<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
ALOMA PARK
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 9, 1994
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Science
Applications International Corporation, a Delaware corporation (the "Company"),
will be held in the Grand Ballroom of the Sheraton Grande Torrey Pines, 10950
North Torrey Pines Road, La Jolla, California, on Saturday, July 9, 1994, at
10:00 A.M. (local time), for the following purposes:
1. To elect eight Class I Directors, each for a term of three years.
2. To approve the appointment of Price Waterhouse as the Company's
independent accountants for the Company's fiscal year ending January 31,
1995.
3. To transact such other business as may properly come before the meeting
or any adjournments, postponements or continuations thereof.
Only stockholders of record at the close of business on May 13, 1994 are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments, postponements or continuations thereof. A list of stockholders
entitled to vote at the meeting will be available for inspection at the offices
of the Corporate Secretary of the Company at 10010 Campus Point Drive, San
Diego, California, for at least 10 days prior to the meeting and will also be
available for inspection at the meeting.
By Order of the Board of Directors
/s/ J. DENNIS HEIPT
J. DENNIS HEIPT
Corporate Secretary
San Diego, California
June 9, 1994
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, TO
ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY
WILL NOT PREVENT YOU FROM ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON,
IF YOU SO DESIRE, BUT WILL HELP THE COMPANY SECURE A QUORUM AND REDUCE THE
EXPENSE OF ADDITIONAL PROXY SOLICITATION.
<PAGE>
[LOGO]
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 9, 1994
---------------------
PROXY STATEMENT
------------------
This Proxy Statement is being furnished to the stockholders of Science
Applications International Corporation, a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held in the Grand Ballroom of the Sheraton Grande Torrey
Pines, 10950 North Torrey Pines Road, La Jolla, California, on Saturday, July 9,
1994, at 10:00 A.M. (local time), and at any and all adjournments, postponements
or continuations thereof. At the Annual Meeting, the stockholders of the Company
are being asked to consider and vote upon: (i) the election of eight Class I
Directors, each for a term of three years, and (ii) the approval of the
appointment of Price Waterhouse as the Company's independent accountants for its
fiscal year ending January 31, 1995.
This Proxy Statement and the enclosed form of proxy are first being mailed
to the stockholders of the Company on or about June 9, 1994.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only stockholders of record of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), and/or Class B Common Stock, par
value $.05 per share (the "Class B Common Stock"), as of the close of business
on May 13, 1994 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, the Company had 44,934,372 shares of
Class A Common Stock and 359,957 shares of Class B Common Stock outstanding. The
Company has no other class of capital stock outstanding.
The Class A Common Stock and the Class B Common Stock are collectively
referred to herein as the "Common Stock." The presence, either in person or by
proxy, of the holders of a majority of the total voting power of the shares of
Common Stock outstanding on the Record Date is necessary to constitute a quorum
and to conduct business at the Annual Meeting. Although abstentions may be
specified on all proposals (other than on the election of directors),
abstentions will only be counted as present for purposes of determining the
presence of a quorum but will not be voted.
Each holder of Class A Common Stock will be entitled to one vote per share,
and each holder of Class B Common Stock will be entitled to five votes per
share, in person or by proxy, for each share of Common Stock held in such
stockholder's name as of the Record Date on any matter submitted to a vote of
stockholders at the Annual Meeting, except that in the election of Directors all
shares are entitled to be voted cumulatively. Accordingly, in voting for
Directors: (i) each share of Class A Common Stock is entitled to as many votes
as there are Directors to be elected, (ii) each share of Class B Common Stock is
entitled to five times as many votes as there are Directors to be elected and
(iii) each stockholder may cast all of such votes for a single nominee or
distribute them among any two or more nominees as such stockholder chooses.
Unless otherwise directed, shares represented by properly executed proxies will
be voted at the discretion of the proxy holders so as to elect the maximum
number of the Board of Directors' nominees that may be elected by cumulative
voting.
1
<PAGE>
On the Record Date, State Street Bank & Trust Company, as Trustee of the
Company's Employee Stock Ownership Plan ("ESOP"), Cash or Deferred Arrangement
("CODA") and Profit Sharing Retirement Plan II (collectively, the "Plans"), held
21,113,739 shares of Class A Common Stock and 40,922 shares of Class B Common
Stock. Each participant in the Plans has the right to instruct the Trustee on a
confidential basis how to vote his or her proportionate interests in all shares
of Common Stock held in the Plans. The Trustee will vote all allocated shares of
Common Stock held in the Plans as to which no voting instructions are received
(except for shares held in the Tax Credit Employee Stock Ownership Plan
("TRASOP") fund accounts of participants in the ESOP), together with all
unallocated shares held in the Plans, in the same proportion, on a plan by plan
basis, as the allocated shares for which voting instructions have been received.
Shares held in the TRASOP fund accounts as to which no voting instructions from
participants are received will not be voted by the Trustee. The Trustee's duties
with respect to voting the Common Stock are governed by the fiduciary provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
These fiduciary provisions of ERISA may require, in certain limited
circumstances, that the Trustee override the votes of participants with respect
to the Common Stock held by the Trustee and to determine, in the Trustee's best
judgment, how to vote the shares.
Shares of Common Stock represented by properly executed proxies received in
time for voting at the Annual Meeting will, unless such proxies have previously
been revoked, be voted in accordance with the instructions indicated thereon. In
the absence of specific instructions, the shares represented by properly
executed proxies will be voted: (i) FOR the election of each nominee of the
Board of Directors as a Class I Director and (ii) FOR the approval of Price
Waterhouse as the Company's independent accountants for its fiscal year ending
January 31, 1995. No business other than that set forth in the accompanying
Notice of Annual Meeting is expected to come before the Annual Meeting; however,
should any other matter requiring a vote of stockholders properly come before
the Annual Meeting, it is the intention of the proxy holders to vote such shares
in accordance with their best judgment on such matter. For information with
respect to advance notice requirements applicable to stockholders who wish to
propose any matter for consideration at an Annual Meeting, see "Stockholder
Proposals for the 1995 Annual Meeting."
Execution of the enclosed proxy card will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked at
any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy bearing a later date to the Corporate
Secretary of the Company, 10260 Campus Point Drive, San Diego, California 92121,
or by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, however, in and of itself constitute a revocation of a
proxy.
The cost of soliciting proxies will be borne by the Company, including the
charges and expenses of persons holding shares in their name as nominee for
forwarding proxy materials to the beneficial owners of such shares. In addition
to the use of the mails, proxies may be solicited by officers, Directors and
employees of the Company in person, by telephone or by telegram. Such
individuals will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection with such solicitation.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a "classified" Board
of Directors consisting of three classes which shall be as equal in number as
possible. The number of authorized Directors is currently fixed at 22 Directors
of which 8 are Class I Directors and the remainder are evenly divided between
Class II and Class III Directors.
At the Annual Meeting, eight Class I Directors are to be elected to serve
three-year terms ending in 1997 or until their successors are elected and
qualified or their earlier death, resignation or removal. Currently, J.R.
Beyster, V.N. Cook, W.H. Demisch, D.A. Hicks, C.B. Malone, B.J. Shillito, J.A.
