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EXHIBIT 10.A
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1984 BONUS COMPENSATION PLAN
SECTION I
PURPOSE
1.01 Purpose. The purpose of the 1984 Bonus Compensation Plan (the "Plan")
is to further the success of the Company by providing special
financial rewards in addition to regular salaries to those officers,
directors, and employees of the Company and its subsidiaries most
responsible for the continued success of the Company.
SECTION II
DEFINITIONS
2.01 Unless otherwise required by the context, the terms used in the Plan
shall have the meanings set forth in this Section II.
2.02 Annual Salary. "Annual Salary" means an officer's, director's, or
employee's total wages (including paid absences) during the
Performance Year, exclusive of any bonus or other fringe benefits that
such person may receive.
2.03 Board of Directors. "Board of Directors" means the Board of Directors
of the Company.
2.04 Bonus Compensation Rate. "Bonus Compensation Rate" means the Bonus
Compensation Rate negotiated with the Federal Government as an element
of the Company's Fringe Rate.
2.05 Committee. "Committee" means the Bonus Compensation Committee of the
Board of Directors of the Company as referred to in Section IX of the
Plan.
2.06 Common Stock. "Common Stock" means the common stock, $.05 par value,
of the Company, or in the event the common stock of the Company shall
consist of more than one class, then it shall mean the class of such
common stock as shall be designated by the Board of Directors.
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2.07 Company. "Company" shall mean Science Applications International
Corporation and any Subsidiary of Science Applications International
Corporation which shall be designated from time to time by the Board
of Directors or the Committee as being eligible to participate in the
Plan.
2.08 Eligible Compensation. "Eligible Compensation" means the total annual
salaries of all officers, directors and employees of the Company and
its subsidiaries.
2.09 Fiscal Year. "Fiscal Year" shall mean the fiscal year of the Company.
2.10 Fringe Rate. "Fringe Rate" means the rate which the Company shall be
entitled to charge for employee fringe benefits under contracts with
the Federal Government as such rate shall be negotiated from time to
time.
2.11 Group. "Group" means the major operating groups of the Company as such
shall be designated by the Company's management from time to time.
2.12 Group Bonus Fund. "Group Bonus Fund" means the aggregate amount which
may be allocated to any particular Group for the payment of bonuses
under the Plan with regard to any Performance Year.
2.13 Group Labor Dollars. "Group Labor Dollars" means aggregate base
salaries paid by any Group, whether direct or indirect, exclusive of
amounts attributable to fringe benefits but before reduction of any
amount on account of (i) any withholding, such as income taxes or
social security taxes, (ii) health and welfare payments, or (iii) any
moving and relocation reimbursements.
2.14 Group Planned Financial Performance. "Group Planned Financial
Performance" means the planned performance for any Group with regard
to any Performance Year as set forth in the approved annual plan for
that Group.
2.15 Group Planned Profit Rate. "Group Planned Profit Rate" is a rate
determined by dividing the Group Profit set forth in the Group Planned
Financial Performance by the Group Revenue set forth in the Group
Planned Financial Performance.
2.16 Group Profit. "Group Profit" means the profit before tax attributable
to any Group which shall be determined in accordance with the
Company's accounting practices and shall be Net Fees attributable to
that Group less Unallowables, interest charges attributable to that
Group and net unfavorable Rate Variances. In the case of net favorable
Rate Variances, the amount of such variances shall be added to Net
Fees for the Group. Rates for which the Rate Variances shall be
computed shall include the Group's overhead expenses, bid and proposal
expenses, general and administrative expenses attributable to the
Group and sick leave. Rate Variances shall be calculated
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from the rates approved in the Group's annual plan. Other income or
expenses attributable to the Group shall be added or deducted as
appropriate.
2.17 Group Revenues. "Group Revenues" means revenues attributable to each
Group as determined in accordance with the Company's accounting
practices.
2.18 Net Fees. "Net Fees" means negotiated contract fees adjusted for
contract overruns and underruns.
