DynCorp Executive Incentive Plan
Amended and Restated as of DynCorp Fiscal Year 2000
I. PURPOSE
The purpose of the Executive Incentive Plan (the Plan) is to reward and
motivate executives who have significant impact on the Company's
strategy, performance and profitability for the achievement of
pre-established, measurable objectives which directly impact the
financial performance of the DynCorp and increase shareholder value.
II. GENERAL DESCRIPTION
At the beginning of the Plan Year, DynCorp and organizational financial
objectives, individual objectives and target incentive award levels
will be established and confirmed in writing for each Plan participant.
At the conclusion of the Plan Year, the achievement of the specified
objectives will be scored and weighted for each participant according
to established formulae to determine the actual incentive amount to be
awarded.
III. ELIGIBILITY
All executives in Salary Bands 1 through 3 who have been in their
positions a minimum of six months during the Plan Year are participants
in the Plan. Inclusion of individuals with less than six months must be
approved as an exception to the Plan.
With the exception of disability, retirement or death, participants
must be employed (on the active payroll) on the date an award is paid
in order to receive an incentive award. However, at its sole
discretion, the Compensation Committee may approve an award to a former
employee, or to the former employee's estate, in such amount as is
deemed appropriate.
Participation in the Plan precludes eligibility for participation in
any other annual cash incentive plan(s) provided by the Company.
IV. RESPONSIBILITIES
A. The Senior Vice President, Human Resources is responsible for
administering the Plan.
B. As appropriate, Band 2 executives are responsible for
confirming Plan participants, recommending individual target
award levels, SBA and SBU financial performance objectives,
and individual performance objectives, submitting financial
results at the end of the Plan Year for SBA, SBU, and other
organizational entities relative to financial objectives
approved at the beginning of the Plan Year, and evaluating
participant individual performance.
C. The DynCorp Chief Financial Officer (CFO) is responsible for
reviewing SBA and SBU financial performance objectives
recommended by the Presidents, informing the CEO of his
concurrence with the recommended measurements or proposing
alternative financial measurements more applicable to specific
SBA's, SBU's and for concurring with the calculations of
actual financial performance used to determine actual award
amounts.
D. The Chief Executive Officer (CEO) is responsible for
reviewing, modifying and subsequently recommending to the
Compensation Committee of the Board of Directors individual
target award levels and financial and individual participant
objectives, DynCorp and Strategic Business Area financial
objectives, deviations from the Plan and actual incentive
payments.
E. The Compensation Committee of the Board of Directors (the
Committee) is responsible for amending the Plan, approving
individual target award levels, DynCorp and other financial
objectives, deviations from the Plan and actual incentive
payments.
V. DEFINITIONS
A. Award Pool
The total dollar amount of the Budgeted Bonus Pool available
for payment of Executive Incentive awards based on approved
participation changes and the organizational financial
performance of DynCorp and Strategic Business Areas during the
Plan Year.
B. Base Salary
The base annual salary rate of a participant as of April 1 of
the Plan Year or, if later, the time the individual is
approved as a participant for a given year, exclusive of
overtime, per diem, bonuses or any other premiums, special
payments or allowances. In the event an existing participant
receives a bona-fide promotion subsequent to April 1 of the
Plan Year, the participant's Base Salary for the remainder of
the Plan Year will be defined as the base annual salary rate
in effect at close of business on the day the promotion
becomes effective.
C. Budgeted Bonus Pool
The dollar amount approved by the Compensation Committee at
the beginning of each Plan Year which equals the maximum
amount of Executive Incentive, Management Incentive, Key
Contributor and Spot awards payable if organizational weighted
financial performance meets exactly 100% of the financial
performance objectives.
D. Financial Objectives
The DynCorp, Strategic Business Area and Strategic Business
Unit financial goals approved by the CEO (SBU) or Compensation
Committee (DynCorp and Strategic Business Area) at the
beginning of the Plan Year.
E. Metrics
The financial and non-financial performance measures which
comprise the performance goals for the Plan Year. The
financial performance metrics are updated annually based on
the organizational financial objectives approved by the
Compensation Committee and included as Exhibit 1 of the Plan
Document.
F. Plan Year
The fiscal year of DynCorp.
G. Strategic Business Area (SBA)
A group of DynCorp organizational units responsible to a
presiding officer who reports directly to the CEO of DynCorp.
H. Strategic Business Unit (SBU)
One or more DynCorp organizational units (excluding joint
ventures) responsible to an officer or manager who reports
directly to the presiding officer of an SBA.