Welch and W.E. Zisch serve as Class I Directors. B.J. Shillito and W.E. Zisch
will be retiring from the Board of Directors and will not be standing for
reelection. R.M. Gates and J.E. Glancy have been nominated by the Board of
Directors to fill these vacancies on the Board of Directors. The eight nominees
who receive the most votes
2
<PAGE>
will be elected as Class I Directors. It is intended that, unless otherwise
indicated, the persons named in the enclosed form of proxy will vote FOR the
election of Directors so as to elect the maximum number of the Board of
Directors' nominees that may be elected by cumulative voting. To the best
knowledge of the Board of Directors, all of the nominees are, and will be, able
to serve. In the event that any of the eight nominees listed below should become
unavailable to stand for election at the Annual Meeting, the proxy holders
intend to vote for such other person, if any, as may be designated by the Board
of Directors, in the place and stead of any nominee unable to serve.
Alternatively, the Board of Directors may elect, pursuant to Section 3.02 of the
Company's Bylaws, to fix the authorized number of Directors at a lower number so
as to give the Nominating Committee of the Board of Directors additional time to
evaluate candidates.
Set forth below is a brief biography of each nominee for election as a Class
I Director and of all other members of the Board of Directors who will continue
in office:
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
TERM ENDING 1997
<TABLE>
<S> <C>
J.R. Beyster, age 69 Director since 1969
Chairman of the Board and Chief Executive Officer
</TABLE>
Dr. Beyster founded the Company in 1969 and has served as Chairman of the
Board and Chief Executive Officer since that time. Dr. Beyster also served as
President of the Company until 1988.
<TABLE>
<S> <C>
V.N. Cook, age 59 Director since 1990
Vice Chairman of the Board
</TABLE>
Mr. Cook joined the Company in July 1991 and was elected as a Vice Chairman
of the Board in January 1992. 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
Federal System Division. He is also the Chairman of Visions Incorporated, an
industry consulting firm.
<TABLE>
<S> <C>
W.H. Demisch, age 49 Director since 1990
Director
</TABLE>
Mr. Demisch is a Managing Director of BT Securities Corp., a position he has
held since August 1993. From 1988 to 1993, he was Managing Director of UBS
Securities, Inc.
<TABLE>
<S> <C>
R.M. Gates, age 50 Nominee for Director
</TABLE>
Mr. Gates is a consultant, author and lecturer. From 1991 to 1993, Mr. Gates
served as the Director of Central Intelligence for the United States and from
1989 to 1991, Mr. Gates served as Assistant to the President of the United
States and Deputy National Security Adviser. Prior to 1989, Mr. Gates served as
the Deputy Director of the Central Intelligence Agency. Mr. Gates is also a
member of the Board of Directors of Hyster-Yale Materials Handling, Inc., NACCO
Industries, Inc. and Varity Corporation.
<TABLE>
<S> <C>
J.E. Glancy, age 48 Nominee for Director
Corporate Executive Vice President
</TABLE>
Dr. Glancy joined the Company in 1976 and has served in various capacities
since that time, including serving as Sector Vice President from 1991 to 1994
and as Group Senior Vice President from 1987 to 1991. He was elected as a
Corporate Executive Vice President in January 1994.
3
<PAGE>
<TABLE>
<S> <C>
D.A. Hicks, age 69 Director since 1984(1)
Chairman of the Board of Hicks & Associates, Inc.
and Director
</TABLE>
Dr. Hicks has served as Chairman of the Board of Hicks & Associates, Inc.
("HAI"), a government and industry consulting company, since 1986. In July 1991,
the Company acquired HAI and HAI has been a wholly-owned subsidiary of the
Company since that time. Dr. Hicks was the Under Secretary of Defense for
Research and Engineering from 1985 to 1986. Prior thereto, he was a Senior Vice
President of Northrop Corporation, an aerospace company, with which he was
associated from 1961 through 1985. Dr. Hicks is also a member of the Board of
Directors of Pilkington Aerospace, Inc.
<TABLE>
<S> <C>
C.B. Malone, age 58 Director since 1993
Director
</TABLE>
Ms. Malone has served as the President of Financial & Management Consulting,
Inc., a consulting company, since 1982. Ms. Malone is also a member of the Board
of Directors of Dell Computer Corporation, Hannaford Bros. Co., Hasbro, Inc.,
Houghton Mifflin Company, The Limited Inc., Mallinckrodt Group, Scott Paper
Company and Union Pacific Corporation.
<TABLE>
<S> <C>
J.A. Welch, age 63 Director since 1984
Director
</TABLE>
Dr. Welch became an employee of the Company in July 1990 and is involved in
a number of scientific endeavors and strategic planning issues. Dr. Welch also
serves as President of Jasper Welch Associates, a consulting firm which he
founded in 1983. Prior thereto, Dr. Welch was a Major General in the United
States Air Force, from which he retired in 1983 after serving for 31 years. Dr.
Welch is also a member of the Board of Directors of Millitech Corp.
CLASS II DIRECTORS
TERM ENDING 1995
<TABLE>
<S> <C>
A.L. Alm, age 57 Director since 1989
Sector Vice President and Director
</TABLE>
Mr. Alm joined the Company in 1989 as a Director and Senior Vice President
and was elected as a Sector Vice President in April 1993. Prior to joining the
Company and since 1987, Mr. Alm was the Chief Executive Officer and President of
Alliance Technologies Corporation, an environmental consulting and engineering
firm. Prior thereto and since 1985, Mr. Alm served as Chairman of the Board and
Chief Executive Officer of Thermo Analytical Corporation, a company in the
environmental laboratory business. Prior thereto and since 1983, Mr. Alm was
Deputy Administrator of the Environmental Protection Agency.
<TABLE>
<S> <C>
B.R. Inman, age 63 Director since 1982
Director
</TABLE>
Admiral Inman, USN (Ret.) joined the Company in April 1990 as a part-time
employee and, in that capacity, advises the Company on a wide variety of
strategic planning issues. Admiral Inman was the Chairman of the Board,
President and Chief Executive Officer of Westmark Systems, Inc., an electronics
industry holding company, from 1986 through 1989. From 1983 to 1986, Admiral
Inman served as Chairman, President and Chief Executive Officer of
Microelectronics and Computer Technology Corporation. Admiral Inman retired from
the United States Navy in 1982. During his career as a United States Naval
Officer, Admiral Inman served in a number of high-level positions in the U.S.
Government, including Director of the National Security Agency from 1977 to
1981. For the last year and one-half of his active naval service, he served as
Deputy Director of Central Intelligence. Admiral Inman is also a member of the
Board of Directors of Fluor Corporation, Southwestern Bell Corporation,
Temple-Inland, Inc. and Xerox Corporation.
- - ------------------------
(1) Dr. Hicks did not serve as a Director from July 1985 through December 1986.
4
<PAGE>
<TABLE>
<S> <C>
M.R. Laird, age 71 Director since 1979
Director
</TABLE>
Mr. Laird has been the Senior Counselor for National and International
Affairs of The Reader's Digest Association, Inc. since 1974. Mr. Laird is a
former nine-term U.S. Congressman, Secretary of Defense and Counsellor to the
President. Mr. Laird is the Chairman of the Board of Directors of COMSAT
Corporation and a member of the Board of Directors of IDS Mutual Fund Group,
Martin-Marietta Corporation, Metropolitan Life Insurance Company, Northwest
Airlines, Inc., The Reader's Digest Association, Inc. and Wallace-Reader's
Digest Funds. He also serves on the Public Oversight Board (SEC Practice
Section, American Institute of Certified Public Accountants).