2.19 Operating Committee. "Operating Committee" shall mean the Operating
Committee of the Board of Directors.
2.20 Participant. A "Participant" shall mean each such person who is
selected to receive a bonus under the Plan. Every officer, director or
employee of the Company or its subsidiaries shall be eligible to
receive a bonus under the Plan.
2.21 Performance Year. "Performance Year" means the Fiscal Year during
which the performance of the Company or a Group is used to determine
the amounts of awards which may be available under the Plan.
2.22 President. "President" means the person serving in the office of the
president of the Company if the Board of Directors has not designated
another officer to be the chief executive officer of the Company. If,
however, the Board of Directors shall have designated another officer
of the Company to be the chief executive officer of the Company, then
the person designated as such chief executive officer shall be deemed
to be the President for the purposes of the Plan.
2.23 President's Bonus Fund. "President's Bonus Fund" means that portion of
the Company Bonus Fund which may be awarded as bonuses under the Plan
by the President in regard to any Performance Year as provided in
Section V of the Plan.
2.24 Profit. "Profit" means the net income of the Company for any
Performance Year as certified by the Company's independent public
accountants before provision for federal taxes and incentive
compensation awards under the Plan.
2.25 Rate Variances. "Rate Variances" means variances from the rates
established for overhead expenses, bid and proposal expenses, general
and administrative expenses and sick leave expenses as set forth in
the approved annual plan for the Group for the Performance Year.
2.26 Spot Bonus. "Spot Bonus" means special bonuses payable to individuals
pursuant to Section VII of the Plan and which are intended to reward
such individuals for extraordinary efforts or special achievements on
a timely basis.
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2.27 Unallowables. "Unallowables" means costs incurred by the Company which
are not deemed to be reimbursable costs pursuant to the Company's
Contracts with the Federal Government.
SECTION III
COMPANY BONUS FUND
3.01 Company Bonus Fund. The Company Bonus Fund for each Performance Year
shall be an amount not in excess of 7% of Eligible Compensation for
such Performance Year and shall be the aggregate of the Group Bonus
Funds, the President's Bonus Fund and any additional funds allocated
from Profit as the Operating Committee shall determine. The Board of
Directors shall have the authority to change the percentage of
Eligible Compensation which shall be used to determine the maximum
amount of the Company Bonus Fund from time to time.
3.02 Composition of Company Bonus Fund. The Company Bonus Fund shall be
comprised of the aggregate of the Group Bonus Funds and the
President's Bonus Fund. The Group Bonus Funds shall constitute 70% of
the Company Bonus Fund and the President's Bonus Fund shall constitute
30% of the Company Bonus Fund. Notwithstanding the foregoing, the
President's Bonus Fund may be increased by any additional funds
allocated from Profit as the Operating Committee shall determine.
4.01 General Policy. The determination of the amount and distribution of
the Group Bonus Fund is intended to reflect and reward the performance
of each of the Company's various Groups as well as the overall
performance of the Company. As an aide in accomplishing this aim, a
Group Bonus Formula shall be used to determine the amount of each
Group's Group Bonus Fund for each Performance Year. The amount of the
Group Bonus Fund as calculated pursuant to the Group Bonus Formula is
intended merely to provide a guide in determining the amount of the
Group Bonus Fund actually established for each Group for each
Performance Year. The Committee shall have the authority to establish
for each Group the actual amount of that Group's Group Bonus Fund
which amount may be equal to, in excess of or less than the amount of
the Group Bonus Fund which would be determined under the Group Bonus
Formula. In exercising this discretion, the Committee shall consider,
among other things, the Company's overall financial performance, and
other special situations in the Performance Year.
