that will provide benefits comparable to the benefits offered under the AMS Retiree Medical Program, as AMS shall modify the Program from time to time, less any required contributions under the Program.

	e.		Supplemental Disability Benefit.

			Subject to the Employee’s provision of evidence of insurability reasonably acceptable to AMS, AMS shall make available to the Employee during the term of this Agreement a disability benefit, paid by AMS, that is supplemental to the disability benefits provided under its existing group long term disability policy and under which benefits are not payable unless the Employee is disabled as defined in the existing policy, and that will be sufficient to ensure that the benefits otherwise payable to the Employee under the terms of the existing policy, together with the supplemental benefit and any compensation or benefits from other sources that are

	a.		In General.

			Except as specifically provided below or elsewhere in this Agreement, the Employee’s employment may be terminated by either party at any time with or without Cause. In any event, the Employee’s employment shall terminate immediately upon his death.

			Except as specifically provided below or elsewhere in this Agreement, in the event that the Employee’s employment is terminated, this Agreement shall terminate and the Employee shall be entitled only to such rights and payment of such benefits as might be provided by the terms of any employee benefit plan or program of AMS, or any other agreement between AMS and the Employee.

			Except as specifically provided below or elsewhere in this Agreement, constructive termination of the Employee’s employment by AMS shall be treated the same as actual termination for purposes of this Agreement. Constructive termination shall mean a termination of the Employee’s employment at his own initiative following the occurrence, without the Employee’s prior written consent, of one or more of the following events:

	(i)		a significant diminution in the nature or scope of the Employee’s authority or the duties that the Employee performs, unless the Employee is given new authority or assigned new duties (whichever is applicable) that are substantially comparable to his previous authority and duties;

	(ii)		a significant reduction in the Employee’s then current base salary, a significant reduction in his opportunities for earnings under his incentive compensation plans, or a significant reduction in his employee benefits as a whole (in each case except as part of a general reduction that applies to other similarly-situated employees); or

	(iii)		the relocation of the Employee’s office from its location at the time of the change to a location more than 25 miles away without his prior written consent.

			perform this Agreement is assigned or transferred to a successor employer pursuant to Section 17 hereof or if the Employee otherwise becomes employed without a significant period of unemployment under substantially similar terms and conditions by a successor to some or all of the business of AMS.

	b.		Voluntary Termination.

			The Employee’s voluntary termination of employment shall be effective upon 30 days’ prior written notice to AMS, unless the parties mutually agree to advance or delay the effective date.

	c.		Termination Without Cause.

			AMS’s termination of the Employee’s employment (or taking of any action or actions resulting in constructive termination of employment) without Cause shall be effective upon 30 days’ prior written notice to the Employee, unless the parties mutually agree to advance or delay the effective date.

			If the Employee’s employment is terminated without Cause and not on account of Disability, the Employee shall be entitled to receive from AMS the following benefits in addition to any other benefits to which he might be entitled:

	(i)		a severance benefit in an amount equal to 100% of the Employee’s annual base salary in effect immediately preceding such termination, but only if (1) the Employee executes a release substantially identical to the release attached hereto, (2) the period for revoking such release has expired, and (3) the Employee has complied with the requirements of Sections 10 and 11 hereof;

	(ii)		full vesting of any unexercised stock options; and

	(iii)		payment of amounts equal (before reduction for taxes) to any premiums for health and dental insurance continuation coverage under any AMS health plans that is elected by the Employee or his beneficiaries pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), at a time or times mutually agreed to by the parties, but only so long as the Employee is not eligible for coverage under a health plan of another employer (whether or not he elects to receive coverage under that plan).

	a.		Additional Benefits.

			If the Employee’s employment is terminated within twelve (12) months following a Change of Control of AMS, and a severance benefit is payable pursuant to Section 6.c.(i) hereof, (i) the amount of the severance benefit shall be increased to 200% of the sum of the Employee’s base salary and Target Annual Bonus, (ii) the 25% hold-back of the severance benefit shall not apply, and (iii) the Employee shall be entitled to the Gross-up Payment, if any, described in subsection c below.

	b.		Definition of Change of Control.