<TABLE>
<S> <C>
W.M. Layson, age 59 Director since 1970
Senior Vice President and Director
</TABLE>
Dr. Layson joined the Company in 1970 as a Director and Vice President. He
was elected as a Senior Vice President in 1975.
<TABLE>
<S> <C>
E.A. Straker, age 56 Director since 1992
Sector Vice President and Director
</TABLE>
Dr. Straker joined the Company in 1971 and has served in various capacities
since that time. He was elected as a Sector Vice President in 1986.
<TABLE>
<S> <C>
J.H. Warner, Jr., age 53 Director since 1988
Executive Vice President and Director
</TABLE>
Dr. Warner joined the Company in 1973 and has served in various capacities
since that time. He was elected as an Executive Vice President in 1989.
<TABLE>
<S> <C>
J.B. Wiesler, age 66 Director since 1989
Director
</TABLE>
Mr. Wiesler was associated with the Bank of America National Trust and
Savings Association from 1949 until his retirement in 1987. For more than five
years prior to his retirement, Mr. Wiesler served in a number of executive
capacities, including Vice Chairman, Head of Retail Banking and Executive Vice
President, Head of North American Division. Mr. Wiesler is also a member of the
Board of Directors of Wahlco Environment Systems, Inc.
CLASS III DIRECTORS
TERM ENDING 1996
<TABLE>
<S> <C>
S.J. Dalich, age 50 Director since 1990
Executive Vice President and Director
</TABLE>
Dr. Dalich joined the Company in 1972 and has served in various capacities
since that time. He was elected as an Executive Vice President in April 1992.
<TABLE>
<S> <C>
C.K. Davis, age 62 Director since 1993
Director
</TABLE>
Dr. Davis has been an International Health Care Consultant to Ernst & Young
since 1985. From 1981 to 1985, Dr. Davis served as the Administrator of the
Health Care Financing Agency. Dr. Davis is a member of the Board of Directors of
Beckman Instruments, Merck & Co., Inc., Pharmaceutical Marketing Services, Inc.
and The Prudential Insurance Company of America, Inc. She is also a member of
the Board of Governors of the American Red Cross.
<TABLE>
<S> <C>
E.A. Frieman, age 68 Director since 1987
Director
</TABLE>
Dr. Frieman has served as the Director of Scripps Institution of
Oceanography and Vice Chancellor of Marine Sciences for the University of
California, San Diego since 1986. Prior thereto and since 1981, Dr. Frieman was
an Executive Vice President and Group Manager of the Company. Dr. Frieman is
also a member of the Board of Directors of The Charles Stark Draper Laboratory,
Inc. and is a member of the Secretary of Energy Advisory Committee.
5
<PAGE>
<TABLE>
<S> <C>
D.M. Kerr, age 55 Director since 1993
Corporate Executive Vice President and Director
</TABLE>
Dr. Kerr joined the Company in January 1993 and was elected as a Corporate
Executive Vice President in January 1994. From 1989 through 1992, 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 1985 through 1989, Dr. Kerr held various executive
positions with EG&G, Inc.
<TABLE>
<S> <C>
L.A. Kull, age 56 Director since 1970(1)
President, Chief Operating Officer and Director
</TABLE>
Dr. Kull joined the Company in 1970 and has served in various capacities
since that time. He was elected Chief Operating Officer in 1983 and President of
the Company in 1988.
<TABLE>
<S> <C>
J.W. McRary, age 54 Director since 1972(2)
Vice Chairman of the Board and
Executive Vice President
</TABLE>
Dr. McRary joined the Company in 1971 and has served in various capacities
since that time. He was elected as an Executive Vice President in 1979 and a
Vice Chairman of the Board in 1988.
<TABLE>
<S> <C>
M.R. Thurman, age 63 Director since 1993
Director
</TABLE>
General Thurman, USA (Ret.) retired from the United States Army in 1991
after having served for 37 years. During his career, General Thurman served as
the Vice Chief of Staff of the United States Army and as the Commander-in-Chief
of the United States Southern Command. General Thurman is a member of the Board
of Directors of Burdeshaw Associates, Ltd. and Military Professional Resources,
Inc., and the Board of Visitors of North Carolina State University.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the year ended January 31, 1994 ("Fiscal 1994"), the Board of
Directors held four meetings. Average attendance at such meetings of the Board
of Directors was 93%. During Fiscal 1994, all Directors, other than A.L. Alm and
M.R. Thurman, attended at least 75% of the aggregate of the meetings of the
Board of Directors and committees of the Board of Directors on which they
served.
The Board of Directors has various standing committees, including an Audit
Committee, a Compensation Committee, an Executive Committee, a Nominating
Committee and an Operating Committee.
AUDIT COMMITTEE
The Audit Committee is primarily concerned with the Company's financial
condition and its responsibilities include (i) reviewing and evaluating the work
and performance of the Company's independent accountants and making
recommendations to the Board of Directors regarding the selection of such
independent accountants; (ii) conferring with the Company's independent
accountants and its financial and accounting officers to evaluate the Company's
internal accounting methods and procedures and the recommended changes therein;
(iii) reviewing the Company's financial projections and plans and the
arrangements for the Company's financing and credit; (iv) reviewing the status
of litigation to which the Company is a party; (v) reviewing circumstances which
may have a major impact on the Company's future profitability; and (vi)
overseeing the activities of the Company's Employee Ethics and Risk Committees.
The Audit Committee held five meetings during Fiscal 1994. The current members
of the Audit Committee are J.B. Wiesler (Chairman), J.R. Beyster (ex-officio),
S.J. Dalich (ex-officio), D.A. Hicks, D.M. Kerr (ex-officio), L.A. Kull
(ex-officio), B.J. Shillito and W.E. Zisch.
- - ------------------------
(1) Dr. Kull did not serve as a Director in 1974 and 1975.
(2) Dr. McRary did not serve as a Director in 1973.
6
<PAGE>
COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing the salary of the
Chairman of the Board and Chief Executive Officer of the Company and
recommending to the Board of Directors the amount of salary to be paid and other
awards to be made to the Chairman of the Board and the Chief Executive Officer
under the Company's bonus and other incentive plans. The Compensation Committee
is also responsible for reviewing the compensation paid to each of the four
other highest paid executive officers of the Company. The Compensation Committee
held one meeting during Fiscal 1994. The Compensation Committee consists of all
Directors who are not also employees of the Company. The current members of the
Compensation Committee are B.J. Shillito (Chairman), C.K. Davis, W.H. Demisch,
E.A. Frieman, M.R. Laird, C.B. Malone, M.R. Thurman, J.B. Wiesler and W.E.
Zisch.
EXECUTIVE COMMITTEE
The Executive Committee's charter provides that it shall have and may
exercise, to the extent permitted by Delaware law, all powers and authorities of
the Board of Directors with respect to the following: (i) taking action on
behalf of the Board of Directors during intervals between regularly scheduled
meetings of the Board of Directors if it is impractical to delay action on a
matter until the next regularly scheduled meeting of the Board of Directors and
(ii) overseeing and assisting in the formulation and implementation of human
resource management, scientific research policies and financial matters. The
Executive Committee held four meetings during Fiscal 1994. The current members
of the Executive Committee are B.R. Inman (Chairman), J.R. Beyster, E.A.
Frieman, L.A. Kull, M.R. Laird, J.W. McRary and B.J. Shillito. All other
Directors are ex-officio members of the Executive Committee.