I. Target Award
The dollar amount that a participant is eligible to receive if
the combined weighted performance against organizational
financial and, if applicable, individual objectives equals an
overall achievement level of exactly 100%.
J. Target Percentage
The percentage of Base Salary which is payable to a
participant if combined weighted performance against
organizational financial and, if applicable, individual
objectives equals an overall achievement level of exactly
100%. This percentage, which is determined at the beginning of
the Plan Year may be changed during the Plan Year to reflect
the promotion, during the Plan Year of a participant to a
position of higher responsibility.
K. Threshold
The level of performance required before any organizational
financial award is paid. For Plan purposes the threshold
performance level is 75% of objectives. The threshold is
applied at two levels.
o If combined weighted performance against all
applicable organizational financial objectives is
less than 75% in the aggregate, then no award is paid
for financial performance.
o If combined weighted performance against both
organizational financial and individual objectives is
less than 75% in the aggregate, then no award is
paid.
VI. FUNDING
At the beginning of the Plan Year executive management will establish,
subject to approval by the Committee, the amount of the Budgeted Bonus
Pool.
The Budgeted Bonus Pool will be accrued ratably on a monthly basis
during the Plan Year. The accrual amount will be reviewed quarterly and
adjusted as necessary to reflect the most recent projections of actual
financial performance versus budgeted performance and additions to,
deletions from or other changes in Plan participation.
At the end of the Plan Year, the Chief Financial Officer reviews
corporate and SBA performance and recommends the performance results to
be used in the calculation of the Award Pool and individual awards. The
CEO reviews the results submitted by the CFO and, subject to further
adjustments as deemed necessary, recommends their approval to the
Committee.
VII. AWARDS
Target Awards ranging from 30% to 70% (in 5% increments) of Base Salary
will be established for each participant at the beginning of each Plan
Year. These targets will be divided into financial and, if appropriate,
individual performance components and weighted as shown in Exhibit 2 to
this document.
Target award recommendations will be submitted for review and approval
in accordance with procedures established by the Senior Vice President,
Human Resources to achieve the approvals described in Section IV of the
Plan.
At the end of the Plan Year, Performance Factors will be calculated for
DynCorp and each SBA. These Performance Factors are expressed as
percentages which are determined by dividing each of the performance
results determined in paragraph VI by their corresponding
pre-established financial objectives. Once determined these Performance
Factors will be multiplied by the appropriate weighting for each
objective to determine Weighted Performance Factors, also expressed as
percentages. The Weighted Performance Factors will be combined to
determine the Aggregate Performance Factor. The Corporate Award Pool
then will be determined by multiplying the Corporate Budgeted Bonus
Pool, as adjusted for participation changes during the Plan Year, by
DynCorp's Aggregate Performance Factor. Total awards paid to corporate
participants may not exceed the Award Pool amount. Similarly, SBA Award
Pools are determined by multiplying the SBA Budgeted Bonus Pool, as
adjusted for participation changes during the Plan Year, by the SBA's
Aggregate Performance Factor. Total awards paid to SBA participants may
not exceed the Award Pool for their respective SBA's.
Additionally, Performance Factors are developed for each objective used
in individual employee Target Awards. Once determined these Performance
Factors will be multiplied by the appropriate weighting for each
objective to determine Weighted Performance Factors, also expressed as
percentages. The Weighted Performance Factors will be combined to
determine the Aggregate Performance Factor.
A bonus due to a participant hired after the beginning of the Plan Year
will be prorated based upon the number of months employed by the
Company as a percentage of the full year.
With the exception of disability, retirement or death, participants
must be employed (on the active payroll) on the date the awards are
paid in order to receive an incentive award. However, at its sole
discretion, the Compensation Committee may approve an award to a former
employee, or to the former employee's estate, in such amount as deemed
appropriate.
VIII. PERFORMANCE MEASUREMENT COMPONENTS
Performance may be measured against financial objectives only or a
combination of financial and non-financial objectives. Incentive awards
under the Plan will be based on organizational or a combination of
organizational and individual achievements in any one, combination of,
or all of the following three areas:
A. The Financial Performance of DynCorp:
DynCorp's financial success is the key determinant of its
ongoing viability as an independent business entity. In
recognition of this, all or a portion of each Corporate
participant's award will be based on DynCorp's performance
against its financial objective. Corporate performance also
may be included in the determination of non-corporate
participants.
