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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, 1995
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)
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<S> <C>
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)
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Registrant's telephone number, including area code: (619) 546-6000
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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 10, 1995, the aggregate market value of the voting stock held by
non-affiliates of Registrant was $349,902,079. 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 10, 1995, there were 45,179,231 shares of Registrant's Class A
Common Stock and 341,822 shares of Registrant's Class B Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement for the Company's 1995
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 86%, 88% and 88% of revenues in fiscal years
1995, 1994 and 1993, respectively. The balance of the Company's revenues are
attributable to the sales of Technical Services and Products to foreign, state
and local governments, commercial customers and others. The percentage of
revenues attributable to Technical Services and Products has remained relatively
constant at approximately 91% and 9%, respectively, for fiscal year 1995 and
approximately 92% and 8%, respectively, for fiscal years 1994 and 1993. The
Company provides Technical Services primarily in the areas of "National
Security," "Environment," "Energy" and "Other Technical Services," the last 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 C of Notes to Consolidated
Financial Statements of the Company set forth on page F-9 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:
- Development and integration of command, control and intelligence
applications software, middleware, and data bases in client-server
architectures to provide situational awareness and decision-aiding to
military commanders and organizations and architectural definition,
systems and software engineering, systems installation, training and site
support.
- 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.
- Defense studies and analyses for various defense and intelligence agencies
of the U.S. Government, including studies regarding conventional and
nuclear warfare issues, treaty negotiation and verification, and the
integration of military operational and technological considerations with
defense policy issues.
- Development of core technology for advanced distributed simulation and
applications for the DOD and other government and commercial customers.
- Support of numerous DOD test and evaluation requirements of ground, air,
sea and space systems, assistance to the U.S. Air Force, U.S. Navy, U.S.
Army, U.S. Marine Corps and the
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Office of the Secretary of Defense in assessing the military effectiveness
and suitability of major communication, sensor, navigation, weapon and
related systems that support primary service and/or joint service roles
and missions.
- 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.
- 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.
- 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.
- Engineering, environmental, quality assurance, integration and program
support to the U.S. Army's chemical demilitarization and remediation
activity.
ENVIRONMENT
In the environment area, the Company performs site assessments, remedial
investigation and feasibility studies, remedial actions, technology evaluations,
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, remedial actions, 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.
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- 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.
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 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, risk assessment, safety analysis,
nuclear engineering, reliability and availability evaluations, simulator
upgrades, energy policy analysis and alternative energy evaluation.
- Support to DOE in planning, facility transitions, safety analysis,
transportation, waste management, quality assurance, emergency
preparedness and public outreach.
- Design, fabrication and application of alternative energy sources such as
solar generators and fuel cells.
- 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.
- Systems integration services to the utility industry, including design,
development and installation of plant process computer systems,
supervisory control and data acquisition (SCADA) systems, and electronic
security systems.
- 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 these areas are
described below:
- Applied research, systems integration and customer support services to
both commercial and federal health care clients, including research
initiatives for the U.S. Advanced Research Projects Agency, developing and
operating a nationwide health care frame relay-based telecommunications
system for the VA and automating the information systems for the DOD's
medical treatment facilities worldwide.
- Development, installation and operation of computer and telecommunications
systems for various transportation applications, including automated toll
revenue collection, rail asset and freight management, intermodal terminal
operation, advanced traffic and congestion management, rail
electrification, traffic control, air traffic control, commercial vehicle
electronic clearance, explosive and contraband detection, and state motor
vehicle registration.
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- Strategic planning, operational analysis and evaluation, surface
transportation planning and engineering, software development and
reengineering, safety and human factors research, and hazardous material
transportation safety.
- Development and integration of fuel cell technology for alternative fuel
vehicles and support to the FAA in flight testing helicopter instrumented
approaches using the satellite based global positioning system (GPS).
- Information technology and automatic data processing outsourcing services
for commercial clients.
- Support to the U.S. Army in the biomedical area, including providing
expert analysis, research planning, program design and review, and topical
research on a variety of military medical issues, including medical
countermeasures to chemical and biological warfare, casualty care,
battlefield hazards and the U.S. Army's breast cancer research program and
biomedical service and management of government facilities.
- 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.
- 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.
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 would 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
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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.
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, 1995, 1994 and 1993, approximately
88%, 89% and 89%, respectively, of the Company's contract revenues from the
Technical Services segment and 68%, 72% and 82%, 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 1995, 1994 and 1993, the U.S. Air Force accounted for 11%,
12%, and 12%, respectively, of consolidated revenues, the U.S. Army accounted
for 19%, 17% and 15%, respectively, of consolidated revenues, the U.S. Navy
accounted for 10%, 10% and 12%, respectively, of consolidated revenues and the
DOE accounted for 11%, 10% and 5%, respectively, of consolidated revenues. No
single contract in the Technical Services segment accounted for 10% or more of
consolidated revenues in fiscal years 1995, 1994 and 1993.
No single customer or contract in the Products segment accounted for 10% or
more of consolidated revenues in fiscal years 1995, 1994 and 1993.
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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
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,
fixed 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 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, 1995, 1994 and 1993, approximately
64%, 65% and 62%, respectively, of the Technical Services revenues were derived
from cost-reimbursement type contracts and 13%, 12% and 16%, respectively, of
the Technical Services 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 Products revenues in these three
years were derived from firm fixed-price type contracts.
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 revenues, exclusive of
related fees, at January 31, 1995 were $13,393,000. Unbilled receivables in this
category which were included in the Products revenues, exclusive of related
fees, at January 31, 1995 were $383,000. 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.
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. The
majority of the Company's indirect contract costs have been agreed upon through
the fiscal year ended January 31, 1991 and substantially all of the Company's
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.
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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
Backlog includes only the funded dollar amount of contracts in process and
does 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.
The backlog for the Technical Services segment at January 31, 1995 and 1994
amounted to approximately $858,000,000 and $695,000,000, respectively, and the
backlog for the Products segment at those dates amounted to approximately
$119,000,000 and $109,000,000, respectively. The Company expects that a
substantial portion of its backlog at January 31, 1995 will be recognized as
revenues prior to January 31, 1996. Some contracts associated with the backlog
are incrementally funded and may continue for more than one year.
EMPLOYEES AND CONSULTANTS
As of March 10, 1995, the Company employed approximately 17,000 persons on a
full-time basis and approximately 1,250 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 10, 1995, approximately 9,950 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 10, 1995, the Company conducted its operations in more than 310
offices and manufacturing and laboratory facilities located in 41 states, the
District of Columbia and various
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foreign countries, and occupied a total of approximately 4,800,000 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
140,000 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.
metropolitan area (McLean, Virginia), the Company owns a building consisting of
approximately 287,000 square feet of space situated on 10 acres of land. In
McLean, Virginia, the Company also occupies two buildings containing a total of
approximately 425,000 square feet of space. The Company has certain rights to
purchase these leased 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 owns and occupies a 62,500 square foot building on approximately
13 acres of land in Virginia Beach, Virginia and owns and occupies an 83,000
square foot building on approximately 8.4 acres of land in Oak Ridge, Tennessee.
The Company also owns and occupies a 95,500 square foot building situated on
approximately 7.3 acres of land in Columbia, Maryland. In addition, the Company
leases approximately 3.1 acres of land in Richland, Washington and owns a 23,700
square foot building on such land. This building was occupied in February 1995.
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 K of Notes to
Consolidated Financial Statements of the Company on page F-16 of this Form 10-K
for information regarding commitments under leases.
ITEM 3. LEGAL PROCEEDINGS.
On February 15, 1994, the Company was served with search warrants and a
subpoena for documents and records associated with the performance by the SAIT
operating unit of the Company under three contracts with the DOD. The search
warrants and subpoena state that the U.S. 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 search warrants and subpoena appear to
be based upon allegations contained in a civil complaint that had been filed
under seal on March 13, 1993 by an employee of the Company's SAIT operating
unit. The complaint was filed in the U.S. District Court for the Southern
District of California and sought damages on behalf of the U.S. Government under
the Federal False Claims Act. On August 1, 1994, the Department of Justice on
behalf of the U.S. Government announced its intention to intervene in the case.
Based on the Company's motion, on November 8, 1994, the District Court dismissed
the employee who had originally filed the complaint from the lawsuit, leaving
only the U.S. Government and the Company as parties. The employee has appealed
the District Court's order to the U.S. Court of Appeals for the Ninth Circuit.
The Company has engaged in a series of presentations and submissions with the
Department of Justice in which the Company responded to issues raised by the
Department of Justice. At this stage of the proceedings, the Company is unable
to assess the impact, if any, of this investigation and lawsuit on its
consolidated financial position, results of operations or ability to conduct
business.
The Company is involved in various other 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 its
consolidated financial position, results of operations or its ability to conduct
business.
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 1995.
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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
1995 Annual Meeting of Stockholders (the "1995 Proxy Statement").
The following is a list of the names and ages (as of April 14, 1995) 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.
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NAME OF
EXECUTIVE OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
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A.L. Alm 58 Sector Vice President of the Company since 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 70 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 52 Sector Vice President since 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.
S.J. Dalich 51 Executive Vice President of the Company since 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 1992.
M.A. Daniels 49 Sector Vice President of the Company since 1993. Mr. Daniels has held various
positions with the Company since 1986, including serving as a Group Senior Vice
President from 1991 to 1993.
D.H. Foley 50 Sector Vice President since 1992. Prior to joining the Company in 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 49 Corporate Executive Vice President since January 1994 and a Director of the
Company since July 1994. 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. Goldstein 62 Sector Vice President since January 1995. Mr. Goldstein has held various
positions with the Company since 1977, including serving as a Group Senior Vice
President from 1990 to January 1995.
J.D. Heipt 52 Senior Vice President for Administration and Secretary of the Company since
1984. Mr. Heipt has held various positions with the Company since 1979.
A.P. Herskowitz 54 Sector Vice President of the Company since 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.
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NAME OF
EXECUTIVE OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
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<S> <C> <C>
M.V. Hughes, III 50 Sector Vice President since 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 52 Sector Vice President of the Company since 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 56 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 57 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.
P.E. McGrath 53 Sector Vice President since July 1994. Dr. McGrath has held various positions
with the Company since 1981, including serving as a Group Senior Vice President
from 1988 to July 1994.
