1997-05-09_Def14a_0000950133-97-001298

The enclosed Proxy is being solicited by the Board of Directors of
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED (the “Company” or “AMS”) in
connection with the annual meeting of shareholders of the Company to be held
May 9, 1997 (the “Annual Meeting”), or any adjournment or adjournments thereof.
The entire expense of solicitation of proxies will be borne by the Company.
Solicitation will be primarily by mail. However, directors, executive officers,
and employees of the Company may also solicit by telephone or personal contact.
The Company will reimburse brokers and other persons holding shares in their
names, or in the names of nominees, for their expenses of sending proxy
materials to beneficial owners and obtaining their proxies. It is anticipated
that the Proxy Statement and Proxy first will be mailed to shareholders on or
about April 11, 1997.

Any shareholder giving a Proxy has the power to revoke it at any time
before it is voted by giving notice of revocation to the Secretary of the
Company. If you attend the Annual Meeting, you may, if you wish, revoke your
Proxy by voting in person. Proxies solicited herein will be voted, and if the
person solicited specifies in the Proxy a choice with respect to matters to be
acted upon, the shares will be voted in accordance with such specification. If
no choice is indicated, the Proxy will be voted for the election of the
nominees listed on pages 2 to 6 under the caption “Information Concerning
Nominees for Director” and for the approval of the AMS 1996 Amended Stock
Option Plan F (“Stock Option Plan F” or “Plan F”).

VOTING PROCEDURE

As of March 21, 1997, there were outstanding 41,240,731 shares of the
Company’s Common Stock, $0.01 par value per share (the “Common Stock”). Each
share of Common Stock is entitled to one vote at the Annual Meeting. Only
shareholders of record at the close of business on March 21, 1997 will be
entitled to vote at the Annual Meeting.

Votes cast in person or by Proxy at the Annual Meeting, abstentions and
Broker Non-votes (as defined below) will be tabulated by the election
inspectors appointed for such Meeting and will be counted for purposes of
determining whether a quorum is present. Each matter submitted to a vote at
the Annual Meeting will be approved by the affirmative vote of the holders of a
majority of the shares present (in person or represented by Proxy) and entitled
to vote on such matter. The election inspectors will treat abstentions on a
particular matter as shares that are present and entitled to vote for purposes
of determining the approval of such matter. Abstentions, therefore, will have
the same effect as a vote against a particular matter. If a broker submits a
Proxy indicating that it does not have discretionary authority as to certain
shares to vote on a particular matter (a “Broker Non-vote”), those shares will
not be treated as present and entitled to vote for purposes of determining the
approval of such matter.

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ELECTION OF DIRECTORS

Eleven directors are to be elected at the Annual Meeting, each to hold
office until the next annual meeting of shareholders of the Company and until
his or her successor is elected and qualified. The directors will be elected
by the affirmative vote of the holders of a majority of the shares present in
person or represented by Proxy and entitled to vote on the election of
directors. Unless otherwise directed, it is the intention of the persons named
in the Proxy to vote such Proxy for the election of the nominees listed on
pages 2 to 6. All of the nominees are now directors of the Company. In the
event that any nominee should be unable to accept the office of director, which
is not anticipated, it is intended that the persons named in the Proxy will
vote for the election of such other person in the place of such nominee for the
office of director as the Board of Directors may recommend. Descriptive
information as to each nominee is set forth below under the caption
“Information Concerning Nominees for Director.”

INFORMATION CONCERNING NOMINEES FOR DIRECTOR

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(1) Mr. Spoon was elected to the Board of Directors in September 1996 after
the Board voted to increase the number of directors constituting the
Board from ten members to eleven members.

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INFORMATION CONCERNING EXECUTIVE OFFICERS

Information concerning Charles O. Rossotti, Chairman; Patrick W. Gross,
Vice Chairman; Paul A. Brands, Vice Chairman and Chief Executive Officer;
Philip M. Giuntini, President; and Frank A. Nicolai, Executive Vice President,
Secretary, and Treasurer, is set forth above under the caption “Information
Concerning Nominees for Director.”

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of March 21, 1997, the number and
percentage of outstanding shares of Common Stock beneficially owned by (i) all
persons known by the Company to own 5% or more of such shares, (ii) each
director, (iii) each executive officer, and (iv) all executive officers and
directors as a group. Unless otherwise noted below, each person or entity named
in the table has sole voting and sole investment power with respect to each of
the shares beneficially owned by such person or entity.

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(1) Amount of beneficial ownership includes stock options granted to
directors and executive officers which have vested and are or will
become exercisable within 60 days of March 21, 1997. Accordingly, Mr.
Altobello has 13,218 options vested and exercisable; Mr. Brands has
37,969 options vested and exercisable; Mr. Forese has 5,999 options
vested and exercisable; Dr. Forman has 31,136 options vested and
exercisable; Mr. Giuntini has 52,866 options vested and exercisable;
Mr. Gross has 13,500 options vested and exercisable; Mr. Nicolai has
13,500 options vested and exercisable; Dr. Leonard has 833 options
vested and exercisable; Mr. Lewis has 2,249 options vested and
exercisable; Mr. Malek has 9,374 options vested and exercisable; Mr.
Spoon has 749 options vested and exercisable; and Mr. Rossotti has no
options vested and exercisable. In addition, Mr. Giuntini’s beneficial
ownership includes 27,970 vested and exercisable options granted to
Donna E. Deeley, his spouse and a Vice President of the Company. All
executive officers and directors as a group (twelve persons) have
beneficial ownership of 209,363 options vested and exercisable within
60 days of March 21, 1997.

(2) All amounts and percentages of Common Stock were calculated to include
stock options vested and exercisable for those individual directors and
executive officers who had such stock options. The number of shares of
Common Stock was calculated as of March 21, 1997.

(3) Indicates a director of the Company.

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(4) Indicates an executive officer of the Company.

(5) Includes 1,125 shares beneficially owned by Mr. Altobello’s
daughter-in-law, who has the sole power to vote and dispose of such
shares. Mr. Altobello disclaims beneficial ownership with respect to
the shares owned by his daughter-in-law.

(6) Amount of beneficial ownership includes 87,634 shares and 27,970
options owned by Mr. Giuntini’s spouse, a Vice President of the
Company, who has the sole power to vote and dispose of such shares.

(7) Includes 111,375 shares beneficially owned by Mr. Gross’ wife and
30,375 shares beneficially owned by each of his two children, with
respect to which shares Mr. Gross disclaims beneficial ownership. Mrs.
Gross and the children have the sole power to vote and dispose of the
shares beneficially owned by them. Also includes 362,310 shares jointly
owned by Mr. and Mrs. Gross, who share joint power to vote and dispose
of such shares.

(8) Includes 64,124 shares beneficially owned by Ms. Nicolai with respect
to which she has sole voting and dispositive power. Mr. Nicolai
disclaims beneficial ownership with respect to the shares owned by Ms.
Nicolai.

(9) Includes 179,750 shares each owned by two trusts, totaling 359,500
shares, for the benefit of Mr. Rossotti’s daughter and son,
respectively, of which Mr. and Mrs. Rossotti are co-trustees. Mr. and
Mrs. Rossotti share joint power to vote and dispose of those shares.
Also includes 929,553 shares jointly owned by Mr. and Mrs. Rossotti,
who share joint power to vote and dispose of such shares.

(10) The shares are jointly owned by Mr. Spoon and his spouse, who share
joint power to vote and dispose of such shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), requires that the Company’s directors, executive officers, and
persons who own more than 10% of a registered class of the equity securities of
the Company (“reporting persons”) file with the Securities and Exchange
Commission initial reports of ownership, and reports of changes in ownership,
of shares of stock, and options to purchase such shares, of the Company.
Reporting persons are required by Securities and Exchange Commission rules to
furnish the Company with copies of all Section 16(a) reports they file.

Based solely upon a review of Section 16(a) reports furnished to the
Company for the fiscal year ended December 31, 1996 (the “1996 fiscal year”),
and representations by reporting persons that no other reports were required
for the 1996 fiscal year, all Section 16(a) reporting requirements were met.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended December 31, 1996 to the Company’s
executive officers.

(1) All amounts were awarded based on the achievement of annual performance
goals under single or multi-year incentive compensation plans.

(2) Each of these awards of Common Stock is associated with performance under
individual incentive compensation plans and was made by the appropriate
Board committee pursuant to a shareholder-approved stock option plan.

(3) All amounts represent the final cash payment awarded for successful
completion of multi-year performance indicators of individual incentive
compensation plans.

(4) These amounts represent the Company’s contribution to special individual
retirement accounts pursuant to the AMS Simplified Employee Pension/IRA
Plan. These numbers also include miscellaneous compensation in immaterial
amounts for several officers (less than $1,000 per person).

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OPTION GRANTS IN FISCAL 1996

Shown below is information concerning stock option grants to the
Company’s executive officers who were granted options on Common Stock during
the Company’s 1996 fiscal year.