This objective, which will be recommended by the CEO, and
approved by the Committee at the beginning of each Plan Year,
may be comprised of one or more financial measurements. The
measurement(s) will be reviewed and, if deemed appropriate,
changed each Plan Year to properly reflect DynCorp's strategic
objectives. Further, the financial objective will be
established at a level that will require above average
performance from the management team to achieve it.
B. The Financial Performance of the Organizational Unit:
For non-Corporate participants, the financial performance of
the SBA or SBU in which they have the most direct control and
accountability, will be given the heaviest weighting in order
to motivate them toward and reward them for achievement of
their financial goals.
Financial objectives established for each SBA and SBU will be
measurable and consistent with the overall strategic goals of
the SBA. SBA and SBU financial objectives will be expressed in
terms of meaningful financial performance measures. Moreover,
as with the DynCorp financial objective, they will be
established at a level that will require above average
performance from the management team to achieve them.
C. The Individual Performance of the Participant:
Individual performance will be measured in terms of
performance against pre-established objectives and the
participant's manager's subjective judgment of overall
individual performance. Performance against objectives must
comprise at least 50% of the individual performance factor.
Individual objectives should be established according to the
following guidelines:
1. Each participant will have 4-6 written objectives
that have been jointly agreed to by the participant
and the participant's supervisor.
2. Objectives will evolve from, respond to and/or
reflect the Company objectives established and
communicated by the CEO. Objectives covering the
following areas may typically be included:
o Key operational objectives
o Human resources management
o Quality and process improvement
o Business development
o Customer satisfaction
3. Objectives will be both quantitative and qualitative
in nature and will include non-financial as well as
appropriate financial related goals.
4. Objectives will be highly measurable and within the
control of the participant.
X. AWARD DETERMINATION
Awards will be calculated as follow:
1) For participants whose awards are based on corporate and/or SBA
financial goals, the Aggregate Performance Factor determined in
Paragraph VII for each participant will be multiplied by the
participant's Target Award to determine the amount of the Target Award
payable. These calculated awards are rounded as noted later in this
paragraph.
2) For each participant with financial objectives for organizational
entities below the corporate and SBA levels, the Aggregate Performance
Factor will be multiplied by the participant's Target Award to
determine the Unadjusted Award Amount.
3) The Unadjusted Award Amounts determined in step 2 above for all
participants will be totaled.
4) Each participant's Unadjusted Award Amount will be calculated as a
percentage of the sum of all Unadjusted Award Amounts calculated in
step 2.
5) The resulting percentage for each participant will be multiplied by the
amount of the Award Pool reduced by the total amount of awards
determined in step 1.
6) The awards determined in steps 1 and 5 will be rounded to the nearest
$100.
Payment of the calculated award is subject to performance exceeding
Threshold performance as described in Section V. (Exhibit 3 to the Plan
shows detailed examples of award calculations.)
The award payable for any single performance component for any
participant may range from 0 to 200% of the established target amount
for the component as designated in Exhibit 1.
If the combined weighted achievement level for all applicable
organizational financial performance objectives is less than the
Threshold level, no award is paid. If the combined weighted achievement
level for organizational financial and individual performance
objectives is less than the Threshold level, no award is paid.
Should a participant transfer to another organization during the Plan
Year, the final award will be jointly determined and prorated for the
time spent in each organization.
All incentive awards proposed under the Plan are subject to the
approval of the CEO and the Committee, who may at their discretion
adjust the amounts to be awarded in order to reflect exceptional
performance, performance that falls below objectives or other
performance factors that affect or potentially affect the ability of
the Company or any of its units to meet its business and financial
goals.
XI. YEAR-END ADMINISTRATION
Initial actual award recommendations will be calculated at the SBA and
Corporate levels and submitted in accordance with procedures
established by the Senior Vice President, Human Resources, for Company
level consolidation and submission to the CEO. Documentation of
objectives, accomplishments and individual evaluations will be required
to be submitted along with the individual award recommendations.
Financial performance will be reviewed by the CFO as soon as the
results for the Plan Year are available. Initial actual award
recommendations will be adjusted as necessary based on this review to
reflect the actual financial performance. The adjusted recommendations
will be submitted by the CEO to the Committee for approval.
A portion of each award payable will be paid in the form of DynCorp
Common Stock. Twenty percent of the total award will be paid in the
aggregate in the form of stock less withholding taxes and Savings and
Retirement Plan (SARP) deferrals due thereon. The remaining 80% of the
award, net of any reductions by reason of the Key Executives
Share-Option Compensation Plan, will be paid in the aggregate in cash,
withholding taxes and SARP deferrals.