P.N. Pavlics 34 Corporate Vice President and Controller of the Company since 1993. Mr. Pavlics
has held various positions with the Company since 1985, including serving as a
Vice President of Administration from June 1989 to 1992.
L.J. Peck 47 Sector Vice President since July 1994. Mr. Peck served as a Group Senior Vice
President from 1991 to July 1994 and he has held various other positions with
the Company since 1983.
S.D. Rockwood 52 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. 49 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 60 Executive Vice President of the Company since 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>
10
<PAGE>
<TABLE>
<CAPTION>
NAME OF
EXECUTIVE OFFICER AGE POSITIONS WITH THE COMPANY AND PRIOR BUSINESS EXPERIENCE
- -------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
D.E. Scott 38 Corporate Vice President and General Counsel of the Company since 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 57 Executive Vice President of the Company since July 1994 and a Director since
1992. Dr. Straker has held various positions with the Company since 1971,
including serving as a Sector Vice President from 1986 to July 1994.
J.P. Walkush 42 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 1992 to January 1994.
J.H. Warner, Jr. 54 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 fair market value of the Class A Common Stock
determined pursuant to the formula and valuation process described below (the
"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 Employee Stock Ownership Plan, Cash
or Deferred Arrangement ("CODA"), 1993 Employee Stock Purchase Plan, 1995
Employee Stock Purchase Plan (if approved by the Company's stockholders at the
1995 Annual Meeting of Stockholders), 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 and
its retirement plans) 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 or less shares 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. In fiscal year 1995, the Company purchased 279,658 shares in the
Limited Market. The Company did not purchase shares in the Limited Market in
fiscal year 1994. The Company's purchases in fiscal year 1995 accounted for 16%
of the total shares purchased by all buyers in the Limited Market during that
year.
During the 1995 and 1994 fiscal years, the trustees of the Company's Profit
Sharing Retirement Plan II (consolidated as of January 1, 1995 with the
Company's Profit Sharing Retirement Plan), Employee Stock Ownership Plan, CODA
and 1993 Employee Stock Purchase Plan purchased an aggregate of 1,065,741 shares
and 1,824,077 shares, respectively, in the Limited Market. These purchases
accounted for approximately 61% and 81% of the total shares purchased by all
buyers in the
12
<PAGE>
Limited Market during fiscal years 1995 and 1994, 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 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. No assurance can be given that a
stockholder desiring to sell all or a portion of his or her shares of the
Company's Class A Common Stock in any trade will be able to do so.
The Company received a no-action letter from the Securities and Exchange
Commission (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 Internal Revenue
Code of 1986, as amended, 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 1995. 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 upon
which such Tender Offer is completed.
PRICE RANGE OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The fair market value of the Class A Common Stock is established pursuant to
the valuation process described below, which uses the formula set forth below to
determine the Formula Price at which the Class A Common Stock trades in the
Limited Market. The Formula Price is reviewed by the Board of Directors at least
four times each year, generally in conjunction with Board of Directors meetings
which are currently scheduled for January, April, July and October. 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 following formula ("Formula") is used in determining the Formula Price:
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 yields a
fair market value for the Class A Common Stock and the Class B Common Stock by
reflecting existing securities market conditions relevant to the valuation of
such stock. In establishing the Market Factor, the Board of Directors considers
the performance of the general securities markets and relevant industry groups,
the financial performance of the Company versus comparable public companies,
general economic conditions, input from
13
<PAGE>
an independent appraisal firm and other relevant factors. 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 qualified retirement plans (the "Committee") and
which is relied upon by the Committee and the Board of Directors. The Market
Factor, as determined by the Board of Directors, remains in effect until
subsequently changed by the Board of Directors. The Formula Price of the Class A
Common Stock, expressed as an equation, is as follows:
E 5.66MP
FORMULA PRICE = --- + ------
W(1) W
The Formula was modified by the Board of Directors on April 14, 1995 to
delete a limitation that the Formula Price not be less than 90% of the net book
value per share of the Class A Comon Stock at the end of the quarter immediately
preceding the date on which a price revision is to occur (the "book value
floor"). The modification was intended to ensure that the Formula Price would be
a fair market value as required by law. The Formula Price has always exceeded
the book value floor, and the book value floor has never been used to establish
the Formula Price. With the exception of this modification, the Formula has not
been modified by the Board of Directors since March 23, 1984.
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 returns.
<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 9, 1993........................... 1.40 $12.63 $63.15
July 9, 1993............................ 1.40 $12.85 $64.25
October 8, 1993......................... 1.40 $13.12 $65.60
January 14, 1994........................ 1.50 $14.19 $70.95
April 9, 1994........................... 1.50 $14.46 $72.30
July 9, 1994............................ 1.45 $14.48 $72.40
October 15, 1994........................ 1.45 $15.07 $75.35
January 14, 1995........................ 1.50 $15.72 $78.60
April 14, 1995.......................... 1.50 $16.41 $82.05
</TABLE>
The Board of Directors believes that the valuation process and Formula
result 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
law.
HOLDERS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
As of March 10, 1995, there were 11,228 holders of record of Class A Common
Stock and 139 holders of record of Class B Common Stock. As of such date,
approximately 92% of the Class A Common Stock and approximately 44% of the Class
B Common Stock were beneficially owned by employees and consultants of the
Company and their respective family members.
14
<PAGE>
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.
ITEM 6. SELECTED FINANCIAL DATA.
The following data has been derived from consolidated audited financial
statements. The consolidated balance sheet at January 31, 1995 and 1994 and the
related consolidated statements of income and of cash flows for the three years
ended January 31, 1995 and notes thereto appear elsewhere in this Form 10-K
Report.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C>
Revenues........................... $1,921,880 $1,670,882 $1,504,112 $1,285,294 $1,162,934
Cost of revenues................... 1,692,623 1,477,701 1,327,992 1,124,756 1,016,250
Selling, general and administrative
expenses.......................... 146,083 120,387 113,174 101,935 90,722
Interest expense................... 3,468 2,966 2,841 2,964 1,999
Provision for income taxes......... 30,654 28,328 22,030 22,023 20,662
---------- ---------- ---------- ---------- ----------
Net income......................... 49,052 41,500 38,075 33,616 33,301
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings per share (1)............. $ 1.01 $ .89 $ .83 $ .75 $ .73
Average number of shares
outstanding, including common
stock equivalents................. 49,264 47,429 46,179 44,825 45,921
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets....................... $ 752,584 $ 611,575 $ 523,613 $ 437,975 $ 372,788
Working capital.................... 173,467 206,580 174,797 131,177 115,122
Long-term liabilities.............. 28,955 25,060 25,851 27,036 26,079
Stockholders' equity............... 387,564 335,502 280,047 234,874 205,751
<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.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Revenues increased 15%, 11% and 17% in 1995, 1994 and 1993, respectively,
over the prior year. Revenues in 1995 from the Company's principal customer, the
U.S. Government, continued to shift toward lower cost service type contracts as
also occurred in 1994 from 1993. 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 86% of revenues in 1995, and 88%
in 1994 and 1993. This decrease is attributable to growth in non-U.S. Government
revenues as a result of the Company's efforts to
15
<PAGE>
increase revenues from state and local governments and commercial clients in
certain focused business areas. The revenue mix between the Technical Services
segment and the Products segment shifted slightly to 91% and 9%, respectively,
of consolidated revenues in 1995 from 92% and 8%, respectively, of consolidated
revenues in 1994 and 1993.
Within the Technical Services segment, 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. Revenues in each of the
business area classifications within the Technical Services segment increased in
1995 over 1994.
National Security revenues decreased to 46% of total revenues in 1995 from
50% in 1994 and 51% in 1993. Although National Security revenues declined as a
percentage of total revenues, these revenues increased 7% in 1995, 9% in 1994
and 13% in 1993 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, simulation and test and evaluation. Revenues in the Environment
business area decreased slightly as a percentage of total revenues to 14% in
1995 from 15% in 1994 and 1993. Energy revenues remained constant at 9% of total
revenues for 1995 and 1994, down slightly from 10% in 1993. Other Technical
Services revenues have increased to 22% of total revenues in 1995 from 17% in
1994 and 16% in 1993. The continued growth in Other Technical Services reflects
the Company's expansion into the health, transportation and commercial
information technology markets and mirrors the country's shift of priorities and
resources from defense programs to civilian programs in areas such as health
care and transportation. The Company expects this trend to continue. 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 its revenues from the environment, energy, health, space, transportation
and commercial information technology business areas.
Product revenues increased 22%, 21% and 28% in 1995, 1994 and 1993,
respectively, over the prior year. The increases in Product revenues have
primarily occurred on existing mature product lines.
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 1995, the Company
had 16,700 full-time employees compared to 15,400 and 14,200 at the end of 1994
and 1993, respectively. Material and subcontract ("M&S") revenues were $560
million in 1995, $458 million in 1994 and $402 million in 1993. As a percentage
of total revenues, M&S revenues were 29% in 1995 and 27% in 1994 and 1993 and
have increased due to the growth in the pass through of M&S costs on certain
large, multi-year systems integration contracts and the growth of Product
revenues. 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. There were 333 contracts with annual revenues greater
than $1 million in 1995, compared with 294 such contracts in 1994. These larger
contracts represented 77% of the Company's revenues in each of these years. Of
these contracts, 20 contracts had individual revenues greater than $10 million
in 1995 and 1994. The remainder of the Company's revenues are derived 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
development contracts. These smaller programs often provide the foundation for
the Company's success on larger procurements.
16
<PAGE>
The following table summarizes revenues by contract type for the last three
years:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Contract type:
Cost-reimbursement............................................ 59% 60% 59%
Time-and-materials and fixed-price level-of-effort............ 22% 21% 20%
Firm fixed-price.............................................. 19% 19% 21%
--- --- ---
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 the payment of negotiated fixed 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 ultimately 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
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 cost of revenues as a percentage of revenues (excluding interest income)
was 88.2% in 1995, 88.5% in 1994 and 88.3% in 1993. This relatively constant
cost of revenues percentage represents a number of offsetting effects. Trends
which increased the cost of revenues percentage are faster revenue growth in M&S
revenues, which have nearly all their associated costs in the cost of revenues
category; faster revenue growth in lower cost service type contracts, which
typically have more of their associated costs in cost of revenues and less costs
in selling, general and administrative ("SG&A") expenses; and overruns during
the performance of certain firm fixed-price contracts in 1995, 1994 and 1993,
which resulted in losses or lower profits for such contracts. The primary trend
which decreased the cost of revenues percentage is the growth in commercial
revenues, which have more of their associated costs in SG&A as opposed to cost
of revenues.
