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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-12771
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3630868
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10260 CAMPUS POINT DRIVE, SAN DIEGO, CALIFORNIA 92121
(Address of Registrant's principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 546-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 14, 1994, the aggregate market value of the voting stock held by
non-affiliates of Registrant was $318,399,037. For the purpose of this
calculation, it is assumed that the Registrant's affiliates include the
Registrant's Board of Directors and certain of the Registrant's employee benefit
plans. The Registrant disclaims the existence of any control relationship
between it and such employee benefit plans.
As of March 14, 1994, there were 44,125,061 shares of Registrant's Class A
Common Stock and 360,880 shares of Registrant's Class B Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for the Company's 1994
Annual Meeting of Stockholders are incorporated by reference in Part III of this
Form 10-K Report.
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Science Applications International Corporation (the "Company") provides
diversified professional and technical services ("Technical Services") and
designs, develops and manufactures high-technology products ("Products"). The
Company's Technical Services and Products are primarily sold to departments and
agencies of the U.S. Government, including the Department of Defense ("DOD"),
Department of Energy ("DOE"), Department of Transportation ("DOT"), Department
of Veterans Affairs ("VA"), Environmental Protection Agency ("EPA") and National
Aeronautics and Space Administration ("NASA"). Revenues generated from the sale
of Technical Services and Products to the U.S. Government as a prime contractor
or subcontractor accounted for 88% of revenues in fiscal years 1994, 1993 and
1992. The balance of the Company's revenues are attributable to the sales of
Technical Services and Products to foreign governments, commercial customers and
others. The percentage of revenues attributable to Technical Services and
Products has remained relatively constant at approximately 92% and 8%,
respectively, for fiscal years 1994, 1993 and 1992. The Company provides
Technical Services primarily in the areas of "National Security," "Environment,"
"Energy" and "Other Technical Services," the latter of which includes the
Company's health, space, transportation and commercial information technology
business areas. For certain financial information regarding the Company's
business segments, see Note B of Notes to Consolidated Financial Statements of
the Company set forth on page F-8 of this Form 10-K.
The principal office and corporate headquarters of the Company is located in
San Diego, California at 10260 Campus Point Drive, San Diego, California 92121
and its telephone number is (619) 546-6000. All references to the Company
include, unless the context indicates otherwise, the Company and its predecessor
and subsidiary corporations.
TECHNICAL SERVICES
NATIONAL SECURITY
The Company currently provides a wide array of national security related
Technical Services to its customers, including advanced research and technology
development, systems engineering and systems integration and technical,
operational and management support services. Examples of the Company's Technical
Services in the national security area include the following:
- Information system engineering and support services, including
requirements analysis and acquisition support, computer system design,
information and user environment modeling and data communication systems
support.
- Technical support in the areas of treaty negotiation and verification and
nuclear weapons reduction.
- Defense studies and analyses for various defense and intelligence agencies
of the U.S. Government, including studies regarding conventional and
nuclear warfare issues and the integration of military operational and
technological considerations with defense policy issues.
- Technology development and technical services to the U.S. Navy in the
general areas of undersea warfare, including surveillance, anti-submarine
warfare, port-area and harbor security and marine biosystems.
- Logistics engineering services and turnkey logistics information
management systems to a wide variety of government customers.
- Design, integration, implementation and operation of battle field
simulation training ranges on land, air and sea.
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- Testing and evaluation of communications systems, an advanced test range
data system and a strategic bomber test concept and other systems for the
U.S. Navy, the U.S. Air Force and other government agencies.
- Research, design, development, integration, evaluation, operation and
maintenance of a wide variety of training devices and simulators for the
military services.
- Systems engineering and technical assistance for cruise missiles, future
aircraft and ballistic missile concepts, systems analysis of sensors for
the detection and tracking of aircraft and ballistic missiles and studies
regarding the survivability of tactical aircraft and strategic missiles.
- Support to the DOD in imagery collection, processing, exploitation and
dissemination systems for digital processing, technology intelligence
communications and information management.
- Hardware development and systems engineering for national space programs.
- Research and engineering in the areas of underground nuclear testing,
nuclear weapons effects and the impact of nuclear effects on military
systems.
- Engineering support for a wide variety of naval avionics systems,
including scientific and engineering studies, hardware design, development
and fabrication, computer engineering and support, and reliability,
maintainability and logistics engineering.
- Maintenance engineering and training, including field technical services
and repair, electronic system design and hands-on operational support,
primarily to the U.S. Navy.
- Independent verification and validation and software quality assurance
support services for shipboard anti-submarine warfare combat systems,
mission planning functions, operational flight software command and
control processors, nuclear surety systems, soft copy imagery processing,
data storage and dissemination systems and various submarine, surface ship
and command, control and communications systems.
ENVIRONMENT
In the environment area, the Company performs site assessments, remedial
investigation and feasibility studies, sampling, monitoring and regulatory
compliance support and training. Examples of the Company's Technical Services in
the environment area include the following:
- Management and technical support to the DOE for the characterization of
the nation's first potential high level waste repository, including the
preparation and coordination of environmental assessments, field testing,
technical evaluations, public information, quality assurance and
information systems and training.
- Development, demonstration and evaluation of new technologies for
hazardous waste treatment, including bioremediation and high-energy plasma
treatment systems.
- Solid and hazardous waste services to federal, state and local governments
and the private sector, including environmental assessments, environmental
impact statements, design engineering, remedial investigations and
feasibility studies, regulatory and enforcement support, pollution
prevention and engineering services.
- Analysis of a broad range of environmental issues associated with the
marine sciences such as ocean dumping, mineral exploration, global change
and global ocean circulation and temperature trends.
- Support associated with the development of treatment technologies,
including treatability studies, development of protocols for technology
evaluation, pollution prevention assessments, waste minimization and
technology assessments.
- Development and implementation of information systems.
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ENERGY
The energy related Technical Services of the Company include safety
evaluations, security, reliability and availability engineering evaluations,
technical reviews, quality assurance, information systems, plant monitoring
systems, instrumentation and control systems and project management. Examples of
the Company's Technical Services in the energy area include the following:
- Engineering and support services to nuclear, electric, gas and other
utility operations in the areas of computer systems, information
processing, configuration management, probabilistic risk assessment,
nuclear engineering, reliability and availability evaluations,
instrumentation and control systems, energy policy analysis and
alternative energy evaluation.
- Information systems services to the DOE, including collection, analysis
and storage of energy information, the development of geographic
information systems and the overall management of large computer
facilities.
- Support to DOE in fusion energy research, including facility management,
computer system development and project management support in connection
with an international thermonuclear experimental reactor.
- Management, operation and technical services for fossil energy research
laboratories.
OTHER TECHNICAL SERVICES
The Company provides Technical Services to government and commercial
customers in such other areas as health, space, transportation and commercial
information technology. The health related Technical Services of the Company
include medical information systems, technology development and adolescent
counseling. The Company also provides a wide variety of Technical Services in
the space, transportation, commercial information technology and other areas.
Examples of the Technical Services provided by the Company in all these areas
are described below:
- Security services for the U.S. Government and commercial customers,
including material control and accountability, computer security,
technical surveillance countermeasures, intrusion detection, access
control and physical plant threat assessments and vulnerability analysis.
- Development and installation of radiation monitoring systems for nuclear
reactor facilities.
- Development and implementation of an automated health care information
system for the DOD to service military medical treatment facilities.
- Policy and analysis support to the DOT and other transporation oriented
government agencies.
- Design, integration and implementation of complex automated toll revenue
collection systems.
- Scientific and computing services to federal agencies involved in global
change research, including processing, utilization and scientific analysis
of space, airborne and ground based remotely sensed data.
- Information technology and automatic data processing outsourcing services
for commercial clients.
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PRODUCTS
The Company designs, develops and manufactures high-technology products for
government and commercial customers. Examples of the Company's Products are
described below:
- Automatic equipment identification technology for rail, truck, air and sea
transportation modes.
- Ruggedized/militarized computers for various military and industrial
applications.
- A portable ultrasonic imaging system primarily used for nondestructive
inspection of aircraft and nuclear power plant piping.
- Hardware products for multi-lateration based range instrumentation
systems, including transponders, airborne instrumentation pods and ground
reference interrogator/relay stations.
- A variety of flat panel displays for military applications based on plasma
and electroluminescent technology and liquid crystal display technology.
RESOURCES
The technical services and products provided by the Company utilize a wide
variety of resources. The Company anticipates the continued availability of the
resources required for the products and services provided to customers. A
substantial portion of the computers and other equipment, materials and
subcontracted work required by the Company could be procured from alternate
supply sources. However, with respect to certain products and programs, the
Company depends on a particular source or vendor. While a temporary or permanent
disruption in the supply of these materials or services could cause
inconvenience or delay or impact the profitability of the affected programs or
products, the Company believes it will not materially affect the profitability
or operations of the Company as a whole.
The availability of skilled employees who have the necessary education
and/or experience in specialized scientific and technological disciplines
remains critical to the future growth and profitability of the Company. To date,
the Company has not experienced any significant difficulty in obtaining or
retaining the services of such employees. As an inducement, the Company
maintains a variety of benefit programs for its employees, including retirement
and bonus plans, group life, health, accident and disability insurance, and
offers its employees the opportunity to participate in the Company's employee
ownership program. See "Business -- Employees And Consultants."
MARKETING
The Company's marketing activities are primarily conducted by its own
professional staff of engineers, scientists, analysts and other personnel. The
Company's marketing approach for its technical services begins with the
development of information concerning the requirements of the U.S. Government
and other potential customers for the types of services provided by the Company.
Such information is gathered in the course of contract performance and from
formal briefings, participation in professional organizations and published
literature. This information is then evaluated and exchanged among marketing
groups within the Company (organized along functional, geographic and other
lines) in order to devise and implement, subject to management review and
approval, the best means of taking advantage of available business
opportunities, including the preparation of proposals responsive to the stated
and perceived needs of customers.
The Company's high-technology products are marketed primarily through the
Company's own sales force, which is augmented by independent sales
representatives.
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COMPETITION
The businesses in which the Company is engaged are highly competitive. The
Company has a large number of competitors, some of which have been established
longer and have substantially greater financial resources and larger technical
staffs than the Company. Some of the other competitors, although smaller in
size, are more highly specialized. In addition, the U.S. Government's own in-
house capabilities and federal non-profit contract research centers are also
competitors of the Company because they perform certain types of services which
might otherwise be performed by the Company.
The primary competitive factors in the business areas in which the Company
is engaged are technical, management and marketing competence and price. The
Company's continued success is dependent upon its ability to hire and retain
highly qualified scientists, engineers, technicians, management and professional
personnel who will provide superior service and performance on a cost effective
basis.
SIGNIFICANT CUSTOMERS
During the fiscal years ended January 31, 1994, 1993 and 1992, approximately
89% of the Company's contract revenues from the Technical Services segment in
each such fiscal year, and 72%, 82% and 90%, respectively, of the Company's
contract revenues from the Products segment, were attributable to prime
contracts with the U.S. Government or to subcontracts with other contractors
engaged in work for the U.S. Government.
In fiscal years 1994, 1993 and 1992, the U.S. Air Force accounted for 12% of
consolidated revenues in each such fiscal year, the U.S. Army accounted for 17%,
15% and 13% of consolidated revenues, respectively, and the U.S. Navy accounted
for 10%, 12% and 13% of consolidated revenues, respectively. No single contract
in the Technical Services segment accounted for 10% or more of consolidated
revenues in fiscal years 1994, 1993 and 1992.
No single customer or contract in the Products segment accounted for 10% or
more of consolidated revenues in fiscal years 1994, 1993 and 1992.
GOVERNMENT CONTRACTS
Many of the U.S. Government programs in which the Company participates as a
contractor or subcontractor may extend for several years; however, such programs
are normally funded on an annual basis. All U.S. Government contracts and
subcontracts may be modified, curtailed or terminated at the convenience of the
government if program requirements or budgetary constraints change. In the event
that a contract is terminated for convenience, the Company would be reimbursed
for its allowable costs through the date of termination and would be paid a
proportionate amount of the stipulated profit or fee attributable to the work
actually performed.
Termination or curtailment of major programs or contracts of the Company,
particularly in research and development, could have a material adverse effect
on the results of the Company's operations. Although such contract and program
terminations have not had a material adverse effect on the Company in the past,
no assurance can be given that curtailments or terminations of U.S. Government
programs or contracts will not have a material adverse effect on the Company in
the future.
The Company's business with the U.S. Government and other customers is
generally performed under cost-reimbursement, time-and-materials, fixed-price
level-of-effort or firm fixed-price contracts. Under cost-reimbursement
contracts, the customers reimburse the Company for its direct costs and
allocable indirect costs, plus a fixed fee or incentive fee. Under
time-and-materials contracts, the Company is paid for labor hours at negotiated
hourly rates and reimbursed for other allowable direct costs at actual costs
plus allocable indirect costs. Under fixed-price level-of-effort contracts, the
customer pays the Company for the actual labor hours provided to the customer,
at negotiated hourly
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rates. Under firm fixed-price contracts, the Company is required to provide
stipulated products, systems or services for a fixed price. Because the Company
assumes the risk of performing a firm fixed-price contract at the stipulated
price, the failure to accurately estimate ultimate costs or to control costs
during performance of the work could result, and in some instances has resulted,
in losses.
During the fiscal years ended January 31, 1994, 1993 and 1992, approximately
65%, 62% and 62%, respectively, of the Technical Services segment contract
revenues were derived from cost-reimbursement type contracts and 12%, 16% and
22%, respectively, of the Technical Services segment contract revenues were from
firm fixed-price type contracts with the balance from time-and-materials and
fixed-price level-of-effort type contracts. In contrast, the majority of the
Company's Products segment contract revenues is derived from firm fixed-price
type contracts.
Contract costs for services or products supplied to the U.S. Government,
including allocated indirect costs, are subject to audit and adjustment by
negotiations between the Company and U.S. Government representatives. Indirect
contract costs have been agreed upon through the fiscal year ended January 31,
1990. Contract revenues for subsequent years have been recorded in amounts which
are expected to be realized upon final settlement.However, no assurance can be
given that audits and adjustments for subsequent years will not result in
decreased revenues or profits for those years.
PATENTS AND PROPRIETARY INFORMATION
Although the Company owns or has made application for patents on certain
products and processes, the nature of the technical services and products
provided by the Company is such that the Company does not presently consider its
competitive position to be dependent upon patent protection. The Company claims
a proprietary interest in certain of its products, software programs,
methodology and know-how. Such proprietary information is protected by
trademarks, tradenames, copyrights, trade secrets, licenses, contracts and other
means.
The U.S. Government has certain rights to data, computer codes and related
material developed by the Company under U.S. Government-funded contracts and
subcontracts. Generally, the U.S. Government may disclose such information to
third parties, including competitors. In the case of subcontracts, the prime
contractor may also have certain rights to the programs and products developed
by the Company under the subcontract.
BACKLOG
The backlog, as defined below, for the Technical Services segment at January
31, 1994 and 1993 amounted to approximately $695,000,000 and $635,000,000,
respectively, and the backlog for the Products segment at those dates amounted
to approximately $109,000,000 and $78,000,000, respectively. The Company expects
that a substantial portion of its backlog at January 31, 1994 will be recognized
as revenues prior to January 31, 1995. Some contracts associated with the
backlog are incrementally funded and may continue for more than one year.
The backlog amounts include only the funded dollar amount of contracts in
process and do not include the dollar amount of projects for which the Company
has been given permission by the customer (i) to begin work but for which a
formal contract has not yet been entered into or (ii) to extend work under an
existing contract prior to the formal amendment or modification of the existing
contract. In these cases, either contract negotiations have not been completed
or a contract or contract amendment has not been executed. When a contract or
contract amendment is executed, the backlog will be increased by the difference
between the dollar value of the contract or contract amendment and the revenue
recognized to date.
Any costs incurred by the Company prior to the execution of a contract or
contract amendment are incurred at the Company's risk, and it is possible that
such costs will not be reimbursed by the customer. Unbilled receivables in this
category which were included in the Technical Services segment
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contract revenues at January 31, 1994 were $16,047,000. Unbilled receivables in
this category which were included in the Products segment contract revenues at
January 31, 1994 were $181,000. Although no assurance can be given that the
contracts or contract amendments will be received or that the related costs will
be recovered, the Company expects to recover substantially all such costs.
EMPLOYEES AND CONSULTANTS
As of March 14, 1994, the Company employed approximately 15,600 persons on a
full-time basis and approximately 900 persons on a part-time basis. The Company
also utilizes the services of consultants to provide specialized technical and
other services on specific projects.
The highly technical and complex services and products provided by the
Company are dependent upon the availability of professional, administrative and
technical personnel having high levels of training and skills. The Company has
not experienced any significant difficulty in recruiting or retaining such
personnel. Management believes the Company's orientation towards employee
ownership is a major factor in the Company's ability to attract and retain
qualified personnel. As of March 14, 1994, approximately 9,000 employees,
consultants and their family members were stockholders of record.
None of the Company's employees are represented by a labor union. To date,
no strikes or work stoppages have been experienced and the Company considers its
relations with its employees to be good.
ITEM 2. PROPERTIES.
As of March 14, 1994, the Company conducted its operations in more than 263
offices and manufacturing and laboratory facilities located in 42 states, the
District of Columbia and various foreign countries, and occupied a total of
approximately 4,300,000 square feet of space. The Company has principal
locations in the San Diego, California and the Washington, D.C. metropolitan
areas and occupies over 1,000,000 square feet of space in each of these
locations.
The Company owns and occupies six buildings totalling approximately 550,000
square feet of space situated on 22.2 acres of land owned by the Company in the
Golden Triangle area of San Diego, California and leases a 128,500 square foot
office building located on that land. The Company also leases approximately
150,000 square feet of space in the Sorrento-Mesa area of San Diego, California.
The Company has options to purchase all of these leased facilities.
At the principal location of the Company in the Washington, D.C. area
(McLean, Virginia), the Company occupies two buildings containing a total of
approximately 425,000 square feet of space. The Company has certain rights to
purchase these buildings. In addition, the Company owns and occupies a 62,000
square foot building on 2.6 acres of land in Reston, Virginia.
The Company occupies a 62,500 square foot building on approximately 13 acres
of land in Virginia Beach, Virginia, owned by the Company and owns and occupies
an 83,000 square foot building on approximately 8.4 acres of land owned by the
Company in Oak Ridge, Tennessee. The Company also leases an office building
containing approximately 100,000 square feet of space in Huntsville, Alabama and
an office building in Orlando, Florida containing approximately 30,000 square
feet of space. The Company has options to purchase these buildings in the
future.
The nature of the Company's business is such that there is no practicable
way to relate occupied space to industry segments. The Company considers its
facilities suitable and adequate for its present needs. See Note J of Notes to
Consolidated Financial Statements of the Company on page F-15 of this Form 10-K
for information regarding commitments under leases.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various investigations, claims and lawsuits
arising in the normal conduct of its business, none of which, in the opinion of
the Company's management, will have a material adverse effect on the Company's
consolidated financial condition or results of operations. On
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February 15, 1994, the Company was served with search warrants and a subpoena
for documents and records associated with the performance by an operating unit
of the Company under three contracts with the DOD. The search warrants and the
subpoena state that the government is seeking evidence regarding the making of
false statements and false claims to the DOD, as well as conspiracy to commit
such offenses. The Company has not been apprised of the details of the
allegations being investigated nor has it been charged with any wrongdoing.
Accordingly, the Company is unable to assess the impact, if any, of this
investigation on its consolidated financial position, results of operations or
its ability to conduct business. For additional information concerning this
investigation, reference is made to the Report on Form 8-K filed by the Company
with the Securities and Exchange Commission on February 18, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal year 1994.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of General Instructions to Form 10-K,
the following list is included as an unnumbered Item in Part I of this Form 10-K
in lieu of being incorporated by reference to the Company's definitive Proxy
Statement used in connection with the solicitation of votes for the Company's
1994 Annual Meeting of Stockholders (the "1994 Proxy Statement").
The following is a list of the names and ages (as of April 9, 1994) of all
Executive Officers of the Company, indicating all positions and offices with the
Company held by each such person and each such person's principal occupation or
employment during at least the past five years. All such persons have been
elected to serve until their successors are elected, or until their earlier
resignation or retirement. Except as otherwise noted, each of the persons listed
below has served in his present capacity for at least the past five years.
<TABLE>
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NAME OF
EXECUTIVE
OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
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A.L. Alm 57 Sector Vice President of the Company since April 1993 and
a Director of the Company since 1989. Mr. Alm served as a
Senior Vice President of the Company from 1989 to April
1993.
J.R. Beyster 69 Chairman of the Board, Chief Executive Officer and a
Director of the Company since the Company was founded and
President of the Company until 1988.
N.E. Carter 51 Sector Vice President since July 1992. Mr. Carter has
held various positions with the Company since 1987,
including serving as a Senior Vice President from June
1988 to July 1992.
V.N. Cook 59 Vice Chairman of the Board since January 1992 and a
Director of the Company since 1990. Mr. Cook was
associated with IBM for 26 years until his retirement in
1989. Mr. Cook held several executive positions at IBM,
including Vice President of IBM's Asia Pacific
Corporation and President of IBM's Federal System
Division. He is also the Chairman of Visions
Incorporated, an industry consulting firm.
S.J. Dalich 50 Executive Vice President of the Company since April 1992
and a Director of the Company since 1990. Dr. Dalich has
held various positions with the Company since 1972,
including serving as a Sector Vice President from 1986 to
April 1992.
M.A. Daniels 48 Sector Vice President of the Company since April 1993.
Mr. Daniels has held various positions with the Company
since 1986, including serving as a Group Senior Vice
President from January 1991 to April 1993.
D.H. Foley 49 Sector Vice President since January 1992. Prior to
joining the Company in November 1991, Dr. Foley served as
a Director of Special Projects for the Defense Advanced
Research Projects Agency since 1985. Dr. Foley was the
Executive Vice President of PAR Technology Corporation
from 1971 to 1985.
J.E. Glancy 48 Corporate Executive Vice President since January 1994 and
a nominee for Director. Dr. Glancy has held various
positions with the Company since 1976, including serving
as a Sector Vice President from April 1991 to January
1994.
J.D. Heipt 51 Senior Vice President for Administration and Secretary of
the Company since 1984. Mr. Heipt has held various
positions with the Company since 1979.
</TABLE>
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<TABLE>
<CAPTION>
NAME OF
EXECUTIVE
OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
- ---------------- --- ---------------------------------------------------------
<S> <C> <C>
A.P. Herskowitz 53 Sector Vice President of the Company since April 1993.
Mr. Herskowitz has held various positions with the
Company since 1979, including serving as a Group Senior
Vice President from June 1987 to April 1993.
M.V. Hughes, III 49 Sector Vice President since January 1991. From 1971 until
he joined the Company in 1990, Mr. Hughes held various
positions, including Senior Vice President and General
Manager, at Planning Research Corporation, a systems
integration and professional services company.
D.W. Hyde 51 Sector Vice President of the Company since April 1993.
Mr. Hyde has held various positions with the Company
since 1985, including serving as a Group Senior Vice
President from April 1988 to April 1993.
D.M. Kerr 55 Corporate Executive Vice President since January 1994 and
a Director of the Company since April 1993. Prior to
joining the Company, Dr. Kerr was President and a
Director of EG&G, Inc., a NYSE-listed company providing
diversified technical services and products to the U.S.
Government and commercial markets, from 1989 through
1992. From 1985 through 1989, Dr. Kerr held various
executive positions with EG&G, Inc.
L.A. Kull 56 President since 1988 and Chief Operating Officer since
1983. He has also served as a Director of the Company
since 1970 (except for the years 1974 and 1975) and has
held various positions with the Company since 1970.
J.J. Martin, Jr. 58 Sector Vice President of the Company since 1990. Dr.
Martin has held various positions with the Company since
1977.
J.W. McRary 54 Vice Chairman of the Board since 1988, Executive Vice
President since 1979 and a Director of the Company since
1972 (except for the year 1973). Dr. McRary has held
various positions with the Company since 1971.
P.N. Pavlics 33 Corporate Vice President and Controller of the Company
since July 1993. Mr. Pavlics has held various positions
with the Company since 1985, including serving as a Vice
President of Administration from June 1989 to July 1992.
S.D. Rockwood 51 Sector Vice President of the Company since 1987. Dr.
Rockwood has held various positions with the Company
since 1986. From 1972 until he joined the Company, Dr.
Rockwood was associated with Los Alamos National
Laboratory, a nuclear weapons design and test laboratory,
where he held various executive positions.
W.A. Roper, Jr. 48 Senior Vice President and Chief Financial Officer of the
Company since 1990. Prior to joining the Company, Mr.
Roper was Executive Vice President and Chief Financial
Officer of Intelogic Trace, Inc., a NYSE-listed computer
sales, leasing and software company. From 1981 to 1987,
Mr. Roper was Corporate Vice President and Treasurer of
Bell & Howell, a NYSE-listed international information
services and manufacturing company.
R.A. Rosenberg 59 Executive Vice President of the Company since July 1992.
Mr. Rosenberg has held various positions with the Company
since 1987. Prior to joining the Company, Mr. Rosenberg
was an officer with the U.S. Air Force from 1957 through
1987.
</TABLE>
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<TABLE>
<CAPTION>
NAME OF
EXECUTIVE
OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
- ---------------- --- ---------------------------------------------------------
<S> <C> <C>
D.E. Scott 37 Corporate Vice President and General Counsel of the
Company since July 1992. Mr. Scott joined the Company in
1987 where he has served as a Corporate Counsel and
Associate General Counsel in the Legal Department. Prior
to joining the Company, Mr. Scott was an attorney with
O'Melveny & Myers, a professional law firm, from 1984
through 1987.
E.A. Straker 56 Sector Vice President of the Company since 1986 and a
Director since July 1992. Dr. Straker has held various
positions with the Company since 1971.
J.P. Walkush 41 Sector Vice President of the Company since January 1994.
Mr. Walkush has held various positions with the Company
since 1976, including serving as a Group Senior Vice
President from January 1992 to January 1994.
J.H. Warner, Jr. 53 Executive Vice President of the Company since 1989 and
Director since 1988. Dr. Warner has held various
positions with the Company since 1973.
</TABLE>
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
THE LIMITED MARKET
Since its inception, the Company has followed a policy of remaining
essentially employee owned. As a result, there has never been a general public
market for any of the Company's securities. In order to provide liquidity for
its stockholders, however, the Company has maintained a limited secondary market
(the "Limited Market") through its wholly-owned subsidiary, Bull, Inc., which
was organized in 1973 for the purpose of maintaining the Limited Market.
The Limited Market generally permits existing stockholders to sell shares of
Class A Common Stock on four predetermined days each year (each a "Trade Date").
All shares of Class B Common Stock to be sold in the Limited Market must first
be converted into five times as many shares of Class A Common Stock. All sales
are made at the prevailing Formula Price to employees, consultants and directors
of the Company who have been approved by the Board of Directors or the Operating
Committee as being entitled to purchase up to a specified number of shares of
Class A Common Stock. In addition, the trustees of the Company's Profit Sharing
Retirement Plan II, Employee Stock Ownership Plan, Cash or Deferred Arrangement,
1993 Employee Stock Purchase Plan, Stock Compensation Plan, Management Stock
Compensation Plan and certain retirement plans of the Company's subsidiaries may
also purchase shares of Class A Common Stock for their respective trusts in the
Limited Market. All sellers in the Limited Market (other than the Company) pay
Bull, Inc. a commission equal to two percent of the proceeds from such sales. No
commission is paid by purchasers in the Limited Market.
In the event that the aggregate number of shares offered for sale is greater
than the aggregate number of shares sought to be purchased by authorized buyers
and the Company, offers to sell 500 shares or less of Class A Common Stock or up
to the first 500 shares if more than 500 shares of Class A Common Stock are
offered by any seller will be accepted first. Offers to sell shares in excess of
500 shares of Class A Common Stock will be accepted on a pro-rata basis
determined by dividing the total number of shares remaining under purchase
orders by the total number of shares remaining under sell orders. If, however,
there are insufficient purchase orders to support the primary allocation of 500
shares of Class A Common Stock for each proposed seller, then the purchase
orders will be allocated equally among all of the proposed sellers up to the
total number of shares offered for sale. To the extent that the aggregate number
of shares sought to be purchased exceeds the aggregate number of shares offered
for sale, the Company may, but is not obligated to, sell authorized but unissued
shares of Class A Common Stock in the Limited Market.
The Company is currently authorized, but not obligated, to purchase up to
1,250,000 shares of Class A Common Stock in the Limited Market on any Trade
Date, but only if and to the extent that the number of shares offered for sale
by stockholders exceeds the number of shares sought to be purchased by
authorized buyers and the Company, in its discretion, determines to make such
purchases. The Company did not purchase shares in the Limited Market in fiscal
year 1994. In fiscal year 1993, the Company purchased 54,559 shares in the
Limited Market. The Company's purchases in fiscal year 1993 accounted for 2% of
the total shares purchased by all buyers in the Limited Market during that year.
During the 1994 and 1993 fiscal years, the trustees of the Company's Profit
Sharing Retirement Plan II, Employee Stock Ownership Plan, CODA and 1993
Employee Stock Purchase Plan purchased an aggregate of 1,824,077 shares and
1,808,961 shares, respectively, in the Limited Market. These purchases accounted
for approximately 81% and 79% of the total shares purchased by all buyers in the
Limited Market during fiscal years 1994 and 1993, respectively. Such purchases
may change in the future, depending on the levels of participation in and
contributions to such plans and the extent to which such contributions are
invested in Class A Common Stock. To the extent that purchases by the
12
<PAGE>
trustees of the Company's employee benefit plans decrease and purchases by the
Company do not increase, the ability of stockholders to resell their shares in
the Limited Market will likely be adversely affected.
The Company received a no-action letter from the SEC (the "SEC Letter") that
authorizes the Company and the Employee Stock Ownership Plan to commence on an
annual basis, at the Company's discretion, a joint tender offer (a "Tender
Offer") to purchase all shares of the Company's Class A Common Stock held by
persons who are not directors, employees or consultants of the Company (or
family members of, or trustees for, such employees, directors or consultants of
the Company) as of the date the Tender Offer is commenced (the "Outside
Stockholders"). Under current federal income tax laws, the Tender Offer, as
structured, would allow Outside Stockholders who tender certain shares purchased
by the Employee Stock Ownership Plan to defer the payment of federal income tax
under Section 1042 of the Code on any capital gain derived from the sale,
provided certain conditions are met.