(1) Each option grant is associated with a performance-based individual
incentive compensation plan for 1994-1995 or 1996-1997 and was made by the
appropriate Board committee pursuant to a shareholder-approved stock option
plan. The options shown as expiring on February 28, 2001 became
exercisable on August 31, 1996. The options shown as expiring on April 1,
2001 will become exercisable one day prior to such expiration date. In
accordance with each incentive compensation plan, the exercise date of an
option award may be accelerated to June 30 or August 31 of the year
following the end of the performance period covered by the plan if the
Compensation Committee determines that the executive successfully completed
the plan.

(2) Each option grant was awarded with an exercise price equal to the market
value of the Common Stock on the date of grant.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

Shown below is information with respect to exercises by the Company’s
executive officers during the Company’s 1996 fiscal year of options to purchase
shares of Common Stock pursuant to the 1992 Amended and Restated Stock Option
Plan E, as amended (“1992 Plan E”), and earlier stock option plans. Also shown
is information with respect to certain unexercised options to purchase shares of
Common Stock held by the Company’s executive officers as of the end of the
Company’s 1996 fiscal year.

(1) Based on the market value of the Common Stock on date of exercise (as
measured by the NASDAQ closing bid price), minus the option’s exercise
price.

(2) Based on the market value of the Common Stock on the last trading day of
1996 (as measured by the NASDAQ closing bid price of $24.50), minus the
exercise price.

LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR

Shown below is information on long-term incentive plans for the Company’s
executive officers, which were approved by the Compensation Committee of the
Board of Directors in 1996 for the 1996-1997 performance period. If the
performance goals set forth in the plans are met, the executive officers will
be entitled to receive the incentive compensation indicated in the table below.
Owing to the Company’s poor performance in 1996, it is not anticipated that any
incentive compensation payments will be made pursuant to these long-term
incentive plans.

(1) The long-term incentive compensation plans for Messrs. Brands,
Giuntini, and Gross are based on pre-tax income targets. The long-term
incentive compensation plans for Messrs. Nicolai and Forman include
pre-tax income and non-financial goals. Mr. Rossotti’s incentive
compensation plan was based on the Company’s pre-tax performance for
fiscal 1996 only and, therefore, is not includable in this table as
long-term incentive compensation.

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(2) If the Compensation Committee determines that the officer has exceeded
the performance goals set forth in his incentive compensation plan, the
Committee may increase his incentive compensation award above the
target level indicated in the preceding column. The increase would be
based on a formula related to pre-tax income, in the case of Messrs.
Brands, Giuntini, and Gross, and on the Committee’s judgment of their
achievement of their specified financial and non-financial goals, in
the case of Messrs. Nicolai and Forman.

Notwithstanding anything to the contrary set forth in any of the
Company’s previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following report and the Performance Graph
shall not be incorporated by reference into any such filings.

COMPENSATION COMMITTEE REPORT OF EXECUTIVE COMPENSATION

COMPOSITION AND RESPONSIBILITIES OF COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors is responsible for
developing and making recommendations to the Board of Directors with respect to
the Company’s compensation policies generally. It is composed entirely of
outside directors who have never served as officers of the Company or its
affiliates (the “Outside Directors”). The Compensation Committee approves the
compensation plans for the Company’s executive officers, including the Chief
Executive Officer (the “CEO”), and on an annual basis determines the
compensation to be paid to the executive officers. The Compensation Committee
is responsible for the granting and administration of stock options and
incentive compensation granted to the executive officers.

The Compensation Committee has furnished the following report for
fiscal 1996:

COMPENSATION OBJECTIVES AND PHILOSOPHY

The objectives of the Company’s executive compensation program are to
provide a level of compensation that will attract and retain executives capable
of achieving long-term success for the Company’s shareholders and to structure
their compensation packages such that a significant portion generally is tied
to the achievement of multi-year targets for pre-tax income.

EXECUTIVE OFFICER COMPENSATION

The Company’s executive compensation program consists of three main
components: (i) annual base salary, (ii) potential for an annual cash bonus and
awards of stock options based on Company pre-tax income, the profit
contribution of a particular business unit, individual performance, or some
combination of these factors, and (iii) the opportunity to earn long-term cash
and stock-based incentives which are intended to encourage the achievement of
superior results over time and to align executive officer and shareholder
interests. In addition to research and recommendations furnished by the
Company’s senior management, the Compensation Committee has relied, inter alia,
on information furnished through executive compensation surveys by a recognized
compensation consulting firm, and information known to various members of the
Board of Directors. The Compensation Committee compares salaries and other
elements of executive compensation with the compensation paid to executives in
technology and consulting firms which are actual competitors of the Company.
Few of these companies are in the Hambrecht & Quist Technology Stock Index, the
peer index chosen by the Company for comparison in the “Shareholder Return
Performance Graph” below, because their shares are not publicly traded. They
include, for example, the consulting divisions of certain Big 6 accounting
firms, other prominent consulting firms which are wholly owned subsidiaries of
publicly traded companies, and other software firms that are privately held.

The executive officers, including the CEO, are eligible for the same
benefits, including group health and life insurance and participation in the
Company’s Simplified Employee Pension/IRA Plan, as are available generally to
the Company’s professional staff, except that the executive officers do not
participate in the Company’s Profit-Sharing Plan or Employee Stock Purchase
Plan. The Company does not provide material perquisites to any of its executive
officers.

ANNUAL BASE SALARY. The Compensation Committee determines the annual
base salary of each of the Company’s executive officers, including the CEO.
Changes in base salary are generally made effective on March 1. The

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same principles are applied in setting the salaries of all executive officers
to ensure that salaries are competitively established. Salaries are determined
by considering the officer’s potential duties and responsibilities within the
Company and his or her business unit, and the officer’s potential impact on the
operations and profitability of the Company. Unlike with respect to the
Company’s incentive compensation arrangements, the Compensation Committee does
not consider achievement of specific corporate performance factors in
establishing base salaries for its executive officers. In general, it is the
policy of the Company to set base salaries lower than would be typical for
comparable positions in similar firms, and to include more compensation in
incentive plans, particularly incentive compensation plans tied to multi-year
performance periods.

INCENTIVE COMPENSATION PLANS. Each executive officer of the Company
generally participates in incentive compensation plans of one to three years in
duration. These plans are similar to multi-year incentive plans in which other
members of the Company’s professional staff participate. Under such plans, the
officer is eligible for annual cash incentive awards, and cash awards which may
be made at the end of the plan if the Compensation Committee determines that
the officer has met the specified goals of the executive’s programs. Some plans
also contemplate awards of stock options under the Company’s
shareholder-approved stock option plans. Each executive officer has a plan
which details the executive officer’s goals, the primary or sole element of
which is financial performance, including targets for the Company’s pre-tax
income, or targets for profit contribution by one or more business units, or a
combination thereof. Certain executive officers also have plans which include
individual, non-financial goals.

The annual cash awards under the incentive compensation plans and the
cash portion of the award for completion of an incentive compensation plan
generally are based on multiples of a percentage of the executive officer’s
salary for the relevant fiscal period. The number of stock options which may be
awarded is determined at the time the performance goals are established. Such
number of stock options is not determined by reference to any specific criteria
other than the Company’s historical practice of awarding stock options in
connection with incentive compensation plans for certain executive officers.
Such number has been relatively consistent for multi-year plans for executive
officers for more than ten years. The exercise price of all options granted in
connection with the incentive compensation plans for the executive officers is
the fair market value of the shares on the date of grant of the option.
Achievement of the specified financial or non-financial goals for plan years
earlier than the final plan year in a multi-year plan entitles the executive to
specified interim cash payments and stock option grants, all of which are
considered advances against the multi-year incentive compensation amounts.
Such interim cash payments are significantly less than a ratable percentage of
the projected incentive compensation payable on successful completion of a
multi-year plan. For example, successful completion of the first year of a
two-year plan typically would entitle the executive to payment of 25% of target
cash incentive compensation. Stock options in connection with multi-year plans
also are granted according to a schedule specified in the plan, typically
including a small percentage of options granted at the time the plans are
approved by the Compensation Committee.

Fiscal 1996 was the first year of two-year incentive compensation plans
for Patrick W. Gross, Paul A. Brands, Philip M. Giuntini, Frank A. Nicolai,
and Fred L. Forman. Charles O. Rossotti completed a one-year incentive
compensation plan. All of these plans included the same pre-tax income target
as a financial goal. In the cases of Messrs. Nicolai and Forman, the
incentive targets also included individual goals based on their respective
areas of responsibility, such as achieving operational goals within budget,
improving the Company’s administrative processes, and expanding the Company’s
Achieving Breakthrough Performance program. All plans required that a minimum
percentage of the stated goal must be achieved before any portion of the
related incentive compensation share was payable. The plans also took into
account projected pre-tax income for the year following the performance year
just ended in determining whether awards are payable and the amounts thereof.
Each plan also included higher award multiples for performance which exceeded
the targets by a stated percentage.