SG&A expenses as a percentage of revenues (excluding interest income) were
7.6%, 7.2% and 7.5% in 1995, 1994 and 1993, 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 have remained constant in
relation to revenues over the past three years. The level of B&P activity and
costs has historically fluctuated depending on the availability of bidding
opportunities and resources. During 1995, IR&D costs increased as a percentage
of revenues due to a focused effort by the Company to build core capabilities in
areas which it believes are key to its future growth: distributed interactive
simulation, imagery, medical, environmental and software development. G&A
expenses increased 21% over 1994 and increased as a percentage of total revenues
to 5.2% in 1995 from 5.0% in 1994. This relative increase was driven by the
growth in revenues from commercial contracts, which have more of their
associated costs in G&A, and an increase in goodwill amortization costs due to
an increase in the number of business acquisitions in 1995 and 1994. 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 increased to 4.3% in 1995 from 3.8% in
1994 and 4.1% in 1993. The National Security operating profit margin was 2.8% in
1995, compared to 3.3% in 1994 and 4.3% in 1993. The lower operating profit
margins in 1995 and 1994 as compared to 1993 were a result of overruns on
certain firm fixed-price contracts in the National Security area. Environment
operating profit margins were 4.9%, 4.5% and 4.2%, respectively, for 1995, 1994
and 1993. Energy operating profit margins increased to 5.8% in 1995 from 5.1% in
1994 and 4.2% in 1993, primarily due to higher profit margins on
17
<PAGE>
contracts with commercial utilities. The operating profit margin in Other
Technical Services increased to 6.3% in 1995 from 4.1% in 1994 and 3.2% in 1993.
The increase in operating profit margins in Other Technical Services in 1995 and
1994 over 1993 was a result of an improvement in the performance of certain firm
fixed-price contracts. The operating profit margin in the Products segment
decreased to 3.9% in 1995 from 9.3% in 1994 and 4.9% in 1993. The 1995 decrease
is attributable to overruns on certain firm fixed-price contracts, while the
1994 increase in profit margin was attributable to higher margins on existing
product lines. In general, overall operating profit margins for the Company in
1995, 1994 and 1993 are lower than historical margins due to increased
competition and overruns on certain firm fixed-price contracts.
Interest expense in 1995, 1994 and 1993 primarily relates to interest on a
building mortgage, deferred compensation 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 in 1995 from 1994 and
1993, overall interest expense increased primarily due to interest accrued on
the deferred compensation plans.
The provision for income taxes as a percentage of income before income taxes
was 38.5% in 1995, 40.6% in 1994 and 36.7% in 1993. The decrease in the
effective rate for 1995 from 1994 was primarily related to a final settlement of
certain issues related to the Company's 1986 and 1987 federal and state income
tax returns. The increase in the effective rate for 1994 was primarily
attributable to the increase in the federal statutory rate as a result of the
Omnibus Budget Reconciliation Act of 1993, as well as a lower level of downward
revisions of prior year tax estimates as a result of ongoing resolutions of
certain issues relating to prior year federal and state income tax returns.
As described in the Notes to Consolidated Financial Statements, effective
February 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits,"
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," SFAS No. 119, "Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments," and Statement of Position ("SOP")
93-6, "Employers' Accounting for Employee Stock Ownership Plans." Adoption of
SFAS No. 112, which required the Company to recognize an obligation to provide
postemployment benefits in accordance with previously issued standards, did not
have a material effect on the Company's financial position or results of
operations in 1995. Adoption of SFAS No. 115, SFAS No. 119 and SOP 93-6, which
required certain disclosures in the Notes to Consolidated Financial Statements,
did not have an effect on the Company's financial position or results of
operations in 1995.
On February 15, 1994, the Company was served with search warrants and a
subpoena for documents and records associated with the performance by the SAIT
operating unit of the Company under three contracts with the Department of
Defense (DOD). The search warrants and subpoena state that the U.S. 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 search warrants and
subpoena appear to be based upon allegations contained in a civil complaint that
had been filed under seal on March 13, 1993 by an employee of the Company's SAIT
operating unit. The complaint was filed in the U.S. District Court for the
Southern District of California and sought damages on behalf of the U.S.
Government under the Federal False Claims Act. On August 1, 1994, the Department
of Justice on behalf of the U.S. Government announced its intention to intervene
in the case. Based on the Company's motion, on November 8, 1994, the District
Court dismissed the employee who had originally filed the complaint from the
lawsuit, leaving only the U.S. Government and the Company as parties. The
employee has appealed the District Court's order to the U.S. Court of Appeals
for the Ninth Circuit. The Company has engaged in a series of presentations and
submissions with the Department of Justice in which the Company responded to
issues raised by the Department of Justice. At this stage of the proceedings,
the Company is unable to assess the impact, if any, of this investigation and
lawsuit on its consolidated financial position, results of operations or its
ability to conduct business.
18
<PAGE>
The Company is involved in various other 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 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, 1995 and
1994, there were no borrowings outstanding under such agreements and cash and
cash equivalents and long-term investments totaled $48 million and $60 million,
respectively. Cash flows generated from operating activities increased to $117
million in 1995 from $86 million and $76 million in 1994 and 1993, respectively.
The Company continues to actively monitor receivables with emphasis placed on
collection activities and the negotiation of more favorable payment terms. As a
result, average receivable days outstanding decreased to 63 in 1995 from 64 in
1994.
Cash flows spent on investing activities increased to $120 million in 1995
compared to $47 million and $37 million in 1994 and 1993, respectively.
Expenditures for the acquisition of businesses were $71 million in 1995 compared
to $14 million in 1994 and $18 million in 1993. Acquisitions of businesses in
1995 were primarily made to complement the Company's capabilities in the areas
of transportation, environment, health and energy. Additional acquisitions were
also made in the National Security business area to improve the Company's
capabilities in areas in which the Company expects continued DOD funding. The
Company expects to continue to acquire businesses for these and other purposes
in the future. Capital expenditures, excluding land and buildings, were $20
million in 1995 and $18 million in 1994 and 1993 and are expected to be
approximately $28 million for 1996. Expenditures for land and buildings were $15
million, $9 million and $2 million in 1995, 1994 and 1993, respectively, and are
expected to be approximately $7 million for 1996.
The Company used $22 million for financing activities in 1995 compared to $1
million and $24 million in 1994 and 1993, respectively. In 1995, funds were
utilized primarily for common stock repurchases and retirement of outstanding
debt associated with businesses acquired in 1995. The 1995 increase in
utilization of funds from 1994 was primarily due to a reduction in sales of the
Company's common stock. The 1994 decrease in utilization of funds from 1993 was
primarily due to increased sales of the Company's common stock and decreased
borrowing activity.
Subsequent to January 31, 1995, the Company increased its borrowing capacity
by replacing its credit/term loan agreements with new unsecured credit
agreements with three banks totaling $105 million, which allow borrowings on a
revolving basis until March 31, 2000. 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, capital
expenditures and future long-term debt requirements.
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 performance. Consequently, because 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.
19
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the fiscal years ended January 31, 1995 and 1994, 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 1995 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 1995 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 1995 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 1995 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
All schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial
statements or the notes thereto.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- ------------------------------------------------------------------------------------------
<C> <S>
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 the fiscal year ended
January 31, 1992 (the "1992 10-K").
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- ------------------------------------------------------------------------------------------
<C> <S>
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 as amended through November 3, 1994.
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. Incorporated by reference to Exhibit 4(l) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1994 (the
"1994 10-K").
4(m)* Registrant's Management Stock Compensation Plan. Incorporated by reference to Exhibit 4(m)
to the 1994 10-K.
4(n)* Form of Non-Qualified Stock Option Agreement -- 1992 Stock Option Plan of the Registrant
(form dated February 1995).
4(o)* Form of Non-Qualified Stock Option Agreement -- 1992 Stock Option Plan of the Registrant
(form dated February 1995).
4(p)* Form of Stock Restriction Agreement of the Registrant's Bonus Compensation Plan (form
dated March 1995).
4(q)* 1995 Employee Stock Purchase Plan (subject to stockholder approval).
4(r)* 1995 Stock Option Plan (subject to stockholder approval).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- ------------------------------------------------------------------------------------------
<C> <S>
10(a)* Registrant's Keystaff Deferral Plan, as amended through January 30, 1995.
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. Incorporated by reference to Exhibit 10(b)
to the 1994 10-K.
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. Incorporated by reference to Exhibit 10(i) to the 1994 10-K.
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.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- ------------------------------------------------------------------------------------------
<C> <S>
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. Incorporated by reference
to Exhibit 10(p) to the 1994 10-K.
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, N.A. dated as of May 26, 1992. Incorporated by
reference to Exhibit 10(o) to the 1993 10-K.
10(s) Third Amendment dated as of June 28, 1994 to Registrant's Employee Stock Purchase Loan
Agreement with Bank of America NT&SA dated as of November 10, 1992.
10(t) Second Amendment dated as of February 24, 1994 to Registrant's Employee Stock Purchase
Loan Agreement with Bank of America NT&SA dated as of November 10, 1992.
10(u) 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. Incorporated by
reference to Exhibit 10(s) to the 1994 10-K.
10(v) Registrant's Employee Stock Purchase Loan Agreement with Bank of America NT&SA dated as of
November 10, 1992. Incorporated by reference to Exhibit 10(t) to the 1994 10-K.
10(w) 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.
27 Financial Data Schedule.
28(a) Annual Report of the Registrant's Employee Stock Purchase Plan for the plan year ended
January 31, 1995.
28(b) Annual Report of the Registrant's Cash or Deferred Arrangement for the plan year ended
December 31, 1994.
<FN>
- ------------------------
* Executive Compensation Plans and Arrangements.
(b) Reports on Form 8-K in the fourth quarter of the fiscal year ended
January 31, 1995:
</TABLE>
A Report on Form 8-K was filed on November 14, 1994. Disclosure was made
under Item 5 -- Other Events.