The Company and the Employee Stock Ownership Plan have completed one Tender
Offer pursuant to which the Employee Stock Ownership Plan purchased on November
20, 1992 an aggregate of 700,444 shares of Class A Common Stock from 186 Outside
Stockholders. The Company has not yet determined whether it will commence a
Tender Offer during calendar year 1994. There can be no assurance that a Tender
Offer will be commenced in the future or, if commenced, that it will be
completed. If a Tender Offer is undertaken in the future, the Company will be
required to take certain actions to ensure that such Tender Offer does not
negatively affect the liquidity of the Limited Market on the Trade Date on which
such Tender Offer is completed.
PRICE RANGE OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The Formula set forth below is used to determine the Formula Price at which
the Class A Common Stock trades in the Limited Market. The Formula Price is
reviewed at least four times each year, generally in conjunction with Board of
Directors meetings which are currently scheduled for April, July, October and
January, and is subject to the limitation that the price may not be less than
90% of the net book value per share of the Class A Common Stock at the end of
the quarter immediately preceding the date on which the price revision is to
occur. Pursuant to the Certificate of Incorporation, the price applicable to
shares of Class B Common Stock is equal to five times the Formula Price.
The Formula Price is determined according to the following formula: the
price per share is equal to the sum of (i) a fraction, the numerator of which is
the stockholders' equity of the Company at the end of the fiscal quarter
immediately preceding the date on which a price revision is to occur ("E") and
the denominator of which is the number of outstanding common shares and common
share equivalents at the end of such fiscal quarter ("W(1)") and (ii) a
fraction, the numerator of which is 5.66 multiplied by the market factor ("M" or
"Market Factor"), multiplied by the earnings of the Company for the four fiscal
quarters immediately preceding the price revision ("P"), and the denominator of
which is the weighted average number of outstanding common shares and common
share equivalents for those four fiscal quarters, as used by the Company in
computing primary earnings per share ("W"). The number of outstanding common
shares and common share equivalents described above assumes the conversion of
each share of Class B Common Stock into five shares of Class A Common Stock. The
5.66 multiplier is a constant which was first included in the Formula in March
1976. The Market Factor is a numerical factor which is intended to reflect
existing securities market conditions relevant to the valuation of the Class A
Common Stock and the Class B Common Stock. The Market Factor is generally
reviewed quarterly by the Board of Directors in conjunction with an appraisal
which is prepared by an independent appraisal firm for the committee
administering the Company's
13
<PAGE>
qualified retirement plans (the "Committee") and which is relied upon by the
Committee and the Board of Directors. Subject to the limitation set forth above,
the Formula Price of the Class A Common Stock, expressed as an equation, is as
follows:
<TABLE>
<S> <C> <C>
E 5.66MP
Formula Price = -- + ------
W1 W
</TABLE>
The Formula was adopted in its present form by the Board of Directors on
March 23, 1984 and became effective with the March 30, 1984 price revision. The
Board of Directors has reviewed the Market Factor on a quarterly basis since
that time. The Market Factor, as determined by the Board of Directors, remains
in effect until subsequently changed by the Board of Directors.
The following table sets forth information concerning the Formula Price for
the Class A Common Stock, the applicable price for the Class B Common Stock and
the Market Factor in effect for the periods beginning on the dates indicated.
There can be no assurance that the Class A Common Stock or the Class B Common
Stock will in the future provide returns comparable to historical rates.
<TABLE>
<CAPTION>
PRICE PRICE
PER SHARE PER SHARE
MARKET OF CLASS A OF CLASS B
DATE FACTOR COMMON STOCK COMMON STOCK
- -------------------------------------------- ------ ------------ ------------
<S> <C> <C> <C>
April 10, 1992.............................. 1.4 $11.17 $55.85
July 10, 1992............................... 1.4 $11.66 $58.30
October 9, 1992............................. 1.4 $11.83 $59.15
January 8, 1993............................. 1.4 $12.01 $60.05
April 9, 1993............................... 1.4 $12.63 $63.15
July 9, 1993................................ 1.4 $12.85 $64.25
October 8, 1993............................. 1.4 $13.12 $65.60
January 14, 1994............................ 1.5 $14.19 $70.95
April 9, 1994............................... 1.5 $14.46 $72.30
</TABLE>
The Board of Directors believes that the Formula results in a fair market
value for the Class A Common Stock within a broad range of financial criteria.
Other than the quarterly review and possible modification of the Market Factor,
the Board of Directors will not change the Formula unless (i) in the good faith
exercise of its fiduciary duties and after consultation with the Company's
independent accountants as to whether the change would result in a charge to
earnings upon the sale of Class A Common Stock or Class B Common Stock, the
Board of Directors, including a majority of the directors who are not employees
of the Company, determines that the Formula no longer results in a fair market
value for the Class A Common Stock or (ii) a change in the Formula or the method
of valuing the Class A Common Stock is required under applicable laws.
HOLDERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
As of March 14, 1994, there were 10,038 holders of record of Class A Common
Stock and 135 holders of record of Class B Common Stock. As of such date,
approximately 92% of the Class A Common Stock and approximately 37% of the Class
B Common Stock were beneficially owned by employees and consultants of the
Company and their respective family members.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and no cash dividends on the Class A Common Stock or Class B Common Stock
are contemplated in the foreseeable future. The Company's present intention is
to retain any future earnings for use in its business.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain selected financial data of the
Company for each of the five years in the period ended January 31, 1994 and at
January 31 of each such year. This table should be read in conjunction with the
consolidated financial statements of the Company and the related notes thereto
appearing elsewhere in this Form 10-K Report.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C>
Revenues............ $1,670,882 $1,504,112 $1,285,294 $1,162,934 $1,022,221
Cost of revenues.... 1,477,701 1,327,992 1,124,756 1,016,250 891,082
Selling, general and
administrative
expenses........... 120,387 113,174 101,935 90,722 81,805
Interest expense.... 2,966 2,841 2,964 1,999 1,327
Provision for income
taxes.............. 28,328 22,030 22,023 20,662 17,230
Net income.......... 41,500 38,075 33,616 33,301 30,777
Earnings per share
(1)................ $.89 $.83 $.75 $.73 $.67
Average number of
shares outstanding,
including common
stock
equivalents........ 47,429 46,179 44,825 45,921 45,976
<CAPTION>
JANUARY 31 (2)
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets........ $ 611,575 $ 523,613 $ 437,975 $ 372,788 $ 345,354
Working capital..... 206,580 162,298 131,177 115,122 115,899
Long-term
liabilities........ 25,060 25,851 27,036 26,079 12,550
Stockholders'
equity............. 335,502 280,047 234,874 205,751 188,395
<FN>
- ------------------------
(1) Fully diluted earnings per share are substantially the same as primary
earnings per share for the years presented. The Company has never declared
or paid cash dividends on its capital stock and no cash dividends are
presently contemplated.
(2) Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
Company applied the principles of the statement retroactively through
restatement of prior financial statements which decreased stockholders'
equity as of February 1, 1989 by $109,000 and increased stockholders'
equity as of February 1, 1991 by $1,035,000 in the aggregate. The
restatement had an immaterial effect on net income for the fiscal years
ended January 31, 1992 and 1993.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
RESULTS OF OPERATIONS
Revenues increased 11%, 17% and 11% in 1994, 1993 and 1992, respectively,
over the prior year. Revenues in 1994 continued to shift toward lower cost
service type contracts. This trend reflects the increasingly competitive
business environment in the Company's traditional business areas, as well as the
Company's increased success in the engineering and field services market, which
typically involve lower cost contracts.
The sale of Technical Services and Products to the U.S. Government as a
prime contractor or subcontractor accounted for 88% of revenues in 1994, 1993
and 1992. The revenue mix between the Technical Services segment and the
Products segment shifted to 92% and 8% of consolidated revenues in 1994 and 1993
from 93% and 7% in 1992, respectively. Product revenues increased 21%, 28% and
32% in 1994, 1993 and 1992, respectively, over the prior year. Within the
Technical Services segment,
15
<PAGE>
revenues are further classified between "National Security," "Environment,"
"Energy" and "Other Technical Services." Other Technical Services includes the
health, space, transportation and commercial information technology business
areas.
National Security revenues have decreased to 50% of total revenues in 1994
from 53% in 1992. Although National Security revenues declined as a percentage
of total revenues, these revenues increased 9% in 1994, 13% in 1993 and 9% in
1992 over the prior year, in spite of declines in the overall defense market
during these periods. The U.S. Government maintained funding in areas in which
the Company has strong capabilities, such as research and development, training
and test and evaluation. Revenues in the Environment business area have remained
relatively constant at 15% of total revenues for 1994 and 1993, a slight
increase from 14% in 1992. In contrast, Energy revenues have decreased as a
percentage of revenues to 9% in 1994 from 10% in 1993 and 13% in 1992. Other
Technical Services revenues have increased to 17% of total revenues in 1994 from
16% in 1993 and 13% in 1992. The growth in Other Technical Services reflects the
Company's expansion into the health, transportation and commercial markets. The
continued growth in the Environment and Other Technical Services revenues
mirrors the country's shift of priorities and resources from defense programs to
environmental, health care and transportation concerns. The Company expects that
the U.S. Government will continue to reduce overall defense spending as a result
of changing priorities and budget constraints. In order for the Company to
maintain or exceed historical revenue growth rates, it will need to continue to
increase its market share in the National Security business area or continue to
diversify into the environment, energy, health, space, transportation and
commercial information technology business areas.
Revenues are generated from the efforts of the Company's technical staff as
well as the pass through of costs for materials and subcontract efforts, which
primarily occur on large, multi-year contracts. At the end of 1994, the Company
had 15,400 full-time employees compared to 14,200 and 13,100 at the end of 1993
and 1992, respectively. Material and subcontract ("M&S") revenues were $458
million in 1994, $402 million in 1993 and $313 million in 1992. As a percentage
of total revenues, M&S revenues were 27% in 1994 and 1993 and 24% in 1992 and
have increased primarily due to the growth of product revenues as discussed
above. Product revenues generally have a very high percentage of M&S cost
content.
The Company's business is directly related to the receipt of contract awards
and contract performance. Approximately 77% of the Company's revenues in 1994
were derived from 294 contracts with individual revenues greater than $1
million. Of these contracts, 20 contracts had individual revenues greater than
$10 million. The remainder of the Company's revenues are produced from a large
number of contracts with individual revenues less than $1 million. Although the
Company has committed substantial resources and personnel required to pursue
larger contracts, the Company believes it maintains a suitable environment for
the performance of smaller, highly technical, research and study contracts.
These smaller programs often provide the foundation for the Company's success on
larger procurements.
The following table summarizes revenues by contract type for the last three
years:
<TABLE>
<CAPTION>
Year ended January 31
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Contract type:
Cost-reimbursement............................................... 60% 59% 58%
Time-and-materials and fixed-price level-of-effort............... 21 20 16
Firm fixed-price................................................. 19 21 26
--------- --------- ---------
Total.............................................................. 100% 100% 100%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Cost-reimbursement contracts provide for the reimbursement of direct costs
and allowable indirect costs, plus a fee or profit component. Time-and-materials
("T&M") contracts typically provide for
16
<PAGE>
the payment of negotiated hourly rates for labor hours incurred plus
reimbursement of other allowable direct costs at actual cost plus allocable
indirect costs. Fixed-price level-of-effort ("FP-LOE") contracts are similar to
T&M contracts since ultimate revenues are based upon the labor hours provided to
the customer. Firm fixed-price contracts require the Company to provide
stipulated products, systems or services for a fixed price. The Company assumes
greater performance risk on firm fixed-price type contracts and the failure to
accurately estimate ultimate costs or to control costs during performance of the
work may result in reduced profits or losses. The Company incurred overruns
during the performance of certain firm fixed-price contracts in 1994, 1993 and
1992, resulting in losses or lower profits for such contracts.
The Company's principal customer, the U.S. Government, continues to shift
the procurement of product and system development contracts to
cost-reimbursement, T&M or FP-LOE contracts instead of firm fixed-price
contracts. This, along with more selective bidding of firm fixed-price
opportunities, resulted in the decrease of the percentage of the Company's
revenues attributable to the higher risk, firm fixed-price contracts.
The cost of revenues as a percentage of revenues (excluding interest income)
was 88.5% in 1994, 88.3% in 1993 and 87.5% in 1992. The higher percentage of
cost of revenues in 1994 and 1993 compared to 1992 is primarily attributable to
two factors: faster revenue growth in the lower cost service type contracts,
which typically have higher cost of revenues, and lower selling, general and
administrative components compared to the Company's more traditional research
and development contracts; and faster growth in M&S revenues which have nearly
all their associated costs in the cost of revenues category.
Selling, general and administrative ("SG&A") expenses as a percentage of
revenues (excluding interest income) were 7.2%, 7.5% and 7.9% in 1994, 1993 and
1992, respectively. SG&A is comprised of general and administrative ("G&A"), bid
and proposal ("B&P") and independent research and development ("IR&D") expenses.
B&P costs remained constant in relation to revenues over the past three years.
During this period, IR&D costs decreased in absolute dollars and as a percentage
of revenues, as development activity on new hardware and software systems
reached a cyclical low point. The overall level of IR&D spending fluctuates
depending on the stage of development for various hardware and software systems.
G&A expenses decreased slightly as a percentage of revenues over the past three
years. The relative decrease was primarily related to the growth in M&S revenues
and low cost service type contracts. The Company continues to closely monitor
G&A expenses as part of an on-going program to control indirect costs.
Operating profit margins by segment are strongly correlated to the Company's
financial performance on the contracts within each segment. The operating profit
margin in the Technical Services segment decreased to 3.8% in 1994 from 4.1% in
1993 and 4.4% in 1992 primarily as a result of a decrease in National Security
operating profit margin to 3.1% in 1994 from 4.3% in 1993 and 3.3% in 1992. In
1994, the Company experienced overruns on certain firm fixed-price contracts in
the National Security area. The operating profit margin in Other Technical
Services was 5.4% in 1994, 3.2% in 1993 and 6.5% in 1992. The increase in profit
margins from 1993 was a result of a decrease in the level of overruns incurred
on certain firm fixed-price contracts. Environment and Energy operating profit
margins remained relatively constant at 4.0% and 4.6%, respectively, for 1994.
The operating profit margin in the Products segment increased to 9.3% in 1994
from 5.2% in 1993 and 6.5% in 1992. The 1994 increase in profit margin is
attributable to higher margins on existing product lines. In general, operating
profit margins in 1994, 1993 and 1992 are lower than historical margins due to
increased competition and overruns on certain firm fixed-price contracts.
Interest expense in 1994, 1993 and 1992 relates to interest on a building
mortgage, deferred compensation, long-term notes payable and borrowings
outstanding under the Company's credit/term loan agreements. Although interest
expense on borrowings under the Company's credit/term loan agreements decreased
from 1993, overall interest expense increased primarily due to interest accrued
on the deferred compensation plans.
17
<PAGE>
The provision for income taxes increased as a percentage of income before
income taxes to 40.6% in 1994 from 36.7% in 1993 and 39.6% in 1992. The increase
in the effective rate for 1994 is primarily attributable to the increase in the
federal statutory rate as a result of the Ominibus Budget Reconciliation Act of
1993 as well as a lower level of downward revisions of prior year tax estimates
caused by ongoing resolutions of certain issues relating to prior year federal
and state income tax returns.
As described in Note A of the Notes to Consolidated Financial Statements,
effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No.
109 requires the use of the liability method for computing deferred income
taxes. One of the principal differences from the deferred method used in the
financial statements is that changes in tax rates and laws will be reflected in
income in the period such changes are enacted. Under the deferred method, such
changes are reflected over time, if at all. The Company has applied the
principles of the statement retroactively through restatement of prior financial
statements which decreased stockholders' equity by $109,000 as of February 1,
1989 and increased stockholders' equity as of February 1, 1991 by $1,035,000.
The restatement had an immaterial effect on net income for the years ended
January 31, 1992 and 1993.
The Company is involved in various investigations, claims and lawsuits
arising in the normal conduct of its business, none of which, the Company
anticipates will have a material adverse effect on its consolidated financial
position, results of operations or its ability to conduct business. On February
15, 1994, the Company was served with search warrants and a subpoena for
documents and records associated with the performance by an operating unit of
the Company under three contracts with the Department of Defense. The search
warrants and subpoena state that the Government is seeking evidence regarding
the making of false statements and false claims to the DOD, as well as
conspiracy to commit such offenses. The Company has not been apprised of the
details of the allegations being investigated nor has it been charged with any
wrongdoing. Accordingly, the Company is unable to assess the impact, if any, of
this investigation on its consolidated financial position, results of operations
or its ability to conduct business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity continue to be funds provided by
operations and revolving credit/term loan agreements. At January 31, 1994 and
January 31, 1993, there were no borrowings outstanding under such agreements
while $17,200,000 was outstanding at January 31, 1992. Capital expenditures,
excluding land and buildings, were $21 million in 1994, $20 million in 1993 and
$26 million in 1992. Expenditures for land and buildings in 1994, 1993, and 1992
were $9 million, $2 million and $9 million, respectively. Capital expenditures
for 1995, including land and buildings, are expected to be approximately $38
million. Expenditures for rental of facilities and equipment were $57 million in
1994 and are expected to be approximately $60 million in 1995.
The Company continues to actively monitor receivables with emphasis placed
on collection activities and the negotiation of more favorable payment terms.
Although receivables increased to $357 million at January 31, 1994 from $341
million at January 31, 1993, average receivable days outstanding decreased by
two days in 1994 from 66 to 64 days. The decrease in average receivable days was
a major factor in the increased average cash balances available for investing
during the year. In addition, the Company was able to reduce average borrowings
from $6,724,000 in 1993 to $541,000 in 1994.
The Company's cash flows from operations plus borrowing capacity are
expected to provide sufficient funds for the Company's operations, business
acquisitions, common stock repurchases and planned capital expenditures.
EFFECTS OF INFLATION
The majority of the Company's contracts are cost-reimbursement type
contracts or are completed within one year. As a result, the Company has been
able to anticipate increases in costs when pricing its contracts. Bids for
longer term fixed-price and T&M type contracts typically include labor and other
cost escalations in amounts expected to be sufficient to cover cost increases
over the period of
18
<PAGE>
performance. Consequently, while costs and revenues include an inflationary
increase commensurate with the general economy, net income, as a percentage of
revenues, has not been significantly impacted by inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Consolidated Financial Statements of the Company attached hereto and
listed on the Index to Consolidated Financial Statements set forth on page F-1
of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the fiscal years ended January 31, 1994 and 1993, the Company did not
have a change in accountants or a disagreement with accountants required to be
reported hereunder.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information with respect to the executive officers of the Company, see
"Executive Officers of the Registrant" at the end of Part I of this Form 10-K.
For information with respect to the Directors of the Company, see "Election of
Directors" appearing in the 1994 Proxy Statement, which information is
incorporated by reference into this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
For information with respect to executive compensation, see the information
set forth under the caption "Executive Compensation" in the 1994 Proxy
Statement, which information (except for the information under the sub-captions
"Compensation Committee Report on Executive Compensation" and "Stockholder
Return Performance Presentation") is incorporated by reference into this Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
For information with respect to the security ownership of certain beneficial
owners and management, see the information set forth under the caption
"Beneficial Ownership of the Company's Securities" in the 1994 Proxy Statement,
which information is incorporated by reference into this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information with respect to the interests of the Company's management
and others in certain transactions, see the information set forth under the
captions "Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" in the 1994 Proxy Statement, which information is
incorporated by reference into this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The Consolidated Financial Statements of the Company are attached
hereto and listed on the Index to Consolidated Financial Statements set
forth on page F-1 of this Form 10-K.
2. Financial Statement Schedules
Schedule V -- Property, Plant and Equipment
Schedule VI -- Accumulated Depreciation and Amortization of Property,
Plant and Equipment
All other schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial
statements or the notes thereto.
19
<PAGE>
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
3(a) Restated Certificate of Incorporation of the Registrant, as amended
July 19, 1990. Incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 31, 1991 (the "1991 10-K").
3(b) Bylaws of the Registrant, as amended through April 10, 1992.
Incorporated by reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K for fiscal year ended January 31, 1992 (the "1992
10-K").
4(a)* Form of Non-Qualified Stock Option Agreement -- 1992 Stock Option Plan
of the Registrant (form dated August 1992). Incorporated by reference
to Exhibit 4(c) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993 (the "1993 10-K").
4(b)* Form of Stock Restriction Agreement of the Registrant's Employee Stock
Ownership Plan (form dated March 1, 1985). Incorporated by reference
to Exhibit 4(e) to Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1985 (the "1985 10-K").
4(c)* Form of Stock Restriction Agreement of the Registrant's Bonus
Compensation Plan (form dated October 1990). Incorporated by reference
to Exhibit 4(f) to the 1991 10-K.
4(d)* Form of Stock Restriction Agreement of the Registrant's Cash or
Deferred Arrangement (TRASOP Account) (form dated March 1, 1985).
Incorporated by reference to Exhibit 4(g) to the 1985 10-K.
4(e)* Registrant's Bonus Compensation Plan, as amended through April 2,
1991. Incorporated by reference to Exhibit 4(l) to the 1991 10-K.
4(f)* Registrant's 1982 Stock Option Plan, as amended through June 9, 1989.
Incorporated by reference to Exhibit 4(n) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1990 (the
"1990 10-K").
4(g)* Registrant's 1992 Stock Option Plan. Incorporated by reference to
Exhibit 4(o) to the 1992 10-K.
4(h)* Form of Non-Qualified Stock Option Agreement (Employee, Director and
Consultant) - 1982 Stock Option Plan (form dated October 1990).
Incorporated by reference to Exhibit 4(p) to the 1991 10-K.
4(i)* Form of Stock Restriction Agreement of the Registrant's Employee Stock
Ownership Plan (TRASOP Account) (form dated April 1, 1991).
Incorporated by reference to Exhibit 4(r) to the 1991 10-K.
4(j)* Registrant's 1993 Employee Stock Purchase Plan. Incorporated by
reference to Annex I to the Registrant's Proxy Statement for the 1993
Annual Meeting of Stockholders as filed April 1993 with the SEC.
4(k)* Form of Stock Restriction Agreement of the Registrant's Bonus
Compensation Plan (form dated July 1992). Incorporated by reference to
Exhibit 4(v) to the 1993 10-K.
4(l)* Registrant's Stock Compensation Plan.
4(m)* Registrant's Management Stock Compensation Plan.
10(a)* Registrant's Keystaff Deferral Plan, as amended through January 31,
1991. Incorporated by reference to Exhibit 10(a) to the 1991 10-K.
10(b) Sixth Amendment dated as of August 10, 1993 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
10(c) Fifth Amendment dated as of August 4, 1992 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1993 10-K.
10(d) Fourth Amendment dated as of June 30, 1992 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(c) to the 1993 10-K.
10(e) Third Amendment dated as of July 1, 1991 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1992 10-K.
10(f) Second Amendment dated as of August 31, 1990 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1991 10-K.
10(g) First Amendment dated as of June 24, 1989, to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1990 10-K.
10(h) Credit Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1989 (the
"1989 10-K").
10(i) Sixth Amendment dated as of July 22, 1993 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988.
10(j) Fifth Amendment dated as of August 10, 1992 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988. Incorporated by
reference to Exhibit 10(h) to the 1993 10-K.
10(k) Fourth Amendment dated as of June 26, 1992 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988. Incorporated by
reference to Exhibit 10(i) to the 1993 10-K.
10(l) Third Amendment dated as of June 14, 1991 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(f) to the 1992 10-K.
10(m) Second Amendment dated as of June 14, 1990 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(c) to the 1991 10-K.
10(n) First Amendment dated as of June 15, 1989 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(c) to the 1990 10-K.
10(o) Credit Agreement with Security Pacific National Bank dated as of
October 31, 1988. Incorporated by reference to Exhibit 10(c) to the
1989 10-K.
10(p) Second Amendment dated as of July 30, 1993 and November 3, 1993 to
Registrant's Credit Agreement with Continental Bank, N.A. dated as of
May 26, 1992.
10(q) First Amendment dated as of June 18, 1992 to Registrant's Credit
Agreement with Continental Bank, N.A. dated as of May 26, 1992.
Incorporated by reference to Exhibit 10(n) to the 1993 10-K.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
10(r) Credit Agreement with Continental Bank dated as of May 26, 1992.
Incorporated by reference to Exhibit 10(o) to the 1993 10-K.
10(s) First Amendment dated as of July 22, 1993 to Registrant's Employee
Stock Purchase Loan Agreement with Bank of America NT&SA dated as of
November 10, 1992.
10(t) Registrant's Employee Stock Purchase Loan Agreement with Bank of
America NT&SA dated November 10, 1992.
10(u) Registrant's Overdraft Facility with Bank of America dated July 26,
1990, as amended through November 25, 1991. Incorporated by reference
to Exhibit 10(o) to the 1992 10-K.
11 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
28(a) Annual Report of the Registrant's Employee Stock Pur-chase Plan for
the plan year ended January 31, 1994.
28(b) Annual Report of the Registrant's Cash or Deferred Arrangement for the
year ended December 31, 1993.
<FN>
- ------------------------
* Executive Compensation Plans and Arrangements.
</TABLE>
(b) Reports on Form 8-K in the fourth quarter of the fiscal year ended
January 31, 1994: NONE.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant)
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By: /s/ J.R. BEYSTER
-----------------------------------
J.R. Beyster
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Date: April 9, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ J.R. BEYSTER
Chairman of the Board and
- ----------------------------------- Principal Executive April 9, 1994
J.R. Beyster Officer
/s/ W.A. ROPER, JR.
Principal Financial
- ----------------------------------- Officer April 9, 1994
W.A. Roper, Jr.
/s/ P.N. PAVLICS
Principal Accounting
- ----------------------------------- Officer April 9, 1994
P.N. Pavlics
/s/ A.L. ALM
- ----------------------------------- Director April 9, 1994
A.L. Alm
- -----------------------------------
V.N. Cook Director April , 1994
/s/ S.J. DALICH
- ----------------------------------- Director April 9, 1994
S.J. Dalich
/s/ C.K. DAVIS
- ----------------------------------- Director April 9, 1994
C.K. Davis
/s/ W.H. DEMISCH
- ----------------------------------- Director April 9, 1994
W.H. Demisch
- -----------------------------------
E.A. Frieman Director April , 1994
/s/ D.A. HICKS
- ----------------------------------- Director April 9, 1994
D.A. Hicks
23
<PAGE>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ B.R. INMAN
- ----------------------------------- Director April 9, 1994
B.R. Inman
/s/ D.M. KERR
- ----------------------------------- Director April 9, 1994
D.M. Kerr
/s/ L.A. KULL
- ----------------------------------- Director April 9, 1994
L.A. Kull
/s/ M.R. LAIRD
- ----------------------------------- Director April 9, 1994
M.R. Laird
/s/ W.M. LAYSON
- ----------------------------------- Director April 9, 1994
W.M. Layson
/s/ C.B. MALONE
- ----------------------------------- Director April 9, 1994
C.B. Malone
/s/ J.W. MCRARY
- ----------------------------------- Director April 9, 1994
J.W. McRary
/s/ B.J. SHILLITO
- ----------------------------------- Director April 9, 1994
B.J. Shillito
/s/ E.A. STRAKER
- ----------------------------------- Director April 9, 1994
E.A. Straker
/s/ M.R. THURMAN
- ----------------------------------- Director April 9, 1994
M.R. Thurman
/s/ J.H. WARNER, JR.
- ----------------------------------- Director April 9, 1994
J.H. Warner, Jr.
/s/ J.A. WELCH
- ----------------------------------- Director April 9, 1994
J.A. Welch
/s/ J.B. WIESLER
- ----------------------------------- Director April 9, 1994
J.B. Wiesler
/s/ W.E. ZISCH
- ----------------------------------- Director April 9, 1994
W.E. Zisch
24
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS..................................... F-2
FINANCIAL STATEMENTS
Consolidated Statement of Income for the three years ended January 31,
1994................................................................. F-3
Consolidated Balance Sheet at January 31, 1994 and 1993............... F-4
Consolidated Statement of Stockholders' Equity for the three years
ended January 31, 1994............................................... F-5
Consolidated Statement of Cash Flows for the three years ended January
31, 1994............................................................. F-6
Notes to Consolidated Financial Statements............................ F-7
FINANCIAL STATEMENT SCHEDULES
Schedule V -- Property, Plant and Equipment........................... F-17
Schedule VI -- Accumulated Depreciation and Amortization of Property,
Plant and Equipment.................................... F-18
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Science Applications International Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Science Applications International Corporation and its subsidiaries
at January 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended January 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
San Diego, California
April 7, 1994
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues........................... $1,670,882 $1,504,112 $1,285,294
Costs and expenses:
Cost of revenues................. 1,477,701 1,327,992 1,124,756
Selling, general and
administrative expenses......... 120,387 113,174 101,935
Interest expense................. 2,966 2,841 2,964
---------- ---------- ----------
1,601,054 1,444,007 1,229,655
---------- ---------- ----------
Income before income taxes......... 69,828 60,105 55,639
Provision for income taxes......... 28,328 22,030 22,023
---------- ---------- ----------
Net income......................... $ 41,500 $ 38,075 $ 33,616
---------- ---------- ----------
---------- ---------- ----------
Earnings per share................. $ .89 $ .83 $ .75
---------- ---------- ----------
---------- ---------- ----------
Average number of shares
outstanding, including common
stock equivalents................ 47,429 46,179 44,825
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JANUARY 31
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 53,556 $ 15,989
Receivables............................................... 356,836 341,109
Inventories............................................... 14,764 14,136
Prepaid expenses.......................................... 10,354 8,779
Deferred income taxes..................................... 22,083 12,499
-------- --------
Total current assets.................................... 457,593 392,512
Property and equipment...................................... 50,581 49,771
Land and buildings.......................................... 69,161 61,486
Other assets................................................ 34,240 19,844
-------- --------
$611,575 $523,613
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $133,433 $116,620
Accrued payroll and employee benefits..................... 106,548 87,318
Income taxes payable...................................... 9,889 13,643
Notes payable and current portion of long-term
liabilities.............................................. 1,143 134
-------- --------
Total current liabilities............................... 251,013 217,715
Long-term liabilities....................................... 25,060 25,851
Stockholders' equity, per accompanying statement:
Class A common stock, $.01 par value...................... 443 427
Class B common stock, $.05 par value...................... 19 19
Additional paid-in capital................................ 172,713 136,613
Retained earnings......................................... 162,327 142,988
-------- --------
Total stockholders' equity.............................. 335,502 280,047
Commitments and contingencies (Note J)......................