NOMINATING COMMITTEE
The Nominating Committee's responsibilities include (i) evaluating and
recommending nominees for election as Directors to the Board of Directors; (ii)
reviewing and recommending to the Board of Directors criteria for membership on
the Board and (iii) proposing nominees to fill vacancies on the Board of
Directors as they occur. The Nominating Committee held four meetings during
Fiscal 1994. The current members of the Nominating Committee are J.R. Beyster
(Chairman), D.A. Hicks, B.R. Inman, M.R. Laird, B.J. Shillito and J.A. Welch.
Any stockholder may nominate a person for election as a Director of the
Company by complying with the procedure set forth in the Company's Bylaws.
Pursuant to Section 3.03 of the Company's Bylaws, in order for a stockholder to
nominate a person for election as a Director, such stockholder must give timely
notice to the Corporate Secretary of the Company prior to the meeting at which
Directors are to be elected. To be timely, notice must be received by the
Corporate Secretary not less than 50 days nor more than 75 days prior to the
meeting (or if fewer than 65 days' notice or prior public disclosure of the
meeting date is given or made to stockholders, not later than the 15th day
following the day on which the notice of the date of the meeting was mailed or
such public disclosure was made). Such notice must contain certain information
about the nominee, including his or her age, business and residence addresses
and principal occupation during the past five years, the class and number of
shares of Common Stock beneficially owned by such nominee and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee. The notice must also contain
certain information about the stockholder proposing to nominate that person.
Pursuant to Section 3.03 of the Company's Bylaws, the Company may also require
any proposed nominee to furnish other information reasonably required by the
Company to determine the proposed nominee's eligibility to serve as a Director.
OPERATING COMMITTEE
The Operating Committee has the authority to (i) approve offers to sell
shares of Class A Common Stock; (ii) authorize the establishment of various
relationships with banking institutions, including depositing funds and
obtaining loans; (iii) approve contracts to be entered into by the Company for
the purchase or lease of goods, services and facilities; (iv) approve the
amendment of the Company's employee benefit plans and the Company's
contributions to any such plan; (v) authorize the filing of registration
statements, reports and other documents with the Securities and Exchange
Commission and state securities commissions; (vi) call the annual meeting of
stockholders, fix the purposes, place, time and record date for such meeting
7
<PAGE>
and approve the proxy materials to be used in connection therewith; (vii) grant
special powers of attorney on behalf of the Company; (viii) review preliminary
agendas for meetings of the Board of Directors; (ix) adopt supplemental
resolutions which modify or amend resolutions theretofore adopted by the Board
of Directors which, in the opinion of the Company's counsel, do not materially
change the purpose and intent of the underlying resolutions and (x) authorize
the merger between the Company and one or more of its subsidiaries. The
Operating Committee held seven meetings during Fiscal 1994. The current members
of the Operating Committee are L.A. Kull (Chairman), J.R. Beyster, S.J. Dalich,
D.M. Kerr, J.W. McRary, J.H. Warner, Jr. and W.E. Zisch.
DIRECTORS' COMPENSATION
Except as otherwise described below, during Fiscal 1994, all Directors,
other than those who are employees of the Company, were paid an annual retainer
of $15,000 and received $1,000 for each day on which they attended meetings of
the Board of Directors or of the committees on which they served; provided,
however, if a committee meeting was held on the same day as a Board of Directors
or other committee meeting, the fee for the each additional meeting was $500.
Directors are reimbursed for expenses incurred by them while attending meetings
or otherwise performing services for the Company. Directors are also entitled to
receive certain other incidental benefits which in the aggregate do not exceed
$1,200 per Director annually. Directors are eligible to receive bonuses under
the Company's Bonus Compensation Plan, pursuant to which for services rendered
during Fiscal 1994, J.B. Wiesler and W.E. Zisch received $10,000 and $60,000,
respectively, in cash, B.J. Shillito received 352 shares of Class A Common Stock
which had a market value on the date of grant of $4,995 and C.K. Davis, C.B.
Malone and M.R. Thurman each received 382 restricted shares of Class A Common
Stock which had a market value on the date of grant of $5,012. Directors are
also eligible to receive stock options under the Company's 1992 Stock Option
Plan, pursuant to which for services rendered during Fiscal 1994, C.K. Davis,
W.H. Demish, E.A. Frieman, M.R. Laird, C.B. Malone and M.R. Thurman each
received stock options to acquire 5,000 shares of Class A Common Stock at $14.19
per share. All such options become exercisable one year after the date of grant
and vest as to 20%, 20%, 20% and 40% on the first, second, third and fourth year
anniversaries of the date of grant, respectively.
The Company has also entered into agreements with certain Directors whereby
such Directors perform consulting and other services for the Company. In Fiscal
1994, J.M. Deutch, a Director of the Company until March 31, 1993, received
$10,000 for consulting services and services as a Director under a consulting
arrangement which provided for remuneration of $5,000 per month. The amount paid
to Mr. Deutch under such consulting arrangement was in lieu of the annual
retainer and meeting fees. In Fiscal 1994, A.K. Jones, a Director of the Company
until June 1, 1993, received $1,000 under a consulting arrangement which
provided for remuneration of $1,000 per day for consulting services. The amount
payable to Dr. Jones under such consulting arrangement was in addition to the
annual retainer and meeting fees. In Fiscal 1994, E.A. Frieman received $60,000
for consulting services and services as a Director under a consulting
arrangement which provides for remuneration of $5,000 per month. The amount
payable to Dr. Frieman under such consulting arrangement is in lieu of the
annual retainer and meeting fees. In Fiscal 1994, B.J. Shillito received $42,963
for consulting services and services as a Director under a consulting
arrangement which provides for remuneration of $2,917 per month, the
reimbursement of certain agreed upon expenses for participation in special
projects and the use of a company car. The amount payable to Mr. Shillito under
such consulting arrangement is in lieu of the annual retainer and meeting fees.
In Fiscal 1994, W.E. Zisch received $25,204 under a consulting arrangement which
provides for remuneration of $1,500 per month plus the use of a company car. The
amount payable to Mr. Zisch under such consulting arrangement is in addition to
the annual retainer and meeting fees.
See "Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions" for information with respect to
transactions between the Company and certain entities in which certain Directors
of the Company may be deemed to have an interest.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table (the "Summary Compensation Table") sets forth
information regarding the annual and long-term compensation for services in all
capacities to the Company for the fiscal years ended January 31, 1994, 1993 and
1992, of those persons who were, at January 31, 1994 (i) the chief executive
officer and (ii) the other four most highly compensated executive officers of
the Company (collectively, the "Named Executive Officers"). The Summary
Compensation Table sets forth the annual and long-term compensation earned by
the Named Executive Officers for the relevant fiscal year whether or not paid in
such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------
FISCAL -------------------------- RESTRICTED OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK(2) (SHARES) COMPENSATION(1)
- - ---------------------------------------- ------ ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster 1994 $ 323,409 $ 180,000 $ 0 0 $ 24,821
Chairman of the Board and 1993 $ 305,772 $ 200,000 $ 0 0 $ 24,569
Chief Executive Officer 1992 $ 299,969 $ 170,000 $ 0 0
D.M. Kerr 1994 $ 313,519 $ 179,999(3) $ 0 10,000 $ 14,297
Corporate Executive Vice President 1993 $ 15,385(4) $ 0 $ 24,997(5) 20,000 $ 0
and Director 1992 N/A(6) N/A(6) N/A(6) N/A(6)
L.A. Kull 1994 $ 285,801 $ 165,000 $ 0 0 $ 24,821
President, Chief Operating Officer 1993 $ 268,504 $ 195,000 $ 0 10,000 $ 24,569
and Director 1992 $ 263,897 $ 160,000 $ 0 0
E.A. Straker 1994 $ 207,898 $ 150,004(7) $ 0 5,000 $ 21,665
Sector Vice President and Director 1993 $ 196,780 $ 140,000 $ 19,997(8) 5,000 $ 20,839
1992 $ 185,960 $ 140,000 $ 30,005(9) 3,000
J.H. Warner, Jr. 1994 $ 229,239 $ 124,995(10) $ 0 2,000 $ 24,091
Executive Vice President and Director 1993 $ 225,664 $ 120,000 $ 40,005(11) 3,000 $ 23,485
1992 $ 213,430 $ 110,000 $ 39,995(12) 3,000
<FN>
- - ------------------------------
(1) Amounts of All Other Compensation are amounts contributed or accrued for
Fiscal 1994 and for fiscal year 1993 by the Company for the Named
Executive Officers under the Company's Profit Sharing Plan, ESOP and CODA.