In February 1997, the Compensation Committee determined that since the
Company did not meet its financial goals for 1996, no incentive compensation
based on financial goals would be awarded to any executive officer of the
Company. The Compensation Committee determined that Messrs. Nicolai and Forman
had substantially met their non-financial performance goals, and determined
that Mr. Nicolai had earned 75% of his target cash payment and Mr. Forman had
earned 100% of his target cash payment. These amounts are shown in the Summary
Compensation Table under “Annual Compensation — Bonus.” The Compensation
Committee in February 1997 also decided not to grant stock options to Messrs.
Brands, Giuntini, Gross, Nicolai, or Forman because the Company did not achieve
the financial performance specified in their incentive compensation plans. Mr.
Rossotti’s 1996 compensation plan did not provide for stock options. Also in
February 1997, the Compensation Committee decided not to

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increase the 1997 annual base salary of any executive officer of the Company
except Mr. Forman.

POLICY ON DEDUCTIBILITY OF COMPENSATION

Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Internal Revenue Code”), the allowable deduction for compensation paid or
accrued with respect to persons who as of the end of the year are employed as
the chief executive officer and each of the four most highly compensated
executive officers of a publicly held corporation is limited to no more than
$1,000,000 per year for fiscal years beginning on or after January 1, 1994.
This limitation does not apply to compensation consisting of stock options
issuable under 1992 Plan E or Plan F, nor to compensation payable under certain
performance-based compensation plans approved by shareholders. The
Compensation Committee has taken certain actions to minimize the adverse
effects of Section 162(m) on the after-tax income of the Company. In
particular, as recommended by the Compensation Committee, the Incentive
Compensation Plan for Executive Officers was presented to and approved by the
shareholders at the 1994 annual meeting of shareholders of the Company, and all
new grants to executive officers of incentive compensation based on financial
performance are covered by the 1996 Incentive Compensation Plan for Executive
Officers (the “IC Plan”), which was approved by the shareholders at the 1996
annual meeting of shareholders of the Company. The IC Plan significantly
limits the Compensation Committee’s discretion regarding the amount of
incentive compensation paid to an employee covered by such Plan. Accordingly,
not all incentive compensation payable to executive officers is paid pursuant
to the IC Plan. The Compensation Committee projects that it is unlikely that
deductions will be lost as a result of this practice. The Compensation
Committee will continue to monitor whether compensation which is limited by
Section 162(m) is likely to exceed the deduction limitations under Section
162(m), and the Compensation Committee is expected to take appropriate actions
to reduce the likelihood of a loss of deductions.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Chief Executive Officer’s annual base salary is established by the
Compensation Committee using the same criteria as discussed above for the
executive officers. Paul Brands, who has served as Chief Executive Officer of
the Company since September 1993, received an annual base salary of $304,000
for 1996, which represented an increase of approximately 6% over his base
salary for 1995. The Compensation Committee did not base this increase on any
specific corporate performance factors. Mr. Brands’ annual incentive
compensation payments are determined by the Compensation Committee based
entirely on targets for the Company’s pre-tax income. Mr. Brands did not meet
those targets for fiscal year 1996, as determined by the Compensation Committee
in February 1997, and consequently, he did not receive an incentive
compensation payment or stock option award based on 1996 performance. The
Compensation Committee also decided not to increase Mr. Brands’ annual base
salary for 1997.

Frederic V. Malek (Chairman)
Daniel J. Altobello
James J. Forese
Dorothy Leonard
W. Walker Lewis
Alan G. Spoon

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SHAREHOLDER RETURN PERFORMANCE GRAPH

The following graph provides a comparison of the cumulative total
return on the Common Stock with returns on the Standard & Poor’s 500 Composite
Index and the Computer Software Sector Index of the Hambrecht & Quist
Technology Stock Index.

[GRAPH]

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COMMITTEES OF THE BOARD OF DIRECTORS

The Company has a standing Executive Committee, Stock Option/Award
Committee, Compensation Committee, and Audit Committee. The Company does not
have a standing Nominating Committee.

The Executive Committee is presently composed of five directors, all of
whom are executive officers of the Company: Charles O. Rossotti, Patrick W.
Gross, Paul A. Brands, Philip M. Giuntini, and Frank A. Nicolai. The Executive
Committee generally has the power to authorize all corporate actions that the
Board of Directors has the power to authorize, except as may be limited by law.
The Executive Committee met once during 1996.

The Stock Option/Award Committee is presently composed of five
directors, all of whom are executive officers of the Company: Charles O.
Rossotti, Patrick W. Gross, Paul A. Brands, Philip M. Giuntini, and Frank A.
Nicolai. The Stock Option/Award Committee administers the Company’s employee
stock option plans, except as noted below. These directors are eligible to
receive options under the plans, but options, if any, awarded to them are
granted and administered by the Compensation Committee. The Stock Option/Award
Committee also administers the Company’s Profit-Sharing Plan, a stock award
plan. Directors and executive officers are not eligible to participate in the
Profit-Sharing Plan. The Stock Option/Award Committee meets as required and
met twice during 1996.

The Compensation Committee is presently composed of six Outside
Directors: Daniel J. Altobello, James J. Forese, Dorothy Leonard, W. Walker
Lewis, Frederic V. Malek, and Alan G. Spoon. Mr. Malek is Chairman of the
Compensation Committee. The Compensation Committee is responsible for
developing and making recommendations to the Board of Directors with respect to
the Company’s compensation policies generally. The Compensation Committee
approves the compensation plans for the Company’s executive officers, including
the Chief Executive Officer, and on an annual basis determines the compensation
to be paid to the executive officers. The Compensation Committee alone is
responsible for the granting and administration of stock options granted to the
executive officers and to the Controller. In 1996, the Compensation Committee
met twice.

The Audit Committee is presently composed of three Outside Directors:
Daniel J. Altobello, James J. Forese, and Dorothy Leonard. Mr. Forese is
Chairman of the Audit Committee. This Committee has the responsibility for
making recommendations to the Board of Directors as to the independent
accountants of the Company; for reviewing with the independent accountants,
upon completion of their audit, the scope of their examination, any
recommendations they may have for improving internal accounting controls,
management systems, or choice of accounting principles, and other matters; and
for reviewing generally the accounting control procedures of the Company. In
1996, the Audit Committee met three times. Also, on the recommendation of the
Audit Committee, the Board of Directors has appointed the accounting firm of
Price Waterhouse LLP to audit the accounts of the Company for the fiscal year
ending December 31, 1997.

The Board of Directors met five times during 1996, and all members
attended 100% of the meetings of the Board and Committees of the Board on which
they serve. Outside Directors are currently entitled to receive fees of $5,000
per Board meeting attended, plus travel expenses, and such fees and expenses
were, in fact, paid for all meetings attended during fiscal 1996. In addition,
Outside Directors were paid a retainer of $5,000 per year during fiscal 1996.
Under the Company’s Outside Directors Stock-for-Fees Plan (the “Stock-for-Fees
Plan”), which was approved by shareholders in May 1995, Outside Directors can
elect to have the annual meeting fees and retainer, which would otherwise be
paid to the Outside Directors in cash, paid in the form of Common Stock. W.
Walker Lewis elected to have his annual meeting fees for three of the Board
meetings he attended during 1996 paid in the form of Common Stock pursuant to
the Stock for Fees Plan.

Outside Directors also receive automatic grants of stock options, which
vest over five years, pursuant to the Company’s stock option plans. The number
of shares subject to grant, and subject to outstanding options, are adjusted
when stock splits occur. The numbers of options reported below in this
paragraph are the numbers of the original grants and do not give effect to the
June 1992, October 1994, or January 1996 stock splits to the extent such splits
occurred after the date of grant. All options granted to Outside Directors
vest at the rate of 1/60th a month for each month the Outside Director
continues to serve as a director. Pursuant to a prior stock option plan, each
Outside Director in May 1988 was granted 5,000 options to purchase shares of
the Common Stock. James J. Forese, who became a director in November 1989, was
granted 5,000 options on November 10, 1989. Dorothy Leonard, who became a
director in September 1991, was granted 5,000 options on September 27, 1991.
Under 1992 Plan E, each new Outside Director was automatically granted 5,000
options (such number subject to adjustments for splits) upon

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first becoming a director, and each Outside Director was automatically granted
an additional 5,000 options (such number subject to adjustments for splits),
vesting over 5 years, when any options previously granted have fully vested.
Plan F provides for the grant of the same amount of options to Outside
Directors. Pursuant to 1992 Plan E, Daniel J. Altobello was granted 7,500
options on July 27, 1993 when he first became a director, and Frederic V. Malek
was granted 5,000 options in April 1993 because his options granted in 1988 had
fully vested. The grant to Mr. Malek was made subject to shareholder approval,
which was obtained in May 1993. In addition, under 1992 Plan E, Mr. Forese was
granted 7,500 options (after giving effect to the October 1994 stock split) in
November 1994 because his options granted in 1988 had fully vested, and W.
Walker Lewis was granted 5,000 options on December 1, 1995 when he became a
director. Most recently, Dr. Leonard was granted 5,000 options under 1992 Plan
E in August 1996 because her options granted in 1991 had fully vested, and Alan
G. Spoon was granted 5,000 options under 1992 Plan E in September 1996 when he
became a director.

COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

Frederic V. Malek, James J. Forese, Dorothy Leonard, Daniel J.
Altobello, and W. Walker Lewis served as members of the Compensation Committee
throughout fiscal 1996. Alan G. Spoon became a member of the Compensation
Committee in September 1996 when he was elected to the Board of Directors. The
Compensation Committee is presently composed of Messrs. Malek, Forese,
Altobello, Lewis, and Spoon and Dr. Leonard. Mr. Malek is Chairman of the
Compensation Committee.