-------- --------
$611,575 $523,613
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------
CLASS A CLASS B
----------------- ---------------
100,000,000 5,000,000
SHARES SHARES
AUTHORIZED AUTHORIZED ADDITIONAL
----------------- --------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
-------- ------ ------ ------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31,
1991................... 41,229 $412 448 $22 $ 93,203 $ 111,655
Restatement for change
in accounting
principle (Note A)... 1,963 (928)
Issuances of common
stock................ 2,602 26 19,948
Repurchases of common
stock................ (2,330) (23) (36) (1) (5,668) (19,830)
Income tax benefit
from employee stock
transactions......... 792
Net income............ 33,616
-------- ------ ------ ------ --------- ---------
Balance at January 31,
1992................... 41,501 415 412 21 110,238 124,513
Issuances of common
stock................ 3,311 33 29,962
Repurchases of common
stock................ (2,093) (21) (40) (2) (6,055) (19,600)
Income tax benefit
from employee stock
transactions......... 2,468
Net income............ 38,075
-------- ------ ------ ------ --------- ---------
Balance at January 31,
1993................... 42,719 427 372 19 136,613 142,988
Issuances of common
stock................ 3,922 39 40,196
Repurchases of common
stock................ (2,326) (23) (8) (7,873) (22,161)
Income tax benefit
from employee stock
transactions......... 3,777
Net income............ 41,500
-------- ------ ------ ------ --------- ---------
Balance at January 31,
1994................... 44,315 $443 364 $19 $ 172,713 $ 162,327
-------- ------ ------ ------ --------- ---------
-------- ------ ------ ------ --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 41,500 $ 38,075 $ 33,616
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 23,127 21,815 19,280
Non-cash compensation......................... 8,831 7,830 8,842
Gain on sales of certain business assets...... (396) (22) (1,129)
Loss on disposal of property and equipment.... 1,102 1,419 471
Loss on disposal of land and building......... 253
Increase (decrease) in cash resulting from
changes in:
Receivables................................. (14,224) (39,395) (15,317)
Inventories................................. 548 (403) 2,978
Prepaid expenses............................ (769) 2,154 (1,654)
Deferred income taxes....................... (9,584) (6,436) (6,063)
Other assets................................ (848) (1,924) 8,238
Progress payments........................... (2,243) (16,951) (36,155)
Accounts payable and accrued liabilities.... 16,813 35,284 16,414
Accrued payroll and employee benefits....... 19,215 17,293 4,288
Income taxes payable........................ 23 9,017 (1,223)
-------- -------- --------
83,095 68,009 32,586
-------- -------- --------
Cash flows from investing activities:
Expenditures for property and equipment......... (21,261) (20,168) (26,011)
Expenditures for land and buildings............. (9,012) (2,093) (8,515)
Acquisitions of certain business assets......... (10,393) (6,716) (2,003)
Proceeds from sales of certain business
assets......................................... 198 491 1,688
Proceeds from disposal of property and
equipment...................................... 368 290 282
Purchase of marketable securities............... (6,187)
Increase in prefunding of voluntary employee
beneficiary association........................ (806) (2,210) (1,012)
-------- -------- --------
(47,093) (30,406) (35,571)
-------- -------- --------
Cash flows from financing activities:
Net (repayments) borrowings under revolving
credit agreements.............................. (17,200) 17,200
Decrease in notes payable and long-term
liabilities.................................... (1,029) (2,805) (1,139)
Sales of common stock........................... 32,651 23,509 12,448
Repurchases of common stock..................... (30,057) (25,678) (25,522)
-------- -------- --------
1,565 (22,174) 2,987
-------- -------- --------
Increase in cash and cash equivalents........... 37,567 15,429 2
Cash and cash equivalents at beginning of
year........................................... 15,989 560 558
-------- -------- --------
Cash and cash equivalents at end of year........ $ 53,556 $ 15,989 $ 560
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
Science Applications International Corporation and its subsidiaries. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
CONTRACT REVENUES
The major portion of the Company's revenues results from contract services
performed for the United States Government or from subcontracts with other
contractors engaged in work for the United States Government under a variety of
contracts, some of which provide for reimbursement of cost plus fees and others
which are fixed-price or time-and-materials type contracts. Generally, revenues
and fees on contracts are recognized as services are performed, using the
percentage-of-completion method of accounting, primarily based on contract costs
incurred to date compared with total estimated costs at completion. Revenues
from the sale of manufactured products are recorded when the products are
shipped.
The Company provides for anticipated losses on contracts by a charge to
income during the period in which the losses are first identified. Unbilled
receivables are stated at estimated realizable value. Contract costs, including
indirect costs, are subject to audit and adjustment by negotiations between the
Company and government representatives. Indirect contract costs have been agreed
upon through 1990. Contract revenues have been recorded in amounts that are
expected to be realized upon final settlement.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments purchased with an original
maturity of three months or less. The carrying amounts approximate fair value.
MARKETABLE SECURITIES
Marketable securities consist of long-term municipal bonds and are valued at
cost which approximates fair market value. Marketable securities of $6,187,000
are included in other assets at January 31, 1994.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
using the moving average and first-in, first-out methods.
BUILDINGS, PROPERTY AND EQUIPMENT
Depreciation and amortization of buildings and related improvements are
provided using the straight-line method over estimated useful lives of thirty to
forty years and ten years, respectively. Depreciation and amortization of
property and equipment are provided over the estimated useful lives of the
assets, primarily using a declining-balance method. The useful lives are three
to ten years for equipment and the shorter of the useful lives or the terms of
the leases for leasehold improvements.
Additions to property and equipment together with major renewals and
betterments are capitalized. Maintenance, repairs and minor renewals and
betterments are charged to expense. When assets are sold or otherwise disposed
of, the cost and related accumulated depreciation or amortization are removed
from the accounts and any resulting gain or loss is recognized.
INCOME TAXES
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The adoption
of SFAS No. 109 changes the Company's method of accounting for income taxes from
the deferred method under Accounting Principles
F-7
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Board Opinion No. 11 to the liability method. The liability method requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities. Additionally, under the liability method, changes in
tax rates and laws will be reflected in income in the period such changes are
enacted. Under the deferred method, changes in tax rates and laws were either
reflected over future periods or not at all.
The Company has applied the principles of SFAS No. 109 retroactively through
restatement of prior financial statements which increased stockholders' equity
as of February 1, 1991 by an aggregate of $1,035,000. The restatement had an
immaterial effect on net income for the years ended January 31, 1992 and 1993.
COMMON STOCK AND EARNINGS PER SHARE
Class A and Class B common stock are collectively referred to as common
stock in the Notes to Consolidated Financial Statements unless otherwise
indicated.
Computations of earnings per share are based on the weighted average number
of shares of common stock outstanding, increased by the effect of dilutive
options using the modified treasury stock method for 1994 and 1993, and the
treasury stock method for 1992. Fully diluted earnings per share was
substantially the same as primary earnings per share in 1994, 1993 and 1992.
A general public market for the Company's common stock does not exist.
Periodic determinations of fair value of the common stock are made by the Board
of Directors, with the assistance of an independent appraisal firm, pursuant to
a stock price formula. The Board of Directors reserves the right to alter the
formula.
RECLASSIFICATIONS
Certain amounts from previous years have been reclassified in the
consolidated financial statements to conform to the 1994 presentation.
NOTE B -- BUSINESS SEGMENT INFORMATION:
The Company's principal business involves the application of scientific
expertise, together with computer and systems technology, to solve complex
technical problems for government agencies and industrial customers. The skills
of the professional staff encompass a variety of scientific and technical
disciplines and the management structure is based upon broad technological
groupings, not necessarily related to any particular industry, line of business,
geographical area, market or class of customer.
For purposes of analyzing and understanding the Company's financial
statements, its operations have been classified into two broad segments:
Technical Services and Products. The Technical Services segment is further
classified between the National Security, Environment, Energy and all Other
business areas. Other business areas include health, space, transportation and
commercial information technology.
Technical services consist of applied and basic research; analyses and
development of new and existing policies, concepts, systems and programs; design
and development of computer software; systems engineering; systems integration;
test and evaluation of new products or systems; technical operational and
management support; environmental engineering; and engineering support to
existing facilities, laboratories, and systems.
Products include custom designed and standard hardware and software products
such as data display devices, "ruggedized" personal computers, sensors and
nondestructive imaging instruments. These products typically incorporate
Company-developed hardware and software as well as hardware and software
manufactured by others.
F-8
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Technical Services segment information from previous years has been
restated to conform to the 1994 presentation which reflects the change to
further classify revenues into the Environment and Energy business areas. The
restatement had no effect on the consolidated financial position or results of
operations for the years ended January 31, 1993 and 1992.
Industry segment information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
---------------------------------------
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Contract revenues:
Technical Services--
National Security.................... $ 830,581 $ 764,280 $ 678,595
Environment.......................... 253,937 225,958 174,689
Energy............................... 156,694 157,320 168,307
Other................................ 287,622 239,926 172,309
Products............................... 140,741 116,349 91,204
Interest income.......................... 1,307 279 190
----------- ----------- -----------
Total revenues........................... $ 1,670,882 $ 1,504,112 $ 1,285,294
----------- ----------- -----------
----------- ----------- -----------
Operating profit:
Technical Services--
National Security.................... $ 25,560 $ 32,683 $ 22,423
Environment.......................... 10,158 9,189 8,407
Energy............................... 7,163 7,085 10,518
Other................................ 15,448 7,636 11,133
Products............................... 13,158 6,074 5,932
----------- ----------- -----------
71,487 62,667 58,413
Interest income.......................... 1,307 279 190
Interest expense......................... (2,966) (2,841) (2,964)
----------- ----------- -----------
Income before income taxes............... $ 69,828 $ 60,105 $ 55,639
----------- ----------- -----------
----------- ----------- -----------
Identifiable assets:
Technical Services--
National Security.................... $ 150,658 $ 165,088 $ 148,302
Environment.......................... 62,681 54,356 33,031
Energy............................... 37,296 46,409 55,081
Other................................ 82,161 44,793 30,202
Products............................... 38,803 43,956 31,268
----------- ----------- -----------
371,599 354,602 297,884
Corporate and other assets............... 239,976 169,011 139,369
----------- ----------- -----------
Total assets............................. $ 611,575 $ 523,613 $ 437,253
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Because of the nature of the Company's business, sales between segments are
not material. Segment operating results reflect general corporate expense
allocations because all such expenses are allocated to individual cost
objectives by the Company, as required by Government Cost Accounting Standards.
Identifiable assets of the respective industry segments consist of receivables
and inventories. All other assets are either corporate in nature, are not
identifiable with particular segments or are not material. Capital expenditures
and depreciation and amortization are not identified as to industry segments for
similar reasons.
F-9
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1994, 1993 and 1992, approximately 88% of the Company's contract
revenues were attributable to prime contracts with the United States Government
or to subcontracts with other contractors engaged in work for the United States
Government. Foreign operations and revenues directly attributable to foreign
customers are not material.
NOTE C -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
JANUARY 31
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Contracts-in-process, less progress payments of $3,903 and
$5,079 at January 31, 1994 and 1993, respectively........ $ 7,196 $ 2,964
Raw materials............................................. 7,568 11,172
-------- --------
$ 14,764 $ 14,136
-------- --------
-------- --------
Property and equipment at cost:
Computers and other equipment............................. $120,617 $111,979
Office furniture and fixtures............................. 15,551 16,211
Leasehold improvements.................................... 10,951 12,279
-------- --------
147,119 140,469
Less accumulated depreciation and amortization............ 96,538 90,698
-------- --------
$ 50,581 $ 49,771
-------- --------
-------- --------
Land and buildings at cost:
Buildings and improvements................................ $ 57,785 $ 49,991
Land...................................................... 17,078 15,860
Land held for future use.................................. 790 790
-------- --------
75,653 66,641
Less accumulated depreciation and amortization.............. 6,492 5,155
-------- --------
$ 69,161 $ 61,486
-------- --------
-------- --------
Accounts payable and accrued liabilities:
Accounts payable.......................................... $ 55,720 $ 64,703
Collections in excess of revenues on uncompleted
contracts................................................ 44,881 31,970
Other accrued liabilities................................. 32,832 19,947
-------- --------
$133,433 $116,620
-------- --------
-------- --------
Accrued payroll and employee benefits:
Salaries, bonuses and amounts withheld from employees'
compensation............................................. $ 59,891 $ 46,748
Accrued vacation.......................................... 36,731 32,237
Accrued contributions to employee benefit plans........... 9,926 8,333
-------- --------
$106,548 $ 87,318
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- RECEIVABLES:
Receivables consist of the following:
<TABLE>
<CAPTION>
JANUARY 31
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Receivables, primarily U.S. Government, less allowance for
doubtful accounts of $755 and $667 at January 31, 1994 and
1993, respectively:
Billed.................................................... $256,996 $231,334
Unbilled, less progress payments of $16,738 and $17,805 at
January 31, 1994 and 1993, respectively.................. 81,699 91,433
Contract retentions....................................... 18,141 18,342
-------- --------
$356,836 $341,109
-------- --------
-------- --------
</TABLE>
Unbilled receivables at January 31, 1994 and 1993 include $16,228,000 and
$13,699,000, respectively, related to costs incurred on projects for which the
Company has been requested by the customer to begin work under a new contract,
or extend work under a present contract, but for which formal contracts or
contract modifications have not been executed. The balance of unbilled
receivables consist of costs and fees billable on contract completion or other
specified events, the majority of which is expected to be collected within one
year. The majority of the retention balance is expected to be collected beyond
one year.
NOTE E -- NOTES PAYABLE:
The Company has substantially equivalent unsecured revolving credit/term
loan agreements with three banks totaling $67,500,000 which allow borrowings on
a revolving basis until July 1, 1996. At that time, the Company has the option
to borrow under three-year term notes, payable in twelve quarterly installments.
The agreements enable borrowings at various interest rates, at the Company's
option, based on prime, money market, London interbank borrowing, certificate of
deposit, bankers' acceptance, or other negotiated rates. Annual facility fees
are 1/4 of 1% of the total commitment during the initial revolving credit term.
There were no balances outstanding under the credit/term loan agreements at
January 31, 1994 and January 31, 1993. At January 31, 1992, $17,200,000 was
outstanding at an interest rate of 4.5%. As of January 31, 1994 the entire
$67,500,000 was available under the most restrictive debt covenants of the
credit/term loan agreements. The maximum amounts outstanding were $19,200,000,
$31,000,000 and $36,500,000 in 1994, 1993 and 1992, respectively. The average
amount outstanding was $541,000, $6,724,000 and $11,308,000 during 1994, 1993
and 1992, respectively. The weighted average interest rate in 1994, 1993 and
1992 was 3.5%, 4.5% and 5.8%, respectively, based upon average daily balances.
NOTE F -- EMPLOYEE BENEFIT PLANS:
The Company has two principal Profit Sharing Retirement Plans. A majority of
employees participate in either plan and their interests vest 25% per year in
the third through sixth year of service. Participants also become fully vested
upon reaching age 59-1/2, permanent disability or death. Contributions charged
to income under the plans were $20,471,000, $19,114,000 and $16,320,000 for
1994, 1993 and 1992, respectively.
The Company has an Employee Stock Ownership Plan in which most employees
participate. The vesting requirements for the Employee Stock Ownership Plan are
the same as the Profit Sharing Retirement Plans. Contributions charged to income
under the plan were $15,096,000, $13,904,000 and $12,092,000 for 1994, 1993 and
1992, respectively.
F-11
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has a Cash or Deferred Arrangement (CODA) which allows
participants to defer a portion of their income through contributions. Such
contributions are not taxable to the participant until distributed from the
CODA. Company contributions to the CODA of $7,673,000, $6,608,000 and $5,962,000
were charged to income in 1994, 1993 and 1992, respectively. Benefits under the
CODA are fully vested to participants and are payable upon termination,
retirement, permanent disability or death.
The Company has a Bonus Compensation Plan providing for bonuses to reward
outstanding employee performance. Bonuses are paid in the form of cash, fully
vested Company common stock or vesting Company common stock. Awards of vesting
Company common stock made prior to July 10, 1992, vest at the rate of 10%, 20%,
30% and 40% after one, two, three and four years, respectively, from the date of
award. Awards of vesting Company common stock made after July 10, 1992, vest at
the rate of 20%, 20%, 20% and 40% after one, two, three and four years,
respectively. The amounts charged to income under the plan were $20,111,000,
$19,234,000 and $16,340,000 for 1994, 1993 and 1992, respectively.
The Company also has an Employee Stock Purchase Plan which allows eligible
employees to purchase shares of the Company's common stock, with the Company
contributing 5% of the existing formula price. There are no charges to income
under the plan.
NOTE G -- INCOME TAXES:
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Payable currently:
Federal......................................... $ 31,482 $ 27,247 $ 13,985
State........................................... 7,408 7,224 4,086
Deferred:
Federal......................................... (8,650) (10,121) 3,543
State........................................... (1,912) (2,320) 409
-------- -------- --------
$ 28,328 $ 22,030 $ 22,023
-------- -------- --------
-------- -------- --------
</TABLE>
F-12
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income taxes are provided for significant income and expense items
recognized in different years for tax and financial reporting purposes. Deferred
tax assets (liabilities) are comprised of the following temporary differences:
<TABLE>
<CAPTION>
JANUARY 31
-------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued vacation pay........................................ $ 14,011 $ 11,984
Income recognition:
Completed contract method................................. 6,727 6,730
Contractually billable method............................. 10,879 3,033
Deferred compensation....................................... 5,374 4,674
Vesting stock bonuses....................................... 3,720 3,154
State income taxes.......................................... 843 1,366
Other....................................................... 1,541 1,024
-------- --------
Total deferred tax assets................................. 43,095 31,965
-------- --------
Employee benefit plan contributions......................... (10,270) (10,011)
Depreciation and amortization............................... (5,054) (4,140)
Contributions to voluntary employee beneficiary
association................................................ (1,562) (2,041)
Other....................................................... (520) (909)
-------- --------
Total deferred tax liabilities............................ (17,406) (17,101)
-------- --------
Net deferred tax asset...................................... $ 25,689 $ 14,864
-------- --------
-------- --------
</TABLE>
A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate (35% for 1994, 34% for 1993 and
1992) to income before income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Amount computed at statutory rate................. $ 24,440 $ 20,436 $ 18,917
State income taxes, net of federal tax benefit.... 3,573 3,236 2,967
Revision of prior years' tax estimates............ (251) (1,887) (1,388)
Other............................................. 566 245 1,527
-------- -------- --------
$ 28,328 $ 22,030 $ 22,023
-------- -------- --------
-------- -------- --------
</TABLE>
Other assets include deferred income taxes of $3,606,000 and $2,365,000 at
January 31, 1994 and 1993, respectively. Income taxes paid in 1994, 1993 and
1992 amounted to $38,392,000, $25,480,000 and $19,498,000, respectively. The
effective rates for 1994, 1993 and 1992 have been reduced as a result of ongoing
resolutions of certain issues relating to prior year federal and state income
tax returns.
F-13
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H -- LONG-TERM LIABILITIES:
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
JANUARY 31
----------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Mortgage payable collateralized by real property.............. $12,654 $12,749
Deferred compensation......................................... 11,609 10,362
Other......................................................... 1,940 2,874
------- -------
26,203 25,985
Less current portion.......................................... 1,143 134
------- -------
$25,060 $25,851
------- -------
------- -------
</TABLE>
In connection with the purchase of land and a building in 1991, the Company
assumed a mortgage note of $12,800,000. Terms of the note include an 8.88%
interest rate with interest only monthly payments until July 1, 1992 and monthly
payments of principal and interest of $102,000 from August 1, 1992 until July 1,
1997 when the remaining principal balance becomes due.
The Company maintains a Keystaff Deferral Plan for the benefit of key
executives and directors, pursuant to which eligible participants may elect to
defer a portion of their compensation. The Company makes no contributions to the
accounts of participants under the plan but does credit participant accounts for
deferred compensation amounts and for interest earned on such deferred
compensation. Interest is accrued based on the Moody's Seasoned Corporate Bond
Rate (7.26% in 1994). Deferred balances will generally be paid upon the later of
ten years of plan participation or retirement unless participants elect an early
pay-out.
The fair value of the Company's long-term liabilities is estimated based on
the current rates offered to the Corporation for similar debt of the same
remaining maturities. The carrying amount of the Company's long-term liabilities
approximates fair value.
Maturities of long-term liabilities are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JANUARY 31
- ----------------------------------------------------------------
<S> <C>
(IN THOUSANDS)
1995............................................................ $ 1,143
1996............................................................ 8,392
1997............................................................ 158
1998............................................................ 13,952
1999............................................................ 38
2000 and after.................................................. 2,520
--------------
$26,203
--------------
--------------
</TABLE>
NOTE I -- COMMON STOCK AND OPTIONS:
The Company has options outstanding under two stock option plans, the 1992
Stock Option Plan (the 1992 plan), which was adopted effective July 10, 1992,
and the 1982 Stock Option Plan (the 1982 Plan). Under the 1992 and 1982 Plans,
options are granted at prices not less than the formula price at the date of
grant and for terms not greater than ten years. Options granted prior to July
10, 1992 generally become exercisable 10%, 20%, 30% and 40% after one, two,
three and four years, respectively, from the date of grant. Options granted
after July 10, 1992 generally become exercisable 20%,
F-14
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20%, 20% and 40% after one, two, three and four years, respectively, from the
date of grant. No options have been granted under the 1982 Plan after July 10,
1992, the date on which the plan terminated. The Company makes no charge to
income in connection with these Plans.
As of January 31, 1994, 19,507,000 shares of Class A common stock were
reserved for issuance upon exercise of options which are outstanding or which
may be granted. As of January 31, 1994, options for 3,315,000 shares of Class A
common stock were exercisable and 8,818,000 shares of Class A common stock were
available for future grants.
A summary of changes in outstanding options under the Plans during the three
years ended January 31, 1994, is as follows:
<TABLE>
<CAPTION>
SHARES OF
CLASS A
COMMON STOCK
OPTION PRICES UNDERLYING
PER SHARE OPTIONS
---------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
January 31, 1991.............................. $ 5.71 to $ 9.76 8,678
Options granted............................. 9.76 to 10.83 3,403
Options canceled............................ 5.71 to 10.83 (507)
Options exercised........................... 5.71 to 9.74 (1,584)
-------
January 31, 1992.............................. 6.82 to 10.83 9,990
Options granted............................. 11.15 to 11.83 2,864
Options canceled............................ 6.82 to 11.83 (556)
Options exercised........................... 6.82 to 10.83 (1,759)
-------
January 31, 1993.............................. 7.04 to 11.83 10,539
Options granted............................. 12.01 to 13.12 2,580
Options canceled............................ 7.04 to 13.12 (442)
Options exercised........................... 7.04 to 11.83 (1,988)
-------
January 31, 1994.............................. $ 8.19 to $13.12 10,689
-------
-------
</TABLE>
The Company has agreed to make available for issuance, purchase or options
approximately 1,635,000 shares of Class A common stock to employees, prospective
employees and consultants, generally contingent upon commencement of employment
or the occurrence of certain events. The selling price of shares and the
exercise price of options are to be the formula price at the date such shares
are made available or options are granted.
NOTE J -- COMMITMENTS AND CONTINGENCIES:
The Company occupies most of its facilities under operating leases. Most of
the leases require the Company to pay maintenance and operating expenses such as
taxes, insurance and utilities and also contain renewal options extending the
leases from one to twenty years. Certain of the leases contain purchase options
and provisions for periodic rate escalations to reflect cost-of-living
increases. Certain equipment, primarily computer-related, is leased under
short-term or cancelable leases. Rental expenses for facilities and equipment
totaled $57,213,000, $54,050,000 and $51,386,000 in 1994, 1993 and 1992,
respectively.
F-15
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Minimum rental commitments, primarily for facilities, under all
noncancelable operating leases in effect at January 31, 1994, are payable as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
JANUARY 31
- ----------------------------------------------------------------
<S> <C>
(IN THOUSANDS)
1995............................................................ $ 36,644
1996............................................................ 21,305
1997............................................................ 15,326
1998............................................................ 10,222
1999............................................................ 7,914
2000 and after.................................................. 16,913
--------------
$108,324
--------------
--------------
</TABLE>
The Company leases a general purpose office building and has guaranteed a
$12,250,000 loan on behalf of the building owner. Certain financial ratios and
balances required by the guarantee have been maintained.
Other commitments at January 31, 1994 include outstanding letters of credit
aggregating $8,442,000, principally related to guarantees on contracts with
commercial and foreign customers, and outstanding surety bonds aggregating
$79,291,000, principally related to performance and payment type bonds.
The Company is subject to certain Government inquiries and investigations of
its business practices. The Company does not anticipate any action as a result
of such inquiries and investigations which would have a material adverse effect
on its consolidated financial position, results of operations or its ability to
conduct business.
Subsequent to the year ended January 31, 1994, the Company was served with
search warrants and a subpoena for documents and records associated with the
performance by an operating unit of the Company under three contracts with the
Department of Defense (DOD). The search warrants and the subpoena state that the
Government is seeking evidence regarding the making of false statements and
false claims to the DOD, as well as conspiracy to commit such offenses. The
Company has not been apprised of the details of the allegations being
investigated nor has it been charged with any wrongdoing. Accordingly, the
Company is unable to assess the impact, if any, of this investigation on its
consolidated financial position or results of operations or its ability to
conduct business.
NOTE K -- SUPPLEMENTARY INCOME STATEMENT INFORMATION:
Charges to costs and expenses for depreciation and amortization of
buildings, property and equipment were $20,120,000, $19,956,000 and $17,294,000
for 1994, 1993 and 1992, respectively.
The Company expensed $5,689,000, $8,238,000 and $9,362,000 of independent
research and development costs during 1994, 1993 and 1992, respectively.
Total interest paid in 1994, 1993 and 1992 amounted to $1,449,000,
$1,743,000 and $2,144,000, respectively.
F-16
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL E
COL B ----------- COL F
------------ COL C OTHER ----------
COL A BALANCE AT --------- COL D CHANGES BALANCE AT
- ------------------------------ BEGINNING OF ADDITIONS ----------- ADD END OF
CLASSIFICATION PERIOD AT COST RETIREMENTS (DEDUCT)(1) PERIOD
- ------------------------------ ------------ --------- ----------- ----------- ----------
Year ended January 31, 1992:
<S> <C> <C> <C> <C> <C>
Computers and other
equipment.................. $ 90,792 $ 22,372 $ 9,746 $ (531) $ 102,887
Office furniture and
fixtures................... 14,814 2,840 1,422 3 16,235
Leasehold improvements...... 10,537 799 1,065 (18) 10,253
------------ --------- ----------- ----------- ----------
$116,143 $ 26,011 $12,233 $ (546) $ 129,375
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
Buildings and
improvements............... $ 40,801 $ 7,585 $ $ $ 48,386
Land........................ 13,884 930 1,118 15,932
Land held for future use.... 1,836 (1,118) 718
------------ --------- ----------- ----------- ----------
$ 56,521 $ 8,515 $-- $ 0 $ 65,036
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
Year ended January 31, 1993:
Computers and other
equipment.................. $102,887 $ 17,275 $ 7,906 $ (277) $ 111,979
Office furniture and
fixtures................... 16,235 915 613 (326) 16,211
Leasehold improvements...... 10,253 1,978 321 369 12,279
------------ --------- ----------- ----------- ----------
$129,375 $ 20,168 $ 8,840 $ (234) $ 140,469
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
Buildings and
improvements............... $ 48,386 $ 2,093 $ 488 $ $ 49,991
Land........................ 15,932 (72) 15,860
Land held for future use.... 718 72 790
------------ --------- ----------- ----------- ----------
$ 65,036 $ 2,093 $ 488 $ 0 $ 66,641
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
Year ended January 31, 1994:
Computers and other
equipment.................. $111,979 $ 18,946 $10,237 $ (71) $ 120,617
Office furniture and
fixtures................... 16,211 1,439 2,048 (51) 15,551
Leasehold improvements...... 12,279 876 2,204 10,951
------------ --------- ----------- ----------- ----------
$140,469 $ 21,261 $14,489 $ (122) $ 147,119
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
Buildings and
improvements............... $ 49,991 $ 7,794 $ $ $ 57,785
Land........................ 15,860 1,218 17,078
Land held for future use.... 790 790
------------ --------- ----------- ----------- ----------
$ 66,641 $ 9,012 $-- $-- $ 75,653
------------ --------- ----------- ----------- ----------
------------ --------- ----------- ----------- ----------
<FN>
- ------------------------
(1) Transfers between classifications.
</TABLE>
F-17
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL C COL E
COL B --------- ----------- COL F
------------ ADDITIONS OTHER ---------
COL A BALANCE AT CHARGED COL D CHANGES BALANCE
- ------------------------------ BEGINNING OF TO COSTS/ ----------- ADD AT END OF
CLASSIFICATION PERIOD EXPENSES RETIREMENTS (DEDUCT)(1) PERIOD
- ------------------------------ ------------ --------- ----------- ----------- ---------
Year ended January 31, 1992:
<S> <C> <C> <C> <C> <C>
Computers and other
equipment.................. $56,929 $ 11,688 $ 8,625 $ 2 $ 59,994
Office furniture and
fixtures................... 10,978 1,248 1,295 (2) 10,929
Leasehold improvements...... 5,876 3,214 1,001 8,089
------------ --------- ----------- ----------- ---------
$73,783 $ 16,150 $10,921 $ 0 $ 79,012
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
Buildings and
improvements............... $ 2,703 $ 1,144 $-- $-- $ 3,847
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
Year ended January 31, 1993:
Computers and other
equipment.................. $59,994 $ 15,436 $ 5,959 $2,331 $ 71,802
Office furniture and
fixtures................... 10,929 1,667 524 (188) 11,884
Leasehold improvements...... 8,089 1,310 179 (2,208) 7,012
------------ --------- ----------- ----------- ---------
$79,012 $ 18,413 $ 6,662 $ (65) $ 90,698
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
Buildings and
improvements............... $ 3,847 $ 1,543 $ 235 $-- $ 5,155
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
Year ended January 31, 1994:
Computers and other
equipment.................. $71,802 $ 15,865 $ 8,738 $ (71) $ 78,858
Office furniture and
fixtures................... 11,884 1,631 1,846 (51) 11,618
Leasehold improvements...... 7,012 1,287 2,237 6,062
------------ --------- ----------- ----------- ---------
$90,698 $ 18,783 $12,821 $ (122) $ 96,538
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
Buildings and
improvements............... $ 5,155 $ 1,337 $-- $-- $ 6,492
------------ --------- ----------- ----------- ---------
------------ --------- ----------- ----------- ---------
<FN>
- ------------------------
(1) Transfers between classifications.
</TABLE>
F-18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
3(a) Restated Certificate of Incorporation of the Registrant, as amended
July 19, 1990. Incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
January 31, 1991 (the "1991 10-K").