In accordance with the transitional provisions applicable to the revised
rules on executive compensation disclosure adopted by the Securities and
Exchange Commission, amounts of All Other Compensation are excluded for
fiscal year 1992.
(2) The amount reported represents the market value on the date of grant
(calculated by multiplying the formula price as determined by the
Company's Board of Directors ("Formula Price") of the Company's Class A
Common Stock on the date of grant by the number of shares awarded),
without giving effect to the diminution in value attributable to the
restrictions on such stock. As of January 31, 1994, the aggregate
restricted stock holdings for the Named Executive Officers and for all
other employees were as follows: J.R. Beyster -- none; D.M. Kerr -- 1,691
shares, with a market value as of such date of $23,995; L.A. Kull -- none;
E.A. Straker -- 6,669 shares, with a market value as of such date of
$94,633; J.H. Warner, Jr. -- 10,359 shares, with a market value as of such
date of $146,994; and all other employees -- 701,574 shares, with a market
value as of such date of $9,955,335. Dividends are payable on such
restricted stock if and when declared. However, the Company has never
declared or paid a cash dividend on its capital stock and no cash
dividends on its capital stock are contemplated in the foreseeable future.
(3) Includes the award of 1,057 shares of Class A Common Stock which had a
market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $14,999.
(4) D.M. Kerr joined the Company in January 1993. Such salary amount
represents the salary paid to D.M. Kerr for services rendered during such
partial fiscal year.
(5) Represents 2,113 shares which vest as to 20%, 20%, 20% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively.
(6) D.M. Kerr was not an employee of the Company in fiscal year 1992.
(7) Includes the award of 705 shares of Class A Common Stock which had a
market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $10,004.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
(8) Represents 1,665 shares which vest as to 20%, 20%, 20% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively.
(9) Represents 2,691 shares which vest as to 10%, 20%, 30% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively.
(10) Includes the award of 352 shares of Class A Common Stock which had a
market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $4,995.
(11) Represents 3,331 shares which vest as to 20%, 20%, 20% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively.
(12) Represents 3,587 shares which vest as to 10%, 20%, 30% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively.
</TABLE>
OPTION GRANTS
The following table sets forth information regarding grants of options to
purchase shares of Class A Common Stock pursuant to the Company's 1992 Stock
Option Plan made during Fiscal 1994 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED(1) EMPLOYEES PRICE EXPIRATION ---------------------
NAME (SHARES) IN FISCAL 1994 (PER SHARE) DATE 5% 10%
- - --------------------------------------- ----------- --------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster........................... 0 N/A N/A N/A N/A N/A
D.M. Kerr.............................. 20,000 0.8% $ 12.01 2/25/98 $ 66,363 $ 146,645
L.A. Kull.............................. 10,000 0.4% $ 12.01 3/30/98 $ 33,181 $ 73,322
E.A. Straker........................... 5,000 0.2% $ 12.01 3/30/98 $ 16,591 $ 36,661
J.H. Warner, Jr........................ 3,000 0.1% $ 12.01 3/30/98 $ 9,954 $ 21,997
<FN>
- - ------------------------
(1) Although the following grants of options were made during Fiscal 1994,
such grants (other than the grant to D.M. Kerr) relate to the individual's
service during the fiscal year 1993. D.M. Kerr joined the Company in
January 1993 and the options granted to him in Fiscal 1994 were provided
in connection with his offer of employment. All such options become
exercisable one year after the date of grant and vest as to 20%, 20%, 20%
and 40% on the first, second, third and fourth year anniversaries of the
date of grant, respectively.
(2) The potential realizable value is based on an assumption that the stock
price of the Class A Common Stock will appreciate at the annual rate shown
(compounded annually) from the date of grant until the end of the 5-year
option term. These values are calculated based on the regulations
promulgated by the Securities and Exchange Commission and should not be
viewed in any way as an estimate or forecast of the future performance of
the Class A Common Stock. There can be no assurance that the values
realized upon the exercise of the stock options will be at or near the
potential realizable values listed in this table.
</TABLE>
10
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information regarding the exercise of options
during Fiscal 1994 and unexercised options to purchase Class A Common Stock
granted during Fiscal 1994 and prior years under the Company's 1982 Stock Option
Plan and 1992 Stock Option Plan to the Named Executive Officers and held by them
at January 31, 1994.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JANUARY 31, 1994 AT JANUARY 31, 1994(2)
ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------- ------------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster...................... 0 N/A 0 0 N/A N/A
D.M. Kerr......................... 0 N/A 0 20,000 N/A $ 43,600
L.A. Kull......................... 0 N/A 6,000 14,000 $ 26,700 $ 39,600
E.A. Straker...................... 0 N/A 4,800 12,200 $ 20,919 $ 39,091
J.H. Warner, Jr................... 3,000 $ 14,970 4,800 10,200 $ 20,919 $ 34,731
<FN>
- - ------------------------
(1) Calculated by multiplying the difference between the Formula Price of the
Class A Common Stock underlying the option as of the date of exercise and
the exercise price of the option by the number of shares of Class A Common
Stock acquired on exercise of the option.
(2) Based on the Formula Price of the Class A Common Stock as of such date
less the exercise price of such options.
</TABLE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Since its inception, the Company has been an employee-owned corporation
based upon the philosophy that those who contribute to the success of the
Company should share in its rewards. The Company's compensation policies, plans
and programs seek to implement this employee ownership philosophy by closely
aligning the financial interest of the Company's employees, including senior
managers, with those of its stockholders.
As members of the Compensation Committee, it is our responsibility to
determine the compensation paid to the Company's Chief Executive Officer and to
review the compensation paid to each of the four other highest paid executive
officers of the Company in light of individual, corporate and business unit
performance, the performance of our competitors and other similar businesses and
relevant market compensation data. To assist the Compensation Committee in
carrying out these responsibilities, Towers Perrin, an internationally
recognized executive compensation consulting firm, was retained by the
Compensation Committee to review the compensation paid to the Company's Chief
Executive Officer and the four other highest paid executive officers of the
Company during the fiscal year ended January 31, 1994 and to provide a
competitive assessment of the various components of such compensation.