During 1996, there were no Compensation Committee interlocks, and there
was no insider participation in the executive compensation decisions of the
Company.

CERTAIN TRANSACTIONS

Shaw, Pittman, Potts & Trowbridge, general counsel to the Company,
earned fees and incurred reimbursable expenses totaling approximately
$2,910,422 from AMS in connection with legal services performed for the Company
during 1996. Barbara M. Rossotti, a member of the firm of Shaw, Pittman, Potts
& Trowbridge, is the spouse of Charles O. Rossotti, Chairman of the Board and a
director of the Company.

PROPOSAL TO APPROVE
1996 AMENDED STOCK OPTION PLAN F

INTRODUCTION AND SUMMARY DESCRIPTION OF PROPOSED AMENDMENTS

The Company’s 1996 Stock Option Plan F was adopted by the Board of
Directors on April 3, 1996, and was approved by the Company’s shareholders on
May 10, 1996 at the 1996 annual meeting of the shareholders of the Company.
The Company’s shareholders are now being asked to approve 1996 Amended Stock
Option Plan F, which was adopted by the Board of Directors on February 21,
1997, subject to shareholder approval. If so approved, 1996 Amended Stock
Option Plan F would implement a number of amendments to 1996 Stock Option Plan
F (the “1996 Plan F Amendments” or the “Amendments”). The 1996 Plan F
Amendments provide that vested nonqualified stock options (“NSOs”) held by an
employee who resigns following completion of ten (10) or more years of
continuous service as an employee would expire one (1) year after the date of
the termination of the employee’s employment, rather than thirty (30) days
after termination of employment. The 1996 Plan F Amendments also provide that
vested NSOs held by an Outside Director whose service as a director terminates
by reason of death, disability or resignation as an Outside Director following
completion of ten (10) years of continuous service, which would expire by their
terms under the version of Plan F currently in effect, would instead expire no
later than the date one (1) year after the date of termination of the Outside
Director’s service as a director. Finally, in response to recent amendments to
regulations issued by the Securities and Exchange Commission under Section 16
of the Exchange Act and by the Internal Revenue Service under Section 162(m) of
the Internal Revenue Code, the Amendments would (i) alter the requirements for
membership on the committee charged with making and administering

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awards under Plan F to “covered employees” within the meaning of Section 162(m)
of the Internal Revenue Code and to officers and directors subject to Section
16 of the Exchange Act, and (ii) modify the scope of amendments to Plan F and
the terms of options issued thereunder that may be made by the Board of
Directors without shareholder approval.

The Board of Directors believes that the 1996 Plan F Amendments will
further the purposes of Plan F, which are: (i) to offer to those employees who
contribute materially to the successful operation of the Company additional
incentive and encouragement to remain in the employ of the Company by
increasing their personal participation in the Company through stock ownership,
(ii) to provide an alternative means of compensating key employees whose
performances contribute significantly to the success of the Company, and (iii)
to attract and retain directors who have not at any time been officers or
employees of the Company (i.e., Outside Directors) and to compensate such
Outside Directors for service to the Company.

The text of Plan F, as proposed to be amended (the “Proposed Plan”) and
incorporating the proposed 1996 Plan F Amendments in italics, is set forth in
Exhibit A to this Proxy Statement, and the following description of such Plan
is qualified by reference to such text.

SUMMARY DESCRIPTION OF PLAN F

Stock Option Plan F provides that options to purchase Common Stock may
be granted to any key employee (including officers and directors) of the
Company and its subsidiaries who meets minimum salary and other requirements
established by the Board of Directors. “Outside Directors” also are eligible
to receive options under Plan F. Stock Option Plan F defines “Outside
Directors” as directors who have not at any time been officers or employees of
the Company. As of March 21, 1997, 1,613 key employees (i.e., six executive
officers, 146 Vice Presidents, 323 Senior Principals, and 1,138 Principals,
including persons in comparable positions) and six Outside Directors were
eligible to participate in Plan F.

Stock Option Plan F provides that it shall be administered by the Board
of Directors or the Stock Option/Award Committee, except as provided below.
The Stock Option/Award Committee currently performs this function. In
accordance with the provisions of Stock Option Plan F, the Stock Option/Award
Committee has authority to determine the employees to be granted options,
whether the options are NSOs or incentive stock options (“ISOs”), the times at
which options are granted, the exercise prices of the options, the numbers of
shares subject to the options, the vesting schedule of the options or whether
the options are immediately vested, the times when options terminate, and
whether the exercise price will be paid in cash or stock.

Under Plan F, as currently in effect (the “Current Plan”), a committee
composed of two or more Outside Directors, each of whom is required to be a
“disinterested person” within the meaning of prior Rule 16b-3 as promulgated
under Section 16(b) of the Exchange Act, has sole authority (i) to grant
options to directors, other than Outside Directors, and to all persons who are
“officers” or “ten percent shareholders” of the Company within the meaning of
Section 16 of the Exchange Act, and (ii) to perform all other functions with
respect to options granted to those persons, including amendments to Stock
Option Plan F or outstanding options which affect such persons. Under the
Proposed Plan, a committee composed of at least two “non-employee directors,”
within the meaning of Rule 16b-3(b)(3) as adopted by Securities and Exchange
Commission on August 15, 1996, who also are “outside directors” within the
meaning of Section 162(m) of the Internal Revenue Code, would have the
authority (i) to make awards to directors of the Company who are not Outside
Directors, to persons who are “officers” of the Company, as defined for
purposes of Section 16 of the Exchange Act, and to “covered employees,” within
the meaning of Section 162(m) of the Internal Revenue Code, and (ii) to perform
all other functions of the Board or the Stock Option/Award Committee with
respect to outstanding awards to any of such directors, officers, and covered
employees, including, without limitation, amendments to Stock Option Plan F or
outstanding options which affect such persons. The Compensation Committee
currently performs these functions with respect to the persons specified in the
preceding sentences (who are currently the Company’s executive officers and
Controller).

Options may be granted to key employees either (a) on the basis of
awards earned under the Company’s incentive compensation programs for groups of
key employees, or (b) as the Board of Directors or the appropriate Committee
may determine. If options are granted in connection with the Company’s
incentive compensation programs, then performance bonuses and options based
thereon are earned based on the employee’s success in meeting predetermined
performance standards during one or more years (the “Performance Period”).
Such options are

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granted, if at all, at the time that the Company determines that the employee
has met or will meet the employee’s predetermined performance standards for the
Performance Period in question.

The award of options to Outside Directors under Stock Option Plan F is
non-discretionary. NSOs for 5,000 shares will be granted automatically to any
new Outside Director on the date of the Outside Director’s first election or
appointment to the Board. Following completion of five years of service as an
Outside Director, each Outside Director will receive an additional grant of
5,000 shares. One sixtieth of such options vest on the date of election or
appointment of each such Outside Director to the Board, and 1/60th vest on the
last day of each month thereafter for as long as the person continues to serve
as a director. Stock Option Plan F provides that options granted to all
directors, officers and ten percent shareholders (as defined for purposes of
Section 16 of the Exchange Act) are not exercisable for a period of at least
six months from the date of grant.

Stock Option Plan F authorizes the issuance of options to purchase a
maximum of 3,800,000 shares, subject to adjustment for future capital changes.
Of this number, 2,980,000 shares remain available as of March 21, 1997 for
issuance pursuant to options granted thereunder. Shares subject to options
granted under Stock Option Plan F which terminate or expire unexercised are
available for the grant of future options. The number of shares which may be
subject to options granted under Stock Option Plan F in any single calendar
year for awards earned for one-year Performance Periods may not exceed 200,000
shares, subject to possible adjustment for capital changes. There is no annual
limitation on options granted with respect to awards earned for Performance
Periods of more than one year. However, the maximum number of shares which may
be subject to options granted under Plan F to any “covered employee,” as
defined in Section 162(m) of the Internal Revenue Code, during the life of such
Plan is 100,000 shares, subject to adjustment for future capital changes.

Under Stock Option Plan F, NSOs are exercisable only to the extent they
are vested. For employees, the Board of Directors or the appropriate Committee
selects a vesting schedule over a period of up to five years or provides for
vesting upon the attainment of specified performance goals or other events.
Optionees who receive NSOs are entitled to exercise at any time, or from time
to time, all or any portion of a vested NSO; provided, however, that all NSOs
expire no later than five years after the date of grant. The exercise price of
all NSOs granted under Stock Option Plan F, except those options granted in
connection with one-year incentive compensation plans, is the fair market value
of the Common Stock on the date of grant of the option. NSOs granted in
connection with one-year incentive compensation plans may be granted with
exercise prices other than the fair market value of the Common Stock on the
date of grant only if the exercise price is determined by a formula selected by
the Board (or the appropriate Committee) that is based on the fair market value
of the Common Stock, as of a date, or over a period, that is within three
months of the date of grant.