Bonus award payments are made following approval by the Compensation
Committee at its annual spring meeting.
Nothing in the Plan or in any action taken hereunder shall constitute
any contract of employment or affect the Company's right to terminate
at any time and for any reason the employment of any employee who is a
participant in the Plan.
Exhibit 1
<PAGE>
Plan Year 2000 Financial Performance Metrics
CORPORATE
EBITDA - Earnings of DynCorp before deductions for interest, taxes,
depreciation, amortization, discontinued operations and
merger/acquisition costs, as recorded on the books and records of the
Corporation.
Plan Year 2000 Performance Objective - $86,000,000
Weighting - 60% of corporate organizational performance
Maximum Recognizable Performance - 150% of Performance Objective
Interest Bearing Debt (IBD) - The amount of DynCorp's interest bearing
debt as disclosed on DynCorp's Consolidated financial statements at the
end of Plan Year.
Plan Year 2000 Performance Objective - Not to exceed $303,000,000
Weighting - 40% of corporate organizational performance
Maximum Recognizable Performance - 150% of Performance Objective
STRATEGIC BUSINESS AREAS AND STRATEGIC BUSINESS UNITS
Factored Operating Profit (FOP) - Earnings of the applicable
organizational unit (i.e. SBA or SBU ) after ESOP and after all
accruals, but before the Corporate G&A Expense, Interest and Dividend
Income, Interest Expense, Net Asset Allocation and Taxes on Income
adjusted upward or downward to reflect the impact of asset utilization
by the product of 1) the difference between budgeted and actual Average
Net Assets multiplied by 2) 40%.
Organization Plan Year 2000 Weighting as % Maximum Recognizable
Performance of SBA Performance
Objective Performance
DI&ET _____________
DTS _____________ 50% 200% of Performance
DIS _____________ Objective
Days Sales Outstanding (DSO)
Days Sales Outstanding as defined in DynCorp Finance Policy Statement
PS505, as in effect at the beginning of the fiscal year during which
performance is measured for Plan purposes
Organization Plan Year 2000 Weighting as % Maximum Recognizable
Performance of SBA Performance
Objective Performance
DI&ET ____________
DTS ____________ 50% 100% of Performance
DIS ____________ Objective
<PAGE>
Exhibit 2
Weighting of Performance Components for Plan Year 2000
DynCorp SBA SBU
Financial Financial Financial Individual
Description Performance Performance Performance Performance
Corporate Participants EBITDA 60%
IBD 40%
SBA Participants EBITDA 12% FOP 40%
IBD 8% DSO 40%
DMR President EBITDA 12% Revenue 32%
IBD 8% FOP 24%
DSO 24%
SBU Participants FOP 40%
DSO 40%
Exhibit 3
Plan Participation
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================================================================
Participants Salary Target % Target Award
----------------------------------------------------------------
----------------------------------------------------------------
Corporate Participant 1 $200,000 40% $80,000
----------------------------------------------------------------
----------------------------------------------------------------
Corporate Participant 2 $125,000 30% $37,500
----------------------------------------------------------------
----------------------------------------------------------------
SBA Staff Participant 1 $250,000 40% $100,000
----------------------------------------------------------------
----------------------------------------------------------------
SBA Staff Participant 2 $130,000 30% $39,000
----------------------------------------------------------------
----------------------------------------------------------------
SBA Staff Participant 3 $150,000 30% $45,000
----------------------------------------------------------------
----------------------------------------------------------------
SBU1 Participant 1 $135,000 30% $40,500
----------------------------------------------------------------
----------------------------------------------------------------
SBU2 Participant 1 $130,000 35% $45,500
----------------------------------------------------------------
----------------------------------------------------------------
SBU2 Participant 2 $125,000 30% $37,500
----------------------------------------------------------------
----------------------------------------------------------------
SBU3 Participant 1 $125,000 30% $37,500
----------------------------------------------------------------
----------------------------------------------------------------
SBU3 Participant 2 $125,000 30% $37,500
----------------------------------------------------------------
----------------------------------------------------------------
Total Target Awards $500,000
================================================================
================================================
Budgeted Pool
------------------------------------------------
Corporate Budgeted Pool $117,500
SBA Budgeted Pool $382,500
----------------- --------
Total Budgeted Pool $500,000
============================= ==================
============================================================================
Performance Factors (Actual Performance divided by Objective
----------------------------------------------------------------------------
-------------------------- ----------------- --------------- ---------------
Unit Objective 1 Objective 2 Aggregate