The compensation policy of the Company, which is endorsed by the
Compensation Committee, is that a substantial portion of the annual compensation
of each executive officer be related to and contingent upon their individual
contribution and performance, the performance of business units under their
management and the performance of the Company as a whole. In this way, the
Company seeks to encourage continuing focus on increasing the Company's revenue
and profitability and stockholder value while at the same time motivating its
executive officers to perform to the fullest extent of their abilities.
The Company generally sets the annual base salaries of its executive
officers at or below competitive levels and causes a significant portion of an
executive officer's compensation to consist of annual and longer-term incentive
compensation which are variable and closely tied to corporate, business unit and
individual
11
<PAGE>
performance. For the fiscal year ended January 31, 1994, the annual and
long-term incentive compensation averaged approximately 30% of the total
compensation (salary and bonus) of executive officers of the Company. As a
result, much of an executive officer's compensation was "at risk."
An executive officer's incentive compensation may consist of cash,
fully-vested stock, vesting stock, options or a combination of these components.
Generally, an annual bonus is given after the end of the fiscal year based on
individual, corporate and business unit performance for such fiscal year and an
executive officer's respective responsibilities, strategic and operational goals
and levels of historic and anticipated performance. By awarding bonuses of
vesting stock and stock options, the Company seeks to encourage individuals to
remain with the Company and continue to focus on the long-term technical and
financial performance of the Company. Further, the Company's general philosophy
is to encourage individuals to have significant stockholdings in the Company so
that they have sufficient economic incentive to maximize the Company's long-term
performance.
In evaluating the performance and establishing the incentive compensation of
the Chief Executive Officer and the Company's other executive officers, the
Compensation Committee recognized that the Company continued to increase its
revenue and profitability during the past fiscal year. For the fiscal year ended
January 31, 1994, the Company's revenues increased to $1.67 billion, an 11.1%
increase from the prior fiscal year. The Company's net income for this same
period was $41.5 million, or a 9.0% increase over the prior fiscal year net
income of $38.1 million. Correspondingly, the Formula Price of the Company's
Class A Common Stock increased from $12.01 at January 31, 1993 to $14.19 at
January 31, 1994, an 18.2% increase. The Compensation Committee has taken
particular note of the Company's continuing financial success despite declining
defense and other government budgets and increasing competition in the Company's
markets. The Compensation Committee has also noted that management has
successfully increased the Company's business base in areas other than national
security, such as energy, environmental, health, transportation, commercial and
international.
The total compensation for J.R. Beyster, the Company's Founder and Chief
Executive Officer, for the fiscal year ended January 31, 1994 was $503,409 and
is relatively unchanged from his total compensation of $505,772 for the prior
fiscal year. Dr. Beyster was paid a salary of $323,409 and a cash bonus of
$180,000 for the fiscal year ended January 31, 1994. The base salary amount
represents a 5.8% increase over the prior fiscal year. Based on the increase in
the Company's revenue and profits, the Company's continued success in the
diversification of the Company's business, as well as the continued increase in
the price of the Company's Class A Common Stock, the Compensation Committee
feels that such an increase in Dr. Beyster's base salary is well warranted.
However, because of a reduction in the amount of the annual bonus pool available
on a company-wide basis, Dr. Beyster's cash bonus represents a 10% decrease from
the cash bonus he received for the prior fiscal year. Because of Dr. Beyster's
relatively large stockholding compared to the other executive officers and
employees of the Company, his bonus has been paid in cash. Further, because Dr.
Beyster is a member of the Company's Stock Option Committee, he is ineligible to
receive stock option awards because of the restrictions imposed by Section 16 of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder.
According to Towers Perrin, the level of Dr. Beyster's total compensation
for the Company's last fiscal year was below the 25th percentile of salaries and
bonuses for chief executive officers based on industry survey data collected by
Towers Perrin. The Compensation Committee would like to emphasize that Dr.
Beyster's below market compensation is not a reflection of the Compensation
Committee's or the Board of Director's opinion of Dr. Beyster's ability or his
relative ranking among other chief executive officers but is instead a
reflection of Dr. Beyster's personal refusal to accept additional compensation
for his services.
Towers Perrin has reviewed the compensation for each of the other four
highest paid executive officers of the Company during its last fiscal year and
has reported to the Compensation Committee that, based on industry survey data
collected by Towers Perrin, the compensation of these executive officers was at
or below competitive market levels for individuals with comparable duties and
responsibilities.
12
<PAGE>
The Compensation Committee believes that the compensation policies, plans
and programs the Company has implemented and which the Compensation Committee
administers have encouraged management's focus on the long-term financial
performance of the Company and have contributed to achieving the Company's
technical and financial success.
<TABLE>
<S> <C>
B. J. Shillito (Chairman) C. B. Malone
C. K. Davis M. R. Thurman
W. H. Demisch J. B. Wiesler
E. A. Frieman W. E. Zisch
M. R. Laird
</TABLE>
April 9, 1994
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During Fiscal 1994, C.K. Davis, W.H. Demisch, J.M. Deutch, E.A. Frieman,
A.K. Jones, M.R. Laird, C.B. Malone, W.J. Perry, B.J. Shillito, M.R. Thurman,
J.B. Wiesler and W.E. Zisch served as members of the Compensation Committee.
None of such persons currently serves or formerly served as an officer or
employee of the Company or any of its subsidiaries except for E.A. Frieman, who
was an Executive Vice President and Group Manager of the Company from 1981 to
1986, and W.E. Zisch, who was an employee of the Company from 1974 to 1988.
Dressendorfer-Laird Incorporated ("D-L Inc."), a company that is 50% owned
by D.M. Laird, the son of M.R. Laird, a Director of the Company, has provided
governmental relations services to the Company since 1983. During Fiscal 1994,
the Company paid D-L Inc. $225,000 for such services. M.R. Laird has no economic
interest in D-L Inc. W. Frieman, daughter of E.A. Frieman, a Director of the
Company, is an employee of the Company and the Director of the Asia Technology
Program for the Company. For services rendered during Fiscal 1994, W. Frieman
received $87,846 in cash compensation. W. Frieman's area of professional
expertise is the analysis of industrial and defense technology in the Pacific
Rim, with an emphasis on China, Japan and Southeast Asia. B.L. Shillito, son of
B.J. Shillito, a Director of the Company, is an employee of the Company and an
attorney in the Company's Legal Department. For services rendered during Fiscal
1994, B.L. Shillito received $115,385 in cash compensation. Prior to joining the
Company, B.L. Shillito was a partner in the law firm of Eckert, Seamans, Cherin
& Mellott and has over 22 years of legal experience.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Foundation for Enterprise Development (the "Foundation"), a non-profit
organization, was founded in 1986 by J.R. Beyster, Chairman of the Board and
Chief Executive Officer of the Company, to promote employee ownership. Dr.
Beyster is the President and a member of the Board of Trustees of the
Foundation. In Fiscal 1994, the Company made a contribution of $250,000 to the
Foundation consisting of a combination of cash and rent-free space in a building
owned by the Company in La Jolla, California, and in a building leased by the
Company in McLean, Virginia. The aggregate estimated fair rental value of the
contributed facilities in Fiscal 1994 was approximately $30,000 and the cash
contribution was $220,000. The Board of Directors has approved a similar
contribution of a combination of cash and rent-free space to the Foundation in
fiscal year 1995 in an aggregate amount of $250,000.