23
<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 14, 1995
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ J.R. BEYSTER
------------------------------------------- Chairman of the Board and Principal April 14, 1995
J.R. Beyster Executive Officer
/s/ W.A. ROPER, JR.
------------------------------------------- Principal Financial Officer April 14, 1995
W.A. Roper, Jr.
/s/ P.N. PAVLICS
------------------------------------------- Principal Accounting Officer April 14, 1995
P.N. Pavlics
/s/ A.L. ALM
------------------------------------------- Director April 14, 1995
A.L. Alm
/s/ V.N. COOK
------------------------------------------- Director April 14, 1995
V.N. Cook
/s/ S.J. DALICH
------------------------------------------- Director April 14, 1995
S.J. Dalich
/s/ C.K. DAVIS
------------------------------------------- Director April 14, 1995
C.K. Davis
/s/ W.H. DEMISCH
------------------------------------------- Director April 14, 1995
W.H. Demisch
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ E.A. FRIEMAN
------------------------------------------- Director April 14, 1995
E.A. Frieman
/s/ J.E. GLANCY
------------------------------------------- Director April 14, 1995
J.E. Glancy
/s/ D.A. HICKS
------------------------------------------- Director April 14, 1995
D.A. Hicks
/s/ B.R. INMAN
------------------------------------------- Director April 14, 1995
B.R. Inman
/s/ D.M. KERR
------------------------------------------- Director April 14, 1995
D.M. Kerr
/s/ L.A. KULL
------------------------------------------- Director April 14, 1995
L.A. Kull
-------------------------------------------
M.R. Laird Director April , 1995
/s/ W.M. LAYSON
------------------------------------------- Director April 14, 1995
W.M. Layson
/s/ C.B. MALONE
------------------------------------------- Director April 14, 1995
C.B. Malone
/s/ J.W. MCRARY
------------------------------------------- Director April 14, 1995
J.W. McRary
/s/ E.A. STRAKER
------------------------------------------- Director April 14, 1995
E.A. Straker
-------------------------------------------
M.R. Thurman Director April , 1995
/s/ M.E. TROUT
------------------------------------------- Director April 14, 1995
M.E. Trout
/s/ J.H. WARNER, JR.
------------------------------------------- Director April 14, 1995
J.H. Warner, Jr.
/s/ J.A. WELCH
------------------------------------------- Director April 14, 1995
J.A. Welch
/s/ J.B. WIESLER
------------------------------------------- Director April 14, 1995
J.B. Wiesler
</TABLE>
25
<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, 1995................................ F-3
Consolidated Balance Sheet at January 31, 1995 and 1994.................................................... F-4
Consolidated Statement of Stockholders' Equity for the three years ended January 31, 1995.................. F-5
Consolidated Statement of Cash Flows for the three years ended January 31, 1995............................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
Financial statement schedules are omitted because they are not applicable or
the required information is shown on 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, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended January 31, 1995, 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 LLP
San Diego, California
March 31, 1995
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues............................................................. $ 1,921,880 $ 1,670,882 $ 1,504,112
Costs and expenses:
Cost of revenues................................................... 1,692,623 1,477,701 1,327,992
Selling, general and administrative expenses....................... 146,083 120,387 113,174
Interest expense................................................... 3,468 2,966 2,841
------------- ------------- -------------
1,842,174 1,601,054 1,444,007
------------- ------------- -------------
Income before income taxes........................................... 79,706 69,828 60,105
Provision for income taxes........................................... 30,654 28,328 22,030
------------- ------------- -------------
Net income........................................................... $ 49,052 $ 41,500 $ 38,075
------------- ------------- -------------
------------- ------------- -------------
Earnings per share................................................... $ 1.01 $ .89 $ .83
------------- ------------- -------------
------------- ------------- -------------
Average number of shares outstanding, including common stock
equivalents......................................................... 49,264 47,429 46,179
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JANUARY 31
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 28,203 $ 53,556
Receivables........................................................................... 421,790 356,836
Inventories........................................................................... 25,356 14,764
Prepaid expenses...................................................................... 13,647 10,354
Deferred income taxes................................................................. 20,536 22,083
----------- -----------
Total current assets................................................................ 509,532 457,593
Property and equipment.................................................................. 57,715 50,581
Land and buildings...................................................................... 88,997 69,161
Intangible assets....................................................................... 56,214 17,485
Other assets............................................................................ 40,126 16,755
----------- -----------
$ 752,584 $ 611,575
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.............................................. $ 191,429 $ 133,433
Accrued payroll and employee benefits................................................. 124,745 106,548
Income taxes payable.................................................................. 18,409 9,889
Notes payable and current portion of long-term liabilities............................ 1,482 1,143
----------- -----------
Total current liabilities........................................................... 336,065 251,013
Long-term liabilities................................................................... 28,955 25,060
Stockholders' equity, per accompanying statement:
Class A common stock, $.01 par value.................................................. 452 443
Class B common stock, $.05 par value.................................................. 17 19
Additional paid-in capital............................................................ 198,052 172,713
Retained earnings..................................................................... 189,043 162,327
----------- -----------
Total stockholders' equity.......................................................... 387,564 335,502
Commitments and contingencies (Note K)..................................................
----------- -----------
$ 752,584 $ 611,575
----------- -----------
----------- -----------
</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 SHARES 5,000,000 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, 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
Issuances of common stock...................... 2,994 30 30,138
Repurchases of common stock.................... (2,066) (21) (21) (2) (8,356) (22,336)
Income tax benefit from employee stock
transactions.................................. 3,557
Net income..................................... 49,052
--------- ----- --- --- ----------- -----------
Balance at January 31, 1995...................... 45,243 $ 452 343 $ 17 $ 198,052 $ 189,043
--------- ----- --- --- ----------- -----------
--------- ----- --- --- ----------- -----------
</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
---------------------------------
1995 1994 1993
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 49,052 $ 41,500 $ 38,075
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 27,738 23,127 21,815
Non-cash compensation..................................................... 9,898 8,831 7,830
Loss on disposal of property and equipment................................ 1,583 706 1,397
Loss on disposal of land and building..................................... 253
Increase (decrease) in cash, excluding effects of acquisitions, resulting
from changes in:
Receivables............................................................. (42,623) (10,438) (25,274)
Inventories............................................................. (4,477) 1,262 452
Prepaid expenses........................................................ (2,129) (1,149) 268
Progress payments....................................................... 11,443 (2,243) (16,951)
Deferred income taxes................................................... 1,547 (9,584) (6,436)
Other assets............................................................ (8,280) (740) (1,922)
Accounts payable and accrued liabilities................................ 44,734 15,392 32,640
Accrued payroll and employee benefits................................... 16,538 18,952 14,977
Income taxes payable.................................................... 12,077 23 9,017
----------- --------- ---------
117,101 85,639 76,141
----------- --------- ---------
Cash flows from investing activities:
Expenditures for property and equipment..................................... (20,188) (18,420) (17,791)
Expenditures for land and buildings......................................... (15,437) (9,012) (2,093)
Acquisitions of certain business assets, net of cash acquired............... (71,109) (14,161) (17,514)
Proceeds from disposal of property and equipment............................ 297 566 781
Purchase of debt securities held to maturity................................ (13,913) (6,187)
----------- --------- ---------
(120,350) (47,214) (36,617)
----------- --------- ---------
Cash flows from financing activities:
Net repayments under revolving credit agreements............................ (17,200)
Decrease in notes payable and long-term liabilities......................... (8,810) (3,452) (4,726)
Sales of common stock....................................................... 17,421 32,651 23,509
Repurchases of common stock................................................. (30,715) (30,057) (25,678)
----------- --------- ---------
(22,104) (858) (24,095)
----------- --------- ---------
(Decrease) increase in cash and cash equivalents............................ (25,353) 37,567 15,429
Cash and cash equivalents at beginning of year.............................. 53,556 15,989 560
----------- --------- ---------
Cash and cash equivalents at end of year.................................... $ 28,203 $ 53,556 $ 15,989
----------- --------- ---------
----------- --------- ---------
Supplemental schedule of noncash investing and financing activities:
Issuance of common stock for acquisitions of certain business assets........ $ 5,282
-----------
-----------
Liabilities assumed in acquisitions of certain business assets.............. $ 25,532 $ 4,107 $ 6,881
----------- --------- ---------
----------- --------- ---------
</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. Investments in affiliates and corporate joint ventures owned
twenty to fifty percent are accounted for under the equity method. Other
investments are generally carried at cost.
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. The majority of the Company's indirect
contract costs have been agreed upon through 1991 and substantially all of the
Company's 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. Of the $28,203,000 total cash and cash
equivalents at January 31, 1995, $24,382,000 was invested in commercial paper.
The carrying amounts approximate fair value due to the short maturity of these
instruments.
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.
DEBT SECURITIES
Effective February 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" prospectively. Adoption of SFAS No. 115 did not have
an effect on the Company's financial position or results of operations in 1995.
Long-term debt securities are included in other assets and consist of long-term
F-7
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
municipal bonds which have been recorded at amortized cost and classified as
"held-to-maturity." As of January 31, 1995, debt securities of $20,100,000 had a
fair value of $19,488,000 maturing between 1996 and 1998. Gross unrealized
losses amounted to $612,000.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill. Goodwill represents the
excess of the purchase cost over the fair value of net assets acquired in an
acquisition and is amortized by a straight line method generally over five to
ten years. Amortization of intangible assets amounted to $6,257,000, $3,007,000
and $1,859,000 in 1995, 1994 and 1993, respectively. Accumulated amortization
was $15,987,000 and $9,730,000 at January 31, 1995 and 1994, respectively.
INCOME TAXES
Income taxes are provided utilizing the liability method under SFAS No. 109.
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.
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. Fully diluted earnings per
share was substantially the same as primary earnings per share in 1995, 1994 and
1993.
A general public market for the Company's common stock does not exist.
Periodic determinations of the fair market value of the common stock are made by
the Board of Directors pursuant to a stock price formula and valuation process
which includes an appraisal prepared by an independent appraisal firm. The Board
of Directors reserves the right to alter the formula and valuation process.
OTHER FINANCIAL INSTRUMENTS
In October 1994, SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," was issued. The Company
has adopted the disclosure requirements of SFAS No. 119 for the year ended
January 31, 1995.