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4.02 Group Bonus Formula. The Group Bonus Formula is intended to reflect
the following criteria: (i) a minimum Group Bonus Fund for each Group
so that individual performance within the Group may be rewarded
notwithstanding the Group's overall performance; (ii) a maximum amount
of Group Bonus Fund for each Group so as to avoid an inordinate drain
on the Company's profit; (iii) a provision for awarding bonuses to a
Group for Group Profit exceeding 3% of Group Revenue while providing
greater incentive for Group Profit exceeding 6% of Group Revenue; (iv)
a procedure for an automatic adjustment to reflect the Bonus
Compensation Rate negotiated as an element of the Company's Fringe
Rate Agreement with the Federal Government; and (v) a procedure for
relating each Group's Group Bonus Fund to such Group's Group Planned
Financial Performance. Accordingly, the Group Bonus Formula is
expressed as follows:
B = .0238L + .3 {R(P/R - .06)} when P >= .06R and B <= .061L
B = .01L {1 + 46(P/R - .03)} when .03R >= P < .06R
B = .01L when P < .03R
where: B represents the Group Bonus Fund, L represents Group Labor
Dollars, P represents Group Profits, and R represents Group Revenues.
The minimum Group Bonus Fund is represented by 1% of Group Labor
Dollars and the maximum Group Bonus Fund is represented by 6.1% of
Group Labor Dollars. An illustration of the application of the Group
Bonus Formula assuming various Group Profits ranging from 3% through
12% of Group Revenue is attached as Table I and Table II to the Plan.
If, at the beginning of any Performance Year, the Bonus Compensation
Rate, the Fringe Rate, or the Group Planned Profit Rate change, then
the numerical coefficients set forth in the Group Bonus Formula may be
adjusted so that the aggregate Group Bonus Funds do not exceed the
amount permitted under the Company Bonus Fund.
SECTION V
PRESIDENT'S BONUS FUND
5.01 Purpose of President's Bonus Fund. The President's Bonus Fund is
primarily intended to provide awards to deserving Participants (i) in
the Company's top level of management, (ii) engaged in Corporate
Development activities, (iii) serving in the Office of the President,
and (iv) serving in Corporate Administration. The President's Bonus
Fund may also be utilized to provide bonus awards to especially
deserving Participants who are not otherwise rewarded, to encourage
stock redistribution, to
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correct any inequities in the amount of the Group Bonus Funds of the
various Groups, or for other special awards.
5.02 Amount of President's Bonus Fund. The President's Bonus Fund for any
Performance Year is determined indirectly as a function of the
aggregate amount of the Group Bonus Funds for the Performance Year.
The President's Bonus Fund shall be an amount equal to 30% of the
Company Bonus Fund with the aggregate of the Group Bonus Funds to be
an amount equal to 70% of the Company Bonus Fund. Notwithstanding the
foregoing, the President's Bonus Fund may be increased by any
additional funds allocated from Profit as the Operating Committee
shall determine.
SECTION VI
DISTRIBUTION OF COMPANY BONUS FUND
6.01 Group Bonus Fund Recommendations. Within 45 days following the end of
the Performance Year and/or from time to time during the Performance
Year, each Group Manager shall submit to the Committee written
recommendations for the payment of bonuses to members of that Group
Manager's Group out of the Group's Group Bonus Fund. The total amount
of such bonus recommendations shall be based upon application of the
Group Bonus Formula to the Company's financial statements for the
Performance Year.
6.02 President's Bonus Fund Recommendations. Within 45 days following the
end of the Performance Year and/or from time to time during the
Performance Year, the President shall submit to the Committee written
recommendations for the payment of bonuses to Participants who are to
receive bonuses paid out of the President's Bonus Fund.
6.03 Internal Group Administration. Each Group Manager shall be responsible
for the implementation and operation of the Plan within that Group
Manager's Group. The method of such implementation and operation
within the Group is not prescribed by the Plan. The Group Manager may
implement the distribution of payments under the Plan within the Group
to meet the business goals of that Group; however, the total bonuses
payable within the Group must be made within the limitations set forth
in the Plan. If a Group Manager elects to apply the Group Bonus
Formula or a similar formula to the administration of the Plan within
the Group so as to allocate the Group's Group Bonus Fund between
different divisions, operations or other identifiable entities within
the Group, consideration must be given to the overhead rate
differentials between those entities due to the allocation of
management and administration overhead. Consideration must also be
given to the need to reward individuals for technical performance for
work unrelated to financial performance.