3(b) Bylaws of the Registrant, as amended through April 10, 1992.
Incorporated by reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K for fiscal year ended January 31, 1992 (the "1992
10-K").
4(a)* Form of Non-Qualified Stock Option Agreement -- 1992 Stock Option Plan
of the Registrant (form dated August 1992). Incorporated by reference
to Exhibit 4(c) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993 (the "1993 10-K").
4(b)* Form of Stock Restriction Agreement of the Registrant's Employee Stock
Ownership Plan (form dated March 1, 1985). Incorporated by reference
to Exhibit 4(e) to Registrant's Annual Report on Form 10-K for the
fiscal year ended January 31, 1985 (the "1985 10-K").
4(c)* Form of Stock Restriction Agreement of the Registrant's Bonus
Compensation Plan (form dated October 1990). Incorporated by reference
to Exhibit 4(f) to the 1991 10-K.
4(d)* Form of Stock Restriction Agreement of the Registrant's Cash or
Deferred Arrangement (TRASOP Account) (form dated March 1, 1985).
Incorporated by reference to Exhibit 4(g) to the 1985 10-K.
4(e)* Registrant's Bonus Compensation Plan, as amended through April 2,
1991. Incorporated by reference to Exhibit 4(l) to the 1991 10-K.
4(f)* Registrant's 1982 Stock Option Plan, as amended through June 9, 1989.
Incorporated by reference to Exhibit 4(n) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1990 (the
"1990 10-K").
4(g)* Registrant's 1992 Stock Option Plan. Incorporated by reference to
Exhibit 4(o) to the 1992 10-K.
4(h)* Form of Non-Qualified Stock Option Agreement (Employee, Director and
Consultant) - 1982 Stock Option Plan (form dated October 1990).
Incorporated by reference to Exhibit 4(p) to the 1991 10-K.
4(i)* Form of Stock Restriction Agreement of the Registrant's Employee Stock
Ownership Plan (TRASOP Account) (form dated April 1, 1991).
Incorporated by reference to Exhibit 4(r) to the 1991 10-K.
4(j)* Registrant's 1993 Employee Stock Purchase Plan. Incorporated by
reference to Annex I to the Registrant's Proxy Statement for the 1993
Annual Meeting of Stockholders as filed April 1993 with the SEC.
4(k)* Form of Stock Restriction Agreement of the Registrant's Bonus
Compensation Plan (form dated July 1992). Incorporated by reference to
Exhibit 4(v) to the 1993 10-K.
4(l)* Registrant's Stock Compensation Plan.
4(m)* Registrant's Management Stock Compensation Plan.
10(a)* Registrant's Keystaff Deferral Plan, as amended through January 31,
1991. Incorporated by reference to Exhibit 10(a) to the 1991 10-K.
10(b) Sixth Amendment dated as of August 10, 1993 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
10(c) Fifth Amendment dated as of August 4, 1992 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1993 10-K.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
10(d) Fourth Amendment dated as of June 30, 1992 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(c) to the 1993 10-K.
10(e) Third Amendment dated as of July 1, 1991 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1992 10-K.
10(f) Second Amendment dated as of August 31, 1990 to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1991 10-K.
10(g) First Amendment dated as of June 24, 1989, to Registrant's Credit
Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to the 1990 10-K.
10(h) Credit Agreement with Citibank, N.A. dated as of October 31, 1988.
Incorporated by reference to Exhibit 10(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 31, 1989 (the
"1989 10-K").
10(i) Sixth Amendment dated as of July 22, 1993 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988.
10(j) Fifth Amendment dated as of August 10, 1992 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988. Incorporated by
reference to Exhibit 10(h) to the 1993 10-K.
10(k) Fourth Amendment dated as of June 26, 1992 to Registrant's Credit
Agreement with Bank of America NT&SA (successor by merger to Security
Pacific National Bank) dated as of October 31, 1988. Incorporated by
reference to Exhibit 10(i) to the 1993 10-K.
10(l) Third Amendment dated as of June 14, 1991 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(f) to the 1992 10-K.
10(m) Second Amendment dated as of June 14, 1990 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(c) to the 1991 10-K.
10(n) First Amendment dated as of June 15, 1989 to Registrant's Credit
Agreement with Security Pacific National Bank dated as of October 31,
1988. Incorporated by reference to Exhibit 10(c) to the 1990 10-K.
10(o) Credit Agreement with Security Pacific National Bank dated as of
October 31, 1988. Incorporated by reference to Exhibit 10(c) to the
1989 10-K.
10(p) Second Amendment dated as of July 30, 1993 and November 3, 1993 to
Registrant's Credit Agreement with Continental Bank, N.A. dated as of
May 26, 1992.
10(q) First Amendment dated as of June 18, 1992 to Registrant's Credit
Agreement with Continental Bank, N.A. dated as of May 26, 1992.
Incorporated by reference to Exhibit 10(n) to the 1993 10-K.
10(r) Credit Agreement with Continental Bank dated as of May 26, 1992.
Incorporated by reference to Exhibit 10(o) to the 1993 10-K.
10(s) First Amendment dated as of July 22, 1993 to Registrant's Employee
Stock Purchase Loan Agreement with Bank of America NT&SA dated as of
November 10, 1992.
10(t) Registrant's Employee Stock Purchase Loan Agreement with Bank of
America NT&SA dated November 10, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ----------------------------------------------------------------------
<S> <C>
10(u) Registrant's Overdraft Facility with Bank of America dated July 26,
1990, as amended through November 25, 1991. Incorporated by reference
to Exhibit 10(o) to the 1992 10-K.
11 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
28(a) Annual Report of the Registrant's Employee Stock Purchase Plan for the
plan year ended January 31, 1994.
28(b) Annual Report of the Registrant's Cash or Deferred Arrangement for the
year ended December 31, 1993.
<FN>
- ------------------------
* Executive Compensation Plans and Arrangements.
</TABLE>
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
STOCK COMPENSATION PLAN
Effective as of April 9, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Awarding Authority . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Share Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PARTICIPATION AND AWARDS . . . . . . . . . . . . . . . . . . . 2
2.1 Designation by Awarding Authority . . . . . . . . . . . . . . . 2
2.2 Awarding Authority to Make Awards . . . . . . . . . . . . . . . 2
2.3 Awards to be Held in Trust . . . . . . . . . . . . . . . . . . . 2
2.4 Vesting and Forfeiture . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Trust Fund Established . . . . . . . . . . . . . . . . . . . . . 3
3.2 Company, Committee and Trustee
Not Responsible for Adequacy of Fund . . . . . . . . . . . . . 3
ARTICLE IV ACCOUNTING PROCEDURES . . . . . . . . . . . . . . . . . . . . . 4
4.1 Committee to Maintain Accounts . . . . . . . . . . . . . . . . . 4
4.2 Accounting Procedures . . . . . . . . . . . . . . . . . . . . . 4
4.3 Invasion of Trust by Creditors . . . . . . . . . . . . . . . . . 4
4.4 Trust Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 4
- i -
<PAGE>
ARTICLE V RIGHTS IN ACQUIRED STOCK . . . . . . . . . . . . . . . . . . . 4
5.1 Power to Vote Stock Rests with Trustee . . . . . . . . . . . . . 4
5.2 Tender Offers . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI DISTRIBUTION OF ACCOUNTS . . . . . . . . . . . . . . . . . . . 5
6.1 Time of Distribution . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Form of Distribution . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Beneficiary Designation . . . . . . . . . . . . . . . . . . . . 5
6.4 Distribution to Guardian . . . . . . . . . . . . . . . . . . . . 6
6.5 Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII ACCELERATION OF DISTRIBUTION AND VESTING . . . . . . . . . . . 6
7.1 Termination of Employment or Death . . . . . . . . . . . . . . . 6
7.2 Change in Control . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Hardship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII PLAN TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . 7
8.1 Termination and Amendment . . . . . . . . . . . . . . . . . . . 7
ARTICLE IX PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . 7
9.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.2 Committee Powers . . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Plan Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Reliance Upon Documents and Opinions . . . . . . . . . . . . . . 9
9.5 Requirement of Proof . . . . . . . . . . . . . . . . . . . . . 10
9.6 Limitation on Liability . . . . . . . . . . . . . . . . . . . 10
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 11
10.1 Restrictions on Plan Interest . . . . . . . . . . . . . . . . 11
10.2 No Enlargement of Employee Rights . . . . . . . . . . . . . . 11
10.3 Rights of Repurchase and
First Refusal for the Company . . . . . . . . . . . . . . . . 12
10.4 Mailing of Payments . . . . . . . . . . . . . . . . . . . . . 12
10.5 Inability to Locate Participant or Beneficiary . . . . . . . . 12
10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 12
10.7 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.8 Illegality of Particular Provision . . . . . . . . . . . . . . 12
10.9 Receipt or Release . . . . . . . . . . . . . . . . . . . . . . 12
10.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 13
- ii -
<PAGE>
Exhibit 4(l)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
STOCK COMPENSATION PLAN
PURPOSE
This Plan is an unfunded compensation arrangement established effective on
April 9, 1994 by Science Applications International Corporation ("SAIC") to make
deferred awards of company stock to selected employees.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in the Plan they shall have the
meaning specified below, unless the context indicates clearly to the contrary.
1.1 ACCOUNT. The bookkeeping account established for an Employee pursuant
to Article IV to record the number of Share Units awarded to the Employee and
the vesting thereof.
1.2 AWARD. The award of Share Units in the Trust to an Employee pursuant
to the Plan.
1.3 AWARDING AUTHORITY. The individual or group of individuals appointed
by the Board to make Awards pursuant to the Plan.
1.4 BENEFICIARY. The person or persons properly designated by the
Participant, in accordance with Section 6.3, to receive the benefits provided
herein upon death of the Participant.
1.5 BOARD. The Board of Directors of Science Applications International
Corporation.
1.6 COMMITTEE. The committee appointed by the Board to administer the
Plan. Members of the Committee shall be eligible to receive Awards under the
Plan at the discretion of the Awarding Authority.
1.7 COMPANY. Science Applications International Corporation, a Delaware
corporation, and any subsidiary thereof, the participation in this Plan of the
Employees of which is approved by the Awarding Authority.
1.8 COMPANY STOCK. The Class A Common Stock of Science Applications
International Corporation.
<PAGE>
1.9 DISTRIBUTION. Payment of the vested balance in a Participant's
Account from the Trust to the Participant or the Participant's Beneficiary.
1.10 EMPLOYEE. A salaried employee of the Company.
1.11 PARTICIPANT. An Employee designated by the Committee to receive an
Award under the Plan.
1.12 PLAN. The Science Applications International Corporation Stock
Compensation Plan as set forth herein and as amended from time to time by the
Board.
1.13 SHARE UNIT. The interest of a Participant in a share of Company Stock
held in the Participant's Account in the Trust.
1.14 TRUST. The Science Applications International Corporation Stock
Compensation Plan Trust established by the Company to hold all assets awarded to
Participants under the Plan.
1.15 TRUSTEE. State Street Bank or such successor trustee as shall be
appointed pursuant to the Trust.
ARTICLE II
PARTICIPATION AND AWARDS
2.1 DESIGNATION BY AWARDING AUTHORITY. The Awarding Authority in its sole
discretion shall designate those Employees who are to receive Awards under the
Plan. The Awarding Authority's designation of an Employee for a particular
Award shall not require the Awarding Authority to make any further Awards to
such Employee.
2.2 AWARDING AUTHORITY TO MAKE AWARDS. The Awarding Authority shall make
Awards under the Plan by determining a number of Share Units to be credited to
those Employees whom the Awarding Authority has selected for participation in
the Plan corresponding to a specified number of shares of Company Stock
allocated in the Trust to such Employees, and by establishing an Account in
favor of such Employees in accordance with Article IV to hold such Share Units.
A separate Account shall be established for each Award. Each Account shall be
subject to a vesting schedule specified by the Awarding Authority. The amount,
timing and vesting of each Award shall be decided in the Awarding Authority's
sole discretion, and the Awarding Authority may apply different terms to Awards
made to different Employees as well as to different Awards made to the same
Employee.
2.3 AWARDS TO BE HELD IN TRUST. Within a reasonable period of time
following the date of an Award, SAIC shall contribute to the Trust Company Stock
or an amount of money sufficient to purchase shares of Company Stock
corresponding to the Share Units made in such
- 2 -
<PAGE>
Award. The Trustee shall apply such contribution toward the purchase of Company
Stock in accordance with the directions of the Committee and the terms of the
Trust. To the extent any such Award is made to an Employee of an affiliate of
SAIC, SAIC may charge the cost of the corresponding Trust contribution to such
affiliate as agreed between SAIC and the affiliate.
2.4 VESTING AND FORFEITURE. Each Account shall be subject to a vesting
schedule, not to exceed seven (7) years, established by the Awarding Authority.
Vesting shall cease upon termination of the Participant's employment with the
Company for any reason other than the death of the Participant. For purposes of
the Plan, an Employee's leave of absence exceeding thirty (30) days other than
(i) a leave of absence caused by the Employee's disability, as defined under the
terms of any of the Company's short-term or long-term disability plans, (ii) a
qualified military leave as determined by the Committee, or (iii) a family or
medical leave covered by federal or state family/medical leave acts, shall be
considered a termination of employment effective on the thirtieth day of such
leave of absence. An Employee's change in status to that of consulting employee
shall also be considered a termination of employment for purposes of the Plan.
In the event of death of a Participant, all of the Participant's Account(s)
shall become immediately vested. The unvested portion of a Participant's
Accounts upon a termination of employment shall be immediately forfeited by the
Participant, and the shares of Company Stock represented by such unvested
portion shall be returned to the Company or reallocated in accordance with the
Committee's directions and the terms of the Trust.
ARTICLE III
TRUST FUND
3.1 TRUST FUND ESTABLISHED. The Company has established the Trust
pursuant to a trust agreement under which the Trustee will hold and administer
in trust all assets deposited with the Trustee in accordance with the terms of
this Plan. The Board shall have the authority to select and remove the Trustee
to act under the Trust agreement, and to enter into new or amended trust
agreements as it deems advisable.
3.2 COMPANY, COMMITTEE AND TRUSTEE NOT RESPONSIBLE FOR ADEQUACY OF TRUST
FUND. Neither the Company, Committee nor Trustee shall be liable or responsible
for the adequacy of the Trust Fund to meet and discharge any or all payments and
liabilities hereunder. All Plan benefits will be paid only from the Trust
assets, and neither the Company, the Committee nor the Trustee shall have any
duty or liability to furnish the Trust with any funds, securities or other
assets except as expressly provided in Section 2.3 hereof.
- 3 -
<PAGE>
ARTICLE IV
ACCOUNTING PROCEDURES
4.1 COMMITTEE TO MAINTAIN ACCOUNTS. The Committee shall open and maintain
a separate Account with respect to each Award made under the Plan for purposes
of keeping a record of the assets held in Trust for each Participant and for
recording the vesting status of each Award.
4.2 ACCOUNTING PROCEDURES. The Committee shall establish and may amend
from time to time accounting procedures for the purpose of making allocations,
Distributions, valuations and adjustments to Accounts provided for in this
Article IV. A Participant or Beneficiary shall have no contractual or other
right to have a particular accounting procedure or convention apply, or continue
to apply, and the Committee shall be free to alter any such procedure or
convention without obligation to any Participant or Beneficiary.
4.3 INVASION OF TRUST BY CREDITORS. If assets of the Trust should be
reduced due to action of the Company's Creditors, as provided in the Trust
document, the Committee shall reduce each Account on a pro rata basis to reflect
such reduction in Trust assets, and the Company shall have no obligation to
replace such lost assets.
4.4 TRUST EXPENSES. Expenses of the Trust which are not paid by the
Company shall be applied to reduce each Account on a pro rata basis.
ARTICLE V
RIGHTS IN ACQUIRED STOCK
5.1 POWER TO VOTE STOCK RESTS WITH TRUSTEE. The power to vote any stock
held by the Trustee shall rest solely with the Trustee, who shall vote such
stock in the same proportion that the other shareholders vote their shares of
Company Stock.
5.2 TENDER OFFERS. In the case of a tender offer for the Company Stock,
the Trustee shall tender the shares of Company Stock held by the Trust only if
more than fifty percent (50%) of the shares of Company Stock held outside the
Trust are tendered by the shareholders.
5.3 DIVIDENDS. All dividends on Company Stock held in Trust shall be held
by the Trustee and reinvested as directed by the Committee. The Committee shall
allocate such dividends among the Accounts pro rata to the shares allocated to
each Account.
- 4 -
<PAGE>
ARTICLE VI
DISTRIBUTION OF ACCOUNTS
6.1 TIME OF DISTRIBUTION. Subject to the acceleration provisions of
Article VII, a Participant's Account shall be Distributed as follows:
(a) If the Participant files an election in a manner prescribed by
the Committee within ninety (90) days following the date of the Award contained
in the Account, the Participant's Account shall be distributed as it becomes
vested, with each payment to be made within a reasonable period of time
following the date of vesting of the portion of the Account to be paid.
(b) If the Participant fails to make the election described in
subsection (a), the Participant's Account shall be distributed in full within a
reasonable period of time following the seventh anniversary of the date of the
Award contained in such Account.
6.2 FORM OF DISTRIBUTION. Distributions shall be made in the form of
Company Stock or cash, or part Company Stock and part cash, as the Committee
shall determine in its sole discretion.
6.3 BENEFICIARY DESIGNATION.
(a) Upon forms provided by the Committee, each Participant shall
designate in writing the Beneficiary or Beneficiaries whom such Participant
desires to receive the benefits of this Plan, if any, payable in the event of
such Participant's death. A Participant may from time to time change his or her
designated Beneficiary or Beneficiaries without the consent of such Beneficiary
or Beneficiaries by filing a new designation in writing with the Committee;
provided, however, that if a married Participant wishes to designate an
individual other than his or her spouse as Beneficiary, such designation shall
not be effective unless consented to in writing by the spouse. Notwithstanding
the foregoing, spousal consent shall not be necessary if it is established to
the satisfaction of the Committee that there is no spouse of the Participant or
that the required consent cannot be obtained because the spouse cannot be
located or is legally incompetent. The Company may rely upon the designation of
Beneficiary or Beneficiaries last filed by the Participant in accordance with
the terms of this Plan.
(b) If the designated Beneficiary does not survive the Participant,
or if there is no valid Beneficiary designation, amounts payable under the Plan
shall be paid to the Participant's spouse, or if there is no surviving spouse,
then to the duly appointed and currently acting personal representative of the
Participant's estate. If there is no personal representative of the
Participant's estate duly appointed and acting in that capacity within sixty
(60) days after the Participant's death, then all payments due under the Plan
shall be payable to the person or persons who can verify by affidavit or court
order to the satisfaction of the Committee that they are legally entitled to
receive the benefits specified hereunder pursuant to the laws of intestate
- 5 -
<PAGE>
succession or other statutory provision in effect at the Participant's death in
the state in which the Participant resided.
6.4 DISTRIBUTION TO GUARDIAN. If the Committee shall find that any person
to whom any payment is payable under this Plan is unable to care for his or her
affairs because of illness or accident, or is a minor, a payment due (unless a
prior claim therefor shall have been made by a duly appointed guardian or other
legal representative) may be paid to the spouse, a child, a parent, or a brother
or sister, or to any custodian, conservator or other fiduciary responsible for
the management and control of such person's financial affairs in such manner and
proportions as the Committee may determine. Any such payment shall be a
complete discharge of the liabilities of the Trust under this Plan.
6.5 WITHHOLDING OF TAXES. To the extent any Distribution from the Trust
is subject to withholding taxes, the Committee may require, as a condition to
the payment of such Distribution, that the Participant or Beneficiary who is
eligible for the Distribution:
(a) make payment to the Company in the form of a check for such
withholding taxes; or
(b) consent to the withholding of shares of Company Stock by the
Trustee sufficient in value to satisfy such withholding taxes, in which case
such shares shall be delivered to the Company which shall make the appropriate
tax withholding.
The Committee may offer either or both of these options to the Participant or
Beneficiary in the Committee's sole discretion.
ARTICLE VII
ACCELERATION OF DISTRIBUTION AND VESTING
7.1 TERMINATION OF EMPLOYMENT OR DEATH. Unless sooner distributed in
accordance with Section 6.1, the vested portion of a Participant's Accounts
shall be distributed from the Trust as soon as practicable following termination
of the Participant's employment with the Company for any reason, including
death. Termination of employment shall include certain leaves of absence and
changes in status as specified in Section 2.4. The Participant and Beneficiary
shall forfeit any unvested portion of the Accounts at the time of such
termination or death.
7.2 CHANGE IN CONTROL. Every Account shall become fully vested and shall
be immediately distributed to the Participants to whom such Accounts belong,
upon the occurrence of a Change in Control (as hereinafter defined) of the
Company. A Change in Control shall be deemed to occur upon any "person" (as
defined in Section 3(a)(9) of the Securities Exchange Act of 1934), other than
the Company, any subsidiary or any employee benefit plan or trust maintained by
the Company or subsidiary becoming the beneficial owner (as defined in Rule
- 6 -
<PAGE>
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
more than 25% of the Company Stock outstanding at such time, without the prior
approval of the Board. For purposes of the foregoing, a subsidiary is any
corporation in an unbroken chain of corporations beginning with the Company if
each of the corporations, other than the last corporation in such chain, owns at
least fifty percent (50%) of the total voting power in one of the other
corporations in such chain.
7.3 HARDSHIP. Notwithstanding the provisions of Section 6.1 hereof, a
Participant shall be entitled to request a hardship Distribution of all or any
portion of the vested portion of his or her Account(s). A Participant must make
a written request for a hardship Distribution, stating the reasons such
withdrawal is necessary because of a financial hardship. The Committee, in its
sole discretion, shall determine whether or not to grant the hardship
Distribution of such Participant's Account(s) and, in so doing, may rely on the
Participant's statements, and a hardship Distribution may be approved without
further investigation unless the Committee has reason to believe such statements
are false.
ARTICLE VIII
PLAN TERMINATION AND AMENDMENT
8.1 TERMINATION AND AMENDMENTS. The Plan shall continue until all amounts
have been distributed in accordance with the terms of the Plan. Notwithstanding
the foregoing sentence, the Board retains the right to amend or terminate the
Plan for any reason, including but not limited to adverse changes in accounting
rules or tax laws or the bankruptcy, receivership or dissolution of the Company.
In the event of a Plan amendment or termination, benefits will either be paid
out when due under the terms of the Plan or as soon as possible as determined by
the Committee in its sole discretion. To the extent feasible, the Committee
shall use its best efforts to avoid adversely affecting the rights of any
existing Participants in the Plan, but the Committee shall be under no specific
duty or obligation in this regard.
ARTICLE IX
PLAN ADMINISTRATION
9.1 COMMITTEE. The Plan shall be administered by the Committee. Subject
to the provisions of the Plan and the authority granted hereunder to the
Awarding Authority, the Committee shall have exclusive power to determine the
manner and time of Awards and payment of benefits to the extent herein provided
and to exercise any other discretionary powers granted to the Committee pursuant
to the Plan. The decisions or determinations by the Committee shall be final
and binding upon all parties, including shareholders, Participants and other
Employees. The Committee shall have the authority to interpret the Plan, to
make factual findings and determinations, to adopt and revise rules and
regulations relating to the Plan and to make any
- 7 -
<PAGE>
other determinations which it believes necessary or advisable for the
administration of the Plan. The Committee's discretion in these matters shall
be as broad and unfettered as permitted by law.
9.2 COMMITTEE POWERS. The Committee shall have all powers necessary to
supervise the administration of the Plan and control its operations. In
addition to any powers and authority conferred on the Committee elsewhere in the
Plan or by law, the Committee shall have, by way of illustration and not by way
of limitation, the following powers and authority:
(a) To designate agents to carry out responsibilities relating to the
Plan;
(b) To employ such legal, actuarial, medical, accounting, clerical
and other assistance as it may deem appropriate in carrying out the provisions
of this Plan;
(c) To administer, interpret, construe and apply this Plan and to
decide all questions which may arise or which may be raised under this Plan by
any Employee, Participant, Beneficiary or other person whomsoever, including but
not limited to all questions relating to eligibility to participate in the Plan,
determination of Awards and the amount of benefits to which any Participant may
be entitled;
(d) To establish rules and procedures from time to time for the
conduct of its business and for the administration and effectuation of its
responsibilities under the Plan;
(e) To establish claims procedures, and to make forms available for
filing of such claims, and to provide the name of the person or persons with
whom such claims should be filed. The Committee shall establish procedures for
action upon claims initially made and the communication of a decision to the
claimant promptly and, in any event, not later than sixty (60) days after the
date of the claim; the claim may be deemed by the claimant to have been denied
for purposes of further review described below in the event a written decision
is not furnished to the claimant within such sixty (60) day period. Every claim
for benefits which is denied shall be denied by written notice setting forth in
a manner calculated to be understood by the claimant (1) the specific reason or
reasons for the denial, (2) specific reference to any provisions of this Plan on
which denial is based, (3) description of any additional material or information
necessary for the claimant to perfect his claim with an explanation of why such
material or information is necessary, and (4) an explanation of the procedure
for further reviewing the denial of the claim under the Plan. The Committee
shall establish a procedure for review of claim denials, such review to be
undertaken by the Committee. The review given after denial of any claim shall
be a full and fair review with the claimant or his duly authorized
representative having one hundred eighty (180) days after receipt of denial of
his claim to request such review, having the right to review all pertinent
documents and the right to submit issues and comments in writing. The Committee
shall establish a procedure for issuance of a decision by the Committee not
later than sixty (60) days after receipt of a request for review from a claimant
unless special circumstances, such as the need to hold a hearing, require a
longer period of time, in which case a decision shall be rendered as soon as
possible but not
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<PAGE>
later than one hundred twenty (120) days after receipt of the claimant's request
for review. The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific reference to any provisions of this
Plan on which the decision is based; and
(f) To perform or cause to be performed such further acts as it may
deem to be necessary, appropriate, or convenient in the efficient administration
of the Plan.
Any action taken in good faith by the Committee in the exercise of
authority conferred upon it by this Plan shall be conclusive and binding upon
the Participants and their beneficiaries. All discretionary powers conferred
upon the Committee shall be absolute.
9.3 PLAN EXPENSES. Members of the Committee shall serve as such without
compensation from the Plan, but may receive compensation from the Company for so
serving. All Plan administration expenses shall be borne by the Company or the
Trust as determined by the Committee in its sole discretion.
9.4 RELIANCE UPON DOCUMENTS AND OPINIONS.
(a) The members of the Committee, the Board, and the Company shall be
entitled to rely upon any:
(i) Tables, valuations, computations, estimates, certificates,
opinions and reports furnished by any consultant, or firm or corporation
which employs one or more consultants or advisors; and
(ii) Computations, estimates and reports furnished by any
consultants or consulting firms.
(b) The members of the Committee, the Board, and the Company shall be
fully protected and shall not be liable in any manner whatsoever for anything
done or action taken or suffered in reliance upon any such consultant, firm, or
corporation which employs one or more consultants or counsel.
(c) Any and all such things done or such actions taken or suffered by
the Committee, the Board, and the Company in so relying shall be conclusive and
binding on all Employees, Participants, Beneficiaries and any other persons
whomsoever, except as otherwise provided by law.
(d) The Committee may, but is not required to, rely upon all records
of the Company with respect to any matter or thing whatsoever, and may likewise
treat such records as conclusive with respect to all Employees, Participants,
Beneficiaries and any other persons whomsoever, except as otherwise provided by
law.
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<PAGE>
9.5 REQUIREMENT OF PROOF. The Committee, the Board, or the Company may
require satisfactory proof of any matter under this Plan from or with respect to
any Employee, Participant or Beneficiary, and no such person shall acquire any
rights or be entitled to receive any benefits under this Plan until such proof
shall be furnished as so required.
9.6 LIMITATION ON LIABILITY. No employee or director of the Company and
no other person shall be subject to any liability by reason of or arising from
his or her participation in the establishment or administration or operation of
the Plan unless he or she acts fraudulently or in bad faith.
9.7 INDEMNIFICATION.
(a) To the extent permitted by law, the Company shall indemnify each
member of the Awarding Authority, of the Committee, and any other employee or
director of the Company who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed proceeding, whether civil,
criminal, administrative, or investigative, by reason of his or her conduct in
the performance in connection with the establishment or administration of the
Plan or any amendment or termination of the Plan.
(b) This indemnification shall apply against expenses including,
without limitation, attorneys fees and any expenses of establishing a right to
indemnification hereunder, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding, except in
relation to matters as to which he or she has acted fraudulently or in bad faith
in the performance of such duties.
(c) The termination of any proceeding by judgment, order, settlement,
conviction, upon a plea of nolo contendere or its equivalent shall not, in and
of itself, create a presumption that the person acted fraudulently or in bad
faith in the performance of his or her duties.
(d) Expenses incurred in defending any such proceeding may be
advanced by the Company prior to the final disposition of such proceeding, upon
receipt of an undertaking by or on behalf of the recipient to repay such amount,
unless it shall be determined ultimately that the recipient is entitled to be
indemnified as authorized in this Section 9.7.
(e) The right of indemnification set forth in this Section 9.7 shall
be in addition to any other right to which any Awarding Authority member,
Committee member or other person may be entitled as a matter of law, by
corporate bylaws or otherwise.
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<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 RESTRICTIONS ON PLAN INTEREST.
(a) A Participant's interest in this Plan shall be limited to his or
her Account in the Trust and he or she shall have no other interest in any
assets of the Company nor any right as against the Company, Awarding Authority
or Committee for payment of benefits under this Plan.
(b) None of the benefits, payments, proceeds, claims or rights
hereunder of any Participant or Beneficiary shall be subject to any claim of any
creditor of such Participant or Beneficiary and in particular the same shall not
be subject to attachment, garnishment, or other legal process by any creditor of
such Participant or Beneficiary.
(c) A Participant or Beneficiary shall not have any right to
alienate, anticipate, commute, pledge, encumber, or assign any of the benefits
or payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
(d) A Participant's and Beneficiary's interest in this Plan and his
or her Account in the Trust are subject to the claims of the Company's creditors
as provided in the Trust. Each Participant and Beneficiary shall, however, be
considered a general creditor of the Company with respect to the assets held in
his or her Account in the Trust, so that if the Company should become insolvent,
the Participant or Beneficiary will have a claim against the Trust assets equal
to that of the Company's other general creditors (regardless of whether such
assets are removed from the trust by a trustee in bankruptcy).
10.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS.
(a) This Plan is strictly a voluntary undertaking on the part of the
Company and shall not be deemed to constitute a contract between the Company and
any Employee, or to be consideration for, or an inducement to, or a condition
of, the employment of any Employee.