			A “Change of Control” shall mean the first of the following events to occur:

	(i)		Any person or group (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Act”)), other than AMS or a trustee or other fiduciary holding securities under an employee benefit plan of AMS or a corporation owned directly or indirectly by the stockholders of AMS in substantially the same proportions as their ownership of stock of AMS, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Act), directly or indirectly, of securities representing 50% or more of the combined voting power of AMS’s then-outstanding securities entitled generally to vote for the election of directors;

	(ii)		AMS’s stockholders approve an agreement to merge or consolidate with another corporation unless AMS’s stockholders immediately before the merger or consolidation are to own more than two-thirds (66-2/3%) of the combined voting power of the resulting entity’s voting securities entitled generally to vote for the election of directors;

	(iii)		AMS’s stockholders approve an agreement (including, without limitation, an agreement of liquidation) to sell or otherwise dispose of all or substantially all of the business or assets of AMS; or

			However, no Change of Control shall be deemed to have occurred by reason of (1) any event involving a transaction in which the Employee or a group of persons or entities with whom or with which the Employee acts in concert, acquires, directly or indirectly, 50% or more of the combined voting power of AMS’s then-outstanding voting securities or the business or assets of AMS, (2) any event involving or arising out of a proceeding under Title 11 of the United States Code or the provisions of any future United States bankruptcy law, an assignment for the benefit of creditors or an insolvency proceeding under state or local law.

	c.		Effect of Section 280G.

			The benefit provided under this Section 7 or Section 6 hereof, if applicable, shall be provided without regard to any limitations imposed by Section 280G or 4999 of the Code.

	(i)		In the event that the Employee becomes entitled to the benefits (including the acceleration of certain benefits) provided under this Section 7 or Section 6 hereof, if applicable (the “Benefits”), if any of the Benefits will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), AMS shall pay to the Employee an additional amount (the “Gross-up Payment”) such that the net amount retained by the Employee, after deduction of any Excise Tax on the Total Benefits (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this subparagraph (i), but before deduction for any federal, state or local income tax on the Benefits, shall be equal to the “Total Benefits,” as defined below.

	(ii)		For purposes of determining whether any of the Benefits will be subject to the Excise Tax and the amount of such Excise Tax:

			280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by AMS’s independent auditors such other payments or benefits (in whole or in part) will 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(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, and such tax counsel shall provide such opinion in writing to the Employee such that he and his tax advisors can rely on it,

	(2)		The amount of the Total Benefits which shall be treated as subject to the Excise Tax shall be equal to the lesser of (I) the total amount of the Total Benefits and (II) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying paragraph (1), above), and

	(3)		The value of any non-cash benefits or any deferred payment or benefit shall be determined by AMS’s independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

	d.		Effect on Pre-existing Change in Control Retention Agreement.

			The American Management Systems, Incorporated Change in Control Executive Retention Agreement between AMS and the Employee shall be cancelled and all rights granted to the Employee under that agreement shall become null and void upon the effective date of this Agreement.

8.		Mitigation and Offset.

		If the Employee’s employment is terminated during the term of this Agreement without Cause, the Employee shall be under no duty or obligation to seek or accept other employment, and no payment or benefits of any kind due him under this Agreement shall be reduced, suspended or in any way offset by any subsequent employment.

9.		Entitlement to Other Benefits.

		Except as expressly provided herein, this Agreement shall not be construed as limiting in any way any rights or benefits the Employee, his spouse, dependents or beneficiaries may have pursuant to any other employee benefits plans or programs.

10.		Confidentiality.

		The Employee acknowledges that all confidential information regarding the business of AMS and its subsidiaries and affiliates is the exclusive property of AMS. On or before the date that his employment with AMS terminates, the Employee shall return to AMS all copies of any material involving such confidential information to AMS, and the Employee 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. The Employee also shall return to AMS by that date any other items in his possession, custody or control that are the property of AMS. The Employee understands that even after the date that his employment with AMS terminates he will remain bound by the terms of the American Management Systems, Incorporated Confidentiality and Intellectual Property Rights Agreement, the AMS Ethical Business Conduct policy statement, and the restrictive covenants contained in this Section 10 and Section 11 hereof. This Section 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. No breach of this Section shall be deemed to have occurred unless AMS provides written notice to the Employee of the breach within 90 days after AMS becomes aware of it.

11.		Non-Solicitation.

		Effective on the date that his employment with AMS terminates and for a period of 12 months thereafter, the Employee shall not directly (a) employ or solicit for employment, or

		assist in any way in solicitation for employment, any person employed by AMS or any of its affiliates then or at any time within the preceding 12 months; or (b) solicit, or assist in any way in the solicitation of business from any of AMS’s or its affiliates’ clients or prospective clients, either for the Employee’s own benefit or the benefit of anyone other than AMS, unless the business being solicited is not competitive with the services or products provided by AMS or its affiliates. Clause (b) shall not apply unless the business being solicited is in a line of business in which AMS was already engaged or already had under active consideration while the Employee was employed by AMS or is a natural extension of such a line business with a client that was an existing client of AMS during that time.