It is the Company's policy not to enter into derivative financial
instruments for speculative purposes. During 1995, the Company entered into
foreign currency forward exchange contracts to protect against currency exchange
risks associated with certain firm and identifiable foreign currency commitments
entered into in the ordinary course of business. At January 31, 1995, the
Company had approximately $5,066,000 of foreign currency forward exchange
contracts in Australian dollars and Spanish pesetas outstanding with net
unrealized losses of $98,000. These contracts were executed with creditworthy
banks for terms of less than eight months.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
long-term investments. The Company invests its excess cash principally in U.S.
Government and municipal debt securities and commercial paper and has
established guidelines relative to diversification and maturities in an effort
to maintain safety and liquidity. These guidelines are periodically reviewed and
modified to take advantage of trends in yields and interest rates.
F-8
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Concentrations of credit risk with respect to receivables are limited
because the Company's primary customers are various agencies of the United
States Government as well as commercial customers engaged in work for the United
States Government. As of January 31, 1995, there were no significant
concentrations of receivables with these commercial customers.
RECLASSIFICATIONS
Certain amounts from previous years have been reclassified in the
consolidated financial statements to conform to the 1995 presentation.
NOTE B -- ACQUISITIONS:
Acquisitions of certain business assets and companies have been accounted
for by the purchase method of accounting. The operations of the companies and
businesses acquired have been included in the accompanying consolidated
financial statements from their respective dates of acquisition. The excess of
the purchase price over fair value of the net assets acquired has been included
in intangible assets as goodwill. The aggregate effect of the purchased
acquisitions was not material, therefore, pro forma financial information is not
required.
NOTE C -- 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 Other business
areas. Other business areas include health, space, transportation and commercial
information technology.
Technical services consist of applied and basic research; analysis 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.
Segment information from previous years has been reclassified to conform to
the 1995 presentation. The reclassifications had no effect on the consolidated
financial position or results of operations for the years ended January 31, 1994
and 1993.
F-9
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Industry segment information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Contract revenues:
Technical Services--
National Security...................................... $ 891,181 $ 830,581 $ 764,280
Environment............................................ 264,511 253,937 225,958
Energy................................................. 169,732 156,694 157,320
Other.................................................. 423,362 287,622 239,926
Products................................................. 171,206 140,741 116,349
Interest income............................................ 1,888 1,307 279
------------- ------------- -------------
Total revenues............................................. $ 1,921,880 $ 1,670,882 $ 1,504,112
------------- ------------- -------------
------------- ------------- -------------
Operating profit:
Technical Services--
National Security...................................... $ 25,356 $ 27,252 $ 33,016
Environment............................................ 12,962 11,341 9,503
Energy................................................. 9,824 7,985 6,675
Other.................................................. 26,526 11,768 7,789
Products................................................. 6,618 13,141 5,684
------------- ------------- -------------
81,286 71,487 62,667
Interest income............................................ 1,888 1,307 279
Interest expense........................................... (3,468) (2,966) (2,841)
------------- ------------- -------------
Income before income taxes................................. $ 79,706 $ 69,828 $ 60,105
------------- ------------- -------------
------------- ------------- -------------
Identifiable assets:
Technical Services--
National Security...................................... $ 181,444 $ 160,752 $ 170,422
Environment............................................ 72,867 66,492 58,382
Energy................................................. 43,730 37,453 46,631
Other.................................................. 156,650 83,716 45,346
Products................................................. 38,627 40,694 43,967
------------- ------------- -------------
493,318 389,107 364,748
Corporate and other assets................................. 259,266 222,468 158,865
------------- ------------- -------------
Total assets............................................... $ 752,584 $ 611,575 $ 523,613
------------- ------------- -------------
------------- ------------- -------------
</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,
inventories and goodwill. 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.
During 1995, 1994 and 1993, approximately 86%, 88% and 88%, respectively, 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.
F-10
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
JANUARY 31
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Contracts-in-process, less progress payments of $1,971 and $3,903 at January
31, 1995 and 1994, respectively............................................ $ 6,794 $ 7,196
Raw materials............................................................... 18,562 7,568
----------- -----------
$ 25,356 $ 14,764
----------- -----------
----------- -----------
Property and equipment at cost:
Computers and other equipment............................................... $ 132,629 $ 120,617
Office furniture and fixtures............................................... 18,136 15,551
Leasehold improvements...................................................... 12,004 10,951
----------- -----------
162,769 147,119
Less accumulated depreciation and amortization.............................. 105,054 96,538
----------- -----------
$ 57,715 $ 50,581
----------- -----------
----------- -----------
Land and buildings at cost:
Buildings and improvements.................................................. $ 75,884 $ 57,785
Land........................................................................ 20,919 17,078
Land held for future use.................................................... 702 790
----------- -----------
97,505 75,653
Less accumulated depreciation and amortization.............................. 8,508 6,492
----------- -----------
$ 88,997 $ 69,161
----------- -----------
----------- -----------
Accounts payable and accrued liabilities:
Accounts payable and other accrued liabilities.............................. $ 135,831 $ 88,552
Collections in excess of revenues on uncompleted contracts.................. 55,598 44,881
----------- -----------
$ 191,429 $ 133,433
----------- -----------
----------- -----------
Accrued payroll and employee benefits:
Salaries, bonuses and amounts withheld from employees' compensation......... $ 70,401 $ 59,891
Accrued vacation............................................................ 41,285 36,731
Accrued contributions to employee benefit plans............................. 13,059 9,926
----------- -----------
$ 124,745 $ 106,548
----------- -----------
----------- -----------
</TABLE>
F-11
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E -- RECEIVABLES:
Receivables consist of the following:
<TABLE>
<CAPTION>
JANUARY 31
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Receivables, primarily U.S. Government, less allowance for doubtful accounts
of $1,214 and $755 at January 31, 1995 and 1994, respectively:
Billed...................................................................... $ 310,429 $ 256,996
Unbilled, less progress payments of $30,113 and $16,738 at January 31, 1995
and 1994, respectively..................................................... 77,749 81,699
Contract retentions......................................................... 23,570 18,141
Refundable income taxes..................................................... 10,042
----------- -----------
$ 421,790 $ 356,836
----------- -----------
----------- -----------
</TABLE>
Unbilled receivables at January 31, 1995 and 1994 include $13,776,000 and
$16,228,000 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 billed and collected within one
year. The majority of the retention balance is expected to be collected beyond
one year.
NOTE F -- 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, 1995, 1994 and 1993. As of January 31, 1995, the entire $67,500,000
was available under the most restrictive debt covenants of the credit/term loan
agreements. The maximum amounts outstanding were $12,800,000, $19,200,000 and
$31,000,000 in 1995, 1994 and 1993, respectively. The average amount outstanding
was $197,000, $541,000 and $6,724,000 during 1995, 1994 and 1993, respectively.
The weighted average interest rate in 1995, 1994 and 1993 was 4.9%, 3.5% and
4.5%, respectively, based upon average daily balances.
NOTE G -- EMPLOYEE BENEFIT PLANS:
Effective February 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment
Benefits," and Statement of Position ("SOP") 93-6, "Employers' Accounting for
Employee Stock Ownership Plans." Adoption of SFAS No. 112, which required the
Company to recognize an obligation to provide postemployment benefits in
accordance with previously issued standards, had an immaterial effect on net
income in 1995. While adoption of SOP 93-6 required certain disclosures in the
Notes to Consolidated Financial Statements, it did not have an effect on the
Company's financial position or results of operations in 1995.
F-12
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Effective January 1, 1995, the Company merged two of its former profit
sharing retirement plans into one principal Profit Sharing Retirement Plan in
which eligible employees participate. Participants' 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 $27,420,000, $20,471,000 and $19,114,000
for 1995, 1994 and 1993, respectively.
The Company has an Employee Stock Ownership Plan (the "Plan") in which
eligible employees participate. Cash contributions to the Plan are based upon
amounts determined annually by the Board of Directors and are allocated to
participants' accounts based on their annual compensation. The Company
recognizes compensation expense as the fair value of the Company common stock or
cash in the year of contribution. The vesting requirements for the Plan are the
same as for the Profit Sharing Retirement Plan. Shares of Company common stock
distributed from the Plan bear a limited put option that, if exercised, would
require the Company to repurchase the shares at their current fair value. At
January 31, 1995, the Plan held 15,974,000 shares of Class A common stock and
37,100 shares of Class B common stock with a combined fair value of
$254,031,000. Contributions charged to income under the Plan were $10,516,000,
$15,096,000, and $13,904,000 for 1995, 1994 and 1993, respectively.
The Company has one principal Cash or Deferred Arrangement (CODA) which
allows eligible participants to defer a portion of their income through
contributions. Such deferrals are fully vested, are not taxable to the
participant until distributed from the CODA upon termination, retirement,
permanent disability or death and may be matched by the Company. The Company's
matching contributions to the CODA of $10,977,000, $7,673,000, and $6,608,000
were charged to income in 1995, 1994 and 1993, respectively. Effective January
1, 1995, the Company's matching contributions to employees hired after such date
will be subject to the same vesting requirements as for the Profit Sharing
Retirement Plan, while the Company's matching contributions for existing
employees remain fully vested.
The Company has a Bonus Compensation Plan which provides for bonuses to
reward outstanding employee performance. Bonuses are paid in the form of cash,
fully vested shares of Class A common stock or vesting shares of Class A common
stock. Awards of vesting shares of Class A 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 shares of Class A
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 this plan were $23,831,000, $20,111,000, and $19,234,000 for 1995,
1994 and 1993, respectively.
During 1995, the Company adopted the Stock Compensation Plan and the
Management Stock Compensation Plan, together referred to as the "Stock
Compensation Plans." The Stock Compensation Plans provide for awards of share
units to eligible employees, which share units generally correspond to shares of
Class A common stock which are held in trust for the benefit of participants.
Participants' interests in these share units vest on a seven year schedule at
the rate of one-third at the end of each of the fifth, sixth and seventh years
following the date of the award. The amount charged to income under these plans
was $160,000 for 1995.
The Company also has an Employee Stock Purchase Plan which allows eligible
employees to purchase shares of the Company's Class A common stock, with the
Company contributing 5% of the existing fair market value. There are no charges
to income under this plan.