(b) An Employee's employment with the Company is not for any
specified term and may be terminated by such Employee or by the Company at any
time for any reason, with or without cause. Nothing in this Plan or in any
agreement pursuant to this Plan shall confer upon any Employee or Participant
any right to continue in the employ of or affiliation with the Company nor
constitute any promise or commitment by the Company regarding future positions,
future work assignments, future compensation or any other term or condition of
employment or affiliation.
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<PAGE>
(c) No person shall have any right to any benefits under this Plan,
except to the extent expressly provided herein.
(d) The Plan is not intended to nor shall it be deemed to be a Plan
providing retirement income or resulting in the deferral of income by employees
for periods extending to the termination of covered employment or beyond.
10.3 RIGHTS OF REPURCHASE AND FIRST REFUSAL FOR THE COMPANY. Any Company
Stock distributed from the Plan shall be subject to a right of repurchase and
right of first refusal by the Company. The terms and conditions of the right of
repurchase and right of first refusal shall be those applied to Company Stock by
the Certificate of Incorporation of Science Applications International
Corporation, as in effect from time to time.
10.4 MAILING OF PAYMENTS. All payments under the Plan shall be delivered
in person or mailed to the last address of the Participant (or, in the case of
the death of the Participant to that of any other person entitled to such
payments under the terms of the Plan). Each Participant shall be responsible
for furnishing the Committee with his or her correct current address and the
correct current name and address of his or her Beneficiary.
10.5 INABILITY TO LOCATE PARTICIPANT OR BENEFICIARY. In the event that the
Committee is unable to locate a Participant or Beneficiary to whom benefits are
payable hereunder after mailing a notice to the Participant's or Beneficiary's
last known address, and such inability lasts for a period of three (3) years,
then any remaining benefits payable hereunder shall be forfeited to the Company
and no Participant or Beneficiary shall have any right to further benefits from
the Plan, even if subsequently located.
10.6 GOVERNING LAW. All legal questions pertaining to the Plan shall be
determined in accordance with the laws of the State of California.
10.7 RECORDS. The records of the Company with respect to the Plan shall be
conclusive on all Participants, Beneficiaries, and all other persons whomsoever.
10.8 ILLEGALITY OF PARTICULAR PROVISION. If any particular provision of
this Plan shall be found to be illegal or unenforceable, such provision shall
not affect the other provisions thereof, but the Plan shall be construed in all
respect as if such invalid provision were omitted.
10.9 RECEIPT OR RELEASE. Any payment to any Participant or Beneficiary in
accordance with the provisions of this Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Awarding Authority, the Committee
and the Company, and the Committee may require such Participant or Beneficiary,
as a condition precedent to such payment, to execute a receipt and release to
such effect.
10.10 ARBITRATION. The Committee's written decision on review of a denial
of benefits, as provided in Section 9.2(e), shall be final, conclusive and
binding on all Participants,
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<PAGE>
Beneficiaries and Employees of the Company. Notwithstanding the foregoing, any
person disputing such a written decision shall submit such dispute to binding
Arbitration pursuant to the rules of the American Arbitration Association, to be
held in San Diego County. The losing party in such arbitration proceedings
shall bear the costs of arbitration, and each party shall bear its own
attorneys' fees.
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<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
MANAGEMENT STOCK COMPENSATION PLAN
Effective as of April 9, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Awarding Authority . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Share Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PARTICIPATION AND AWARDS . . . . . . . . . . . . . . . . . . . 2
2.1 Designation by Awarding Authority . . . . . . . . . . . . . . . 2
2.2 Awarding Authority to Make Awards . . . . . . . . . . . . . . . 2
2.3 Awards to be Held in Trust . . . . . . . . . . . . . . . . . . . 2
2.4 Vesting and Forfeiture . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Company, Committee and Trustee
Not Responsible for Adequacy of Fund . . . . . . . . . . . . . 3
ARTICLE IV ACCOUNTING PROCEDURES . . . . . . . . . . . . . . . . . . . . . 4
4.1 Committee to Maintain Accounts . . . . . . . . . . . . . . . . . 4
4.2 Accounting Procedures . . . . . . . . . . . . . . . . . . . . . 4
4.3 Invasion of Trust by Creditors . . . . . . . . . . . . . . . . . 4
ARTICLE V RIGHTS IN ACQUIRED STOCK . . . . . . . . . . . . . . . . . . . 4
5.1 Power to Vote Stock Rests with Trustee . . . . . . . . . . . . . 4
5.2 Tender Offers . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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<PAGE>
ARTICLE VI DISTRIBUTION OF ACCOUNTS . . . . . . . . . . . . . . . . . . . 5
6.1 Time of Distribution . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Form of Distribution . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Beneficiary Designation . . . . . . . . . . . . . . . . . . . . 5
6.4 Distribution to Guardian . . . . . . . . . . . . . . . . . . . . 6
6.5 Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII ACCELERATION OF DISTRIBUTION AND VESTING . . . . . . . . . . . 6
7.1 Termination of Employment or Death . . . . . . . . . . . . . . . 6
7.2 Change in Control . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Hardship . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII PLAN TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . 7
8.1 Termination and Amendment . . . . . . . . . . . . . . . . . . . 7
ARTICLE IX PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 7
9.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.2 Committee Powers . . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Plan Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Reliance Upon Documents and Opinions . . . . . . . . . . . . . . 9
9.5 Requirement of Proof . . . . . . . . . . . . . . . . . . . . . 10
9.6 Limitation on Liability . . . . . . . . . . . . . . . . . . . 10
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 11
10.1 Restrictions on Plan Interest . . . . . . . . . . . . . . . . 11
10.2 No Enlargement of Employee Rights . . . . . . . . . . . . . . 11
10.3 Rights of Repurchase and
First Refusal for the Company . . . . . . . . . . . . . . . . 12
10.4 Mailing of Payments . . . . . . . . . . . . . . . . . . . . . 12
10.5 Inability to Locate Participant or Beneficiary . . . . . . . . 12
10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 12
10.7 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.8 Illegality of Particular Provision . . . . . . . . . . . . . . 12
10.9 Receipt or Release . . . . . . . . . . . . . . . . . . . . . . 12
10.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 12
- ii -
<PAGE>
Exhibit 4(m)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
MANAGEMENT STOCK COMPENSATION PLAN
PURPOSE
This Plan is an unfunded compensation arrangement established effective on
April 9, 1994, by Science Applications International Corporation ("SAIC") to
make deferred awards of company stock to selected management and highly
compensated employees.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in the Plan they shall have the
meaning specified below, unless the context indicates clearly to the contrary.
1.1 ACCOUNT. The bookkeeping account established for an Employee pursuant
to Article IV to record the number of Share Units awarded to the Employee and
the vesting thereof.
1.2 AWARD. The award of Share Units in the Trust to an Employee pursuant
to the Plan.
1.3 AWARDING AUTHORITY. The individual or group of individuals appointed
by the Board to make Awards pursuant to the Plan.
1.4 BENEFICIARY. The person or persons properly designated by the
Participant, in accordance with Section 6.3, to receive the benefits provided
herein upon death of the Participant.
1.5 BOARD. The Board of Directors of Science Applications International
Corporation.
1.6 COMMITTEE. The committee appointed by the Board to administer the
Plan. Members of the Committee shall be eligible to receive Awards under the
Plan at the discretion of the Awarding Authority.
1.7 COMPANY. Science Applications International Corporation, a Delaware
corporation, and any subsidiary thereof, the participation in this Plan of the
Employees of which is approved by the Awarding Authority.
1.8 COMPANY STOCK. The Class A Common Stock of Science Applications
International Corporation.
<PAGE>
1.9 DISTRIBUTION. Payment of the vested balance in a Participant's
Account from the Trust to the Participant or the Participant's Beneficiary.
1.10 EMPLOYEE. A management or highly compensated employee of the Company,
as determined by the Committee.
1.11 PARTICIPANT. An Employee designated by the Committee to receive an
Award under the Plan.
1.12 PLAN. The Science Applications International Corporation Stock
Compensation Plan for Management Employees as set forth herein and as amended
from time to time by the Board.
1.13 SHARE UNIT. The interest of a Participant in a share of Company Stock
held in the Participant's Account in the Trust.
1.14 TRUST. The Science Applications International Corporation Stock
Compensation Plan Trust established by the Company to hold all assets awarded to
Participants under the Plan.
1.15 TRUSTEE. State Street Bank or such successor trustee as shall be
appointed pursuant to the Trust.
ARTICLE II
PARTICIPATION AND AWARDS
2.1 DESIGNATION BY AWARDING AUTHORITY. The Awarding Authority in its sole
discretion shall designate those Employees who are to receive Awards under the
Plan. The Awarding Authority's designation of an Employee for a particular
Award shall not require the Awarding Authority to make any further Awards to
such Employee.
2.2 AWARDING AUTHORITY TO MAKE AWARDS. The Awarding Authority shall make
Awards under the Plan by determining a number of Share Units to be credited to
those Employees whom the Awarding Authority has selected for participation in
the Plan corresponding to a specified number of shares of Company Stock
allocated in the Trust to such Employees, and by establishing an Account in
favor of such Employees in accordance with Article IV to hold such Share Units.
A separate Account shall be established for each Award. Each Account shall be
subject to a vesting schedule specified by the Awarding Authority. The amount,
timing and vesting of each Award shall be decided in the Awarding Authority's
sole discretion, and the Awarding Authority may apply different terms to Awards
made to different Employees as well as to different Awards made to the same
Employee.
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<PAGE>
2.3 AWARDS TO BE HELD IN TRUST. Within a reasonable period of time
following the date of an Award, SAIC shall contribute to the Trust Company Stock
or an amount of money sufficient to purchase shares of Company Stock
corresponding to the Share Units made in such Award. The Trustee shall apply
such contribution toward the purchase of Company Stock in accordance with the
directions of the Committee and the terms of the Trust. To the extent any such
Award is made to an Employee of an affiliate of SAIC, SAIC may charge the cost
of the corresponding Trust contribution to such affiliate as agreed between SAIC
and the affiliate.
2.4 VESTING AND FORFEITURE. Each Account shall be subject to a vesting
schedule, not to exceed seven (7) years, established by the Awarding Authority.
Vesting shall cease upon termination of the Participant's employment with the
Company for any reason other than the death of the Participant. For purposes of
the Plan, an Employee's leave of absence exceeding thirty (30) days other than
(i) a leave of absence caused by the Employee's disability, as defined under the
terms of any of the Company's short-term or long-term disability plans, (ii) a
qualified military leave as determined by the Committee, or (iii) a family or
medical leave covered by federal or state family/medical leave acts, shall be
considered a termination of employment effective on the thirtieth day of such
leave of absence. An Employee's change in status to that of consulting employee
shall also be considered a termination of employment for purposes of the Plan.
In the event of the death of a Participant, all of the Participant's Accounts
shall become immediately vested. The unvested portion of a Participant's
Accounts upon termination of employment shall be immediately forfeited by the
Participant, and the shares of Company Stock represented by such unvested
portion shall be returned to the Company or reallocated in accordance with the
Committee's directions and the terms of the Trust.
ARTICLE III
TRUST FUND
3.1 TRUST FUND ESTABLISHED. The Company has established the Trust
pursuant to a trust agreement under which the Trustee will hold and administer
in trust all assets deposited with the Trustee in accordance with the terms of
this Plan. The Board shall have the authority to select and remove the Trustee
to act under the Trust agreement, and to enter into new or amended trust
agreements as it deems advisable.
3.2 COMPANY, COMMITTEE AND TRUSTEE NOT RESPONSIBLE FOR ADEQUACY OF TRUST
FUND. Neither the Company, Committee nor Trustee shall be liable or responsible
for the adequacy of the Trust Fund to meet and discharge any or all payments and
liabilities hereunder. All Plan benefits will be paid only from the Trust
assets, and neither the Company, the Committee nor the Trustee shall have any
duty or liability to furnish the Trust with any funds, securities or other
assets except as expressly provided in Section 2.3 hereof.
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<PAGE>
ARTICLE IV
ACCOUNTING PROCEDURES
4.1 COMMITTEE TO MAINTAIN ACCOUNTS. The Committee shall open and maintain
a separate Account with respect to each Award made under the Plan for purposes
of keeping a record of the assets held in Trust for each Participant and for
recording the vesting status of each Award.
4.2 ACCOUNTING PROCEDURES. The Committee shall establish and may amend
from time to time accounting procedures for the purpose of making allocations,
Distributions, valuations and adjustments to Accounts provided for in this
Article IV. A Participant or Beneficiary shall have no contractual or other
right to have a particular accounting procedure or convention apply, or continue
to apply, and the Committee shall be free to alter any such procedure or
convention without obligation to any Participant or Beneficiary.
4.3 INVASION OF TRUST BY CREDITORS. If assets of the Trust should be
reduced due to action of the Company's Creditors, as provided in the Trust
document, the Committee shall reduce each Account on a pro rata basis to reflect
such reduction in Trust assets, and the Company shall have no obligation to
replace such lost assets.
4.4 TRUST EXPENSES. Expenses of the Trust which are not paid by the
Company shall be applied to reduce each Account on a pro rata basis.
ARTICLE V
RIGHTS IN ACQUIRED STOCK
5.1 POWER TO VOTE STOCK RESTS WITH TRUSTEE. The power to vote any stock
held by the Trustee shall rest solely with the Trustee, who shall vote such
stock in the same proportion that the other shareholders vote their shares of
Company Stock.
5.2 TENDER OFFERS. In the case of a tender offer for the Company Stock,
the Trustee shall tender the shares of Company Stock held by the Trust only if
more than fifty percent (50%) of the shares of Company Stock held outside the
Trust are tendered by the shareholders.
5.3 DIVIDENDS. All dividends on Company Stock held in Trust shall be held
by the Trustee and reinvested as directed by the Committee. The Committee shall
allocate such dividends among the Accounts pro rata to the shares allocated to
each Account.
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<PAGE>
ARTICLE VI
DISTRIBUTION OF ACCOUNTS
6.1 TIME OF DISTRIBUTION. Subject to the acceleration provisions of
Article VII, a Participant's Account shall be Distributed as follows:
(a) The vested portion of the Participant's Account shall be
distributed within a reasonable period of time following the date (i) it becomes
vested, or (ii) the Participant's employment with the Company terminates
(including upon a leave of absence or change in status as specified in
Section 2.4), as elected by the Participant in a manner prescribed by the
Committee within ninety (90) days following the date of the Award contained in
the Account. Such election shall be irrevocable.
(b) If the Participant fails to make the election described in
subsection (a), the Participant's Account shall be distributed in full within a
reasonable period of time following the seventh anniversary of the date of the
Award contained in such Account.
6.2 FORM OF DISTRIBUTION. Distributions shall be made in the form of
Company Stock or cash, or part Company Stock and part cash, as the Committee
shall determine in its sole discretion.
6.3 BENEFICIARY DESIGNATION.
(a) Upon forms provided by the Committee, each Participant shall
designate in writing the Beneficiary or Beneficiaries whom such Participant
desires to receive the benefits of this Plan, if any, payable in the event of
such Participant's death. A Participant may from time to time change his or her
designated Beneficiary or Beneficiaries without the consent of such Beneficiary
or Beneficiaries by filing a new designation in writing with the Committee;
provided, however, that if a married Participant wishes to designate an
individual other than his or her spouse as Beneficiary, such designation shall
not be effective unless consented to in writing by the spouse. Notwithstanding
the foregoing, spousal consent shall not be necessary if it is established to
the satisfaction of the Committee that there is no spouse of the Participant or
that the required consent cannot be obtained because the spouse cannot be
located or is legally incompetent. The Company may rely upon the designation of
Beneficiary or Beneficiaries last filed by the Participant in accordance with
the terms of this Plan.
(b) If the designated Beneficiary does not survive the Participant,
or if there is no valid Beneficiary designation, amounts payable under the Plan
shall be paid to the Participant's spouse, or if there is no surviving spouse,
then to the duly appointed and currently acting personal representative of the
Participant's estate. If there is no personal representative of the
Participant's estate duly appointed and acting in that capacity within sixty
(60) days after the Participant's death, then all payments due under the Plan
shall be payable to the person or persons who can verify by affidavit or court
order to the satisfaction of the Committee that they
- 5 -
<PAGE>
are legally entitled to receive the benefits specified hereunder pursuant to the
laws of intestate succession or other statutory provision in effect at the
Participant's death in the state in which the Participant resided.
6.4 DISTRIBUTION TO GUARDIAN. If the Committee shall find that any person
to whom any payment is payable under this Plan is unable to care for his or her
affairs because of illness or accident, or is a minor, a payment due (unless a
prior claim therefor shall have been made by a duly appointed guardian or other
legal representative) may be paid to the spouse, a child, a parent, or a brother
or sister, or to any custodian, conservator or other fiduciary responsible for
the management and control of such person's financial affairs in such manner and
proportions as the Committee may determine. Any such payment shall be a
complete discharge of the liabilities of the Trust under this Plan.
6.5 WITHHOLDING OF TAXES. To the extent any Distribution from the Trust
is subject to withholding taxes, the Committee may require, as a condition to
the payment of such Distribution, that the Participant or Beneficiary who is
eligible for the Distribution:
(a) make payment to the Company in the form of a check for such
withholding taxes; or
(b) consent to the withholding of shares of Company Stock by the
Trustee sufficient in value to satisfy such withholding taxes, in which case
such shares shall be delivered to the Company which shall make the appropriate
tax withholding.
The Committee may offer either or both of these options to the Participant or
Beneficiary in the Committee's sole discretion.
ARTICLE VII
ACCELERATION OF DISTRIBUTION AND VESTING
7.1 TERMINATION OF EMPLOYMENT OR DEATH. Unless sooner distributed in
accordance with Section 6.1, and notwithstanding any provision to the contrary
in Section 6.1, the vested portion of a Participant's Accounts shall be
distributed from the Trust as soon as practicable following termination of the
Participant's employment with the Company for any reason, including death.
Termination of employment shall include certain leaves of absence and changes in
status as specified in Section 2.4. The Participant and Beneficiary shall
forfeit any unvested portion of the Accounts at the time of such termination or
death.
7.2 CHANGE IN CONTROL. Every Account shall become fully vested and shall
be immediately distributed to the Participants to whom such Accounts belong,
upon the occurrence of a Change in Control (as hereinafter defined) of the
Company. A Change in Control shall be deemed to occur upon any "person" (as
defined in Section 3(a)(9) of the Securities Exchange Act
- 6 -
<PAGE>
of 1934), other than the Company, a subsidiary or any employee benefit plan or
trust maintained by the Company or a subsidiary becoming the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of more than 25% of the Company Stock outstanding at such time,
without the prior approval of the Board. For purposes of the foregoing, a
subsidiary is any corporation in an unbroken chain of corporations beginning
with the Company if each of the corporations, other than the last corporation in
such chain, owns at least fifty percent (50%) of the total voting power in one
of the other corporations in such chain.
7.3 HARDSHIP. Notwithstanding the provisions of Section 6.1 hereof, a
Participant shall be entitled to request a hardship Distribution of all or any
portion of the vested portion of his or her Account(s). A Participant must make
a written request for a hardship Distribution, stating the reasons such
withdrawal is necessary because of a financial hardship. The Committee, in its
sole discretion, shall determine whether or not to grant the hardship
Distribution of such Participant's Account(s) and, in so doing, may rely on the
Participant's statements, and a hardship Distribution and vesting acceleration
may be approved without further investigation unless the Committee has reason to
believe such statements are false.
ARTICLE VIII
PLAN TERMINATION AND AMENDMENT
8.1 TERMINATION AND AMENDMENTS. The Plan shall continue until all amounts
have been distributed in accordance with the terms of the Plan. Notwithstanding
the foregoing sentence, the Board retains the right to amend or terminate the
Plan for any reason, including but not limited to adverse changes in accounting
rules or tax laws or the bankruptcy, receivership or dissolution of the Company.
In the event of a Plan amendment or termination, benefits will either be paid
out when due under the terms of the Plan or as soon as possible as determined by
the Committee in its sole discretion. To the extent feasible, the Committee
shall use its best efforts to avoid adversely affecting the rights of any
existing Participants in the Plan, but the Committee shall be under no specific
duty or obligation in this regard.
ARTICLE IX
PLAN ADMINISTRATION
9.1 COMMITTEE. The Plan shall be administered by the Committee. Subject
to the provisions of the Plan and the authority granted hereunder to the
Awarding Authority, the Committee shall have exclusive power to determine the
manner and time of Awards and payment of benefits to the extent herein provided
and to exercise any other discretionary powers granted to the Committee pursuant
to the Plan. The decisions or determinations by the Committee shall be final
and binding upon all parties, including shareholders, Participants and other
Employees. The Committee shall have the authority to interpret the Plan, to
make factual findings and
- 7 -
<PAGE>
determinations, to adopt and revise rules and regulations relating to the Plan
and to make any other determinations which it believes necessary or advisable
for the administration of the Plan. The Committee's discretion in these matters
shall be as broad and unfettered as permitted by law.
9.2 COMMITTEE POWERS. The Committee shall have all powers necessary to
supervise the administration of the Plan and control its operations. In
addition to any powers and authority conferred on the Committee elsewhere in the
Plan or by law, the Committee shall have, by way of illustration and not by way
of limitation, the following powers and authority:
(a) To designate agents to carry out responsibilities relating to the
Plan;
(b) To employ such legal, actuarial, medical, accounting, clerical
and other assistance as it may deem appropriate in carrying out the provisions
of this Plan;
(c) To administer, interpret, construe and apply this Plan and to
decide all questions which may arise or which may be raised under this Plan by
any Employee, Participant, Beneficiary or other person whomsoever, including but
not limited to all questions relating to eligibility to participate in the Plan,
determination of Awards and the amount of benefits to which any Participant may
be entitled;
(d) To establish rules and procedures from time to time for the
conduct of its business and for the administration and effectuation of its
responsibilities under the Plan;
(e) To establish claims procedures, and to make forms available for
filing of such claims, and to provide the name of the person or persons with
whom such claims should be filed. The Committee shall establish procedures for
action upon claims initially made and the communication of a decision to the
claimant promptly and, in any event, not later than sixty (60) days after the
date of the claim; the claim may be deemed by the claimant to have been denied
for purposes of further review described below in the event a written decision
is not furnished to the claimant within such sixty (60) day period. Every claim
for benefits which is denied shall be denied by written notice setting forth in
a manner calculated to be understood by the claimant (1) the specific reason or
reasons for the denial, (2) specific reference to any provisions of this Plan on
which denial is based, (3) description of any additional material or information
necessary for the claimant to perfect his claim with an explanation of why such
material or information is necessary, and (4) an explanation of the procedure
for further reviewing the denial of the claim under the Plan. The Committee
shall establish a procedure for review of claim denials, such review to be
undertaken by the Committee. The review given after denial of any claim shall
be a full and fair review with the claimant or his duly authorized
representative having one hundred eighty (180) days after receipt of denial of
his claim to request such review, having the right to review all pertinent
documents and the right to submit issues and comments in writing. The Committee
shall establish a procedure for issuance of a decision by the Committee not
later than sixty (60) days after receipt of a request for review from a claimant
unless special circumstances, such as the need to hold a hearing, require a
- 8 -
<PAGE>
longer period of time, in which case a decision shall be rendered as soon as
possible but not later than one hundred twenty (120) days after receipt of the
claimant's request for review. The decision on review shall be in writing and
shall include specific reasons for the decision written in a manner calculated
to be understood by the claimant with specific reference to any provisions of
this Plan on which the decision is based; and
(f) To perform or cause to be performed such further acts as it may
deem to be necessary, appropriate, or convenient in the efficient administration
of the Plan.
Any action taken in good faith by the Committee in the exercise of
authority conferred upon it by this Plan shall be conclusive and binding upon
the Participants and their beneficiaries. All discretionary powers conferred
upon the Committee shall be absolute.
9.3 PLAN EXPENSES. Members of the Committee shall serve as such without
compensation from the Plan, but may receive compensation from the Company for so
serving. All Plan administration expenses shall be borne by the Company or the
Trust as determined by the Committee in its sole discretion.
9.4 RELIANCE UPON DOCUMENTS AND OPINIONS.
(a) The members of the Committee, the Board, and the Company shall be
entitled to rely upon any:
(i) Tables, valuations, computations, estimates, certificates,
opinions and reports furnished by any consultant, or firm or corporation
which employs one or more consultants or advisors; and
(ii) Computations, estimates and reports furnished by any
consultants or consulting firms.
(b) The members of the Committee, the Board, and the Company shall be
fully protected and shall not be liable in any manner whatsoever for anything
done or action taken or suffered in reliance upon any such consultant, firm, or
corporation which employs one or more consultants or counsel.
(c) Any and all such things done or such actions taken or suffered by
the Committee, the Board, and the Company in so relying shall be conclusive and
binding on all Employees, Participants, Beneficiaries and any other persons
whomsoever, except as otherwise provided by law.
(d) The Committee may, but is not required to, rely upon all records
of the Company with respect to any matter or thing whatsoever, and may likewise
treat such records as conclusive with respect to all Employees, Participants,
Beneficiaries and any other persons whomsoever, except as otherwise provided by
law.
- 9 -
<PAGE>
9.5 REQUIREMENT OF PROOF. The Committee, the Board, or the Company may
require satisfactory proof of any matter under this Plan from or with respect to
any Employee, Participant or Beneficiary, and no such person shall acquire any
rights or be entitled to receive any benefits under this Plan until such proof
shall be furnished as so required.
9.6 LIMITATION ON LIABILITY. No employee or director of the Company and
no other person shall be subject to any liability by reason of or arising from
his or her participation in the establishment or administration or operation of
the Plan unless he or she acts fraudulently or in bad faith.
9.7 INDEMNIFICATION.
(a) To the extent permitted by law, the Company shall indemnify each
member of the Awarding Authority, of the Committee, and any other employee or
director of the Company who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed proceeding, whether civil,
criminal, administrative, or investigative, by reason of his or her conduct in
the performance in connection with the establishment or administration of the
Plan or any amendment or termination of the Plan.
(b) This indemnification shall apply against expenses including,
without limitation, attorneys fees and any expenses of establishing a right to
indemnification hereunder, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding, except in
relation to matters as to which he or she has acted fraudulently or in bad faith
in the performance of such duties.
(c) The termination of any proceeding by judgment, order, settlement,
conviction, upon a plea of nolo contendere or its equivalent shall not, in and
of itself, create a presumption that the person acted fraudulently or in bad
faith in the performance of his or her duties.
(d) Expenses incurred in defending any such proceeding may be
advanced by the Company prior to the final disposition of such proceeding, upon
receipt of an undertaking by or on behalf of the recipient to repay such amount,
unless it shall be determined ultimately that the recipient is entitled to be
indemnified as authorized in this Section 9.7.
(e) The right of indemnification set forth in this Section 9.7 shall
be in addition to any other right to which any Awarding Authority member,
Committee member or other person may be entitled as a matter of law, by
corporate bylaws or otherwise.
- 10 -
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 RESTRICTIONS ON PLAN INTEREST.
(a) A Participant's interest in this Plan shall be limited to his or
her Account in the Trust and he or she shall have no other interest in any
assets of the Company nor any right as against the Company, Awarding Authority
or Committee for payment of benefits under this Plan.
(b) None of the benefits, payments, proceeds, claims or rights
hereunder of any Participant or Beneficiary shall be subject to any claim of any
creditor of such Participant or Beneficiary and in particular the same shall not
be subject to attachment, garnishment, or other legal process by any creditor of
such Participant or Beneficiary.
(c) A Participant or Beneficiary shall not have any right to
alienate, anticipate, commute, pledge, encumber, or assign any of the benefits
or payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
(d) A Participant's and Beneficiary's interest in this Plan and his
or her Account in the Trust are subject to the claims of the Company's creditors
as provided in the Trust. Each Participant and Beneficiary shall, however, be
considered a general creditor of the Company with respect to the assets held in
his or her Account in the Trust, so that if the Company should become insolvent,
the Participant or Beneficiary will have a claim against the Trust assets equal
to that of the Company's other general creditors (regardless of whether such
assets are removed from the trust by a trustee in bankruptcy).
10.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS.
(a) This Plan is strictly a voluntary undertaking on the part of the
Company and shall not be deemed to constitute a contract between the Company and
any Employee, or to be consideration for, or an inducement to, or a condition
of, the employment of any Employee.
(b) An Employee's employment with the Company is not for any
specified term and may be terminated by such Employee or by the Company at any
time for any reason, with or without cause. Nothing in this Plan or in any
agreement pursuant to this Plan shall confer upon any Employee or Participant
any right to continue in the employ of or affiliation with the Company nor
constitute any promise or commitment by the Company regarding future positions,
future work assignments, future compensation or any other term or condition of
employment or affiliation.
- 11 -
<PAGE>
(c) No person shall have any right to any benefits under this Plan,
except to the extent expressly provided herein.
(d) The Plan is not intended to nor shall it be deemed to be a Plan
providing retirement income or resulting in the deferral of income by employees
for periods extending to the termination of covered employment or beyond.
10.3 RIGHTS OF REPURCHASE AND FIRST REFUSAL FOR THE COMPANY. Any Company
Stock distributed from the Plan shall be subject to a right of repurchase and
right of first refusal by the Company. The terms and conditions of the right of
repurchase and right of first refusal shall be those applied to Company Stock by
the Certificate of Incorporation of Science Applications International
Corporation, as in effect from time to time.
10.4 MAILING OF PAYMENTS. All payments under the Plan shall be delivered
in person or mailed to the last address of the Participant (or, in the case of
the death of the Participant to that of any other person entitled to such
payments under the terms of the Plan). Each Participant shall be responsible
for furnishing the Committee with his or her correct current address and the
correct current name and address of his or her Beneficiary.
10.5 INABILITY TO LOCATE PARTICIPANT OR BENEFICIARY. In the event that the
Committee is unable to locate a Participant or Beneficiary to whom benefits are
payable hereunder after mailing a notice to the Participant's or Beneficiary's
last known address, and such inability lasts for a period of three (3) years,
then any remaining benefits payable hereunder shall be forfeited to the Company
and no Participant or Beneficiary shall have any right to further benefits from
the Plan, even if subsequently located.
10.6 GOVERNING LAW. All legal questions pertaining to the Plan shall be
determined in accordance with the laws of the State of California.
10.7 RECORDS. The records of the Company with respect to the Plan shall be
conclusive on all Participants, Beneficiaries, and all other persons whomsoever.
10.8 ILLEGALITY OF PARTICULAR PROVISION. If any particular provision of
this Plan shall be found to be illegal or unenforceable, such provision shall
not affect the other provisions thereof, but the Plan shall be construed in all
respect as if such invalid provision were omitted.