Under Stock Option Plan F, ISOs are exercisable only to the extent they
are vested. ISOs vest over a period of up to seven years. Employees who have
been granted ISOs may exercise at any time, or from time to time, all or any
portion of a vested ISO. ISOs expire up to eight years after the date they are
granted. The exercise price of ISOs is determined by the appropriate Committee
and must be at least equal to the fair market value of the Common Stock on the
date the ISO is granted (except ISOs granted to ten percent shareholders, in
which case the price may not be less than 110% of fair market value).

For purposes of Stock Option Plan F, the fair market value of the
Common Stock is the closing bid price of the Common Stock as quoted in the
National Association of Securities Dealers Automated Quotation System
(“NASDAQ”) in the national market on the date of grant of the option, or, if
there is no trade on such date, on the most recent date upon which the Common
Stock was traded. On March 21, 1997, the closing bid price of the Common Stock
was $21.00 per share. Options granted to employees may be amended to advance
the date on which the option vests. If an option is so amended, the amendment
also may provide that the shares which would not have been vested under the
original vesting schedule shall be subject to repurchase for a period of time
by the Company at the original exercise price upon termination of employment of
the employee for any reason. If the Company is merged, consolidated, sold,
liquidated, or dissolved, Stock Option Plan F also provides for the automatic
acceleration of the vesting of options which would have vested within one year
of any such event.

An option is exercised by giving written notice to the Company,
specifying the full number of shares of Common Stock to be purchased and
tendering payment to the Company of the exercise price. Payment for shares
issued upon the exercise of an option may consist of cash or delivery of a
properly executed exercise notice,

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together with irrevocable instructions to a broker to promptly deliver to the
Company the number of sales or loan proceeds required to pay the exercise
price. Under Stock Option Plan F, the Board of Directors or the appropriate
Committee also has the authority to permit an optionee to pay the exercise
price for shares using shares of the Common Stock owned for at least six
months, or a combination of cash and such previously-owned stock.

An option is not transferable during the lifetime of the optionee,
other than by will, by the laws of descent and distribution, or pursuant to a
qualified domestic relations order (“QDRO”). Unless transferred under a QDRO,
an option is exercisable during the optionee’s lifetime only by the optionee.
Upon termination of an employee’s employment with the Company for any reason
whatsoever, all options held by such employee which are not exercisable on the
date of such termination shall expire. If the Board of Directors or the
appropriate Committee determines that an employee has committed certain defined
acts of misconduct such as embezzlement, fraud, dishonesty, breach of fiduciary
duty or deliberate disregard of the Company’s rules resulting in loss, damage
or injury to the Company, neither the employee nor his or her estate would be
entitled to exercise any option whatsoever.

To the extent NSOs held by an employee are exercisable upon an
employee’s termination of employment, shares subject to NSOs held by such
employee may be purchased during the “exercise period,” after which the NSOs
shall expire and all rights granted under the agreement pursuant to which the
options were granted shall become null and void. Under the Current Plan, the
“exercise period” for shares subject to NSOs held by such employee, his or her
heirs, legatees or legal representatives, as the case may be, ends on the
earlier of (i) the date on which the NSO expires by its terms, or (ii) (A)
except in the case of death or disability, within thirty (30) days, or (B) in
the case of death or disability, within one year after the date of termination
of employment. Under the Proposed Plan, the “exercise period” for such shares
would end on the earlier of (i) the date on which the NSO expires by its terms,
or (ii) (A) except in the case of death, disability, or resignation as an
employee following completion of ten (10) or more years of continuous service
as an employee, thirty (30) days after the date of the employee’s termination
of employment, or (B) in the case of death, disability, or resignation as an
employee following completion of ten (10) or more years of continuous service,
one (1) year after the date of the employee’s termination of employment.

Upon termination of an Outside Director as a member of the Board of
Directors for any reason other than certain retirement events, death or
disability, all options held by such Outside Director which are not exercisable
on the date of such termination shall expire. Under the Current Plan, in the
event of termination by reason of death or disability, all options then
unvested would vest automatically, all options would be exercisable by the
Outside Director, his or her heirs, legatees, or legal representatives, as the
case may be, at any time until the date on which the options expire by their
original terms. In addition, the Current Plan provides that termination of an
Outside Director’s membership on the Board of Directors by reason of retirement
after completion of at least ten (10) years of continuous service will extend
vesting and exercisability of such Director’s options. Options unvested on the
date of retirement will continue to vest at the rate of 1/60th per month for so
long as such Director survives, and vested options will be exercisable at any
time until the date on which all such options expire by their original terms,
five years from the date of grant. Under the Proposed Plan, upon the
termination of an Outside Director as a member of the Board of Directors for
the reason of resignation as an Outside Director following completion of at
least ten (10) years of continuous service as an Outside Director, death or
disability, the “exercise period” for shares subject to NSO held by such
Outside Director, his heirs, legatees, or legal representatives, as the case
may be, would end on the earlier of (i) the date on which the NSO expires by
its terms, or (ii) the date one (1) year after the date of termination of such
Outside Director’s service as a member of the Board of Directors.

All ISOs held by an employee will expire unless exercised by the
employee, his or her heirs, legatees or legal representatives, as the case may
be, before the earlier of (1) the date on which the ISO expires by its terms,
or (2)(a) except in the case of death or disability, within thirty (30) days
after the date employment is terminated, or (b) in the case of death or
disability, within one year after the date of termination of employment. In no
event will a granted and outstanding ISO expire more than three months after
the date of the employee’s termination of employment.

Under the Current Plan, the Board of Directors may, at any time, amend
Stock Option Plan F or the terms of options granted under such Plan, except
that no amendment may, without approval of the shareholders, (i) materially
increase the benefits accruing to the participants under the Plan, (ii)
increase the number of shares which may be issued under the Plan, except for
adjustments in certain circumstances, or (iii) materially modify the
requirements as to eligibility for participation in the Plan. The Proposed
Plan would permit the Board, at any time, to amend

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Stock Option Plan F or the terms of options granted under such Plan, except
that no amendment may, without approval of the shareholders, (i) modify the
requirements as to the exercise price of stock options, (ii) increase the
number of shares which may be issued under the Plan, except for adjustments in
certain circumstances, (iii) materially modify the requirements as to
eligibility for participation in the Plan, or (iv) materially modify the terms
of the Plan as to “covered employees” within the meaning of Section 162(m) of
the Internal Revenue Code. The Current Plan also provides that an amendment to
an option granted to an Outside Director may not be made more frequently than
every six months unless necessary to comply with the Internal Revenue Code or
the Employee Retirement and Income Security Act of 1974, as amended. The
Proposed Plan would eliminate this restriction.

Plan F shall remain in effect until January 1, 2006.

TAX CONSEQUENCES

Information regarding the federal income tax consequences to the
Company and to optionees of options granted under Stock Option Plan F follows.
This information is not intended to be exhaustive and is only intended to
briefly summarize the federal income tax statutes, regulations and currently
available agency interpretations thereof, and is intended to apply to Stock
Option Plan F as normally operated. It is recommended that optionees consult
their own professional tax advisors for personal and specific advice about
options.

An optionee has no tax consequences from the grant of an NSO. Upon
exercise of an NSO, the optionee has compensation income taxable at ordinary
income tax rates on the amount by which the fair market value of the shares
received as of the date of exercise exceeds the exercise price. The Company is
entitled to a deduction equal to the amount of compensation income to the
optionee as long as income taxes are withheld on the optionee’s compensation
income. Upon the sale of Common Stock acquired through the exercise of an NSO,
any difference between the amount realized and the fair market value of the
Common Stock as of the date of exercise will be capital gain or loss.

An employee is not taxed upon the grant of an ISO. Except for the
possible imposition of the alternative minimum tax, an optionee is not taxable
on the exercise of an ISO. Unlike the exercise of an NSO, the Company is not
entitled to a deduction with respect to an ISO unless the optionee engaged in a
disqualifying disposition described below. Upon a sale of shares acquired upon
exercise of an ISO, the employee will recognize capital gain or loss, as the
case may be, equal to the difference between the amount realized on the sale
and the exercise price, provided the sale occurs at least two years after the
grant of the ISO and at least one year after the exercise of the ISO. If these
holding periods are not satisfied, the sale of shares acquired upon exercise of
an ISO is a “disqualifying disposition.” If the sale is a disqualifying
disposition, the excess of the fair market value of the shares on the date the
ISO was exercised over the exercise price is compensation income taxable at
ordinary income tax rates, and any excess of the sale price of the shares over
the fair market value of the shares on the date the ISO was exercised would be
capital gain. The Company would be entitled to a deduction equal to the amount
of compensation income taxable to the optionee. The excess of the fair market
value of the shares at the time of exercise over the exercise price of the ISO
increases the optionee’s alternative minimum taxable income.

If an optionee who is subject to the “short-swing profit liability”
rules under Section 16(b) of the Exchange Act purchases shares of Common Stock
within six months before the optionee exercises an NSO or an ISO, the tax
consequences of exercising the option which normally occur on the option
exercise date may be delayed for up to six months. In such a case, unless the
optionee makes an election under Section 83(b) of the Internal Revenue Code to
avoid the delay, the tax consequences which normally occur on the exercise date
of an ISO or NSO will occur on the first date on which a sale of the shares of
Common Stock acquired upon exercise of the option would not subject the
optionee to liability under Section 16(b) of the Exchange Act.