F-13
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H -- INCOME TAXES:
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Payable currently:
Federal............................................................ $ 29,138 $ 31,482 $ 27,247
State and foreign.................................................. 8,110 7,408 7,224
Deferred:
Federal............................................................ (5,300) (8,650) (10,121)
State and foreign.................................................. (1,294) (1,912) (2,320)
--------- --------- ---------
$ 30,654 $ 28,328 $ 22,030
--------- --------- ---------
--------- --------- ---------
</TABLE>
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
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Income recognition:
Contractually billable method............................ $ 16,657 $ 10,879
Completed contract method................................ 2,127 6,727
Accrued vacation pay....................................... 15,240 14,011
Deferred compensation...................................... 6,628 5,374
Vesting stock bonuses...................................... 4,591 3,720
Other...................................................... 3,677 2,384
-------- --------
Total deferred tax assets.............................. 48,920 43,095
-------- --------
Employee benefit plan contributions........................ (9,356) (10,270)
Depreciation and amortization.............................. (4,026) (5,054)
Cash to accrual basis conversion for certain
subsidiaries.............................................. (2,221)
Contributions to voluntary employee beneficiary
association............................................... (1,562)
Other...................................................... (1,875) (520)
-------- --------
Total deferred tax liabilities......................... (17,478) (17,406)
-------- --------
Net deferred tax asset..................................... $ 31,442 $ 25,689
-------- --------
-------- --------
</TABLE>
A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate (35% for 1995 and 1994, and 34%
for 1993) to income before income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Amount computed at statutory rate................... $27,897 $24,440 $20,436
State income taxes, net of federal tax benefit...... 4,303 3,573 3,236
Revision of prior years' tax estimates.............. (4,134) (251) (1,887)
Nondeductible meals and entertainment............... 2,150 772 705
Other............................................... 438 (206) (460)
------- ------- -------
$30,654 $28,328 $22,030
------- ------- -------
------- ------- -------
</TABLE>
F-14
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other assets include deferred income taxes of $10,906,000 and $3,606,000 at
January 31, 1995 and 1994, respectively. Income taxes paid in 1995, 1994 and
1993 amounted to $35,600,000, $38,392,000, and $25,480,000, respectively. The
effective rates for 1995, 1994 and 1993 have been reduced as a result of ongoing
resolutions of certain issues relating to prior year federal and state income
tax returns as well as a favorable settlement of 1986 and 1987 tax years.
NOTE I -- LONG-TERM LIABILITIES:
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
JANUARY 31
----------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Mortgage payable collateralized by real property.............. $12,551 $12,654
Deferred compensation......................................... 14,042 11,609
Other......................................................... 3,844 1,940
------- -------
30,437 26,203
Less current portion.......................................... 1,482 1,143
------- -------
$28,955 $25,060
------- -------
------- -------
</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 and monthly payments of principal and interest of $102,000 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 this 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 1995). 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 carrying amount of the Company's long-term liabilities approximates fair
value. The fair value of the Company's long-term liabilities is estimated based
on the current rates offered to the Company for similar debt of the same
remaining maturities.
Maturities of long-term liabilities are as follows:
<TABLE>
<CAPTION>
(IN
YEAR ENDING JANUARY 31 THOUSANDS)
- -----------------------------------------------------------------------
<S> <C>
1996................................................................... $1,482
1997................................................................... 631
1998................................................................... 14,490
1999................................................................... 654
2000................................................................... 316
2001 and after......................................................... 12,864
-------
$30,437
-------
-------
</TABLE>
NOTE J -- 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 fair market
F-15
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
value 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%, 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 the 1982 Plan terminated. The Company makes no charge to income in
connection with these Plans.
As of January 31, 1995, 17,633,000 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, 1995, options for 4,014,000 shares of Class A
common stock were exercisable and 5,980,000 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, 1995, is as follows:
<TABLE>
<CAPTION>
SHARES OF
CLASS A
COMMON STOCK
OPTION PRICES UNDERLYING
PER SHARE OPTIONS
---------------- --------------
(IN THOUSANDS)
<S> <C> <C>
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
Options granted............................ 14.19 to 15.07 3,201
Options canceled........................... 8.19 to 15.07 (646)
Options exercised.......................... 8.19 to 13.12 (1,591)
-------
January 31, 1995............................. $ 9.32 to $15.07 11,653
-------
-------
</TABLE>
The Company has agreed to make available for issuance, purchase or options
approximately 1,114,000 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 fair market value at the date such
shares are made available or options are granted.
NOTE K -- 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 $58,538,000, $57,213,000 and $54,050,000 in 1995, 1994 and 1993,
respectively.
F-16
<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, 1995, are payable as
follows:
<TABLE>
<CAPTION>
(IN
YEAR ENDING JANUARY 31 THOUSANDS)
- ----------------------------------------------------------------------
<S> <C>
1996.................................................................. $41,826
1997.................................................................. 25,003
1998.................................................................. 17,348
1999.................................................................. 13,506
2000.................................................................. 8,684
2001 and after........................................................ 11,393
--------
$117,760
--------
--------
</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, 1995 include outstanding letters of credit
aggregating $11,676,000, principally related to guarantees on contracts with
commercial and foreign customers, and outstanding surety bonds aggregating
$86,324,000, principally related to performance and payment type bonds.
On February 15, 1994, the Company was served with search warrants and a
subpoena for documents and records associated with the performance by the SAIT
operating unit of the Company under three contracts with the DOD. The search
warrants and subpoena state that the U.S. 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 search warrant and subpoena appear to be
based upon allegations contained in a civil complaint that had been filed under
seal on March 13, 1993 by an employee of the Company's SAIT operating unit. The
complaint was filed in the U.S. District Court for the Southern District of
California and sought damages on behalf of the U.S. Government under the Federal
False Claims Act. On August 1, 1994, the Department of Justice on behalf of the
U.S. Government announced its intention to intervene in the case. Based on the
Company's motion, on November 8, 1994, the District Court dismissed the employee
who had originally filed the complaint from the lawsuit, leaving only the U.S.
Government and the Company as parties. The employee has appealed the District
Court's order to the U.S. Court of Appeals for the Ninth Circuit. The Company
has engaged in a series of presentations and submissions with the Department of
Justice in which the Company responded to issues raised by the Department of
Justice. At this stage of the proceedings, the Company is unable to assess the
impact, if any, of this investigation and lawsuit on its consolidated financial
position, results of operations or ability to conduct business.
The Company is involved in various other 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 its
consolidated financial position, results of operations or its ability to conduct
business.
NOTE L -- SUPPLEMENTARY INCOME STATEMENT INFORMATION:
Charges to costs and expenses for depreciation and amortization of
buildings, property and equipment were $21,481,000, $20,120,000 and $19,956,000
for 1995, 1994 and 1993, respectively.
The Company expensed $8,490,000, $5,689,000 and $8,238,000 of independent
research and development costs during 1995, 1994 and 1993, respectively.
Total interest paid in 1995, 1994 and 1993 amounted to $1,514,000,
$1,449,000 and $1,743,000 respectively.
F-17
<PAGE>
Exhibit 4(g)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1992 STOCK OPTION PLAN
1. Purpose
Science Applications International Corporation (the "Company") hereby
establishes the Science Applications International Corporation 1992 Stock Option
Plan (the "Plan"). The purpose of the Plan is to advance the interests of the
Company and its stockholders by providing a means by which the Company and its
Subsidiaries shall be able to attract and retain qualified key employees,
directors and consultants and provide such personnel with an opportunity to
participate in the increased value of the Company which their effort, initiative
and skill have helped produce.
2. Definitions
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Class A Common Stock of the Company, par
value $.01.
(d) "Committee" shall mean the Company's Stock Option Committee
responsible for administering the Plan.
(e) "Employee/Optionee" shall mean an Optionee who is an employee of the
Company or any Subsidiary.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Exercise Price" shall mean the price per share at which an Option may
be exercised, as determined by the Committee and as specified in the Optionee's
option agreement.
(h) "Formula Price" shall mean the price per share of Common Stock as
established by the Board from time to time.
(i) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(Amended 11-03-94)
1
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(j) "Optionee" shall mean any person who holds an Option pursuant to the
Plan.
(k) "Plan" shall mean this Science Applications International Corporation
1992 Stock Option Plan, as it may be amended from time to time.
(l) "Purchase Price" shall mean at any particular time the Exercise Price
times the number of shares for which an Option is being exercised.
(m) "Subsidiary" as used in the Plan means any corporation (other than the
Company) 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.
3. Administration
(a) THE COMMITTEE. The Plan shall be administered by the Committee which
shall consist of not less than three nor more than seven directors appointed by
the Board. Any vacancies on the Committee will be filled by the Board or the
Operating Committee of the Board. Each Committee member shall be a
"disinterested person" as defined in Rule 16b-3 under the Exchange Act. Members
of the Committee shall not be eligible to receive Options under the Plan while
they are serving on the Committee; however, service by a director on the
Committee shall not affect in any way Options which may be granted to such
director while not serving on the Committee. No member of the Committee shall be
liable for any action or determination in respect thereto, if made in good
faith.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion and on behalf of the
Company:
(i) to grant Options;
(ii) to determine the Exercise Price per share of Options to be
granted;
(iii) to determine the individuals to whom, and the time or times at
which, Options shall be granted and the number of shares for which an
Option will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and regulations relating
to the Plan;
(vi) to determine the terms and provisions of each Option granted
and, with the consent of the Optionee, to modify or amend each Option;
(Amended 11-03-94)
2
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(vii) to accelerate or defer, with the consent of the Optionee, the
exercise date of any Option;
(viii) with the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
(ix) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) COMMITTEE DISCRETION. In exercising its authority, the Committee
shall have the broadest possible discretion and the Committee's determinations
under the Plan made in good faith shall be binding and conclusive on Optionees
and other persons claiming entitlements under the Plan. In no event shall a
Committee determination with respect to a particular Optionee or provision of
the Plan be binding with respect to any other Optionee (even if similarly
situated) nor with respect to any future determinations regarding the same or
other provisions of the Plan.