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6.04 Approvals. All individual bonuses to be awarded from the Group Bonus
Fund must be recommended in writing by the Group Manager to the
Committee and all individual bonuses to be awarded out of the
President's Bonus Fund must be in writing from the President to the
Committee. The Committee must approve all individual bonuses awarded
out of the Group Bonus Fund and the President's Bonus Fund except that
any bonus payable to the President must be approved by the Board of
Directors and any bonus payable to the other Committee members must be
approved by the President. Notwithstanding the foregoing, no member of
the Committee shall be eligible to receive a bonus that is payable in
Common Stock. No individual shall be advised of a bonus recommendation
until such bonus shall have been approved by the Group Manager or the
President, as appropriate, and the Committee.
6.05 Recommendation Format. Written bonus recommendations submitted by the
Group Manager or the President to the Committee may be in memorandum
form or on an appropriate recommendation form as prescribed by the
Committee from time to time.
SECTION VII
SPOT BONUSES
7.01 Spot Bonus Awards. Spot Bonuses may be awarded under the Plan at any
time. Spot Bonuses shall be awarded by the Group Manager or the
President (i) to reward extraordinary effort or special achievement
for which the timeliness of the award is particularly important, (ii)
are payable in cash only and in amounts of $1,000 or less, (iii) are
normally deliverable within one week, and (iv) require the prior
written approval of only the Group Manager in regard to Spot Bonuses
to be payable to a Participant in the Group Manager's Group or by the
President in regard to Spot Bonuses to be payable to any other
Participant. The award of a Spot Bonus by the Group Manager or the
President will be subsequently reviewed by the Committee.
7.02 Accounting for Spot Bonuses. Spot Bonuses paid during the Performance
Year will be charged to the Group's 1% minimum Group Bonus Fund or the
President's Bonus Fund, as appropriate, for the Performance Year.
SECTION VIII
PAYMENT OF BONUSES
8.01 Time of Payment. Payment of the annual bonus awards shall be made as
soon as practicable after the decision by the Committee to make
payment of any bonus. Bonus
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awards made during the Performance Year shall be charged to the
Company Bonus Fund or the President's Bonus Fund as appropriate for
such Performance Year pursuant to the provisions of Section 3.01.
Payment of Spot Bonuses shall be made within seven working days
following the date of approval of such Spot Bonus by the Group Manager
or the President.
8.02 Form of Payment. Bonuses awarded under the Plan, except for Spot
Bonuses, shall be payable in cash or Common Stock or a combination of
cash and Common Stock within the sole discretion of the Committee.
8.03 Stock Restriction Agreement. To the extent that any bonus awarded
under the Plan is paid in Common Stock, as a condition to the receipt
of such bonus, the Participant shall be required to execute and
deliver a stock restriction agreement in such form and upon such terms
and conditions, including, but not limited to, the granting of a right
of first refusal to the Company regarding such Common Stock and a
right on the part of the Company to repurchase such Common Stock from
the Participant upon the Participant's termination of affiliation with
the Company, as the Committee, in its sole discretion, shall deem
appropriate.
8.04 Forfeiture of Shares. To the extent that any bonus awarded under the
Plan is paid in shares of Common Stock, such shares may be issued
subject to forfeiture, in whole or in part, in accordance with a
vesting schedule which the Committee may, in its sole discretion,
establish.
8.05 Valuing Common Stock. To the extent that bonuses awarded under the
Plan are paid in Common Stock, the per share value of such Common
Stock shall be based upon the Formula Price for the Common Stock in
effect at the time the bonus is awarded. The bonus will be deemed to
have been awarded on the date the Committee approves the granting of
the bonus.
8.06 Individual Bonus Awards. Any bonus award to a Participant with respect
to a Performance Year, other than a Spot Bonus, shall generally be
made within the following guidelines.