R.D. Layson, wife of W.M. Layson, a Director of the Company, is an employee
of the Company and the Deputy Division Manager for the Information Systems
Integration Division. For services rendered during Fiscal 1994, R.D. Layson
received $80,318 in cash and stock compensation and options to acquire 500
shares of Class A Common Stock at $14.19 per share. Such options become
exercisable one year after the date of grant and vest as to 20%, 20%, 20% and
40% on the first, second, third and fourth year anniversaries of the date of
grant, respectively. R.D. Layson has been an employee of the Company for over 14
years and works in the area of systems integration and software development
management.
See also "Compensation Committee Interlocks and Insider Participation."
14
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the Class A Common Stock against the cumulative
total return of the S&P Composite-500 Stock Index and the Dow Jones Diversified
Technology Index for the ten (10) fiscal years commencing February 1, 1984 and
ending January 31, 1994. The comparison of total return shows the change in
year-end stock price, assuming the immediate reinvestment of all dividends for
each of the periods and has been indexed to $100.00 as of January 31, 1989. The
information for the Dow Jones Diversified Technology Index for the six (6)
fiscal years commencing February 1, 1988 and ending January 31, 1994 was
provided by Dow Jones. The information for the Dow Jones Diversified Technology
Index for the four (4) fiscal years commencing February 1, 1984 and ending
January 31, 1988 was compiled by Houlihan Lokey Howard & Zukin, a specialty
investment banking firm, for the companies which comprised the Dow Jones
Diversified Technology Index during such time period.
COMPARISON OF TEN-YEAR
CUMULATIVE TOTAL RETURN
AMONG SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,
S&P COMPOSITE-500 STOCK INDEX AND
DOW JONES DIVERSIFIED TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Dow Jones Diversified Technology
SAIC Stock Price S&P 500 Index Index
<S> <C> <C> <C>
Jan-84 40.95 45.51 72.77
Jan-85 51.55 52.41 81.04
Jan-86 69.69 64.36 91.58
Jan-87 83.27 86.23 109.75
Jan-88 85.96 83.36 87.26
Jan-89 100 100 100
Jan-90 113.8 114.39 110.06
Jan-91 119.17 123.95 125.96
Jan-92 136.14 152.03 140.32
Jan-93 146.64 168.11 159.76
Jan-94 173.26 189.76 196.92
</TABLE>
15
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
CLASS A COMMON STOCK
To the best of the Company's knowledge, as of May 13, 1994, no person (other
than State Street Bank and Trust Company ("State Street") in its capacity as
trustee of the Company's retirement plans) beneficially owned more than 5% of
the outstanding shares of Class A Common Stock. The following table sets forth,
as of May 13, 1994, to the best of the Company's knowledge, the number of shares
of Class A Common Stock beneficially owned by each Director, each nominee for
Director, the Named Executive Officers and all executive officers and Directors
as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- - -------------------------------------------------- ----------------- --------
<S> <C> <C>
A.L. Alm.......................................... 36,679 *
J.R. Beyster...................................... 874,383 1.9%
V.N. Cook......................................... 46,822 *
S.J. Dalich....................................... 97,348 *
C.K. Davis........................................ 497 *
W.H. Demisch...................................... 12,925 *
E.A. Frieman...................................... 36,706 *
R.M. Gates........................................ -0- *
J.E. Glancy....................................... 123,857 *
D.A. Hicks........................................ 12,822 *
B.R. Inman........................................ 61,693 *
D.M. Kerr......................................... 17,127 *
L.A. Kull......................................... 260,082 *
M.R. Laird........................................ 38,659 *
W.M. Layson....................................... 115,277 *
C.B. Malone....................................... 382 *
J.W. McRary....................................... 226,168 *
B.J. Shillito..................................... 66,400(2) *
E.A. Straker...................................... 111,920 *
M.R. Thurman...................................... 582 *
J.H. Warner, Jr. ................................. 138,814 *
J.A. Welch........................................ 26,097 *
J.B. Wiesler...................................... 3,000 *
W.E. Zisch........................................ 56,919 *
State Street Bank and Trust Company............... 21,113,739(3) 47.0%
One Enterprise Drive
North Quincy, MA 02171
All executive officers and Directors as a group
(37 persons)..................................... 3,043,229 6.7%
<FN>
- - ------------------------
* Less than 1% of the outstanding shares of Class A Common Stock and less
than 1% of the voting power of the Common Stock.
(1) The beneficial ownership depicted in the table includes: (i) shares held
for the account of the individual by the Trustee of the Company's ESOP and
CODA as follows: A.L. Alm (3,618 shares), J.R. Beyster (46,184 shares),
V.N. Cook (1,371 shares), S.J. Dalich (31,751 shares), J.E. Glancy
(23,886) shares), D.A. Hicks (8 shares), B.R. Inman (9 shares), D.M. Kerr
(451 shares), L.A. Kull (35,352 shares), W.M. Layson (37,525 shares), J.W.
McRary (39,862 shares), E.A. Straker (36,232 shares), J.H. Warner, Jr.
(29,679 shares), J.A. Welch (2,743 shares), and all executive officers and
Directors as a group (386,085 shares); (ii) shares subject to options
exercisable within 60 days following May 13, 1994, as follows: A.L. Alm
(19,859 shares), V.N. Cook (4,900 shares), S.J. Dalich (7,400 shares),
W.H. Demisch (1,900 shares), E.A. Frieman (1,900 shares), J.E. Glancy
(3,600 shares), D.A. Hicks (1,900 shares), B.R. Inman (7,900 shares), D.M.
Kerr (4,000 shares), L.A. Kull (8,000 shares), M.R. Laird (1,900 shares),
J.W. McRary (11,000 shares), B.J. Shillito (1,900 shares), E.A. Straker
(7,300 shares), J.H. Warner, Jr. (6,900 shares), J.A. Welch (1,900
shares), and all executive officers and Directors as a group (207,092);
(iii) shares held by spouses, minor children or other relatives sharing a
household with the individual, as follows: J.E. Glancy (250 shares), W.M.
Layson (47,752 shares), E.A. Straker (20,655 shares), and
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
all executive officers and Directors as a group (69,657 shares); and (iv)
shares held by certain trusts established by the individual, as follows:
J.R. Beyster (828,199 shares), L.A. Kull (216,730 shares), J.B. Wiesler
(3,000 shares), W.E. Zisch (56,919 shares) and all executive officers and
Directors as a group (1,142,043 shares).
(2) Does not include 27,300 shares held by certain trusts established by B.J.
Shillito and his wife for the benefit of their children and grandchildren
and 58,510 shares held by his children and their spouses. B.J. Shillito
disclaims beneficial ownership of these shares.
(3) At May 13, 1994, State Street, as Trustee for the Company's retirement
plans, beneficially owned the following percentage of the outstanding
shares of Class A Common Stock and Class B Common Stock and voting power
of the Common Stock under the following plans: ESOP -- 35.8% Class A
Common Stock, 11.4% Class B Common Stock and 34.9% of voting power of the
Common Stock; CODA -- 11.1% Class A Common Stock, 0% Class B Common Stock
and 10.7% of voting power of the Common Stock; and Profit Sharing Plan II
-- 0.1% Class A Common Stock, 0.01% Class B Common Stock and 0.1% of
voting power of the Common Stock. Under the terms of the Company's
retirement plans, participants are entitled to direct State Street how to
vote Common Stock allocated to their accounts in the plans.