10.9 RECEIPT OR RELEASE. Any payment to any Participant or Beneficiary in
accordance with the provisions of this Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Awarding Authority, the Committee
and the Company, and the Committee may require such Participant or Beneficiary,
as a condition precedent to such payment, to execute a receipt and release to
such effect.
10.10 ARBITRATION. The Committee's written decision on review of a denial
of benefits, as provided in Section 9.2(e), shall be final, conclusive and
binding on all Participants,
- 12 -
<PAGE>
Beneficiaries and Employees of the Company. Notwithstanding the foregoing, any
person disputing such a written decision shall submit such dispute to binding
Arbitration pursuant to the rules of the American Arbitration Association, to be
held in San Diego County. The losing party in such arbitration proceedings
shall bear the costs of arbitration, and each party shall bear its own
attorneys' fees.
- 13 -
<PAGE>
EXHIBIT 10(b)
SIXTH AMENDMENT TO CREDIT AGREEMENT
Dated as of August 10, 1993
This SIXTH AMENDMENT TO CREDIT AGREEMENT, is dated as of August 10, 1993
(this "Amendment"), among SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a
Delaware corporation (the "Borrower"), CITIBANK, N.A. ("Citibank") and CITICORP
USA, INC. ("CUSA").
PRELIMINARY STATEMENTS. The Borrower and Citibank have entered into a
Credit Agreement dated as of October 31, 1988 (as amended by First Amendment
dated as of July 28, 1989, Second Amendment dated as of August 31, 1990, Third
Amendment dated as of July 1, 1991, Fourth Amendment dated as of June 30, 1992
and Fifth Amendment dated as of August 4, 1992, the "Credit Agreement").
Citibank wishes to assign its rights and obligations under the Credit Agreement
to CUSA, a wholly-owned subsidiary of Citibank, pursuant to Section 15.7 of the
Credit Agreement, and the parties hereto wish to amend the Credit Agreement in
certain respects as hereinafter set forth. Terms defined in the Credit
Agreement are used in this Amendment as defined in the Credit Agreement and,
unless the context otherwise requires, all references to Sections and Exhibits
shall be deemed to refer to the corresponding Sections of and Exhibits to the
Credit Agreement.
The parties hereto therefore agree as follows:
SECTION 1. ASSIGNMENT. Effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof, Citibank
shall sell and assign to CUSA and CUSA shall purchase and assume from Citibank
all of Citibank's rights and obligations under the Credit Agreement. CUSA and
Citibank shall make arrangements among themselves with respect to the terms of
such assignment and assumption. After giving effect to such assignment and
assumption, CUSA shall be a party to the Credit Agreement and shall have the
rights and obligations of Citibank thereunder and Citibank shall relinquish its
rights and be released from its obligations under the Credit Agreement and shall
cease to be a party thereto.
SECTION 2. AMENDMENTS. Effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof, the
Credit Agreement is amended as follows:
a. Section 2.3 shall be amended (i) by inserting the words "to cause
Citibank" after "the Bank" in the fourth line, (ii) by adding "and Citibank"
after "Borrower" in the final sentence, and (iii) by adding the following
sentence after the final sentence:
"In the event that Citibank notifies the Bank that you have failed to pay
any obligations under any Acceptance Agreement when due, you shall be
deemed to have requested a Prime Rate Loan hereunder in the amount of such
unpaid obligations and the Bank is hereby irrevocably authorized to make
such a Prime
<PAGE>
Rate Loan and to deliver the proceeds thereof to Citibank for application
to such obligations."
b. Section 2.4 shall be amended by adding "shall be in substantially the
form of Exhibit I hereto," after the parenthetical in the second sentence.
c. Section 8.5 shall be deleted and restated in its entirety as follows:
8.5 PAYMENTS OF CERTIFIED AMOUNTS; OCCURRENCE OF SPECIFIED
CONDITIONS. Determination of amounts payable under Sections 4.5, 4.7, 5.5,
5.7, 6.5, and 8.4 and Section 2 of Exhibit A in connection with a Fixed CD
Rate Loan, a Eurodollar Loan or a Money Market Rate Loan, as the case may
be, shall be calculated, and the existence of circumstances described in
Section 8.6 shall be determined, as though the Bank funded such Loan by a
borrowing from Citibank and that Citibank funded such borrowing through the
purchase of an instrument of the type, maturity and amount corresponding to
the instrument or index used as a reference in determining the rate of
interest applicable to such Loan.
d. The definition of "Termination Date" in Section 15.1 is deleted and
restated in its entirety as follows:
"TERMINATION DATE" shall mean July 1, 1996, or such anniversary of the
date of this Agreement to which the Termination Date shall be extended
pursuant to Section 15.14.
e. Section 15.14 shall be amended by deleting all references to "June 30"
and substituting therefor "July 31."
f. Section 1 of Exhibit A shall be amended by deleting the definition of
"Bank" and restating such definition in its entirety as follows:
"BANK" shall mean Citicorp USA, Inc., a Delaware corporation.
g. Exhibit A shall be amended by inserting the following definition in
the appropriate alphabetical order in Section 1 thereof:
"CITIBANK" shall mean Citibank, N.A., a national banking association.
h. The definitions of "Assessment Rate," "Eurodollar Rate," "Fixed CD
Rate," "Prime Rate" and "Reserve Percentage" in Section 1 of Exhibit A shall be
amended by deleting each reference to "the Bank" contained therein and
substituting "Citibank".
i. Section 5 of Exhibit A shall be deleted and restated in its entirety
as follows:
<PAGE>
5. ADDRESS FOR NOTICES. All notices sent or delivered to the Bank
shall be addressed to the Bank at: Citicorp USA, Inc., c/o Citicorp North
America, Inc., 725 South Figueroa Street, Los Angeles, CA 90017, Attn:
Michael Watchorn.
j. Exhibits C-1, C-2, D-1 and D-2 shall be deleted and replaced with
Exhibits C-1, C-2, D-1 and D-2 to this Amendment, respectively.
k. A new Exhibit I shall be added in the form of Exhibit I hereto.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective
as of the date hereof, provided that (a) the representations and warranties
contained in Section 4 hereof are correct on and as of such date; (b) no event
has occurred and is continuing on such date which constitutes an Event of
Default or which would constitute an Event of Default but for the requirement
that notice be given or time elapse or both; and (c) CUSA shall have received
(i) counterparts of this Amendment executed by the Borrower and Citibank, (ii)
promissory notes of Borrower in the form attached as Exhibits C-1 and C-2
hereto, appropriately completed (the "Replacement Notes"), and (iii) a
certificate of the Secretary or an Assistant Secretary of the Borrower attaching
a copy of the resolutions of the Board of Directors of the Borrower authorizing
the execution and delivery of this Amendment and the Replacement Notes and
certifying the name and true signature of each officer of the Borrower executing
this Amendment or the Replacement Notes on its behalf.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants as follows: (a) the Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction indicated at
the beginning of this Amendment; (b) the execution, delivery and performance by
the Borrower of this Amendment and the Replacement Notes are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene the Borrower's charter or by-laws, or
any law or any contractual restriction binding on or affecting the Borrower; (c)
no authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Borrower of this Amendment and the Replacement
Notes; (d) this Amendment constitutes, and the Replacement Notes when executed
and delivered will constitute, the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms; and (e) all representations and warranties of the Borrower set forth in
Section 13.1 of the Credit Agreement are true and correct as of the date first
stated above, as if repeated and restated in full herein.
SECTION 5. RETURN OF REVOLVING NOTES. Promptly following the
effectiveness of Sections 1 and 2 hereof, Citibank shall return the
<PAGE>
original Revolving Notes to the Borrower, marked "cancelled and replaced".
SECTION 6. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. Upon the
effectiveness of Sections 1 and 2 hereof, on and after the date hereof, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Credit
Agreement as amended by this Amendment, and each reference to "the Revolving
Notes" in the Credit Agreement shall mean and be a reference to the Replacement
Notes. Except as specifically amended above, the Credit Agreement shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts and by any combination of the parties hereto in
separate counterparts, each of which counterparts shall be an original and all
of which taken together shall constitute one and the same Amendment.
SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By S/W. A. Roper
-----------------------------
Name William A. Roper, Jr.
---------------------------
Title Sr. V.P./CFO
--------------------------
By S/Ward Reed
-----------------------------
Name Ward Reed
---------------------------
Title Corp. V.P. & Treasurer
--------------------------
CITIBANK, N.A.
By: S/Edward Lettieri
---------------------------------
Vice President
CITICORP USA, INC.
By: S/Carolyn R. Bodmer
---------------------------------
Vice President
<PAGE>
EXHIBIT C-1
REVOLVING DOMESTIC NOTE
U.S. $
--------------------- ----------------------------------
, 19
--------------------- ---------
[NAME OF BORROWER], a [jurisdiction of incorporation] corporation (the
"Borrower"), FOR VALUE RECEIVED, hereby promises to pay to the order of CITICORP
USA, INC. (the "Bank") at the office of Citibank, N.A. located at 399 Park
Avenue, New York, New York, (i) the principal amount of each Revolving Loan made
by the Bank to the Borrower as a Domestic Loan pursuant to the Agreement
referred to below on the last day of the Interest Period (as defined in the
Agreement) applicable thereto and (ii) on the Termination Date (as defined in
the Agreement) the principal sum of __________________________ Dollars, or if
less, the aggregate unpaid principal amount of the Revolving Loans made by the
Bank to the Borrower as Domestic Loans pursuant to the Agreement, in each case
in lawful money of the United States of America (in freely transferable U.S.
dollars and in immediately available funds).
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates per annum which shall be determined in accordance with the provisions
of the Credit Agreement dated as of October 31, 1988, between Science
Applications International Corporation and the Bank (as amended by First
Amendment dated as of July 28, 1989, Second Amendment dated as of August 31,
1990, Third Amendment dated as of July 1, 1991, Fourth Amendment dated as of
June 30, 1992, Fifth Amendment dated as of August 4, 1992, and Sixth Amendment
dated as of July 30, 1993, and as it may be further amended from time to time,
the "Agreement"), said interest to be payable at the times provided for in the
Agreement.
This Note is one of the Revolving Domestic Notes referred to in the
Agreement and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or in part, as specified
in the Agreement. In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
[This Note is issued in replacement for the Revolving Domestic Note of
the Borrower dated October 31, 1988.]1
[Science Applications International Corporation has, pursuant to the
provisions of the Agreement, guaranteed the payment in full of the principal of
and interest on this Note.]2
[NAME OF BORROWER]
By
-----------------------------
1 To be deleted in the case of a Note issued by a Borrowing Subsidiary.
2 To be deleted in the case of a Note issued by the Company.
<PAGE>
EXHIBIT C-2
REVOLVING EURODOLLAR NOTE
U.S. $
--------------------- ----------------------------------
, 19
--------------------- ---------
[NAME OF BORROWER], a [jurisdiction of incorporation] corporation (the
"Borrower"), FOR VALUE RECEIVED, hereby promises to pay to the order of CITICORP
USA, INC. (the "Bank") at the office of Citibank, N.A. located at 399 Park
Avenue, New York, New York, (i) the principal amount of each Revolving Loan made
by the Bank to the Borrower as a Eurodollar Loan pursuant to the Agreement
referred to below on the last day of the Interest Period (as defined in the
Agreement) applicable thereto and (ii) on the Termination Date (as defined in
the Agreement) the principal sum of __________________________ Dollars, or if
less, the aggregate unpaid principal amount of the Revolving Loans made by the
Bank to the Borrower as Eurodollar Loans pursuant to the Agreement, in each case
in lawful money of the United States of America (in freely transferable U.S.
dollars and in immediately available funds).
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates per annum which shall be determined in accordance with the provisions
of the Credit Agreement dated as of October 31, 1988, between Science
Applications International Corporation and the Bank (as amended by First
Amendment dated as of July 28, 1989, Second Amendment dated as of August 31,
1990, Third Amendment dated as of July 1, 1991, Fourth Amendment dated as of
June 30, 1992, Fifth Amendment dated as of August 4, 1992, and Sixth Amendment
dated as of July 30, 1993, and as it may be further amended from time to time,
the "Agreement"), said interest to be payable at the times provided for in the
Agreement.
This Note is one of the Revolving Eurodollar Notes referred to in the
Agreement and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or in part, as specified
in the Agreement. In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
[This Note is issued in replacement for the Revolving Eurodollar Note
of the Borrower dated October 31, 1988.]1
[Science Applications International Corporation has, pursuant to the
provisions of the Agreement, guaranteed the payment in full of the principal of
and interest on this Note.]2
[NAME OF BORROWER]
By
-----------------------------------------
Title
-------------------------
1 To be deleted in the case of a Note by a Borrowing Subsidiary.
2 To be deleted in the case of a Note issued by the Company.
<PAGE>
EXHIBIT D-1
TERM DOMESTIC NOTE
U.S. $
-------------------- -------------------------
, 19
---------------------
[NAME OF BORROWER], a [jurisdiction of incorporation] corporation (the
"Borrower"), FOR VALUE RECEIVED, hereby promises to pay to the order of CITICORP
USA, INC. (the "Bank") at the office of Citibank, N.A. located at 399 Park
Avenue, New York, New York, (i) the principal amount of each Term Loan made by
the Bank to the Borrower as a Domestic Loan pursuant to the Agreement referred
to below on the last day of the Interest Period (as defined in the Agreement)
applicable thereto, PROVIDED that the Borrower shall reduce the aggregate
principal amount of all Term Loans outstanding hereunder by making twelve
substantially equal quarter-annual payments of principal (from sources other
than proceeds of Term Loans) on the last Business Day (as defined in the
Agreement) of each January, April, July and October of each year, commencing
with the first such date to occur after the Termination Date (as defined in the
Agreement), and with a final payment of all unpaid principal on the third
anniversary of the Termination Date.
The Borrower promises also to pay interest on the unpaid principal
amount thereof in like money at said office from the date hereof until paid at
the rates per annum which shall be determined in accordance with the provisions
of the Credit Agreement dated as of October 31, 1988, between Science
Applications International Corporation and the Bank (as amended by First
Amendment dated as of July 28, 1989, Second Amendment dated as of August 31,
1990, Third Amendment dated as of July 1, 1991, Fourth Amendment dated as of
June 30, 1992, Fifth Amendment dated as of August 4, 1992, and Sixth Amendment
dated as of July 30, 1993, and as it may be further amended from time to time,
the "Agreement"), said interest to be payable at the times provided for the
Agreement.
This Note is one of the Term Domestic Notes referred to in the
Agreement and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or in part, as specified
in the Agreement. In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
[Science Applications International Corporation has, pursuant to the
provisions of the Agreement, guaranteed the payment in full of the principal of
and interest on this Note.]1
[NAME OF BORROWER]
By
--------------------------------
Title:
- ------------------------
1 To be deleted in the case of a Note issued by the Company.
<PAGE>
EXHIBIT D-2
TERM EURODOLLAR NOTE
U.S. $
-------------------- -------------------------
, 19
---------------------
[NAME OF BORROWER], a [jurisdiction of incorporation] corporation
(the "Borrower"), FOR VALUE RECEIVED, hereby promises to pay to the order of
CITICORP USA, INC. (the "Bank") at the office of Citibank, N.A. located at 399
Park Avenue, New York, New York, (i) the principal amount of each Term Loan made
by the Bank to the Borrower as a Eurodollar Loan pursuant to the Agreement
referred to below on the last day of the Interest Period (as defined in the
Agreement) applicable thereto, PROVIDED that the Borrower shall reduce the
aggregate principal amount of all Term Loans outstanding hereunder by making
twelve substantially equal quarter-annual payments of principal (from sources
other than proceeds of Term Loans) on the last Business Day (as defined in the
Agreement) of each January, April, July and October of each year, commencing
with the first such date to occur after the Termination Date (as defined in the
Agreement), and with a final payment of all unpaid principal on the third
anniversary of the Termination Date.
The Borrower promises also to pay interest on the unpaid principal
amount thereof in like money at said office from the date hereof until paid at
the rates per annum which shall be determined in accordance with the provisions
of the Credit Agreement dated as of October 31, 1988, between Science
Applications International Corporation and the Bank (as amended by First
Amendment dated as of July 28, 1989, Second Amendment dated as of August 31,
1990, Third Amendment dated as of July 1, 1991, Fourth Amendment dated as of
June 30, 1992, Fifth Amendment dated as of August 4, 1992, and Sixth Amendment
dated as of July 30, 1993, and as it may be further amended from time to time,
the "Agreement"), said interest to be payable at the times provided for the
Agreement.
This Note is one of the Term Eurodollar Notes referred to in the
Agreement and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or in part, as specified
in the Agreement. In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
[Science Applications International Corporation has, pursuant to the
provisions of the Agreement, guaranteed the payment in full of the principal of
and interest on this Note.]1
[NAME OF BORROWER]
By
--------------------------------
Title:
1 To be deleted in the case of a Note issued by the Company.
<PAGE>
EXHIBIT I
NOTICE OF BORROWING
[Date]
CITICORP USA, INC.
c/o Citicorp North America, Inc.
725 South Figueroa Street, Fifth Floor
Los Angeles, CA 90017
Attention: Michael Watchorn
Ladies and Gentlemen:
Pursuant to the Credit Agreement between you and Science Applications
International Corporation dated as of October 31, 1988 (as amended through the
date hereof, the "Credit Agreement;" all terms defined therein being used with
the same meanings), the undersigned, _________________________________ (the
"Borrower"), hereby notifies you of the Borrower's request for a Loan under the
Credit Agreement as follows:
1. The amount of such Loan shall be $ .
--------------------
2. The date of borrowing of such Loan shall be , 19 .
----------------- ----
3. Such Loan shall be a:
Prime Rate Loan with an Interest Period of days.
------- ----
Eurodollar Rate Loan with an Interest Period of
---------- -----------
months.
Fixed CD Rate Loan with an Interest Period of days.
------- ------
Money Market Rate Loan with an interest rate of
-------
% per annum and a maturity date of
--------------
, 19 .
------------------ --- ---
4. $ of the proceeds of such Loan will be used by the
------------
Borrower to purchase or carry Margin Stock [if none insert "NONE"].
<PAGE>
Pursuant to Section 9 of the Credit Agreement, the undersigned hereby
certifies that:
(a) there exists no Event of Default and all representations and warranties
contained in the Credit Agreement (excluding those contained in subsections (c)
and (e) of Section 13.1 thereof) are true and correct as of the date hereof,
both before and after giving effect to such Loan; and
(b) if such Loan increases the outstanding principal amount of Revolving
Loans to the Borrower or if this Notice is given in connection with the making
of the initial Term Loans to the Borrower, there exists no Default or Event of
Default and all representations and warranties contained in the Credit Agreement
are true and correct as of the date hereof, both before and after giving effect
to such Loan.
Very truly yours,
[NAME OF BORROWER]
By
-----------------------------
Title
--------------------------
<PAGE>
EXHIBIT 10(i)
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (the "Sixth Amendment") is
made and dated as of July 22, 1993 by and between SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION, a Delaware corporation (the "Company") and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").
RECITALS
A. The Bank or its predecessor in interest and the Company entered
into a Credit Agreement dated as of October 31, 1988, as amended by a First
Amendment to Credit Agreement dated as of June 15, 1989, a Second Amendment to
Credit Agreement dated as of June 14, 1990, a Third Amendment to Credit
Agreement dated as of June 14, 1991, a Fourth Amendment to Credit Agreement
dated as of June 26, 1992 and a Fifth Amendment to Credit Agreement dated as of
August 10, 1992 (as so amended, the "Agreement").
B. The parties now desire to further amend the Agreement on the
following terms and conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same meanings as in
the Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. AMENDMENTS. The Bank and the Company hereby agree to amend the
Agreement as follows:
2.1 Section 15.1 of the Agreement is amended by deleting in its
entirety the definition for "Termination Date" and inserting the following in
lieu thereof:
"'TERMINATION DATE' shall mean July 1, 1996 or such later date of this
Agreement to which the Termination Date shall be extended pursuant to
Section 15.14."
3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Bank:
- 1 -
<PAGE>
3.1 AUTHORIZATION. The execution, delivery and performance of this
Sixth Amendment have been duly authorized by all necessary corporate action by
the Company and has been duly executed and delivered by the Company.
3.2 BINDING OBLIGATION. This Sixth Amendment is the legally valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally or by equitable principals relating to enforceability.
3.3 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution of this
Sixth Amendment, the making by the Company of any borrowings under the
Agreement, nor the performance of the Agreement has constituted or resulted in
or will constitute or result in a breach of the provisions of any contract to
which the Company is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to the Company, or result in
the creation under any agreement or instrument of any security interest, lien,
charge, or encumbrance upon any of the assets of the Company. No approval or
authorization of any governmental authority is required to permit the execution,
delivery or performance by the Company of this Sixth Amendment, the Agreement,
or the transactions contemplated hereby or thereby, or the making of any
borrowing by the Company under the Agreement.
3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. The representations
and warranties set forth in Section 13 of the Agreement are true and correct in
all respects on and as of the date hereof as though made on and as of the date
hereof.
3.5 DEFAULT. No Default or Event of Default under the Agreement has
occurred and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Sixth
Amendment shall be subject to the compliance by the Company with its agreements
herein contained, and to the delivery of the following to the Bank in form and
substance satisfactory to the Bank:
4.1 CORPORATE RESOLUTION. A copy of a resolution or resolutions
passed by the Board of Directors of the Company, certified by the Secretary or
an Assistant Secretary of the Company as being in full force and effect on the
effective date of this Sixth Amendment, authorizing the amendments to the
Agreement herein provided for and the execution, delivery and performance of
this Sixth Amendment and any note or other instrument or agreement required
hereunder.
- 2 -
<PAGE>
4.2 AUTHORIZED SIGNATORIES. A certificate, signed by the Secretary
or an Assistant Secretary of the Company and dated the date of this Sixth
Amendment, as to the incumbency of the person or persons authorized to execute
and deliver this Sixth Amendment and any instrument or agreement required
hereunder on behalf of the Company.
4.3 OTHER EVIDENCE. Such other evidence with respect to the Company
or any other person as the Bank may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking of all
corporate action in connection with this Sixth Amendment and the Agreement and
the compliance with the conditions set forth herein.
5. MISCELLANEOUS.
5.1 EFFECTIVENESS OF THE AGREEMENT. Except as hereby amended, the
Agreement shall remain in full force and effect.
5.2 WAIVERS. This Sixth Amendment is specific in time and in intent
and does not constitute, nor should it be construed as, a waiver of any other
right, power or privilege under the Agreement, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement; nor does it
preclude any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power, privilege or default
hereunder, or under any agreement, contract, indenture, document or instrument
mentioned in the Agreement, constitute a waiver of any other default of the same
or of any other term or provision.
5.3 COUNTERPARTS. This Sixth Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This Sixth Amendment shall not become
effective until the Company and the Bank shall have signed a copy hereof,
whether the same or counterparts, and the same shall have been delivered to the
Bank.
5.4 JURISDICTION. This Sixth Amendment, and any instrument or
agreement required hereunder, shall be governed by and construed under the laws
of the State of California.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be duly executed and delivered as of the date first written above.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By: S/W. A. Roper
-----------------------------
Title: Sr. V.P. & CFO
--------------------------
By: S/Ward Reed
-----------------------------
Title: Corp. V.P. & Treasurer
--------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: S/L. Kannegieter
------------------------------
Lori Kannegieter
Vice President
- 4 -
<PAGE>
EXHIBIT 10(p)
July 30, 1993
Science Applications
International Corporation
10260 Campus Point Drive
San Diego, California 92121
Attention: Mr. Ward Reed
Corporate Vice President
and Treasurer
Re: Credit Agreement
Ladies and Gentlemen:
Please refer to the Credit Agreement dated as of May 26,
1992, as amended as of June 18, 1992 (as so amended, the "CREDIT
AGREEMENT"), between Science Applications International
Corporation (the "BORROWER") and Continental Bank N.A. (the
"BANK"). You have requested that the Bank extend the termination
date under the Credit Agreement and make several other amendments
to the Credit Agreement. All defined terms used herein and not
otherwise defined shall have the meanings assigned to them in the
Credit Agreement.
We have agreed that the Credit Agreement shall be amended as
follows:
(a) The figures "$150,000,000" and "119,148,000"
appearing in the third line of Section 10.8 of the Credit
Agreement shall be deleted and replaced with the figures
"$175,000,000" and "132,294,000," respectively.
(b) The figure "1.4" appearing in the fourth line of
Section 10.9 of the Credit Agreement shall be deleted and
replaced with the figure "1.5".
(c) The last sentence of Section 10.10 of the Credit
Agreement shall be amended to read as follows:
<PAGE>
Science Applications
International Corporation
July 30, 1993
Page 2
"For purposes of this Section 10.10, "Reference
Amount" shall mean (i) for Fiscal Year 1989 of the
Company, $60,000,000 and (ii) for Fiscal Years 1990
through 1993 of the Company, $60,000,000 PLUS 50% of
consolidated net income (if any) of the Company and its
Restricted Subsidiaries for Fiscal Year 1989 and each
Fiscal Year ended thereafter MINUS 100% of consolidated
net loss (if any) of the Company and its Restricted
Subsidiaries for Fiscal Year 1989 and each Fiscal Year
ended thereafter and (iii) for Fiscal Years 1994 and
each succeeding Fiscal Year of the Company, $75,000,000
PLUS 50% of consolidated net income (if any) of the
Company and its Restricted Subsidiaries for Fiscal Year
1989 and each Fiscal Year ended thereafter MINUS 100%
of consolidated net loss (if any) of the Company and
its Restricted Subsidiaries for Fiscal Year 1989 and
each Fiscal Year ended thereafter".
(d) The definition of the term "Termination Date"
contained in Section 15.1 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"TERMINATION DATE" shall mean June 30, 1996,
or the anniversary of such date to which the
Termination Date shall be extended pursuant to
Section 15.14.
To induce the Bank to execute this amendment, the Borrower
hereby represents that (i) as of the date hereof and after giving
effect to the extension set forth herein, there exists no Default
and (ii) no action, suit or proceeding is pending or, to the
knowledge of the Borrower, threatened against the Borrower which,
if adversely determined, might in management's reasonable
judgment have a material adverse effect on the operations,
business, property, assets, or condition of the Borrower and its
Restricted Subsidiaries taken as a whole. The Borrower
reaffirms, as of the date hereof, its representations and
warranties contained in Section 13 of the Credit Agreement
(except to the extent such representations and warranties relate
solely to an earlier date).
<PAGE>
Science Applications
International Corporation
July 30, 1993
Page 3
The effectiveness of this amendment is expressly conditioned
upon your delivery to the Bank of the following documents, each
of which shall be in form and substance reasonably satisfactory
to the Bank:
(a) the necessary resolutions of the Borrower's Board
of Directors and/or the Operating Committee of the
Borrower's Board of Directors authorizing and approving this
amendment;
(b) signed copies of a certificate of the Secretary or
an assistant secretary or other appropriate officer of the
Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this amendment;
(c) favorable opinions of counsel to the Borrower
confirming the following:
(1) the valid existence, good standing and due
qualification of the Borrower;
(2) the due authorization, execution and delivery
by the Borrower of this amendment; and
(3) that the amendment constitutes a legal, valid
and binding agreement of the Borrower.
The effectiveness of this amendment is further conditioned
upon the agreement of each of Bank of America and Citibank, N.A.
to extend the termination date under their respective credit
facilities with the Borrower to a date no earlier than June 30,
1996.
<PAGE>
Science Applications
International Corporation
July 30, 1993
Page 4
If the foregoing correctly sets forth your understanding
kindly sign and return the enclosed signed copy of this letter.
Very truly yours,
CONTINENTAL BANK N.A.
By: /S/ Elizabeth M. Nolan
--------------------------
Title: Vice President
-----------------------
Confirmed and agreed to:
Science Applications
International Corporation
By: /S/ W. A. Roper
---------------------------------
Title: Senior Vice President and
------------------------------
Chief Financial Officer
------------------------------
By: /S/ Ward Reed
---------------------------------
Title: Corporate Vice President
------------------------------
and Treasurer
------------------------------
<PAGE>
[CONTINENTAL BANK LOGO]
November 3, 1993
Science Applications
International Corporation
10260 Campus Point Drive
San Diego, California 92121
Attention: Mr. Ward Reed
Corporate Vice President
and Treasurer
Re: Letter amendment dated July 30, 1993
Ladies and Gentlemen:
Please refer to the letter amendment dated July 30, 1993
between Science Applications International Corporation and
Continental Bank N.A. (the "AMENDMENT"). You have called to our
attention that the Amendment contains a typographical error. The
figure "$75,000,000" appearing in the 11th line of the first
paragraph on page two of the Amendment should be "$45,000,000".
This letter will confirm our agreement that the correct figure is
"$45,000,000". If this letter correctly sets forth your
understanding, kindly sign and return the enclosed signed copy of
this letter.
Very truly yours,
CONTINENTAL BANK N.A.
By: /S/ Joseph E. Tyler
--------------------------
Title: Vice President
-----------------------
Confirmed and agreed to:
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
By: /S/ Ward Reed
---------------------------------
Title: Corporate Vice President
------------------------------
and Treasurer
------------------------------
By: /S/ W. A. Roper
---------------------------------
Title: Senior Vice President and
------------------------------
Chief Financial Officer
------------------------------
<PAGE>
Exhibit 10(s)
FIRST AMENDMENT TO
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE LOAN AGREEMENT
This First Amendment to Employee Stock Purchase Loan Agreement (the
"First Amendment") dated as of July 22, 1993, is between BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") and SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION (the "Company") and amends the Employee Stock Purchase
Loan Agreement dated as of November 10, 1992 between the Bank and the Company
(the "Agreement").
PRELIMINARY STATEMENT
The Bank and the Company desire to amend the Agreement on the
following terms and conditions.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. TERMS. All capitalized terms used herein shall have the same
meanings as in the Agreement unless otherwise defined herein.
2. AMENDMENTS. The parties hereto agree that Section 1(a) is hereby
amended by deleting "June 30, 1993" and inserting "June 30, 1994" in lieu
thereof.
3. REPRESENTATIONS AND WARRANTIES. The Company representations and
warrants to the Bank:
3.1 AUTHORIZATION; ENFORCEABLE AGREEMENT. This First Amendment, and
any instrument or agreement required hereunder, are within the Company's powers,
have been duly authorized, and do not conflict with any of its organizational
papers. This First Amendment is a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will be
similarly legal, valid, binding and enforceable. This First Amendment does not
conflict with any law, agreement, or obligation by which the Company is bound.
3.2 DEFAULT. No Default or Event of Default under the Agreement has
occurred and is continuing.