Category of
Participant's Minimum Amount Maximum Amount
Employment of Bonus (if any) of Bonus
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Operations Manager 5% of Annual Salary 25% of Annual Salary
Division Manager 5% of Annual Salary 20% of Annual Salary
Others 1 Week's Salary 15% of Annual Salary
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Recommendations for bonus awards outside these guidelines must be
accompanied by a written justification from the Group Manager or the
President unless such recommendation has been previously coordinated
with the Committee.
SECTION IX
ADMINISTRATION
9.01 The Committee. The Plan shall be administered by the Committee which
shall consist of not less than two directors appointed by the Board of
Directors, each of whom shall satisfy the requirements of Rule 16b-3,
as amended, under the Securities Exchange Act of 1934 (the "Exchange
Act"). The Committee may appoint a separate committee with respect to
Participants who are not subject to Section 16 of the Exchange Act.
9.02 Authority of the Committee. The Committee shall be authorized to
interpret the terms and provisions of the Plan and to adopt such rules
and regulations for the administration of the Plan as it may, in its
sole discretion, deem advisable. Without limiting the generality of
the foregoing, and subject to the terms, provisions and conditions of
the Plan, the Committee is authorized to:
(a) Approve the Participants who shall receive bonus awards
under the Plan.
(b) Prescribe the form, which shall be consistent with the Plan,
of the documents, if any, evidencing awards granted under
the Plan, including the stock restriction agreement referred
to in Section 8.03 of the Plan.
(c) Approve the amount of bonuses to be awarded to any
Participant under the Plan and the form of payment of such
bonuses.
SECTION X
AMENDMENT OR TERMINATION
10.01 Amendment or Termination. The Plan may, at any time or from time to
time, be amended, or may, at any time, be terminated, by either the
stockholders of the Company or by the Board of Directors subject only
to the provisions of Section 10.02 below.
10.02 Restriction on Amendment or Termination. No amendment or termination
of the Plan by either the stockholders of the Company or the Board of
Directors shall, without the
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Participant's consent, affect any bonus award theretofore made to such
Participant under the Plan.
SECTION XI
MISCELLANEOUS
11.01 Certain Conditions and Limitations. The award of a bonus under the
Plan may be effected only if the Committee determines that the award
or the payment of such award complies with applicable securities and
other laws. The Company may, but shall not be required to, register or
qualify under applicable securities laws, at the Company's expense,
any or all of the interests in the Plan and shares of Common Stock
awarded or paid pursuant to the Plan.
11.02 Other Compensation or Incentive Arrangements. The Plan is not intended
as, and shall not be deemed a substitute for, or preclude continuance
or establishment of, incentive compensation, profit participation or
bonus plans of subsidiaries, divisions, or other operating entities of
the Company or any other plan, practice, or arrangement for the
payment of compensation or fringe benefits, including, without
limitation, commissions, prizes, production or similar bonuses,
retirement, profit sharing, group insurance, stock purchase or stock
bonus plans or any other bonus plans or arrangements, that may now or
hereafter be in effect for employees generally or any group or class
of employees or employee, and any such plan, practice or arrangement
may be continued or authorized and payments thereunder made
independently of the Plan.
11.03 Continuation of Employment. Nothing contained in the Plan, or in the
award of any bonus pursuant to the Plan, shall confer upon any
employee any right to continue in the employ of the Company or
interfere in any way with the right of the Company to reduce such
employee's compensation from the rate in existence at the time of the
granting of a bonus under the Plan.
11.04 No Vested Interest in the Plan. No Participant nor any employee of the
Company, nor any person claiming under or through any of them, nor any
other person, shall have any right or interest, whether vested or
otherwise, in the Plan or its continuance, or in or to the payment of
any award under the Plan, whether such award be vested, contingent or
otherwise, unless and until all the terms and conditions of the Plan
or any rules and regulations of the Committee thereunder and of any
instrument executed pursuant thereto affecting such award and its
payment, shall be fully complied with as specifically provided in the
Plan and the rules and regulations of the Committee thereunder. No
rights under the Plan, contingent or otherwise, shall be assignable or
subject to any encumbrance, pledge or charge of any nature, except as
may be specifically authorized by the Committee.