4. Eligibility
The individuals who shall be eligible to participate in the Plan and to
receive Options hereunder shall be such key employees, directors and consultants
of the Company and its Subsidiaries as the Committee shall from time to time
determine. The Committee may designate one or more directors who are not
eligible for participation in the Plan for a specified period of time. No
Option shall be granted to any person who, at the time the Option is granted,
owns (including stock owned by application of the constructive ownership rules
of Section 425(d) of the Code) stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or any
Subsidiary.
5. Stock Subject to the Plan
Options may be granted permitting the purchase of the aggregate of not more
than 12,000,000 shares of the Company's Common Stock, subject to adjustment
pursuant to Section 10 hereof. These shares may consist either in whole or in
part of shares of the Company's authorized but unissued Common Stock or shares
of the Company's authorized and issued Common Stock reacquired by the Company
and held in its treasury. If an Option granted under this Plan is surrendered,
expires or for any other reason ceases to be exercisable in whole or in part,
the shares which were subject to any such Option but as to which the Option
ceases to be exercisable shall be available for Options to be granted under the
Plan.
(Amended 11-03-94)
3
<PAGE>
6. Stock Options
(a) NON-QUALIFIED OPTIONS. The Options granted pursuant to the Plan shall
be non-qualified stock options and specifically not incentive stock options as
that term is used in the Code.
(b) OPTION AGREEMENTS. Options shall be evidenced by written option
agreements between the Optionee and the Company in such form as the Committee
shall from time to time determine. No Option or purported Option shall be a
valid and binding obligation of the Company unless previously granted by the
Committee and evidenced in writing by such an option agreement. Appropriate
officers of the Company are hereby authorized to execute and deliver option
agreements in the name of the Company, as directed from time to time by the
Committee.
(c) EXERCISE PRICE. The Exercise Price at which Options may be granted
under the Plan shall be not less than one hundred percent (100%) of the fair
market value of the Common Stock on the day the Option is granted, but may be
less than the Exercise Price or Prices of previously granted Options, whether in
effect, canceled or expired. As long as the Company's Common Stock is not
listed on any national securities exchange or traded on a regular basis (as
determined by the Company's Board or a Committee of the Board to which the Board
has delegated the authority to make such determination) on the over-the-counter
market, fair market value may be taken as the Formula Price as in effect at the
date of grant.
(d) DATE OF GRANT. The Committee shall, after it approves the granting of
an Option to a participant, cause the participant to be notified of such action.
The date on which the Committee approves the granting of an Option shall be
considered the date on which such Option is granted.
(e) TERMS OF EXERCISE. The right to purchase shares covered by any Option
or Options under the Plan shall be exercisable only in accordance with the terms
and conditions of the grant to such Optionee. The Committee may, in its
discretion, provide that such Option or Options may be exercised in whole or in
part in installments, cumulative or otherwise, for any period or periods of time
specified by the Committee of not more than ten years from the date of the grant
of the Option. Subject to the provisions of Paragraph 9, that portion of an
Option which is exercisable or an installment basis may not be exercised prior
to the expiration of the applicable installment period.
(f) NON-TRANSFERABILITY. An Option granted under the Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the Optionee to whom granted, may be exercised only by such
Optionee or his conservator or other legal representative.
(Amended 11-03-94)
4
<PAGE>
7. Expiration and Termination
(a) EXPIRATION OF OPTION. Each Option and all rights and obligations
thereunder shall, subject to the provisions of Paragraph 9, expire on a date to
be determined by the Committee, such date, however, in no event to be later than
ten (10) years from the date an Option is granted.
(b) TERMINATION OF EMPLOYMENT OR AFFILIATION. Subject to the provisions
of Paragraph 9, that portion of an Option which is exercisable on an installment
basis may not be exercised unless the Optionee shall continue in the employ or
affiliation of the Company or any of its Subsidiaries during the entire period
to which such installment relates. Except as set forth below in Paragraphs 7(c)
through (e) or otherwise set forth in an option agreement, all Options granted
to an Optionee under this Plan shall terminate and no longer be exercisable as
of the date such Optionee ceases to be employed or affiliated with the Company
or any Subsidiary; provided, however, the Committee in its discretion may extend
the period of time that such Optionee may exercise such Optionee's Options, but
in no event may the Committee extend such period of time beyond the expiration
date of the Options or beyond ten (10) years from the date of grant of such
Options.
(c) TERMINATION DUE TO RETIREMENT OR PERMANENT TOTAL DISABILITY. In the
event an Employee/Optionee's employment with the Company or any Subsidiary shall
terminate as the result of normal retirement, permanent total disability or
early retirement under the terms of a retirement or pension plan maintained by
the Company and in which such Employee/Optionee is a participant, such
Employee/Optionee may, at any time within ninety (90) days after such
termination of employment, exercise such Employee/Optionee's Options to the
extent that the Employee/Optionee was entitled to exercise them on the date of
such termination of employment, unless such Options would expire pursuant to
their terms at an earlier date, in which case such Options shall remain
exercisable only until the earlier expiration date.
(d) DEATH. If an Optionee dies while in the employ or affiliation of the
Company or of a Subsidiary without having fully exercised such Optionee's
Options, such Options may, within one (1) year of the Optionee's death (or
within such shorter period as may be specified in the Option by the Committee),
be exercised by the person or persons to whom the Optionee's rights under the
Option shall pass by will or by the applicable laws of descent and distribution
to the extent that such deceased Optionee was entitled to exercise the Options
on the date of death, unless such Options would expire pursuant to their terms
at an earlier date, in which case such Options shall remain exercisable only
until the earlier expiration date.
(e) LEAVES OF ABSENCE. An Employee/Optionee who is on a leave of absence
pursuant to the terms of the Company's Administrative Policy No. B-11 "Unpaid
Personal Leave of Absence" or any amended or replacement policy thereof, shall
not, during the period of any such absence be deemed, by virtue of such absence
alone, to have terminated such
(Amended 11-03-94)
5
<PAGE>
Employee/Optionee's employment with the Company or any Subsidiary except as the
Committee may otherwise expressly provide. Except as otherwise determined by
the Committee, unless such Employee/Optionee is on a Medical Leave (as
hereinafter defined), all rights which such Employee/Optionee would have had to
exercise Options granted hereunder will be suspended during the period of such
leave of absence. Upon such Employee/Optionee's return to the Company or any
Subsidiary all rights to exercise Options shall be restored to the extent such
Options are exercisable at that time. The Committee in its discretion may
permit the exercise, while on a leave of absence, of Options which would
otherwise expire or may defer the expiration date of such Options, but not
beyond ten (10) years from their date of grant. An Employee/Optionee who is on
a Medical Leave shall have all rights to exercise such Employee/Optionee's
Options that such Employee/Optionee would have had if such Employee/Optionee
were not on a Medical Leave. For purposes of this Paragraph 7(e), "Medical
Leave" shall be defined as a leave of absence for medical reasons which shall
begin after ninety-one (91) consecutive calendar days of total disability leave
and shall remain in effect until the earlier of a release by the attending
physician for the Employee/Optionee to return to work or until the termination
of employment.
8. Exercise of Options
(a) The Purchase Price shall be paid in full when the Option is exercised.
The Purchase Price may be paid in whole or in part in (i) cash or (ii) whole
shares of Common Stock of the Company evidenced by negotiable certificates,
valued at the Formula Price in effect on the date of exercise; provided,
however, that unless an exception is granted by the Secretary of this
Corporation, shares of Common Stock of the Company acquired through the exercise
of a stock option must have been owned by the Optionee for at least six months
before such shares of Common Stock may be used to pay the Purchase Price. The
Company or any Subsidiary shall be entitled to deduct from other compensation
payable to each Optionee any sums required by federal, state or local tax law to
be withheld with respect to the exercise of an Option but, in the alternative,
may require the Optionee or other person exercising the Option to pay, or the
Optionee or such other persons may pay, such sums to the employer corporation at
the time of such exercise. The Committee shall have the authority in its
discretion to allow withholding on exercise of an Option to be satisfied by
withholding from the shares to be issued upon the exercise of the Option a
number of shares, valued at the Formula Price in effect on the date of exercise
of the Option, equal in value to the withholding requirement. In allowing such
withholding in Common Stock, the Committees may prescribe such rules as may be
required to satisfy Rule 16b-3 under the Exchange Act.
(b) An Optionee shall have no rights as a shareholder of the Company with
respect to any shares for which his or her Option is exercised until the date of
exercise of such Option and the issuance of a stock certificate for such shares.
No adjustment shall be made for dividends, ordinary or extraordinary or whether
in currency, securities or other property, distributions, or other rights for
which the record date is prior to the date such stock certificate is issued.
(Amended 11-03-94)
6
<PAGE>
9. Change In Control
Notwithstanding any provision of Paragraph 7 above to the contrary, any
Option granted pursuant to the Plan shall, in the case of a Change In Control
(as hereinafter defined) of the Company, become fully exercisable as to all
shares of Common Stock to which it relates from and after the date of such
Change In Control. For purposes of this Paragraph 9, the term "Change in
Control" shall be deemed to occur upon any "person" (as defined in Section 13(d)
of the Exchange Act), other than the Company or any Subsidiary or employee
benefit plan or trust maintained by the Company or any Subsidiary, becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 25% of the Common Stock of the Company outstanding
at such time, without the prior approval of the Board.
10. Capital Adjustments
The aggregate number of shares of the Company's Common Stock subject to
this Plan, the maximum number of shares as to which Options may be granted to
any one Optionee hereunder, and the number of shares and the Exercise Price
shall be appropriately adjusted, as determined by the Committee in its
discretion, for any increase or decrease in the number of shares of Common Stock
which the Company has issued resulting from any stock split, stock dividend,
combination of shares or any other change, or any exchange for other securities
or any reclassification, reorganization, redesignation, recapitalization, or
otherwise.
11. No Employment Obligation
An Employee/Optionee's employment with the Company or a Subsidiary is not
for any specified term and may be terminated by such Employee/Optionee or by the
Company or a Subsidiary at any time, for any reason, with or without cause.
Nothing in this Plan or in any option agreement pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ of, or affiliation
with, the Company or a Subsidiary nor constitute any promise or commitment by
the Company or a Subsidiary regarding future positions, future work assignments,
future compensation or any other term or condition of employment or affiliation.