4. ENFORCING THIS AGREEMENT; MISCELLANEOUS
4.1 CALIFORNIA LAW. This First Amendment is governed by laws of the
State of California law.
4.2 SUCCESSORS AND ASSIGNS. This First Amendment is binding on the
Company's and the Bank's successors and assignees. The Company agrees that it
may not assign this First Amendment without the Bank's prior consent.
4.3 NOTICES. All notices required under this First Amendment shall
be personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this First Amendment, or to such other
addresses as the Bank and the Company may specify from time to time in writing.
<PAGE>
5. MISCELLANEOUS.
5.1 EFFECTIVENESS OF THE AGREEMENT. Except as hereby amended, the
Agreement shall remain in full force and effect.
5.2 COUNTERPARTS. This First Amendment may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
This First Amendment is executed as of the date stated at the top of
the first page.
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By S/ W. A. Roper, Jr.
-----------------------------------------------
Title Senior Vice President and CFO
--------------------------------------------
By Ward Reed
-----------------------------------------------
Title Corporate Vice President and Treasurer
--------------------------------------------
Notices:
Science Applications International Corporation
10260 Campus Point Drive
San Diego, California 92121
With a copy to:
Science Applications International Corporation
Legal Department
10260 Campus Point Drive
San Diego, California 92121
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By S/ Lori Kannegieter
----------------------------------------------------
Lori Kannegieter
Vice President
Notices:
555 S. Flower St., Credit Products #5618
Los Angeles, California 90071
Attention:Lori Kannegieter
Vice President
<PAGE>
Exhibit 10(t)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE LOAN AGREEMENT
This Agreement dated as of November 10, 1992, is between BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") and SCIENCE
APPLICATIONS INTERNATIONAL CORPORATION (the "Company").
1. THE COMMITMENT.
(a) From time to time from the date hereof through June 30, 1993 (the
"Availability Period"), upon the request of the Company, the Bank will consider
requests to make loans (each a "Loan" and collectively, the "Loans") to certain
employees of the Company designated in writing by the Company (each an "Eligible
Employee"). The total amount of all Loans advanced hereunder shall not exceed
at any one time $250,000 (the "Commitment").
(b) The proceeds of each Loan shall be used by the Eligible Employee
to purchase capital stock of the Company and such Loans shall be permitted up to
70% of the purchase price for such stock. The Bank shall have no responsibility
to ensure that the proceeds of a Loan are used by an Eligible Employee for such
purpose.
(c) Each Loan shall bear interest at a fixed rate per annum equal to
one percent in excess of the Bank's Reference Rate. The Reference Rate is the
rate of interest publicly announced from time to time by the Bank in San
Francisco, California as its Reference Rate. The Reference Rate is set by the
Bank based on various factors, including the Bank's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate shall take effect at
the opening of business on the day specified in the public announcement of a
change in the Bank's Reference Rate.
(d) Loans may not be less than $3,000 or more than $50,000, and shall
be fully amortized on a monthly basis and have a maturity of up to 36 months
from the date of such Loan as agreed to by the Eligible Employee and the Bank.
(e) The Company shall pay to a Bank an administrative fee of $1,000,
payable upon the effective date of this Agreement.
2. DISBURSEMENTS, PAYMENTS AND COSTS
(a) DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and
each payment by the Company will be made at the Bank's branch (or other
location) selected by the Bank from time to time made for the account of the
Bank's branch selected by the Bank from time to time; made in immediately
available funds, or such other type of funds selected by the Bank; evidenced by
records kept by the Bank. In addition, the Bank may, at its discretion, require
the Company to sign one or more promissory notes.
(b) DIRECT DEBIT. The Company agrees that interest and principal
payments and any fees incurred hereunder or under the Employee Loan Agreement
will be deducted automatically on the
- 1 -
<PAGE>
due date from the Company's checking account number 14504-01770. If a due date
does not fall on a Banking Day, the Bank will debit such account on the first
Banking Day (as hereafter defined) following the due date. The Company will
maintain sufficient funds in such account on the dates the Bank enters debits
authorized by this Agreement. If there are insufficient funds in such account
on the date the Bank enters any debit authorized by this Agreement, the debit
will be reversed.
(c) BANKING DAYS. Unless otherwise provided in this Agreement, a
"Banking Day" is a day other than a Saturday or a Sunday on which the Bank is
opened for business in California. All payments and debits which would be due
or done on a day which is not a Banking Day will be due or done on the next
Banking Day. All payments received on a day which is not a Banking Day will be
applied to the Loans on the next Banking Day.
(d) TAXES. The Company will not deduct any taxes from any payments
it makes to the Bank. If any government authority imposes any taxes or charges
on any payments made by the Company, the Company will pay the taxes or charges.
Upon request by the Bank, the Company will confirm that it has paid the taxes by
giving the Bank official tax receipts (or notarized copies) within 30 days after
the due date. However, the Company will not pay the Bank's net income taxes.
(e) ADDITIONAL COSTS. The Company will pay the Bank, on demand, for
the Bank's costs or losses arising from any statute or regulation, or any
request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to the Loans in a manner determined by the Bank, using any reasonable
method. The costs include the following any reserve or deposit requirements;
and any capital requirements relating to the Bank's assets and commitments for
Loans.
(f) LATE PAYMENTS. If the Bank does not receive (by payment, through
direct debit or otherwise) any payment from the Company when due hereunder, such
late payment shall bear interest at a rate per annum which is two percentage
point higher than the rate of interest otherwise payable hereunder, payable on
demand. This will not constitute a waiver of any default. Such interest will
be computed on the basis of a 365/366-day year and the actual number of days
elapsed.
3. CONDITIONS
(a) The Bank must receive the following items, in form and content
acceptable to the Bank, before it extends any Loan under this Agreement:
(i) CORPORATE RESOLUTION. A copy of a resolution or resolutions
passed by the Board of Directors of the Company, certified by the Secretary or
an Assistant Secretary of the Company as being in full force and effect on the
effective date of this Agreement, authorizing the Company to undertake its
obligations hereunder.
(ii) AUTHORIZED SIGNATORIES. A certificate, signed by the
Secretary or an Assistant Secretary of Company and dated the date of this
Agreement, as to the incumbency of the person or persons authorized to execute
and deliver this Agreement and any instrument or agreement required hereunder on
behalf of the Company.
(iii) OTHER EVIDENCE. Such other evidence with respect to the
Company or any other person as any Bank may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking of all
corporate proceedings in connection with this Agreement and the compliance with
the conditions set forth herein.
- 2 -
<PAGE>
(b) The obligation of the Bank to make any Loan hereunder (including
its initial Loan) is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date (which shall be a Banking Day):
(i) EMPLOYEE LOAN AGREEMENT. Each request for a Loan will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank. Each Eligible Employee being made a loan shall execute
and deliver to Bank an Employee Loan Agreement. The Company shall have
designated in writing that the person requesting such Loan is an Eligible
Employee.
(ii) CREDITWORTHINESS. The Bank shall have approved, in its sole
discretion, the creditworthiness of the Eligible Employee to whom the Loan is
being made.
(iii) LOAN PROCESSING FEE. Each employee shall pay to the Bank
when requesting a Loan a loan processing fee in an amount equal to the greater
of (i) $100 and (ii) one percent of the principal amount of such Loan. Such fee
may be retained by the Bank in its sole discretion whether or not such Loan is
made.
(iv) NO EXISTING DEFAULT. No event described in Section 7 shall
exist or shall result from such borrowing.
(v) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Company contained in Section 4 shall
be true and correct on and as of such borrowing date with the same effect as if
made on and as of such borrowing date.
4. REPRESENTATIONS AND WARRANTIES
When the Company signs this Agreement, the Company makes the following
representations and warranties:
(a) REPRESENTATIONS AND WARRANTIES IN EXISTING AGREEMENT. The
representations and warranties made by the Company contained in Section 13 of
that Credit Agreement dated as of October 31, 1988, as amended, between the
Company and the Bank (the "Existing Agreement") are true and correct on and as
of the date hereof with the same effect as if made on and as of the date hereof.
(b) AUTHORIZATION; ENFORCEABLE AGREEMENT. This Agreement, and any
instrument or agreement required hereunder, are within the Company's powers,
have been duly authorized, and do not conflict with any of its organizational
papers. This Agreement is a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and any instrument
or agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable. This Agreement does not conflict with
any law, agreement, or obligation by which the Company is bound.
(c) FINANCIAL INFORMATION. All financial and other information that
has been or will be supplied to the Bank, including the Company's financial
statement dated as of July 31, 1992, is sufficiently complete to give the Bank
accurate knowledge of the Company's financial condition in form and content
required by the Bank in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the assets or the financial condition of the Company.
- 3 -
<PAGE>
(5) COVENANTS
The Company agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full, the Company shall duly comply
with the covenants set forth in Sections 10 and 11 of the Existing Agreement.
(6) DEFAULT
If any of the following events occur, the Bank may do one or more of
the following: declare the Company in default, stop making any additional Loans
available, and require each Eligible Employee to repay his or her entire Loan
immediately and without prior notice, and make demand hereunder for immediate
repayment of all Loans without presentment, demand, protest or notices of any
kind, all of which are hereby expressly waived by the Company. If a bankruptcy
petition is filed with respect to the Company, the entire debt outstanding under
this Agreement will automatically be due immediately.
(a) FAILURE TO PAY. The Company fails to make a payment under this
Agreement when due.
(b) NON-COMPLIANCE. The Company fails to meet the conditions of, or
fails to perform any obligation under this Agreement, any other agreement made
in connection with this Agreement, or any other agreement the Company has with
the Bank or any affiliate of the Bank.
(c) CROSS-DEFAULT. Any default occurs under any agreement in
connection with any credit the Company has obtained from any other lender or
which the Company has guaranteed whether or not such default is waived by the
other lender, if the default consists of failing to make a payment when due or
gives or (if waived) would have given the other lender the right to accelerate
the obligation.
(d) TERMINATION OF EXISTING AGREEMENT. The Existing Agreement shall
be terminated or otherwise cease to be in effect for any reason.
(e) FALSE INFORMATION. The Company has given the Bank false or
misleading information or representations.
7. GUARANTY OF LOANS.
(a) GUARANTY. If any Eligible Employee fails to pay any amount when
due under his or her Employee Loan Agreement within 45 days of when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise),
the Company unconditionally, absolutely and irrevocably guarantees and promises
to pay to the Bank, or order, (and on demand, if not paid in accordance with the
next sentence), in lawful money of the United States and in immediately
available funds, any and all present or future obligations of such Eligible
Employee owing to Bank thereunder (the "Guarantied Obligations"). The Bank
shall deduct automatically any amounts owing under this Section 8 on such 45th
day. The term Guarantied Obligations is used herein in its most comprehensive
sense and include any and all advances, debts, obligations, and liabilities of
any Eligible Employee under his or her Employee Loan Agreement, now, or
hereafter made, incurred, or created, whether voluntary or involuntarily, and
however arising, including, without limitation, any and all attorneys' fees,
costs, premiums, charges, or interest owed by any Eligible Employee to the Bank,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether an Eligible
- 4 -
<PAGE>
Employee may be liable individually or jointly with others, whether recovery
upon such indebtedness may be or hereafter becomes barred by any statute of
limitations or whether such indebtedness may be or hereafter become otherwise
unenforceable.
(b) CONTINUING GUARANTY. This Agreement is a continuing guaranty
which relates to any Guarantied Obligation, including those which arise under
successive transactions which shall either cause Eligible Employees to incur new
Guarantied Obligations, continue the Guarantied Obligations from time to time,
or renew them after they have been satisfied. The Company agrees that nothing
shall discharge or satisfy its obligations created hereunder except for the full
payment in cash of the Guarantied Obligations with interest as applicable.
(c) INDEPENDENT OBLIGATION. The Company agrees that it is directly
liable to the Bank for payment of the Guarantied Obligations if any Eligible
Employee has failed to make payment thereof within 45 days of when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise),
that its obligations hereunder are independent of the Guarantied Obligations of
any Eligible Employee, or of any other guarantor, and that a separate action or
actions may be brought and prosecuted against the Company, whether action is
brought against any Eligible Employee or whether any Eligible Employee is joined
in any such action or actions. The Company agrees that any releases which may
be given by the Bank to any Eligible Employee or any other guarantor shall not
release it from this Agreement.
(d) NO IMPAIRMENT OF OBLIGATIONS. The obligations of the Company
under this Agreement shall not be affected, modified or impaired upon the
occurrence from time to time of any of the following, whether or not with notice
to or the consent of the Company: (i) the compromise, settlement, change,
modification, amendment (whether material or otherwise) or partial termination
of any or all of the Guarantied Obligations; (ii) the failure to give notice to
the Company of the occurrence of any default under the terms and provisions of
any Employee Loan Agreement; (iii) the waiver of the payment, performance or
observance of any of the Guarantied Obligations; (iv) the taking or omitting to
take any actions referred to in any Employee Loan Agreement or of any action
under this Agreement; (v) any failure, omission or delay on the part of the Bank
to enforce, assert or exercise any right, power or remedy conferred in this
Agreement, any Employee Loan Agreement, or any other indulgence or similar act
on the part of the Bank in good faith and in compliance with applicable law;
(vi) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all of the assets, marshalling of assets,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors or
readjustment of, or other similar proceedings which affect any Eligible
Employee, any other guarantor of any of the Guarantied Obligations of any
Eligible Employee or any of the assets of any of them, or any allegation of
invalidity or contest of the validity of this Agreement in any such proceeding;
(vii) to the extent permitted by law, the release or discharge of any other
guarantors of the Guarantied Obligations from the performance or observance of
any obligation, covenant or agreement contained in any quaranties of the
Guarantied Obligations by operation of law; or (viii) the default or failure of
any other guarantors of the Guarantied Obligations fully to perform any of their
respective obligations set forth in any such guaranties of the Guarantied
Obligations. To the extent any of the foregoing refers to any actions which the
Bank may take, the Company hereby agrees that the Bank may take such actions in
such manner, upon such terms, and at such times as the Bank, in their
discretion, deem advisable, without, in any way or respect, impairing,
affecting, reducing or releasing the Company from its undertakings hereunder and
the Company hereby consents to each and all of the foregoing actions, events and
occurrences.
- 5 -
<PAGE>
(e) WAIVERS. The Company hereby waives: (i) any and all rights to
require the Bank to prosecute or seek to enforce any remedies against any
Eligible Employee or any other party liable to the Bank on account of the
Guarantied Obligations; (ii) any right to assert against the Bank any legal or
equitable defense (other than indefeasible payment in full of the Guarantied
Obligations or as expressly provided in this Agreement), set-off, counterclaim,
or claim which the Company may now or at any time hereafter have against any
Eligible Employee or any other party liable to the Bank in any way or manner
under any Employee Loan Agreement; (iii) all defenses, counterclaims and offsets
of any kind or nature, arising directly or indirectly from the present or future
lack of perfection, sufficiency, validity or enforceability of any Employee Loan
Agreement and the security interest granted pursuant thereto; (iv) any defense
arising by reason of any claim or defense based upon an election of remedies by
the Bank including, without limitation, any direction to proceed by judicial or
nonjudicial foreclosure or by deed in lieu thereof, which, in any manner
impairs, affects, reduces, releases, destroys or extinguishes the Company's
subrogation rights, rights to proceed against any Eligible Employee for
reimbursement, or any other rights of the Company to proceed against any
Eligible Employee, against any other guarantor, or against any other security,
with the Company understanding that the exercise by the Bank of certain rights
and remedies may offset or eliminate the Company's right of subrogation against
any Eligible Employee, and that the Company may therefore incur partially or
totally non-reimbursable liability hereunder; (v) all presentments, demands for
performance, notices of non-performance, protests, notices of protest, notices
of dishonor, notices of default, notice of acceptance of this Agreement, and
notices of the existence, creation, or incurring of new or additional
indebtedness, and all other notices or formalities to which the Company may be
entitled; and (vi) without limiting the generality of the foregoing, the Company
hereby expressly waives any and all benefits of California Civil Code Sections
2809, 2810 2819, 2825, 2839 and 2845 through 2850.
(f) WAIVER OF SUBROGATION RIGHTS. The Company hereby agrees that
unless and until all Guarantied Obligations have been paid to the Bank in full,
it shall not have any rights of subrogation, reimbursement or contribution as
against any Eligible Employee or any other guarantor, if any, and shall not seek
to assert or enforce the same. The Company understands that the exercise by the
Bank of certain rights and remedies contained in an Employee Loan Agreement may
affect or eliminate Company's right of subrogation if any, against any Eligible
Employee and that Company may therefore incur a partially or totally non-
reimbursable liability hereunder; nevertheless, the Company hereby authorizes
and empowers the Bank to exercise, in its sole discretion, any right and remedy,
or any combination thereof, which may then be available, since it is the intent
and purpose of the Company that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
(g) FINANCIAL STATUS OF ELIGIBLE EMPLOYEES. The Company is presently
informed of the financial condition of all Eligible Employees and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of nonpayment of the Guarantied Obligations. The Company hereby covenants that
it will continue to keep itself informed of the financial condition of all
Eligible Employees, the status of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment. The Company hereby waives
its right, if any, to require the Bank to disclose to it any information which
they may now or hereafter acquire concerning such condition or circumstances
including, but not limited to, the release of any other guarantor.
(h) EVIDENCE OF OBLIGATIONS. The Bank's books and records evidencing
the Guarantied Obligations shall be admissible in any action or proceeding and
shall be binding upon the Company for the purpose of establishing the terms set
forth therein and shall constitute prima facie proof thereof.
- 6 -
<PAGE>
8. ENFORCING THIS AGREEMENT; MISCELLANEOUS
(a) GAAP. Except as otherwise stated in this Agreement, all
financial information provided to the Bank and all financial covenants will be
made under generally accepted accounting principles, consistently applied.
(b) CALIFORNIA LAW. This Agreement is governed by California law.
(c) SUCCESSORS AND ASSIGNS. This Agreement is binding on the
Company's and the Bank's successors and assignees. The Company agrees that it
may not assign this Agreement without the Bank's prior consent. The Bank may
sell participations in or assign this Agreement, the Loans and the Commitment
and may exchange financial information about the Company with actual or
potential participants or assignees. If a participation is sold or any Loan is
assigned, the purchaser will have the right of set-off against the Company.
(d) ARBITRATION.
(i) This paragraph concerns the resolution of any controversies
or claims between the Company and the Bank that arise from this Agreement
(including any renewals, extensions or modifications of this Agreement); any
document, agreement or procedure related to or delivered in connection with this
Agreement; any violation of this Agreement; or any claims for damages arising in
connection herewith, including claims for injury to persons, property or
business interests (torts).
(ii) At the request of the Company or the Bank, any such
controversies or claims will be settled by arbitration in accordance with the
United States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California law.
Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration. For
purposes of the application of the statute of limitations, the filing of an
arbitration pursuant to this paragraph is the equivalent of the filing of a
lawsuit, and any claim or controversy which may be arbitrated under this
paragraph is subject to any applicable statue of limitations. The arbitrators
will have the authority to decide whether any such claim or controversy is
barred by the statute of limitations and, if so, to dismiss the arbitration on
that basis.
(iii) If there is a dispute as to whether an issue is arbitrable,
the arbitrators will have the authority to resolve any such dispute. The
decision that results from an arbitration proceeding may be submitted to any
authorized court of law to be confirmed and enforced.
(iv) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to arbitration,
arises from or relates to an obligation to the Bank secured by real property
located in California. In this case, both the Company and the Bank must consent
to submission of the claim or controversy to arbitration. If both parties do
not consent to arbitration, the controversy or claim will be settled as follows:
(A) The Company and the Bank will designate a referee (or a panel of referees)
selected under the auspices of the American Arbitration Association in the same
manner as arbitrators are selected in Association-sponsored proceedings; (B) the
designated referee (or the panel of referees) will be appointed by a court as
provided in California Code of Civil Procedure Section 638 and the following
related sections; (C) The referee (or the presiding referee of the panel) will
be an active attorney or a retired judge; and (D) The award that results from
the decision of the referee (or the panel) will be entered as a judgment in the
court that appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644 and 645.
- 7 -
<PAGE>
(v) This provision does not limit the right of the Company or
the Bank to: exercise self-help remedies such as setoff; (ii) foreclosure
against or sell any real or personal property collateral; or (iii) act in a
court of law, before, during or after the arbitration proceeding to obtain an
interim remedy; and/or additional or supplementary remedies.
(vi) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Company or the Bank, including the suing
party, to submit the controversy or claim to arbitration if the other party
contests the lawsuit. However, if the controversy or claim arises from or
relates to an obligation to the Bank which is secured by real property located
in California at the time of the proposed submission to arbitration, this right
is limited according to the provision above requiring the consent of both the
Company and the Bank to seek resolution through arbitration.
(vii) If the Bank forecloses against any real property
securing this Agreement, the Bank has the option to exercise the power of sale
under the deed of trust or mortgage, or to proceed by judicial foreclosure.
(e) SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a Loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
(f) COSTS. If the Bank incurs any expenses in connection with
administering or enforcing this Agreement, or if the Bank takes collection
action under this Agreement, it is entitled to costs and reasonable attorneys'
fees, including any allocated costs of in-house counsel.
(g) ATTORNEYS' FEES. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees (including any allocated costs of in-house counsel) incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.
(h) ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively: represent the sum of the
understandings and agreements between the Bank and the Company concerning this
credit; replace any prior oral or written agreements between the Bank and the
Company concerning this credit; and are intended by the Bank and the Company as
the final, complete and exclusive statement of the terms agreed to by them. In
the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
(i) NOTICES. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
the Bank and the Company may specify from time to time in writing.
(j) HEADINGS. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
- 8 -
<PAGE>
(k) COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
This Agreement is executed as of the date stated at the top of the
first page.
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By S/ W. A. Roper, Jr.
-----------------------------------------
Title Senior Vice President and CFO
-----------------------------------------
By Ward Reed
--------------------------------------------
Title Corporate Vice President and Treasurer
-----------------------------------------
Notices:
Science Applications International Corporation
10260 Campus Point Drive
San Diego, California 92121
With a copy to:
Science Applications International Corporation
Legal Department
10260 Campus Point Drive
San Diego, California 92121
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By S/ Valerie Milner
-------------------------------------------------
Valerie Milner
Vice President
Notices:
555 S. Flower St., Credit Products #5618
Los Angeles, California 90071
Attention:Valerie Milner
Vice President
- 9 -
<PAGE>
ADDENDUM TO LOAN AGREEMENT
1. Delete endorsement stamp.
2. Replace Section 19 as follows:
"19. At the option of the Bank, all sums of interest and principal
hereunder shall be due and payable upon (a) termination of employment
of borrower with Science Applications International Corporation (SAIC)
or any subsidiary thereof or (b) the occurrence of a default under the
Employee Stock Purchase Loan Agreement dated as of September 30, 1992,
as amended from time to time, between SAIC and the Bank.
3. Insert the following signature block at the end thereof:
"APPROVED:
"Science Applications International Corporation
By
--------------------------------------------
Title "
------------------------------------------
- 10 -
<PAGE>
EXHIBIT 11
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Year ended January 31
-----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
PRIMARY:
Net Income $ 41,500 $ 38,075 $ 33,616
Reduction of interest expense, net of
income tax expense on assumed retirement
of short-term and long-term debt 501 465 ---
Interest earned, net of income tax expense
on assumed investment of U.S. government
securities or commercial paper 17 --- ---
------- ------- -------
Adjusted net income $ 42,018 $ 38,540 $ 33,616
------- ------- -------
------- ------- -------
Weighted average shares outstanding 45,404 44,168 43,573
Dilutive stock options, based on the
modified treasury stock method for
1993 and 1994 and treasury stock
method for 1992, using average fair
value 2,025 2,011 1,252
------- ------- -------
Total average shares outstanding 47,429 46,179 44,825
------- ------- -------
------- ------- -------
Per Share Amount $ .89 $ .83 $ .75
------- ------- -------
------- ------- -------
FULLY DILUTED:
Net Income $ 41,500 $ 38,075 $ 33,616
Reduction of interest expense, net of
income tax expense on assumed retirement
of short-term and long-term debt 435 425 ---
Interest earned, net of income tax expense
on assumed investment of U.S. government
securities or commercial paper 5 --- ---
------- ------- -------
Adjusted net income $ 41,940 $ 38,500 $ 33,616
------- ------- -------
------- ------- -------
Weighted average shares outstanding 45,404 44,168 43,573
Dilutive stock options, based on the
modified treasury stock method for
1993 and 1994 and treasury stock
method for 1992, using year-end or
exercise date established price
if higher than average fair value 2,025 2,011 1,536
------- ------- -------
Total average shares outstanding 47,429 46,179 45,109
------- ------- -------
------- ------- -------
Per Share Amount $ .88 $ .83 $ .75
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
American Systems Engineering Corporation
Andrew Palmer & Associates Limited
(subsidiary of SAIC Science and Engineering Limited)
Bull, Inc.
Campus Point Realty Corporation
General Sciences Corporation
Hicks & Associates
JHK & Associates, Inc.
SAIC Commercial Enterprises, Inc.
SAIC de Mexico, S.A. de C.V.
SAIC Engineering, Inc.
SAIC Global Technology Corporation
SAIC - MIR
SAIC Science and Engineering Limited
(subsidiary of SAIC UK Limited)
SAIC UK Limited
Science Applications International Corporation
(SAIC Canada)
Science Applications International (Barbados) Corporation
Science Applications International, Europe S.A.
Syntonic Technology, Inc.
<PAGE>
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
ANNUAL REPORT
JANUARY 31, 1994
<PAGE>
EXHIBIT 28(a)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1994
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number _____________
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
(Full title of the plan)
Science Applications International Corporation
10260 Campus Point Drive, San Diego, California 92121
-----------------------------------------------------
(Name of issuer of the securities held pursuant to
the plan and the address of its principal executive office)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Science Applications International Corporation
1993 Stock Purchase Plan Committee have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly
authorized.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK
PURCHASE PLAN
Date: March 11, 1994 BY: /s/Anne Maharry
---------------
Anne Maharry
Science Applications
International Corporation
1993 Stock Purchase
Plan Committee
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
INDEX TO FINANCIAL STATEMENTS
Page
____
Report of Independent Accountants F-2
Financial Statements:
Statement of Net Assets Available
for Benefits as of January 31, 1994 and 1993 F-3
Statement of Changes in Net Assets
Available for Benefits for the years ended
January 31, 1994, 1993, and 1992 F-4
Notes to Financial Statements F-5
Schedules:
None
All schedules are omitted because they are not applicable or
the required information is shown in the Financial Statements or
the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stock Purchase Plan Committee and Participants of the
Science Applications International Corporation 1993 Employee Stock
Purchase Plan
In our opinion, the financial statements listed in the
accompanying index present fairly, in all material respects, the
net assets available for benefits of the Science Applications
International Corporation 1993 Employee Stock Purchase Plan at
January 31, 1994 and 1993, and the changes in net assets
available for benefits for each of the three years in the period
ended January 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
San Diego, California
March 11, 1994
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS
January 31
-------------------------
1994 1993
------------ ------------
ASSETS:
Investments at fair value:
SAIC Class A Common Stock
(Cost $2,358,000 and
$1,815,000, respectively) $ 2,601,000 $ 1,889,000
Receivables:
Participant contributions
withheld 727,000 645,000
Employer contributions
receivable 38,000 34,000
----------- -----------
3,366,000 2,568,000
LIABILITIES:
Benefits distributable 2,601,000 1,889,000
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 765,000 $ 679,000
=========== ===========
See accompanying notes to financial statements.
F-3
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended January 31
-------------------------------------
1994 1993 1992
----------- ----------- -----------
Gain realized on distribution
of investments in SAIC
Common Stock $ 74,000 $ 84,000 $ 43,000
Increase (decrease)
in unrealized appreciation
of investments in SAIC
Common Stock 168,000 (10,000) 42,000
Participant contributions 3,061,000 2,456,000 2,079,000
Employer contributions 163,000 129,000 109,000
Benefits paid and
additions to benefits
distributable (3,380,000) (2,521,000) (2,149,000)
----------- ----------- -----------
Increase in net assets 86,000 138,000 124,000
Net assets at beginning of year 679,000 541,000 417,000
----------- ----------- -----------
Net assets at end of year $ 765,000 $ 679,000 $ 541,000
=========== =========== ===========
See accompanying notes to financial statements.
F-4
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE A - PLAN DESCRIPTION
The Science Applications International Corporation 1993
Employee Stock Purchase Plan (the "Plan") is a two year plan which
became effective on July 9, 1993 and will terminate on July 31,
1995. The financial statements reflect the net assets and
changes in net assets of the Plan as well as the previous plan
(the "1991 Plan") which became effective June 27, 1991. The 1991
Plan terminated on June 31, 1993. All shares purchased under the
1991 Plan were distributed or repurchased by March 31, 1994. The
plans are identical except for the number of shares reserved for
issuance. Both plans provide for the purchase of Class A Common
Stock of Science Applications International Corporation (the
"Company" or "SAIC") by participating employees through voluntary
payroll deductions. Each participant is furnished with a copy of
the complete Plan before electing to participate in the Plan.
Science Applications International Corporation is the Trustee
under the Plan. No trustee fees have ever been paid by the Plan.
No bonds of any nature are furnished to the Plan by the Trustee,
its officers or employees. The Plan is administered by the Stock
Purchase Plan Committee (the "Committee") whose members are
appointed by the Company's Board of Directors to serve at the
discretion of the Board. The members of the Committee do not act
in the capacity of trustees. The members of the Committee receive
no compensation from the Plan for services rendered in connection
therewith. The members of the Committee as of March 11, 1994
are: A. Maharry, W. Reed, W. A. Roper. The Plan is not subject
to the Employee Retirement Income Security Act of 1974, as
amended.
At predetermined purchase dates during the year, the Trustee
purchases for the account of each participant the whole number of
shares of the Company's Class A Common Stock (the "Common Stock")
which may be acquired from funds available in the participant's
Stock Purchase Account, together with the Company's 5%
contribution described below. The authority to control and manage
the operation and administration of the Plan is vested in the
Stock Purchase Plan Committee. Generally, all employees of the
Company and its affiliates who have adopted the Plan are eligible
to participate in the Plan. Employees may contribute to the Plan
by authorizing payroll deductions in amounts equal to 3% or more,
up to a maximum of 10%, of their base compensation. These
contributions are allocated to the Stock Purchase Accounts of the
respective participants. No interest is paid on amounts in the
participants' Stock Purchase Accounts.