NEW PLAN BENEFITS

The number of stock options that would have been granted during the
Company’s 1996 fiscal year to each of the following persons or groups had the
Proposed Plan been in effect would not differ from the number which was in fact
granted under 1992 Plan E, as set forth below.

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(1) The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option, and that the option
is exercised and the shares are sold on the last day of its term for the
appreciated stock price. Such values do not include consideration of
income tax consequences.

(2) Options which were granted during the Company’s 1996 fiscal year pursuant
to 1992 Plan E.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the shares of
Common Stock present at the Annual Meeting or represented by Proxy and entitled
to vote to approve 1996 Amended Stock Option Plan F is required for approval of
such Plan. The Board of Directors has unanimously adopted a resolution
approving 1996 Amended Stock Option Plan F and directed that it be submitted to
the shareholders for their consideration. The members of the Board of
Directors and the Company’s executive officers have advised the Company that
they intend to vote all shares in their control in favor of 1996 Amended Stock
Option Plan F. In the event that 1996 Amended Stock Option Plan F is not
approved by the shareholders of the Company at the Annual Meeting, the Board of
Directors will reconsider the Amendments.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF 1996 AMENDED STOCK OPTION PLAN F

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OTHER MATTERS

A representative from Price Waterhouse LLP, independent public
accountants to the Company, is expected to be present at the Annual Meeting,
will have an opportunity to make a statement should the representative desire
to do so, and is expected to be available to respond to appropriate questions
during such Meeting.

The Board of Directors does not know of any matters to be presented at
the Annual Meeting other than those stated above. If any other business should
come before the Annual Meeting, including a vote to adjourn such Meeting, the
persons named in the enclosed Proxy will vote thereon at the Meeting, or any
adjournment thereof, as he or they determine to be in the best interests of the
Company.

To be included in the Proxy Statement and form of Proxy for the 1998
annual meeting, shareholder proposals intended to be presented at that meeting
must be received by the Company no later than December 12, 1997.

ANNUAL REPORT

A copy of the 1996 Annual Report of the Company (which includes
condensed financial data and a letter to stockholders) accompanies this Proxy
Statement. Appendix 1 to this Proxy Statement, titled “1996 Financial Report,”
contains all of the financial information (including the Company’s audited
financial statements), and certain general information, previously published in
the Company’s Annual Report. Appendix 1 is incorporated herein by reference. A
copy of the Company’s Annual Report on Form 10-K may be obtained without charge
by writing to Frank A. Nicolai, Secretary, American Management Systems,
Incorporated, 4050 Legato Road, Fairfax, Virginia 22033.

BY ORDER OF THE BOARD OF DIRECTORS,

Frank A. Nicolai
Secretary

April 11, 1997
Fairfax, Virginia

SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REMINDED TO
DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE
PROVIDED.

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EXHIBIT A

AMERICAN MANAGEMENT SYSTEMS, INCORPORATED
1996 AMENDED STOCK OPTION PLAN F
AS IN EFFECT ON MARCH 21, 1997

(as Amended February 21, 1997, such Amendment
Subject to Shareholder Approval)

I. PURPOSES

There are three purposes of 1996 Stock Option Plan F (the “Plan”). The
first is to offer to those employees who contribute materially to the
successful operation of AMERICAN MANAGEMENT SYSTEMS, INCORPORATED (the
“Corporation”) additional incentive and encouragement to remain in the employ
of the Corporation by increasing their personal participation in the
Corporation through stock ownership. The second purpose is to provide an
alternative means of compensating key employees whose performances contribute
significantly to the success of the Corporation. The third is to attract and
retain directors who have not at any time been officers or employees of the
Corporation (“Outside Directors”) and to compensate such Outside Directors for
service to the Corporation. The Plan provides a means whereby optionees may
purchase shares of the $0.01 par value common stock of the Corporation (the
“Common Stock”) pursuant to options. The options may be either one of two
types, (1) “incentive stock options” which will qualify as such under Section
422 of the Internal Revenue Code of 1986, as amended (the “Code”), or under any
applicable successor statute, or (2) “nonqualified stock options,” that is,
options which are not intended to qualify as incentive stock options under
Section 422 of the Code.

II. ADMINISTRATION

Except as otherwise provided in this Section 2, the Plan shall be
implemented and administered by the Board of Directors of the Corporation (the
“Board”) or a Stock Option/Award Committee (the “Committee”) appointed by the
Board and composed of three or more directors of the Corporation.

The Committee may be delegated the authority and discretion to adopt
and revise such rules and regulations as it shall deem necessary for the
administration of the Plan, and to determine, consistent with the provisions of
the Plan, the employees to be granted options, whether such options shall be
nonqualified stock options or incentive stock options, the times at which
options shall be granted, the exercise price of the shares subject to each
option (subject to paragraph D of Section 6), the number of shares subject to
each option, the vesting schedule of options or whether the options shall be
immediately vested, the times when options shall terminate, and whether the
exercise price of options shall be paid in cash or stock. Acts of a majority
of the members of the Committee at a meeting at which a quorum is present, or
acts approved in writing by a majority of the members of the Committee, shall
be the valid acts of the Committee. The Committee’s actions, including any
interpretation or construction of any provisions of the Plan or any option
granted hereunder, shall be final, conclusive and binding unless otherwise
determined by the Board at its next regularly scheduled meeting. No member of
the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.

Notwithstanding any other provision of this Section or the Plan or any
documentation governing incentive compensation plans pursuant to which officers
may elect to receive options under this Plan, a committee composed of at least
two Non-Employee Directors, within the meaning of Rule 16b-3(b)(3) of the
Securities and Exchange Commission who also are “outside directors” within the
meaning of Section 162(m) of the Code, shall have the authority (a) to make
awards to directors of the Corporation who are not Outside Directors, to all
persons who are “officers” of the Corporation as defined for purposes of
Sections 16(a) and 16(b) of the Securities Exchange Act of 1934, as amended
(the “Act”), and to “covered employees,” within the meaning of Section 162(m)
of the Code and (b) to perform all other functions of the Board or Committee
with respect to outstanding awards to any of such directors, officers, and
covered employees including without limitation amendments to this Plan or such
outstanding awards which affect such persons. Further, notwithstanding any
other provision of this Section or the Plan, all awards made to Outside
Directors shall be automatic and nondiscretionary as set forth in the Plan.

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III. ELIGIBILITY; PARTICIPATION; SPECIAL LIMITATIONS

All key employees (including officers and directors) of the
Corporation, or any corporation in which the Corporation owns stock possessing
more than 50 percent of the voting power ( a “Subsidiary”), who meet minimum
salary and other requirements established by the Board, shall be eligible to
receive options under the Plan. All Outside Directors also shall be eligible
to receive options under the Plan. An employee who has been granted an option
may be granted an additional option or options or rights under the Plan if the
Committee or the Board shall so determine. The granting of an option under the
Plan shall not affect any outstanding stock option previously granted to an
employee under the Plan or any other plan of the Corporation.

Nothing contained in the Plan, or in any option granted pursuant to the
Plan, shall (i) confer upon any employee the right to continued employment, or
shall interfere in any way with the right of the Corporation or a Subsidiary to
terminate the employment of such employee at any time or (ii) confer upon any
Outside Director the right to continued membership on the Board of Directors,
or shall interfere in any way with the right of the Corporation to terminate
the membership on the Board of Directors of such Outside Director.

In no event, however, shall an incentive stock option be granted to any
person who then owns (as that term is defined in Section 424 of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Corporation or of any of its Subsidiaries, unless the exercise
price as determined under paragraph D of Section 6 hereof is equal to at least
110% of the fair market value of the stock subject to the incentive stock
option as of the date of grant and unless the term during which such incentive
stock option may be exercised does not exceed five years from the date of the
grant thereof. Options will not be treated as incentive stock options to the
extent that the aggregate fair market value (determined as of the date the
option is granted) of the Common Stock with respect to which options are
exercisable for the first time by an employee during any calendar year (under
all incentive stock option plans of the Corporation and its Subsidiaries)
exceeds $100,000.

IV. BASIS OF GRANT

Options shall be granted to employees either (a) on the basis of awards
earned under the Corporation’s incentive compensation programs for groups of
key employees, as in effect from time to time, or (b) as the Board of Directors
or the Committee may determine from time to time. If options are granted based
on (a) hereof, then performance bonuses and options based thereon shall be
earned based on the employee’s success in meeting predetermined performance
standards during one or more years (the “Performance Period”). Options shall
be granted under (a) hereof, if at all, at the time that the Corporation
determines in its judgment that the employee has met or will meet the
employee’s predetermined performance standards for the Performance Period.

Each Outside Director automatically shall be granted non-qualified
stock options to purchase 5,000 shares on the date of the Outside Director’s
first election or appointment to the Board, subject to vesting as provided in
Paragraph B of Section 6 hereof. Each Outside Director automatically shall be
granted non-qualified stock options to purchase an additional 5,000 shares (the
“Additional Options”) on the day after all stock options previously granted
under this paragraph become 100% vested (other than vesting by reason of death
or disability). All such subsequent grants of stock options shall vest, as to
one-sixtieth, on the date of grant and shall thereafter be subject to vesting
as provided in Paragraph B of Section 6 hereof.