</TABLE>
CLASS B COMMON STOCK
As of May 13, 1994, to the best of the Company's knowledge, State Street in
its capacity as trustee of the Company's retirement plans was the only
stockholder which was a beneficial owner of more than 5% of the outstanding
shares of Class B Common Stock. At such date, State Street beneficially owned
40,922 shares of Class B Common Stock or approximately 11.4% of the Class B
Common Stock then outstanding. State Street's total ownership of Common Stock is
set forth in Note (3) above. None of the Directors, nominees for Director or
executive officers of the Company own any shares of Class B Common Stock.
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse as independent
accountants for the Company for the fiscal year ending January 31, 1995, subject
to approval by the stockholders of the Company. Price Waterhouse has served as
the Company's independent accounting firm since 1977. There is no requirement in
the Company's Charter or Bylaws that the selection of independent accountants be
submitted to a vote of stockholders. However, the Board of Directors deems this
matter to be of such importance that it has concluded that it should be subject
to approval of the stockholders. If the stockholders do not approve the
appointment of Price Waterhouse, the Board of Directors will reconsider such
appointment.
It is anticipated that a representative of Price Waterhouse will be present
at the Annual Meeting and will have the opportunity to make a statement if he or
she desires to do so. Such representative will also be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING
Any stockholder proposals intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Company no later than February
9, 1995 in order to be considered for inclusion in the Proxy Statement and form
of proxy relating to that meeting.
In addition, Section 2.01 of the Company's Bylaws provides that in order for
a stockholder to propose any matter for consideration at an annual meeting of
the Company, such stockholder must have given timely prior written notice to the
Corporate Secretary of the Company of his or her intention to bring such
business before the meeting. To be timely, notice must be received by the
Company not less than 50 days nor more than 75 days prior to the meeting (or if
fewer than 65 days' notice or prior public disclosure of the meeting date is
given or made to stockholders, not later than the 15th day following the day on
which the notice of the date of the meeting was mailed or such public disclosure
was made). Such notice must contain certain information, including a brief
description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at the annual meeting, the
class and number of shares of Common Stock beneficially owned by the stockholder
who proposes to bring the business before the meeting and any material interest
of such stockholder in the business so proposed.
17
<PAGE>
ANNUAL REPORT
The Company's 1994 Annual Report to Stockholders for the year ended January
31, 1994, which includes audited financial statements, is being mailed with this
Proxy Statement to stockholders of record on May 13, 1994.
The Company will provide without charge to any stockholder, upon request, a
copy of its Form 10-K Annual Report for the year ended January 31, 1994 (without
exhibits), as filed with the Securities and Exchange Commission. Requests should
be directed in writing to Science Applications International Corporation, 10260
Campus Point Drive, San Diego, California 92121, Attention: Corporate Secretary.
By Order of the Board of Directors
/s/ J. DENNIS HEIPT
J. Dennis Heipt
Corporate Secretary
June 9, 1994
18
<PAGE>
[LOGO] PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JULY 9, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. R. BEYSTER, J. D. HEIPT and D. E. SCOTT,
and each of them, with full power of substitution, as proxies to represent the
undersigned and to vote all of the shares of Class A Common Stock and/or Class B
Common Stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Science Applications International Corporation (the "Company")
to be held in the Grand Ballroom of the Sheraton Grande Torrey Pines, 10950
North Torrey Pines Road, La Jolla, California, on Saturday, July 9, 1994 at
10:00 A.M. (local time), and at any adjournment, postponement or continuation
thereof, as follows:
1. Election of eight Class I Directors.
/ / FOR all nominees listed below (EXCEPT AS MARKED TO THE CONTRARY BELOW)
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name in the
following list:
J.R. Beyster, V.N. Cook, W.H. Demisch, R.M. Gates, J.E. Glancy, D.A. Hicks, C.B.
Malone and J.A. Welch
/ / WITHHOLD AUTHORITY to vote for ALL nominees listed above.
2. Proposal to approve the appointment of Price Waterhouse as independent
accountants for the fiscal year ending January 31, 1995.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, on any other matters properly coming before the
meeting and any adjournment, postponement or continuation thereof.
<PAGE>
This proxy will be voted as directed. If this proxy card is properly signed and
returned but no directions are specified, this proxy will be voted FOR the
election of directors so as to elect the maximum number of the Board of
Directors' nominees that may be elected by cumulative voting and FOR Proposal 2.
This proxy card, if properly executed and delivered in a timely manner, will
revoke all prior proxies.
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE.
Dated ________________________, 1994
_______________________________________
Signature
__________________________________________
Signature
Please sign EXACTLY as name or names
appear hereon. When signing as attorney,
executor, trustee, administrator or
guardian, please give your full title. If
a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
<PAGE>
[LOGO]
VOTING INSTRUCTION CARD FOR ANNUAL MEETING OF STOCKHOLDERS -- JULY 9, 1994
The undersigned hereby instructs the Trustee, State Street Bank and Trust
Company, and any successor, under the Cash or Deferred Arrangement, Employee
Stock Ownership Plan ("ESOP") and Profit Sharing Retirement Plan II
(collectively, the "Plans") of Science Applications International Corporation
(the "Company") to vote all of the shares of Class A Common Stock and/or Class B
Common Stock held for the undersigned's account in each of the Plans at the
Annual Meeting of Stockholders of the Company to be held in the Grand Ballroom
of the Sheraton Grande Torrey Pines, 10950 North Torrey Pines Road, La Jolla,
California, on Saturday, July 9, 1994 at 10:00 A.M. (local time), and at any
adjournment, postponement or continuation thereof, as follows:
1. Election of eight Class I Directors.
/ / FOR all nominees listed below (EXCEPT AS MARKED TO THE CONTRARY BELOW)
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through such nominee's name in
the following list:
J.R. Beyster, V.N. Cook, W.H. Demisch, R.M. Gates, J.E. Glancy, D.A. Hicks, C.B.
Malone and J.A. Welch
/ / WITHHOLD AUTHORITY to vote for ALL nominees listed above.
2. Proposal to approve the appointment of Price Waterhouse as independent
accountants for the fiscal year ending January 31, 1995.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, on any other matters properly coming before the
meeting and any adjournment, postponement or continuation thereof.
<PAGE>
THIS VOTING INSTRUCTION CARD IS SOLICITED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS.
The shares of Class A Common Stock and/or Class B Common Stock to which this
voting instruction card relates will be voted as directed. If this card is
signed and returned but no instructions are indicated with respect to a
particular item, the vote of such shares as to any such item will be deemed to
have been directed, and such shares will be voted FOR the election of directors
so as to elect the maximum number of the Board of Directors' nominees that may
be elected by cumulative voting and FOR Proposal 2. All allocated shares of
Class A Common Stock and/or Class B Common Stock held in the Plans (other than
shares held in the TRASOP accounts of participants in the ESOP) as to which no
voting instruction cards are received, together with all shares held in the
Plans which have not yet been allocated to the accounts of participants, will be
voted, on a Plan-by-Plan basis, in the same proportion as the shares held in
each Plan for which voting instructions have been received are voted. Shares
held in the TRASOP accounts of participants in the ESOP as to which no voting
instruction cards are received will not be voted by the Trustee. This voting
instruction card, if properly executed and delivered, will revoke all prior
voting instruction cards.
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE. IN ORDER TO BE COUNTED, VOTING INSTRUCTION CARDS MUST BE
RECEIVED BY THE PROXY COUNTER BY JULY 5, 1994.
Dated ______, 1994
______________________________________
Signature
Please sign EXACTLY as name or names
appear hereon. When signing as
attorney, executor, trustee,
administrator or guardian, please give
your full title.