Purchases of SAIC's Common Stock are made in the limited
secondary market or from the Company. There is no general public
market for the Common Stock. However, the Company has established
F-5
<PAGE>
and maintains a limited secondary market for the Common Stock
through its wholly-owned subsidiary, Bull, Inc. This limited
market permits stockholders to sell stock at a price determined by
a formula (the "Formula Price") to employees, consultants and
directors of the Company who have been approved by the Board of
Directors or the Operating Committee of the Board of Directors as
being entitled to purchase an equity interest in the Company.
The purchase price to be paid for shares of Common Stock is
the prevailing Formula Price. Of this price, 95% is paid out of
the participant contributions, and 5% is paid or accrued by the
Company. A participant is not entitled to purchase an amount of
Common Stock having a fair market value, as measured on its
purchase date, in excess of $25,000 in any calendar year pursuant
to the Plan and any other employee stock purchase plans which may
be adopted by the Company.
A participant's interest in his account is 100% vested at all
times. Shares of Common Stock acquired under the Plan will be
issued to the participant no later than 90 days after the end of
the Company's fiscal year in which the acquisition occurred.
Until distribution occurs, the shares are held by the Company,
acting as Trustee, on behalf of the participants. Each
participant is furnished with a statement of account in the Plan
at the time of any distribution.
All shares of Common Stock purchased pursuant to the Plan are
subject to the Company's right of repurchase upon the
participant's termination of employment or affiliation with the
Company. The repurchase price is the then prevailing Formula
Price in the case of shares held by the participant directly, and
at the Formula Price in effect at the time of the annual
distribution of shares out of the Plan in the case of shares held
by the Plan for the benefit of the participant. Such shares are
also subject to the Company's right of first refusal in the event
that the participant desires to sell such shares other than in the
limited market.
Participants may withdraw the money held in their Stock
Purchase Accounts at any time prior to the acquisition of shares
of Common Stock therewith, although upon doing so the participant
will no longer be eligible to re-enroll until the beginning of
the next applicable plan year.
The Plan will terminate on the earlier of July 31, 1995 or
when 650,000 shares of Common Stock have been purchased pursuant
to the Plan or at the discretion of the Company's Board of
Directors. For the Plan year ended January 31, 1994, 248,077
shares of Common Stock were purchased by the Plan.
F-6
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the
accrual basis of accounting.
INVESTMENT VALUATION AND INCOME, GAINS AND LOSSES
The fair value of Common Stock is determined using the
Formula Price. Realized gains and losses on Common Stock are the
difference between the Formula Price when distributed and the
original cost of the shares of Common Stock. As of January 31,
1994 and 1993, the Formula Price per share was $14.19 and $12.01,
respectively, for Class A Common Stock. The number of shares held
by the Plan was 183,278 and 157,327 on January 31, 1994 and 1993,
respectively.
BENEFITS DISTRIBUTABLE
Investments in Common Stock which are distributed from the
Plan after the end of the Plan's fiscal year are considered a
liability of the Plan in the year in which the shares were
acquired.
ADMINISTRATIVE EXPENSES OF THE PLAN
All expenses incurred in the administration of the Plan,
including Trustee fees, are paid out of the Plan assets unless the
Company elects to pay such costs. During Plan years ended January
31, 1994, 1993, and 1992, the Company paid all administrative
expenses of the Plan.
CONTRIBUTIONS
Participant contributions are accrued when the compensation
from which the contribution is made is earned. Employer
contributions are accrued when the corresponding participant's
contributions are accrued.
NOTE C - TAX STATUS AND FEDERAL INCOME TAX CONSEQUENCES TO
PARTICIPANTS
The Plan is not subject to federal income taxes and is
intended to qualify under Section 423(b) of the Internal Revenue
Code.
No taxable income will be recognized by a participant in the
1993 Stock Purchase Plan until the taxable year of sale or
certain other dispositions of the shares of Common Stock acquired
under the Plan.
F-7
<PAGE>
EXHIBIT 28(b)
Securities and Exchange Commission
Washington, D.C., 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the calendar year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
----------------------------
(Full Title of Plan)
Science Applications International Corporation
10260 Campus Point Drive, San Diego, California 92121
-----------------------------------------------------
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Science Applications International Corporation Retirement Plans
Committee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
DATE 4-4-94 /s/Ward Reed
------------------------------- --------------------------------
Ward Reed
Corporate Vice President
and Treasurer
Retirement Plans Committee
<PAGE>
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
REPORT, FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
DECEMBER 31, 1993 AND 1992
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants F-2
Financial Statements:
Statement of Net Assets Available for Benefits F-3
Statement of Changes in Net Assets Available for Benefits F-4
Notes to Financial Statements F-5
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes F-14
Schedule II - Schedule of Reportable Transactions F-15
Other schedules required by Section 2520.103-10 of the Department of Labor Rules
and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Retirement Plans Committee
and Participants of the Science Applications
International Corporation Cash or Deferred Arrangement
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the net assets available for benefits
of the Science Applications International Corporation Cash or Deferred
Arrangement (the Plan) at December 31, 1993 and 1992, and the changes in net
assets available for benefits for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PRICE WATERHOUSE
San Diego, California
March 25, 1994
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
<S> <C> <C>
ASSETS
Investments:
Mutual funds, at market value $ 127,253,000 $ 97,979,000
SAIC Common Stock, at fair value 64,225,000 39,335,000
Short-term investments, at market value 20,000 76,000
Participant loans 6,646,000 4,657,000
------------- -------------
198,144,000 142,047,000
------------- -------------
Receivables:
Employee contributions 1,478,000 1,094,000
Employer contributions 473,000 579,000
------------- -------------
1,951,000 1,673,000
------------- -------------
Total assets 200,095,000 143,720,000
------------- -------------
LIABILITIES
Accrued Plan expenses 38,000 32,000
------------- -------------
Total liabilities 38,000 32,000
------------- -------------
Net assets available for benefits $ 200,057,000 $ 143,688,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993 1992
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Mutual funds:
Realized gain $ 1,189,000 $ 252,000
Change in unrealized appreciation 4,287,000 1,982,000
Other investment income 6,946,000 4,988,000
SAIC Common Stock:
Realized gain 2,000 750,000
Change in unrealized appreciation 5,115,000 2,633,000
Interest 533,000 449,000
Employee contributions 39,462,000 33,524,000
Employer contributions 7,674,000 6,627,000
------------- -------------
Total additions 65,208,000 51,205,000
------------- -------------
Deductions from net assets attributed to:
Distributions to participants (8,694,000) (8,154,000)
Plan expenses (145,000) (116,000)
Plan to plan transfer of fund balances (11,166,000)
------------- -------------
Total deductions (8,839,000) (19,436,000)
------------- -------------
Net increase 56,369,000 31,769,000
Net assets at beginning of year 143,688,000 111,919,000
------------- -------------
Net assets at end of year $ 200,057,000 $ 143,688,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - PLAN DESCRIPTION
GENERAL
The Science Applications International Corporation Cash or Deferred Arrangement
(the "Plan" or "CODA") was established on September 18, 1982 and became
effective January 1, 1983. The authority to administer the Plan is vested in
the Retirement Plans Committee (the "Committee") whose members are the Named
Fiduciaries for purposes of Section 402 (a) of the Employee Retirement Income
Security Act of 1974, as amended. Generally, employees of Science Applications
International Corporation (the "Company" or "SAIC") and its subsidiaries are
eligible to participate in the Plan upon commencing employment, except for
employees in groups or units designated as ineligible.
The Plan consists of a Deferred Fund which is the fund in which assets acquired
by the Plan in its function as a qualified Cash or Deferred Arrangement are held
and accounted for. The Plan permits a participant to elect to defer up to 18%
of their eligible compensation, as defined, for the Plan year and to have such
deferred amount contributed directly by the Company to the Deferred Fund for the
benefit of the participant. Such contributions are limited under Section 401(a)
of the Internal Revenue Code ("IRC") to $8,994 and $8,728 for the years ended
December 31, 1993 and 1992, respectively. Amounts deferred by participants,
including rollovers from qualified plans, totaled $39,462,000 and $33,524,000
for the years ended December 31, 1993 and 1992, respectively.
In addition to amounts deferred by participants, the Company, at its discretion,
may make a matching contribution equal to a specified percentage of the
aggregate amounts deferred by participants. The match is only provided on
participant deferrals of up to 10% of compensation, with any deferrals above 10%
receiving no match. In 1993 and 1992, the Company contributed 30% of the first
$2,000 of a participant's annual deferred compensation and 15% of such deferred
compensation above $2,000 for a yearly total of $7,674,000 and $6,396,000,
respectively. During 1993 and 1992, the Company contribution was allocated to
the SAIC Common Stock Fund. Also, the Company, at its discretion, may make an
additional contribution to the Deferred Fund for the benefit of participants in
order to comply with Section 401(k) of the Code. The additional Company
contributions are allocated to participants' accounts as prescribed by the
Company. During 1992, additional Company contributions of $231,000 were
invested in the Vanguard Money Market Prime Portfolio. No additional
contribution was made during 1993.
The Company's contribution to the Deferred Fund is to be paid in cash unless the
Company's Board of Directors determines to make the contribution in shares of
Class A Common Stock or another form. Contributions to the participant's
Deferred Fund shall not exceed the maximum amount deductible by the Company for
Federal income tax purposes.
Participants may elect to borrow against their deferred participant account
balances. Upon this election, the loan balance is transferred from the
applicable investment fund(s) to a separate loan fund (participant loans) until
repayment.
Participants are permitted to transfer to the Plan their account balances from a
previous employer's qualified retirement plan within a specified time period.
F-5
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A participant's interest in the Deferred Fund account is 100% vested at all
times. The participant's interest in the Deferred Fund account will be paid in
a single distribution to the participant or their designated beneficiary upon
termination of employment with the Company, retirement, permanent disability or
death. A participant may not make withdrawals from the Deferred Fund accounts
while employed with the Company prior to attaining age 59-1/2 unless the
Committee determines the participant is incurring financial hardship. After
attaining age 59-1/2, a participant may make one withdrawal each Plan year even
if still employed with the Company. Distributions from the Deferred Fund are
paid in cash.
During 1992, the Plan transferred 942,000 shares of the Company's Class A Common
Stock and $18,000 in cash from the SAIC Common Stock Fund to the SAIC Employee
Stock Ownership Plan (the "ESOP"). The aggregate cost and market value,
respectively, of the shares transferred was $10,402,000 and $11,148,000. This
transfer was pursuant to a 30 percent ownership requirement under Section 1042
of the IRC. Participants remain fully vested with respect to their interest in
the shares transferred to the ESOP.
INVESTMENT PROGRAMS
The investment programs offered to participants in the Deferred Fund allow
participants to choose among seven investment funds offered by the Vanguard
Group of Investment Companies. Participants are also allowed to direct a
portion of their investment into Class A Common Stock of the Company. During
1993 and 1992, the first $2,000 of a participant's annual deferred compensation
under the Plan was invested in the SAIC Common Stock Fund. Such investment into
the SAIC Common Stock Fund may be exchanged into one of the Vanguard Funds
subject to certain restrictions.
The seven Vanguard Funds offered are as follows:
1) Vanguard GNMA Portfolio, which invests in fixed income securities guaranteed
by the U.S. Government; 2) Vanguard Index Trust-500 Portfolio, which invests in
common stocks; 3) Vanguard Prime Portfolio, which invests in money market
instruments; 4) Vanguard Short-Term Federal Portfolio, which invests in U.S.
government obligations; 5) Vanguard Wellesley Income Fund, which invests in
fixed income securities and common stocks; 6) Vanguard Windsor Fund, which
invests in common stocks; and 7) Vanguard International Growth Portfolio, which
invests in common stocks of companies based outside the United States. Separate
Deferred Fund accounts are established for each investment program selected by a
participant. Participants may elect to transfer their existing account balances
at any time among the investment funds and/or alter the allocations of future
contributions among the investment alternatives under rules prescribed by the
Committee.
PLAN TERMINATION
Although the Company has not expressed any intent to terminate the Plan, it
reserves the right to suspend or discontinue contributions to the Plan or to
terminate its participation in the Plan at any time. In the event of
termination, a distribution of the participants' Deferred Fund account balances
will be made in accordance with the Plan provisions.
F-6
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting. Certain amounts from the prior year have been reclassified to
conform to the 1993 presentation.
INVESTMENT VALUATION AND INCOME, GAINS AND LOSSES
VANGUARD FUNDS
Deposits to the Vanguard Funds are used to buy shares from a diversified
portfolio of securities. Securities listed on any securities exchange are
valued at the last sale price as of each valuation date. Securities not listed
or traded as of the close of trading on the valuation date are valued at the
latest quoted bid price of a dealer who regularly trades in the security being
valued.
Investment transactions are accounted for on the date the shares in the fund are
purchased or sold. Realized and unrealized gains and losses are computed based
on the market value at the beginning of the year or purchase price if purchased
during the year.
SAIC COMMON STOCK
There is no general public market for the Company's Common Stock. However, the
Company has established and maintains a limited secondary market for Common
Stock through its wholly-owned subsidiary, Bull, Inc. This limited market
permits stockholders to sell stock at a price determined by a formula (the
"Formula Price") to employees and consultants who have been approved by the
Company's Board of Directors as being entitled to purchase an equity interest in
the Company.
The fair value of the Common Stock is determined pursuant to the Formula Price.
The gains or losses realized on distribution of investments and the increases or
decreases in unrealized appreciation are calculated as the difference between
the Formula Price and the market value of the investments at the beginning of
the year. As of December 31, 1993 and 1992, the Formula Price of the Company's
Class A Common Stock was $13.12 and $11.83 and the Plan held approximately
4,895,000 shares and 3,325,000 shares, respectively.
It is the policy of the Committee to keep the SAIC Common Stock Fund invested
primarily in Common Stock, except for estimated reserves for use in
distributions and investment exchanges by participants. Such reserves are
invested in the Vanguard Prime Portfolio mutual fund. If reserves in the SAIC
Common Stock Fund are less than the amount required at any given time to make
requested distributions and investment changes, investment exchanges out of the
SAIC Common Stock Fund by participants may have to be deferred.
SHORT-TERM INVESTMENTS
Short-term investments consist primarily of State Street Bank and Trust Short-
Term Investment Fund, which invests in short-term money market instruments.
State Street Bank and Trust Company is the Plan's Trustee.
CONTRIBUTIONS
Company contributions are accrued based upon the amounts deferred by
participants and those amounts determined by the Company's Board of Directors
(Note 1).
F-7
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ADMINISTRATIVE EXPENSES OF THE PLAN
All expenses incurred in the administration of the Plan are paid out of Plan
assets unless the Company elects to pay such costs. Fees totaling $27,000 and
$28,000 were paid or accrued to the Trustee by the Plan during 1993 and 1992,
respectively. Other Plan expenses totaling $118,000 and $88,000 were paid or
accrued by the Plan during 1993 and 1992, respectively.
NOTE 3 - TAX STATUS
The Plan is intended to qualify under Section 401(a) of the Code. In addition,
the Deferred Fund of the Plan is intended to be a "Qualified Cash or Deferred
Arrangement" under Section 401(k) of the Code. The Plan is not subject to
Federal income taxes.
The Plan received a favorable determination letter from the Internal Revenue
Service during 1993 stating that the Plan qualifies under Sections 401(a) and
401(k) of the Code and is exempt from Federal income taxes. It is management's
opinion that the Plan will continue to qualify under Sections 401(a) and 401(k)
of the Code; however, if necessary, the Plan will be amended to maintain its
qualified status.
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT PROGRAM
Financial information by investment program as of December 31, 1993 and 1992,
and for the years then ended are shown on the following pages.
F-8
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT PROGRAM - continued
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GNMA INDEX PRIME WELLESLEY WINDSOR INT'L GROWTH STFED
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $13,844,000 $17,792,000 $16,738,000 $11,982,000 $43,286,000 $ 8,211,000 $12,882,000
SAIC Common Stock
Short-term investments
Participant loans
----------- ----------- ----------- ----------- ----------- ----------- -----------
13,844,000 17,792,000 16,738,000 11,982,000 43,286,000 8,211,000 12,882,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Receivables:
Employee contributions 123,000 198,000 127,000 154,000 372,000 107,000 98,000
Employer contributions
----------- ----------- ----------- ----------- ----------- ----------- -----------
123,000 198,000 127,000 154,000 372,000 107,000 98,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets 13,967,000 17,990,000 16,865,000 12,136,000 43,658,000 8,318,000 12,980,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES
Accrued Plan expenses
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for benefits $13,967,000 $17,990,000 $16,865,000 $12,136,000 $43,658,000 $ 8,318,000 $12,980,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SAIC COMMON PARTICIPANT STATE STREET
STOCK LOANS STIF TOTAL
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ 2,518,000 $127,253,000
SAIC Common Stock 64,225,000 64,225,000
Short-term investments $20,000 20,000
Participant loans $6,646,000 6,646,000
----------- ---------- ------- ------------
66,743,000 6,646,000 20,000 198,144,000
----------- ---------- ------- ------------
Receivables:
Employee contributions 299,000 1,478,000
Employer contributions 443,000 30,000 473,000
----------- ---------- ------- ------------
742,000 30,000 1,951,000
----------- ---------- ------- ------------
Total assets 67,485,000 6,646,000 50,000 200,095,000
----------- ---------- ------- ------------
LIABILITIES
Accrued Plan expenses 38,000 38,000
----------- ---------- ------- ------------
Total liabilities 38,000 38,000
----------- ---------- ------- ------------
Net assets available
for benefits $67,485,000 $6,646,000 $12,000 $200,057,000
----------- ---------- ------- ------------
----------- ---------- ------- ------------
</TABLE>
F-9
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT PROGRAM - continued
Statement of Net Assets Available for Benefits at December 31, 1992
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD SAIC COMMON
GNMA INDEX PRIME WELLESLEY WINDSOR INT'L GROWTH STFED STOCK
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
Mutual funds $ 13,239,000 $ 14,035,000 $ 17,756,000 $ 5,572,000 $ 29,956,000 $ 2,372,000 $ 12,606,000 $ 2,443,000
SAIC Common Stock 39,335,000
Short-term investments
Participant loans
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
13,239,000 14,035,000 17,756,000 5,572,000 29,956,000 2,372,000 12,606,000 41,778,000
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Receivables:
Employee contributions 3,000 1,000 2,000 1,000 3,000 1,000 1,000 1,082,000
Employer contributions 231,000 328,000
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
3,000 1,000 233,000 1,000 3,000 1,000 1,000 1,410,000
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Total assets 13,242,000 14,036,000 17,989,000 5,573,000 29,959,000 2,373,000 12,607,000 43,188,000
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
LIABILITIES
Accrued plan expenses
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Total liabilities
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Net assets available
for benefits $ 13,242,000 $ 14,036,000 $ 17,989,000 $ 5,573,000 $ 29,959,000 $ 2,373,000 $ 12,607,000 $43,188,000
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<CAPTION>
PARTICIPANT STATE STREET
LOANS STIF TOTAL
ASSETS
<S> <C> <C> <C>
Investments:
Mutual funds $ 97,979,000
SAIC Common Stock 39,335,000
Short-term investments $ 76,000 76,000
Participant loans $ 4,657,000 4,657,000
--------- ------ ----------
4,657,000 76,000 142,047,000
--------- ------ ----------
Receivables:
Employee contributions 1,094,000
Employer contributions 20,000 579,000
--------- ------ -----------
20,000 1,673,000
--------- ------ -----------
Total assets 4,657,000 96,000 143,720,000
--------- ------ -----------
LIABILITIES
Accrued plan expenses 32,000 32,000
--------- ------ -----------
Total liabilities 32,000 32,000
--------- ------ -----------
Net assets available
for benefits $ 4,657,000 $ 64,000 $143,688,000
--------- ------ -----------
--------- ------ -----------
</TABLE>
F-10
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT PROGRAM - continued
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED
DECEMBER 31, 1993
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GNMA INDEX PRIME WELLESLEY WINDSOR INT'L GROWTH STFED
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Mutual funds:
Realized gain $ 116,000 $ 427,000 $ 101,000 $ 469,000 $ 13,000 $ 63,000
Change in unrealized
(depreciation) appreciation (193,000) 621,000 126,000 2,198,000 1,516,000 19,000
Other investment income 854,000 444,000 $ 499,000 764,000 3,556,000 66,000 763,000
SAIC Common Stock:
Realized gain
Change in unrealized
appreciation
Interest
Employee contributions 1,903,000 2,763,000 1,857,000 1,734,000 5,078,000 1,027,000 1,420,000
Employer contributions 8,000 8,000 6,000 10,000 17,000 4,000 3,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
2,688,000 4,263,000 2,362,000 2,735,000 11,318,000 2,626,000 2,268,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Deductions from net assets
attributed to:
Distributions to participants (648,000) (713,000) (1,114,000) (438,000) (1,762,000) (115,000) (851,000)
Plan expenses
Exchanges (1,315,000) 404,000 (2,372,000) 4,266,000 4,143,000 3,434,000 ( 1,044,000)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(1,963,000) (309,000) (3,486,000) 3,828,000 2,381,000 3,319,000 (1,895,000)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 725,000 3,954,000 (1,124,000) 6,563,000 13,699,000 5,945,000 373,000
Net assets at beginning of year 13,242,000 14,036,000 17,989,000 5,573,000 29,959,000 2,373,000 12,607,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of year $ 13,967,000 $ 17,990,000 $ 16,865,000 $ 12,136,000 $ 43,658,000 $ 8,318,000 $12,980,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
SAIC COMMON PARTICIPANT STATE STREET
STOCK LOANS STIF TOTAL
<S> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Mutual funds:
Realized gain $ 1,189,000
Change in unrealized
(depreciation) appreciation 4,287,000
Other investment income
6,946,000
SAIC Common Stock:
Realized gain $ 2,000 2,000
Change in unrealized
appreciation 5,115,000 5,115,000
Interest 103,000 $ 416,000 $ 14,000 533,000
Employee contributions 19,112,000 4,568,000 39,462,000
Employer contributions 7,510,000 108,000 7,674,000
----------- ------------ ------------ ------------
31,842,000 416,000 4,690,000 65,208,000
----------- ------------ ------------ ------------
Deductions from net assets
attributed to:
Distributions to participants (2,876,000) (177,000) (8,694,000)
Plan expenses
(145,000) (145,000)
Exchanges
(4,669,000) 1,750,000 (4,597,000)
----------- ------------ ------------ ------------
(7,545,000) 1,573,000 (4,742,000) (8,839,000)
----------- ------------ ------------ ------------
Net increase (decrease) 24,297,000 1,989,000 (52,000) 56,369,000
Net assets at beginning of year
43,188,000 4,657,000 64,000 143,688,000
----------- ------------ ------------ ------------
Net assets at end of year
$ 67,485,000 $ 6,646,000 $ 12,000 $200,057,000
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
F-11
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT PROGRAM - continued
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED
DECEMBER 31, 1992
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GIC GNMA INDEX PRIME WELLESLEY WINDSOR
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Mutual funds:
Realized gain (loss) $ 77,000 $ 243,000 $ 21,000 $ (56,000)
Change in unrealized
(depreciation)
appreciation (171,000) 312,000 (5,000) 2,149,000
Other investment
income $ 167,000 861,000 382,000 $ 635,000 311,000 1,854,000
SAIC Common Stock:
Realized gain
Change in unrealized
appreciation
Interest
Employee contributions 1,518,000 1,908,000 1,770,000 694,000 3,477,000
Employer contributions 231,000
---------- ---------- ---------- ---------- ---------- ----------
167,000 2,285,000 2,845,000 2,636,000 1,021,000 7,424,000
---------- ---------- ---------- ---------- ---------- ----------
Deductions from net
assets attributed to:
Distributions to
participants (89,000) (715,000) (636,000) (1,408,000) (193,000) (1,555,000)
Plan to plan transfer of
fund balances (3,000) (2,000) (2,000) (3,000)
Plan expenses
Exchanges (2,261,000) 992,000 1,591,000 (692,000) 2,602,000 1,227,000
---------- ---------- ---------- ---------- ---------- ----------
(2,350,000) 274,000 953,000 (2,100,000) 2,407,000 (331,000)
---------- ---------- ---------- ---------- ---------- ----------
Net (decrease) increase (2,183,000) 2,559,000 3,798,000 536,000 3,428,000 7,093,000
Net assets at
beginning of year 2,183,000 10,683,000 10,238,000 17,453,000 2,145,000 22,866,000
---------- ---------- ---------- ---------- ---------- ----------
Net assets at end
of year $ 0 $ 13,242,000 $ 14,036,000 $ 17,989,000 $ 5,573,000 $ 29,959,000
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
VANGUARD VANGUARD SAIC COMMON PARTICIPANT STATE STREET
INT'L GROWTH STFED STOCK LOANS STIF TOTAL
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Mutual funds:
Realized gain (loss) $ (59,000) $ 26,000 $ 252,000
Change in unrealized
(depreciation)
appreciation (130,000) (173,000) 1,982,000
Other investment
income 52,000 726,000 4,988,000
SAIC Common Stock:
Realized gain $ 750,000 750,000
Change in unrealized
appreciation 2,633,000 2,633,000
Interest 109,000 $ 324,000 $ 16,000 449,000
Employee contributions 582,000 1,253,000 17,763,000 4,559,000 33,524,000
Employer contributions 6,297,000 99,000 6,627,000
---------- ----------- ---------- ---------- ---------- -----------
445,000 1,832,000 27,552,000 324,000 4,674,000 51,205,000
---------- ----------- ---------- ---------- ---------- -----------
Deductions from net
assets attributed to:
Distributions to
participants (89,000) (424,000) (2,862,000) (183,000) (8,154,000)
Plan expenses (116,000) (116,000)
Plan to plan transfer of
fund balances (3,000) (11,153,000) (11,166,000)
Exchanges 104,000 2,021,000 (2,529,000) 1,441,000 (4,496,000)
---------- ----------- ----------- ---------- ---------- -----------
15,000 1,594,000 (16,544,000) 1,258,000 (4,612,000) (19,436,000)
---------- ----------- ----------- ---------- ---------- -----------
Net (decrease) increase 460,000 3,426,000 11,008,000 1,582,000 62,000 31,769,000
Net assets at
beginning of year 1,913,000 9,181,000 32,180,000 3,075,000 2,000 111,919,000
---------- ----------- ----------- ---------- ---------- -----------
Net assets at end
of year $ 2,373,000 $ 12,607,000 $ 43,188,000 $ 4,657,000 $ 64,000 $ 143,688,000
---------- ----------- ----------- ---------- ---------- -----------
---------- ----------- ----------- ---------- ---------- -----------
</TABLE>
F-12
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS
Transactions involving cash, securities or assets of the Company, the Trustee or
other affiliated persons are considered to be party-in-interest transactions
under Section 2520.103-10 of the Department of Labor Rules and Regulations for
Reporting and Disclosure. Reportable party-in-interest transactions for the
years ended December 31, 1993 and 1992 are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------
NUMBER NUMBER
INVESTMENT SALES OF UNITS OF SALES COST PROCEEDS
<S> <C> <C> <C> <C>
State Street Bank & Trust
Short-term Investment Fund 629,000 83 $ 62,889,000 $ 62,889,000
SAIC Class A Common Stock 2,000 1 $ 22,000 $ 24,000
<CAPTION>
NUMBER NUMBER OF
INVESTMENT PURCHASES OF UNITS PURCHASES COST
<S> <C> <C> <C>
State Street Bank & Trust
Short-term Investment Fund 629,000 95 $ 62,832,000
SAIC Class A Common Stock 1,572,000 4 $ 19,796,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
----------------------------------------------------------
NUMBER NUMBER
INVESTMENT SALES OF UNITS OF SALES COST PROCEEDS
<S> <C> <C> <C> <C>
State Street Bank & Trust
Short-term Investment Fund 538,000 65 $ 53,820,000 $ 53,820,000
SAIC Class A Common Stock * 951,000 4 $ 10,499,000 $ 11,249,000
<CAPTION>
NUMBER NUMBER OF
INVESTMENT PURCHASES OF UNITS PURCHASES COST
<S> <C> <C> <C>
State Street Bank & Trust
Short-term Investment Fund 539,000 79 $ 53,880,000
SAIC Class A Common Stock 1,590,000 4 $ 18,109,000
<FN>
* Investment sales include the transfer of 942,000 shares of SAIC Class A Common
Stock to the ESOP (Note 1).
</TABLE>
F-13
<PAGE>
ADDITIONAL INFORMATION
SCHEDULE 1
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT DECEMBER 31, 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION OF COST OF CURRENT
IDENTITY OF ISSUE INVESTMENT SHARES OR UNITS ASSET VALUE
<S> <C> <C> <C> <C>
Mutual funds:
The Vanguard Group of
Investment Companies GNMA Portfolio 1,335,000 $ 13,455,000 $ 13,844,000
Index Trust-500
Portfolio 406,000 14,902,000 17,792,000
Prime Portfolio 19,256,000 19,256,000 19,256,000
Short-Term Federal
Portfolio 1,246,000 12,799,000 12,882,000
Wellesley Income Fund 623,000 11,732,000 11,982,000
Windsor Fund 3,112,000 40,981,000 43,286,000
World Intl. Growth
Portfolio 608,000 6,977,000 8,211,000
------------- -------------
120,102,000 127,253,000
Common Stock:
SAIC Class A 4,895,000 59,110,000 64,225,000
Short-term investment:
State Street Short-Term Investment
Bank & Trust Fund 20,000 20,000 20,000
Participant Loans,
Due 1/7/94 to 12/7/18;
6% - 12% 1,000 6,646,000 6,646,000
------------- -------------
$ 185,878,000 $ 198,144,000
------------- -------------
------------- -------------
</TABLE>
F-14
<PAGE>
ADDITIONAL INFORMATION
SCHEDULE II
SAIC APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT PLAN
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
YEAR ENDED DECEMBER 31, 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF PURCHASE SELLING LEASE
PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS PRICE PRICE RENTAL
<S> <C> <C> <C> <C>
State Street Bank & Trust Short-term Investment Fund 95 $ 62,832,000
State Street Bank & Trust Short-term Investment Fund 83 $ 62,889,000
SAIC Class A Common Stock 4 $ 19,796,000
<CAPTION>
CURRENT VALUE
ON
EXPENSE COST OF TRANSACTION NET GAIN
INCURRED ASSET DATE OR (LOSS)
<S> <C> <C> <C> <C>
State Street Bank & Trust $ 62,832,000
State Street Bank & Trust $ 62,889,000 $ 62,889,000 $ 0
SAIC $ 19,796,000
<FN>
* Transactions or series of transactions in excess of 5 percent of the current
value of the Plan's assets as of December 31, 1992 as defined in Section
2520.103-6 of the Department of Labor Rules and Regulations for Reporting
and Disclosure under ERISA.
</TABLE>
F-15