V. NUMBER OF SHARES AND OPTIONS

A. Shares of Stock Subject to the Plan. The number of shares
authorized to be issued pursuant to options granted under the Plan is 3,800,000
shares, subject to adjustment in accordance with the provisions of paragraph G
of Section 6 hereof. Shares subject to options granted under the Plan may be
authorized and unissued shares or shares previously acquired or to be acquired
by the Corporation and held in treasury. Any shares subject to an option which
expires for any reason or is terminated unexercised as to such shares may again
be subject to an option granted under the Plan.

B. Maximum Number of Options. The number of shares which may be
subject to options granted under the Plan in any single calendar year for
awards earned for one-year Performance Periods shall not exceed 200,000 shares,
subject to adjustment in accordance with paragraph G of Section 6 hereof.
There shall be no annual

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limitation on options granted with respect to awards earned for Performance
Periods of more than one year. Notwithstanding the foregoing, the maximum
number of shares which may be subject to options granted under the Plan to any
“covered employee” for purposes of Section 162(m) of the Code during the life
of the Plan shall be 100,000 shares subject to adjustment in accordance with
paragraph G of Section 6 hereof.

VI. TERMS AND CONDITIONS OF OPTIONS

A. Option Agreement. Each option granted pursuant to the Plan shall
be evidenced by an agreement (“Option Agreement”) between the Corporation and
the optionee receiving the option. Option Agreements (which need not be
identical) shall state whether the option is an incentive stock option or a
nonqualified stock option, shall designate the number of shares and the
exercise price of the options to which they pertain, shall set forth the
vesting schedule of the options or state that the options are vested
immediately. The Option Agreements shall be in writing, dated as of the date
the option is granted, and shall be executed on behalf of the Corporation by
such officers as the Board or the Committee shall authorize. Option Agreements
generally shall be in such form and contain such additional provisions as the
Board or the Committee, as the case may be, shall prescribe, but in no event
shall they contain provisions inconsistent with the provisions of the Plan.

B. Exercise of Options. Options are exercisable only to the extent
they are vested. Options granted to employees shall vest either immediately or
periodically pursuant to a schedule selected by the Board or the Committee at
the same time the option is granted, except that the maximum vesting period for
nonqualified stock options shall be five (5) years and the maximum vesting
period for incentive stock options shall be seven (7) years. The Option
Agreement shall either state that the options are fully vested upon grant and
immediately exercisable in full or shall set forth the vesting schedule
selected by the Board or the Committee.

One-sixtieth of options granted to each Outside Director shall vest on
the first date of election or appointment of each such Outside Director and an
additional one-sixtieth shall vest on the last day of each month, so long as
such Outside Director remains a member of the Board of Directors of the
Corporation and, if such Outside Director resigns as an Outside Director after
completion of ten (10) or more years of continuous service as an Outside
Director, so long as such individual survives, until such option is vested in
full. Upon termination of an Outside Director as a member of the Board of
Directors by reason of death or disability, all options held by such Outside
Director shall vest fully as of the date of termination.

Optionees may exercise at any time or from time to time all of any
portion of a vested option; provided, however, that options granted to any
director or “officer” of the Corporation or “beneficial owner” of more than ten
percent of any class of equity security of the Corporation, as defined for
purposes of Sections 16(a) and 16(b) of the Act shall not be exercisable for a
period of at least six months from the date of grant.

C. Repurchase Amendment. Options granted to employees may be amended
to advance the date on which the option shall vest. If an option is so
amended, the amendment also may provide that the shares which would not have
been vested under the vesting schedule set forth in the Option Agreement shall
be subject to repurchase by the Corporation for a specified period of time at
the original exercise price if the employment of the optionee is terminated for
any reason prior to expiration of the repurchase period. The amendment shall
be evidenced by a written agreement (the “Repurchase Amendment”) between the
Corporation and the optionee, shall be executed on behalf of the Corporation by
such officers as the Board or the Committee shall authorize, and shall be in
such form and contain such provisions as the Board or the Committee, as the
case may be, shall prescribe.

D. Exercise Price.

1. Incentive Stock Options. The price at which incentive stock
options granted pursuant to the Plan may be exercised shall be determined by
the Committee or the Board, which price shall be at least equal to the fair
market value of the underlying Common Stock at the date at the options are
granted. In the case of incentive stock options granted to a person who owns,
immediately after the grant of such incentive stock option, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Corporation or of any of its Subsidiaries (as more fully set forth in Section 3
hereof), the purchase price of the Common Stock covered by such incentive stock
option shall not be less than 110% of the fair market value of such stock on
the date of grant.

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2. Nonqualified Stock Options. The price at which all
nonqualified stock options granted pursuant to the Plan may be exercised,
except those options granted on the basis of awards earned for one-year
Performance Periods under the Corporation’s incentive compensation programs,
shall be the fair market value of the Common Stock on the date of grant. The
exercise price of nonqualified stock options granted on the basis of awards
earned for one-year Performance Periods under the Corporation’s incentive
compensation programs may be other than the fair market value of the Common
Stock on the date of grant only if the exercise price is determined by a
formula which is based on the fair market value of the Common Stock, as of a
date, or for a period, that is within three months of the date of grant and
which is selected by the Board of Directors or Committee, in its sole
discretion, and determined by the Board of Directors or Committee, in its sole
discretion, to be in the best interests of the Corporation and consistent with
the intent of the incentive compensation program. The exercise price as
determined under any such formula may be below fair market value of the Common
Stock on the date of grant. Notwithstanding the foregoing, the exercise price
of any option granted to a “covered employee” for purposes of Section 162(m) of
the Code shall be the fair market value of the Common Stock on the date of
grant.

3. Fair Market Value. For purposes of the Plan the term “fair
market value” shall be defined as the closing bid price of the Common Stock
quoted over the National Association of Securities Dealers Automated Quotation
System (“NASDAQ”) in the national market on the date of grant of the option or
if there is no trade on such date, the closing bid price on the last preceding
date upon which such Common Stock was traded. In the event that the Common
Stock is not traded over NASDAQ, the term fair market value shall be defined as
the closing bid price of the Common Stock published in the National Daily Stock
Quotation Summary on the date of grant of the option, of if there are no
quotations published on such date, on the most recent date upon which such
Common Stock was quoted. In the event that the Common Stock is listed upon an
established stock exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Common Stock on such stock exchange or
exchanges on the date the option is granted, or if no sale of the Common Stock
shall have been made on any exchange on that date, then the next preceding day
on which there was a sale of such stock.

4. Payment. Payment of the exercise price may be (i) in cash,
(ii) by delivery to the Corporation of (x) irrevocable instructions to deliver
to a broker the stock certificates representing the shares for which the option
is being exercised, and (y) irrevocable instructions to the broker to sell such
shares and promptly deliver to the Corporation the portion of the proceeds
equal to the exercise price, or in the sole discretion of the Board or
Committee, (iii) by exchange of Common Stock of the Corporation, or, (iv)
partly in cash and partly by exchange of such Common Stock, provided that for
purposes of (iii) and (iv) the value of such Common Stock shall be the fair
market value on the date of exercise, and further provided that such Common
Stock shall have been held by the optionee for a period of at least six (6)
months prior to the date of exercise.

The Board or the Committee may permit deferred payment of all or
any part of the purchase price of the shares purchased pursuant to the Plan,
provided the par value of the shares must be paid in cash.

E. Suspension or Termination of Options. Subject to earlier termination
as provided below, (i) all nonqualified stock options shall expire, and all
rights granted under nonqualified stock Option Agreements shall become null and
void on the date specified in the Option Agreement, which date shall be no
later than five (5) years after the nonqualified stock options are granted and
(ii) all incentive stock options shall expire, and all rights granted under
incentive stock Option Agreements shall become null and void on the date
specified in the Option Agreement, which date shall be no later than eight (8)
years after the date the incentive stock options are granted.

Upon termination of an employee’s employment with the Corporation or a
Subsidiary for any reason, or upon termination of an Outside Director as a
member of the Board of Directors for any reason other than resignation as an
Outside Director following completion of ten (10) or more years of continuous
service as an Outside Director, death or disability, all options held by such
employee or Outside Director which are not exercisable on the date of such
termination shall expire. To the extent nonqualified stock options are
exercisable on such date, shares subject to nonqualified stock options held by
an employee may be purchased during the “exercise period,” after which the
nonqualified stock options shall expire and all rights granted under the Option
Agreement shall become null and void. The “exercise period” for shares subject
to nonqualified stock options held by an employee, his heirs, legatees or legal
representatives, as the case may be, ends on the earlier of (i) the date on
which the nonqualified stock option expires by its terms, or (ii) (A) except in
the case of death, disability, or resignation as an employee following
completion of ten (10) or more years of continuous service as an employee,
thirty (30) days after the date of the

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employee’s termination of employment, or (B) in the case of death, disability,
or resignation as an employee following completion of ten (10) or more year of
continuous service, one (1) year after the date of the employee’s termination
of employment. Upon termination of an Outside Director as a member of the
Board of Directors for the reason of resignation as an Outside Director
following completion of at least ten (10) years of continuous service as an
Outside Director, death or disability, the “exercise period” for shares subject
to nonqualified stock options held by the Outside Director, his heirs,
legatees, or legal representatives, as the case may be, ends on the earlier of
(i) the date on which the nonqualified stock option expires by its terms, or
(ii) the date one (1) year after the date of termination of the Outside
Director’s service as a member of the Board of Directors. In any event, no
nonqualified stock option may be exercised after the date on which the
nonqualified stock option expires by its terms.