Performance Performance Performance
Factor 1 Factor Factor
-------------------------- ----------------- --------------- ---------------
-------------------------- ----------------- --------------- ---------------
Corporate 92% 100% 95%
-------------------------- ----------------- --------------- ---------------
-------------------------- ----------------- --------------- ---------------
SBA 90% 100% 95%
-------------------------- ----------------- --------------- ---------------
-------------------------- ----------------- --------------- ---------------
SBU1 110% 100% 105%
-------------------------- ----------------- --------------- ---------------
-------------------------- ----------------- --------------- ---------------
SBU2 95% 105% 100%
-------------------------- ----------------- --------------- ---------------
-------------------------- ----------------- --------------- ---------------
SBU3 85% 95% 90%
========================== ================= =============== ===============
=====================================================================
Award Pool (Aggregate Performance Factor times Budgeted Pool)
---------------------------------- ----------------------------------
Corporate $111,625
---------------------------------- ----------------------------------
SBA $325,125
================================== ==================================
=========================================================================
Corporate and SBA Awards (Target Award times Aggregate Performance
Factor)
------------------------------ ------------ --------------- -------------
Participants Target Aggregate Calculated
Award Performance Award
Factor
----------------------- ------------- ------------ ---------------
Corporate Participant 1 $80,000 95% $76,000
Corporate Participant 2 $37,500 95% $35,625
----------------------- -------
Total Corporate $111,625
========
SBA Staff Participant 1 $100,000 95% $95,000
SBA Staff Participant 2 $39,000 95% $37,050
SBA Staff Participant 3 $45,000 95% $42,750
----------------------- -------
Total SBA Staff $174,800
========
============================== ============ =============== =============
<PAGE>
Exhibit 3 (continued)
===============================================================================
Unadjusted Award Calculation for SBU Participants
-------------------------------------------------------------------------------
----------------------- ---------- --------------- -------------- ------------
Participant Target Aggregate Unadjusted % of Total
Award Performance Award Unadjusted
Factor Awards
---------- --------- ----------- ------------ -----------
SBU1 Participant 1 $40,500 105% $42,525 22.0%
SBU2 Participant 1 $45,500 100% $45,500 23.6%
SBU2 Participant 2 $37,500 100% $37,500 19.4%
SBU3 Participant 1 $37,500 90% $33,750 17.5%
SBU3 Participant 2 $37,500 90% $33,750 17.5%
------------------ ------- -----
Total SBU $193,025 100.0%
==================== ========== ========== =========== = ============
==============================================
Award Pool Available for SBU Awards
---------------------------- ------------
Total SBA Award Pool $325,125
Awards To SBA Staff $174,800
--------
Available for SBU Awards $150,325
============================ ============
------------------------------------------------------------------
Award Calculation (% of Total Unadjusted Awards times Available
Pool)
------------------------ ------------- ------------ --------------
Participant % of Total Available Award Amount
Unadjusted Pool
Awards
------------------ ------------- ----------- --------------
SBU1 Participant 1 22.0% $150,325 $33,072
SBU2 Participant 1 23.6% $150,325 $35,477
SBU2 Participant 2 19.4% $150,325 $29,163
SBU3 Participant 1 17.5% $150,325 $26,306
SBU3 Participant 2 17.5% $150,325 $26,306
------------------ ----- -------
Total SBU 100.0% $150,324
------------------------ ------------- ------------ --------------
=========================================
Plan Participation
-----------------------------------------
=========================================
Participants Final Award
-----------------------------------------
-----------------------------------------
Corporate Participant 1 $76,000
-----------------------------------------
-----------------------------------------
Corporate Participant 2 $35,600
-----------------------------------------
-----------------------------------------
SBA Staff Participant 1 $95,000
-----------------------------------------
-----------------------------------------
SBA Staff Participant 2 $37,100
-----------------------------------------
-----------------------------------------
SBA Staff Participant 3 $42,800
-----------------------------------------
-----------------------------------------
SBU1 Participant 1 $33,100
-----------------------------------------
-----------------------------------------
SBU2 Participant 1 $35,500
-----------------------------------------
-----------------------------------------
SBU2 Participant 2 $29,200
-----------------------------------------
-----------------------------------------
SBU3 Participant 1 $26,300
-----------------------------------------
-----------------------------------------
SBU3 Participant 2 $26,300
-----------------------------------------
-----------------------------------------
Total Awards $500,000
=========================================