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11.05 Issuance of Common Stock. Any shares of Common Stock as payment, in
whole or in part, of any bonus awarded under the Plan may be purchased
by the Company in the limited internal market established and
maintained by the Company or may be issued from the treasury stock of
the Company or from the authorized but unissued Common Stock of the
Company.
11.06 Non-Transferability. Except as specifically provided in the Plan, no
interest in or payment under the Plan shall be transferable by the
Participant other than by will or by the laws of descent and
distribution.
11.07 Tax Withholding. The Company shall have the right to deduct from any
payment of bonuses awarded under the Plan or from any other
compensation payable to the Participant receiving such bonus, any sums
required by Federal, state or local tax law to be withheld with
respect to such bonus payment. There is no obligation under the Plan
that any Participant or other person be advised of the existence of
any such tax or the amount which the Company will be so required to
withhold.
11.08 Term of the Plan. Subject to approval by a majority of the holders of
the outstanding common stock of the Company, the Plan is effective as
of February 1, 1984.
11.09 Governing Law. The Plan, and any awards made under the Plan, shall be
governed by, and be construed in accordance with, the laws of the
State of Delaware.
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TABLE I
GROUP BONUS FORMULA ILLUSTRATION
ASSUMING GROUP REVENUE OF $10M & GROUP LABOR DOLLARS OF $4.2M
Group Profit as a % of Group Revenue
(Dollars in Thousands)
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3%
& less 4% 5% 6% 8% 10% 12%
------- ------- ------- ------- ------- ------- -------
Group Revenues ............... $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Costs at Provisional
Rates .................... 9,200 9,200 9,200 9,200 9,200 9,200 9,200
-------------------------------------------------------------------------------------------
Net Fees ..................... $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800
Unallowables ................. -5 -5 -5 -5 -5 -5 -5
Interest ..................... -100 -100 -100 -100 -100 -100 -100
Overhead Variance ............ -300 -225 -150 -75 +75 +225 +400
B&P Variance ................. -55 -40 -25 -10 +20 +50 +75
G&A Variance ................. -30 -20 -10 -- +20 +20 +20
Sickleave Variance ........... -10 -10 -10 -10 0 +20 +20
Other ........................ -- -- -- -- -10 -10 -10
- -------------------------------------------------------------------------------------------------------------------------------
Group Profit Before
Taxes .................... $ 300 $ 400 $ 500 $ 600 $ 800 $ 1,000 $ 1,200
===========================================================================================
% of Revenues ................ 3% 4% 5% 6% 8% 10% 12%
- -------------------------------------------------------------------------------------------------------------------------------
(A) Bonus Base
($4.2M x .01) ............ $ 42 $ 42 $ 42 $ 42 $ 42 $ 42 $ 42
- -------------------------------------------------------------------------------------------------------------------------------
(B) Earnable
Add: 46(P/R - .03) Base ...... $ -- $ 19 $ 39 $ 58 $ 58 $ 58 $ 58
Add: 30% Profit 6% ........... -- -- -- -- 60 120 180
- -------------------------------------------------------------------------------------------------------------------------------
(B) Total Earned ............. $ -- $ 19 $ 39 $ 58 $ 118 $ 178 $ 238
(A+B) Total Group Bonus Fund . 42 61 81 100 160 220 280
Total Group Bonus Funds
to be Distributed ........ 42 61 81 100 160 220 256
- -------------------------------------------------------------------------------------------------------------------------------
Bonus Distributed as a %
of Group Labor Dollars ... 1.0% 1.5% 1.9% 2.4% 3.8% 5.2% 6.1%
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TABLE II
GROUP BONUS FUND GENERATED PER GROUP BONUS FORMULA
($10 MILLION GROUP REVENUE WITH TOTAL GROUP LABOR DOLLARS OF $4.2 MILLION)
[GRAPH]
GROUP PROFIT BEFORE TAXES AS A PERCENTAGE OF GROUP REVENUE