12.		Employee Representation.

		The Employee represents and warrants to AMS that he is not now under any obligation of a contractual or other nature to any person, business or other entity that is inconsistent or in conflict with this Agreement or that would prevent him from performing his obligations under this Agreement.

13.		Arbitration.

		Any dispute or controversy arising under or in connection with this Agreement shall, if AMS or the Employee 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 the Employee 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 the Employee’s covenants in Sections 10 and 11 hereof.

14.		Legal Expenses.

		Except as provided in Section 13 hereof, if any dispute or controversy arises under or in connection with this agreement, AMS shall promptly pay all the Employee’s legal fees and expenses relating to the dispute or controversy, including, by way of example rather than limitation, reasonable attorneys’ fees incurred by the Employee in seeking to obtain or enforce any right or benefit under this Agreement, provided, however, that this obligation of AMS shall not apply unless the Employee prevails in whole or in part on the dispute or controversy. This obligation shall apply irrespective of whether the dispute or controversy is resolved by arbitration, litigation, or a settlement thereof.

15.		Interest.

		AMS shall pay to the Employee interest at the prime lending rate as announced from time to time by Citibank, N.A. or its successors or another substantially similar rate on all or any part of any amount to be paid to the Employee hereunder that is not paid when due or that is deferred under an express obligation to pay interest.

16.		Indemnification.

	a.		AMS agrees that if the Employee is made a party, or, is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of AMS, or is or was serving at the request of AMS as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Employee’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Employee shall be indemnified and held harmless by AMS to the fullest extent permitted or authorized by AMS’s certificate of incorporation and by-laws. To the extent consistent with the foregoing, this obligation to indemnify the Employee and hold him harmless shall continue even if he has ceased to be a director, officer, member, employee or agent of AMS or other such entity described above, and shall inure to the benefit of the Employee’s heirs, executors and administrators. AMS shall advance to the Employee all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by AMS of a written request for such advance. Such request shall include an undertaking by the Employee to repay the amount of such advance if it shall ultimately be determined that the Employee is not entitled to be indemnified against such costs and expenses.

	b.		Neither the failure of AMS (including its Board, independent legal counsel or stockholders) to have made a determination before such Proceeding concerning payment of amounts claimed by the Employee under subsection a above that indemnification of the Employee is proper because he has met the applicable standards of conduct, nor a determination by AMS (including its Board, independent legal counsel or stockholders) that the Employee has not met such applicable standards of conduct, shall create a presumption that the Employee has not met the applicable standards of conduct.

17.		Assignability and Binding Nature.

		This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, heirs (in the case of the Employee) and assigns. No rights or obligations may be assigned or transferred by AMS except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which AMS is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of AMS, provided that the assignee or transferee is the successor to all or substantially all of

		the assets of AMS and such assignee or transferee assumes the liabilities, obligations, and duties of AMS, as contained in this Agreement, either contractually, or as a matter of law. AMS further agrees, that in the event of a sale of assets or liquidation as described in the foregoing sentence, it shall take whatever action it is legally entitled to take in order to cause the assignee or transferee to expressly assume the liabilities, obligations, and duties of AMS under this Agreement. Notwithstanding any such assignment, AMS shall not be relieved from liability under this Agreement. No rights or obligations of the Employee under this Agreement may be assigned or transferred by the Employee other than his right to receive compensation and benefits, provided such assignment or transfer is otherwise permitted by law.

18.		Notices.

		All notices required or permitted hereunder shall be in writing and shall be deemed effective: (a) upon personal delivery; (b) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid; or (c) in the case of delivery by nationally recognized overnight delivery service, when received, addressed as follows:

		If to AMS to: American Management Systems, Incorporated 4050 Legato Road Fairfax, VA 22033 Attention: Garry Griffiths, Chief Human Resources Officer With a copy (which shall not constitute notice) to: Shaw Pittman LLP 2300 N Street, N.W. Washington, DC 20037 Attention: Barbara M. Rossotti, Esq. If to the Employee, to: Larry R. Seidel 4431 Dittmar Road Arlington, VA 22207

		or to such other address or addresses as either party shall designate to the other in writing from time to time by like notice. At AMS’s sole discretion it may substitute, for any advance notification otherwise required in this Agreement (including the right to a delayed effective date provided in Section 6 hereof in lieu of advance notice), continued payment of regular salary and benefits during the otherwise required advance notification period.

19.		Amendment.

		This agreement may be amended or modified only by a written instrument executed by both AMS and the Employee.