To the extent incentive stock options are exercisable on the date of
termination, shares subject to incentive stock options may be purchased by the
employee, his heirs, legatees or legal representatives, as the case may be, on
the earlier of (i) the date on which the incentive stock option expires by its
terms or (ii) (A) except in the case of death or disability, within thirty (30)
days, or (B) in the case of death or disability, within one (1) year after the
date of termination of employment, after which the incentive stock options
shall expire and all rights under the Option Agreements shall become null and
void In any event, no incentive stock option may be exercised after the date
on which the incentive stock option expires by its terms.

If the Director of Human Resources of the Corporation or his or her
designee reasonably believes an optionee other than an Outside Director has
committed an act of misconduct as described in this paragraph, the Director of
Human Resources may suspend the optionee’s rights to exercise any option
pending a determination by the Board of Directors. If the Board of Directors
determines an optionee other than an Outside Director has committed an act of
embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the
Corporation, breach of fiduciary duty or deliberate disregard of Corporation
rules resulting in loss, damage or injury to the Corporation, or if an optionee
makes an unauthorized disclosure of any trade secret or confidential
information, engages in any conduct constituting unfair competition, induces
any customer to breach a contract with an optionee or induces any principal for
whom the Corporation acts as agent to terminate such agency relationship,
neither the optionee nor his or her estate shall be entitled to exercise any
option whatsoever. In making such determination, the Board of Directors shall
act fairly and shall give the optionee an opportunity to appear and present
evidence on his or her behalf at a hearing before a committee of the Board of
Directors. For any optionee who is an “officer” for purposes of Section 16 of
the Act, the determination shall be made by the Committee.

F. Non-Transferability of Options. Options pursuant to the Plan are
not transferable by the optionee otherwise than by will or the laws of descent
and distribution, or pursuant to a qualified domestic relations order as
defined by the Code, Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. Except as permitted by the
preceding sentence, no option nor any right granted under an Option Agreement
shall be transferred, assigned, pledged, hypothecated or disposed of in any
other way (whether by operation of law or otherwise), or be subject to
execution, attachment or similar process, and each option shall be exercisable
during the optionee’s lifetime only by the optionee. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of such options or
of such other rights contrary to the provisions hereof, or to subject such
options or such other rights to execution, attachment or similar process, such
options and such other rights shall immediately terminate and become null and
void.

G. Adjustment Provisions. Except as otherwise provided in this
paragraph G, in the event of changes in the Common Stock by reason of any stock
split, combination of shares, stock dividend, reclassification, merger,
consolidation, reorganization, recapitalization or similar adjustment, or by
reason of the dissolution or liquidation of the Corporation, appropriate
adjustments may be made in (i) the aggregate number of or class of shares
available under the Plan, and (ii) the number, class and exercise price of
shares remaining subject to all outstanding options. Whether any adjustment or
modification is to be made as a result of the occurrence of any of the events
specified in this section, and the extent thereof, shall be determined by the
Board, whose determination shall be binding and conclusive. Notwithstanding
the previous sentence, in the event of a stock split, stock dividend or other
event that is functionally equivalent to a stock split or stock dividend, (i)
the number of shares subject to then-outstanding options will be adjusted
so that upon exercise of the option, the holder of each option will be entitled
to receive the number of shares or other securities which the holder would have
been entitled to receive after the event had the option been exercised
immediately before the earlier of the date of the consummation of the event or
the record date of the event (the “event date”), (ii) the price of each share
subject to then-outstanding options will be adjusted

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proportionately so that the aggregate purchase price for all then-outstanding
options will be the same immediately after the event date as before the event
date, (iii) an appropriate and proportionate adjustment will be made as of the
event date in the maximum number of shares that may be issued pursuant to
options granted under the Plan, (iv) any adjustment with respect to
then-outstanding incentive stock options will be made in a transaction that does
not constitute a modification under Section 424(h)(3) of the Code, and (v) any
option to purchase fractional shares resulting from an adjustment will be
eliminated. Existence of the Plan or of Option Agreements pursuant to the Plan
shall in no way impair the right of the Corporation or its stockholders to make
or effect any adjustments, recapitalizations, reorganizations or other changes
in the Corporation’s capital structure or its business, or any merger,
consolidation, dissolution or liquidation of the Corporation, or any issue of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock of the Corporation, or any grant of options on its stock not
pursuant to the Plan.

VII. RIGHTS AS A SHAREHOLDER

Optionees shall not have any of the rights and privileges of
shareholders of the Corporation in respect of any of the shares subject to any
option granted pursuant to the Plan unless and until a certificate, if any,
representing such shares shall have been issued and delivered.

VIII. WITHHOLDING

To the extent required by applicable federal, state, local or foreign
law, an optionee shall make arrangements satisfactory to the Corporation for
the satisfaction of any withholding tax obligations that arise by reason of an
option exercise or the disposition of shares acquired upon exercise of an
incentive stock option. The Corporation shall not be required to issue shares
until such obligations are satisfied. The Committee may permit these
obligations to be satisfied by having the Corporation withhold a portion of the
shares of Common Stock that otherwise would be issued upon exercise of the
option, or to the extent permitted, by permitting the optionee to tender shares
owned by the optionee.

IX. RECEIPT OF PROSPECTUS

Upon the execution of an Option Agreement, each optionee receiving
options pursuant to the Plan shall be given a Prospectus, as filed by the
Corporation under the Securities Act of 1933, including any exhibits thereto,
describing the Plan. Each Option Agreement shall contain an acknowledgment by
the optionee that the requirements of this section have been met.

X. SUCCESSORS

The provisions of the Plan shall be binding upon, and inure to the
benefit of, all successors of any optionee, including, without limitation, his
estate and the executors, administrators or trustees thereof, his heirs and
legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such optionee.

XI. TERMINATION AND AMENDMENT OF THE PLAN

Subject to obtaining shareholder approval of this Amended Stock Option
Plan F at the annual meeting of the shareholders on May 9, 1997, the Plan shall
remain in effect until January 1, 2006, unless sooner terminated as hereinafter
provided. The Board shall have complete power and authority at any time to
terminate the Plan or to make such modification or amendment thereof as it
deems advisable and may from time to time suspend, discontinue or abandon the
Plan, provided that no such action by the Board shall adversely affect any
right or obligation with respect to any grant theretofore made, and, further
provided that without approval by vote of the shareholders, the Board shall not
adopt any amendment that would (i) materially modify the requirements as to the
exercise price of stock options, (ii) increase the number of shares which may
be issued under the Plan (except as provided in paragraph G of Section 6
hereof), (iii) materially modify the requirements as to eligibility for
participation in the Plan, or (iv) materially modify the terms of the Plan as
to “covered employees” within the meaning of Section 162(m) of the Code.

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XII. INDEMNIFICATION OF COMMITTEE

In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys’ fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, Option Agreements
or any option granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his duties;
provided that within sixty (60) days after institution of any such action, suit
or proceeding a Committee member shall in writing offer the Corporation the
opportunity, at its own expense, to defend the same.

XIII. MERGER OF THE CORPORATION

Unless the options issued pursuant to this Plan are assumed in a
transaction to which Section 424(a) of the Code applies, if the Corporation
shall (i) merge or consolidate with another corporation under circumstances
where the Corporation is not the surviving corporation, (ii) sell all, or
substantially all of its assets, or (iii) liquidate or dissolve, then each
option shall terminate on the date and immediately prior to the time such
merger, consolidation, sale, liquidation or dissolution becomes effective or is
consummated, provided that the holder of the option shall have the right
immediately prior to the effectiveness or consummation of such merger,
consolidation, sale, liquidation or dissolution, to exercise any or all of the
vested portion of the option, unless such option has otherwise expired or been
terminated pursuant to its terms or the terms hereof. In the event of such
merger, consolidation, sale, liquidation or dissolution, any portion of an
outstanding option which would have vested within one year after the date on
which such merger, consolidation, sale, liquidation or dissolution becomes
effective or is consummated shall vest immediately prior to the effectiveness
or consummation of such merger, consolidation, sale, liquidation or dissolution
and shall be part of the vested portion of the option which the holder of the
option may exercise.

XIV. APPROVAL OF PLAN; EFFECTIVE DATE

The plan was adopted by the Board of Directors on April 3, 1996, and
was approved by the shareholders on May 10, 1996. The Plan was amended by the
Board of Directors on February 21, 1997, subject to shareholder approval of the
amendments at the annual meeting of shareholders on May 9, 1997.

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APPENDIX 1

AMERICAN MANAGEMENT SYSTEMS, INCORPORATED

1996 FINANCIAL REPORT

CONTENTS
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