12. Government and Stock Exchange Regulations
The Company shall not be required to issue any shares upon the exercise of
any Option unless and until the Company has fully complied with any then
applicable requirements by the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies having
jurisdiction, and of any exchanges upon which Common Stock of the Company may be
listed.
Upon the exercise of an Option at a time when there is not in effect a
registration statement under the Securities Act of 1933 or a similar statute
(the "Act") relating to the stock
(Amended 11-03-94)
7
<PAGE>
issuable upon exercise thereof and available for delivery a prospectus meeting
the requirements of Section 10(a)(3) of said Act, or if the rules or
interpretations of the Securities and Exchange Commission so require, the stock
may be issued only if the holder represents and warrants in writing to the
Company that the shares purchased are being acquired for investment and not with
a view to distribution thereof.
13. Amendment, Suspension or Termination of Plan
The Board or the Operating Committee of the Board may at any time suspend
or terminate the Plan and may amend it from time to time in such respects as the
Board or the Operating Committee may deem advisable in order that Options
granted thereunder shall conform to any change in the law, or in any other
respect which the Board or the Operating Committee may deem to be in the best
interests of the Company; provided, however, that no such amendment shall,
without the approval of the holders of outstanding shares of the Company having
a majority of the general voting power, (i) except as specified in Paragraph 10,
increase the maximum number of shares for which Options may be granted under the
Plan, (ii) change the provisions of Paragraph 6(c) relating to the establishment
of the Exercise Price other than to change the manner of determination the fair
market value of the Company's Common Stock to conform with any then applicable
provisions of the Code or regulations issued thereunder, or (iii) permit the
granting of Options to members of the Committee. No Option may be granted
during any suspension, or after termination of the Plan.
14. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
Optionees or others claiming entitlements under the Plan or any obligations on
the part of the Company, any Subsidiary or the Committee, except as expressly
provided herein.
15. Effective Date
The effective date of the Plan shall be July 10, 1992.
16. Termination Date
Unless the Plan shall have been previously terminated by the Board or the
Operating Committee of the Board, the Plan shall terminate on July 31, 1995,
except as to Options theretofore granted and outstanding under the Plan at that
date, and no Option shall be granted after that date.
(Amended 11-03-94)
8
<PAGE>
Exhibit 4(n)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT AND CONFIRMATION
1992 STOCK OPTION PLAN
ACCOUNT NUMBER: OPTION NUMBER:
OPTION SHARES:
OPTION PRICE:
GRANT DATE:
EXPIRATION DATE:
THIS AGREEMENT is entered into as of the above stated Grant Date by and between
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation
("Company"), and the undersigned, who is affiliated with Company or a subsidiary
of Company ("Subsidiary") as an employee, director or consultant ("Optionee").
RECITALS
WHEREAS the Company's Board of Directors has approved the granting to Optionee
of an option to purchase shares of Company's Class A Common Stock, $.01 par
value per share ("Stock"), in the belief that the interests of Company and
Optionee will be advanced by encouraging and enabling Optionee to acquire a
proprietary interest in Company.
NOW, THEREFORE, in consideration of the mutual promises herein set forth, it is
agreed:
1. GRANT OF OPTION; NUMBER OF SHARES; OPTION PRICE. Subject to Optionee
executing and returning this Agreement to the Company's Stock Programs
Department within 120 days from the Grant Date, Company hereby grants to
Optionee an option to purchase, on the terms and conditions herein set forth,
all or any part of the number of shares of Stock ("Option Shares"), at the
purchase price per share ("Option Price") both set forth above. In the event,
Optionee fails to execute and return this Agreement as provided above, the
option granted pursuant to this Agreement shall be null and void.
2. TERM OF OPTION. This stock option shall expire five (5) years from
the Grant Date of this Agreement, except as and to the extent that the term of
the option may sooner terminate as provided in Section 4 hereof. Notice of
termination or expiration shall not be the responsibility of the Company.
3. EXERCISE OF OPTION. The right to exercise the option shall be in
accordance with the following schedule:
(a) The option may not be exercised in whole or in part at any
time prior to the first-year anniversary of the Grant Date.
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(b) The option may be exercised as to 20% of the Option Shares
after the first-year anniversary of the Grant Date.
(c) The option may be exercised as to an additional 20% of the
Option Shares after the second-year anniversary of the Grant
Date.
(d) The option may be exercised as to an additional 20% of the
Option Shares after the third-year anniversary of the Grant
Date.
(e) The option may be exercised as to an additional 40% of the
Option Shares after the fourth-year anniversary of the Grant
Date.
The rights to exercise the option, as specified in the preceding schedule, shall
be cumulative. Optionee may buy all, or from time to time, any part, of the
maximum number of Option Shares which are exercisable, but in no case may
Optionee exercise the option in regard to any fraction of a share. The option
granted hereby shall be exercised by giving not less than fifteen (15) days
written notice of exercise to the Stock Programs Department of the Company,
specifying the number of Option Shares in regard to which the option is being
exercised and accompanying such notice with payment of the full purchase price
therefor. Except as set forth in Section 4(c) below, this option shall be
exercisable only by Optionee.
4. TERMINATION OF OPTION. If Optionee shall cease to be affiliated
with Company or a Subsidiary as an employee, director or consultant, the
unexpired portion of this option shall terminate in accordance with the
following:
(a) If Optionee ceases to be affiliated with Company or a
Subsidiary and such affiliation ceases for any reason other
than death, retirement or permanent total disability, Optionee
may exercise this option within the thirty (30) day period
following such cessation of affiliation, but only to the
extent that this option was exercisable at the date of such
cessation of affiliation.
(b) If Optionee is an employee and ceases to be affiliated with
Company or a Subsidiary and such affiliation ceases as a
result of Optionee's normal retirement, permanent total
disability or early retirement under the terms of a retirement
or pension plan maintained by Company or a Subsidiary and in
which Optionee is a participant, Optionee may exercise this
option within the ninety (90) day period following such
cessation of affiliation, but only to the extent that this
option was exercisable at the date of such cessation of
affiliation.
(c) If Optionee ceases to be affiliated with Company or a
Subsidiary and such affiliation ceases as a result of
Optionee's death, this option may be exercised within the
one (1) year period following such death, and then only by the
person or persons to whom Optionee's rights under this option
shall pass by Optionee's will or by the laws of descent and
distribution, but only to the extent that this option was
exercisable at the date of Optionee's death.
(d) If Optionee is an employee of Company or a Subsidiary and is
on a leave of absence pursuant to the terms of Company's
Administrative Policy No. B-11 "Unpaid Personal Leave of
Absence", Optionee shall not during the period of such
absence be deemed, by virtue of such absence alone, to
2
<PAGE>
have terminated Optionee's employment with Company or a
Subsidiary. Unless Optionee is on a Medical Leave (as
hereinafter defined), all rights which Optionee would have had
to exercise the option will be suspended during the period of
such leave of absence. Upon Optionee's return to
Company or a Subsidiary, all rights to exercise the option
shall be restored to the extent the option is exercisable at
that time. If Optionee is on a Medical Leave, Optionee shall
have all rights to exercise the option that Optionee would
have had if Optionee were not on a Medical Leave. For
purposes of this Section 4(d), "Medical Leave" shall be
defined as a leave of absence for medical reasons which shall
begin after ninety-one (91)consecutive calendar days of total
disability leave and shall remain in effect until the earlier
of a release by the attending physician for Optionee to return
to work or until the termination of employment.
(e) If any portion of the option granted hereunder is not
exercised by the end of the applicable period specified in
(a), (b) or (c) of the Section 4, any such unexercised portion
and all of Optionee's rights with respect thereto shall
terminate at the end of such period. In no event shall this
option or any portion thereof be exercisable beyond the five
(5) year term stated in Section 2.
5. RIGHTS, RESTRICTIONS AND LIMITATIONS. All shares of Stock issued
upon exercise of this option are subject to the rights, restrictions and
limitations set forth in Article Fourth of Company's Restated Certificate of
Incorporation, as amended.
6. RESTRICTIONS UNDER SECURITIES LAW. All shares of Stock covered by
this Agreement are subject to any restrictions which may be imposed under
applicable state and federal securities laws and are subject to obtaining all
necessary consents which may be required by, or any condition which may be
imposed in accordance with, applicable state and federal securities laws or
regulations.
7. INVESTMENT. Optionee agrees that any and all shares of Stock
purchased upon the exercise of this option shall be acquired for investment and
not for distribution.
8. CAPITAL ADJUSTMENT. The Option Price and the number of Option
Shares shall be appropriately adjusted for any increase or decrease in the
number of shares of Stock which Company has issued and outstanding resulting
from any stock split, stock dividend, combination of shares or any other change,
or any exchange for other securities or any reclassification, reorganization,
redesignation, recapitalization or otherwise.
9. INCORPORATION OF STOCK OPTION PLAN. The option granted hereby is
granted pursuant to Company's 1992 Stock Option Plan ("Plan"), all the terms and
conditions of which are hereby made a part hereof and are incorporated herein by
reference. In the event of any inconsistency between the terms and conditions
contained herein and those set forth in the Plan, the terms and conditions of
the Plan shall prevail.
10. EMPLOYMENT AT WILL. If Optionee is an employee of Company or a
Subsidiary, such employment is not for any specified term and may be terminated
by employee or by Company or a Subsidiary at any time, for any reason, with
or without cause. Nothing in this Agreement or the Plan shall confer upon
employee any right to continue in the employ of Company or a Subsidiary nor
constitute any promise or commitment by Company regarding
3
<PAGE>
future positions, future work assignments, future compensation or any other term
or condition of employment.
11. MISCELLANEOUS. This Agreement contains the entire agreement between
the parties with respect to its subject matter. This Agreement shall be binding
upon and shall inure to the benefit of the respective parties, the successors
and assigns of Company, and the heirs, legatees and personal representatives of
Optionee. Optionee acknowledges that signing the Agreement constitutes an
unequivocal acceptance of this Agreement and any attempted modifications or
deletions will have no force or effect upon the Company's right to enforce the
terms and conditions stated herein.
12. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware without reference
to such State's principles of conflict of laws.
IN WITNESS WHEREOF, THE UNDERSIGNED OPTIONEE HEREBY AGREES TO ALL THE
TERMS AND CONDITIONS OF THIS AGREEMENT AND HEREBY ACKNOWLEDGES THAT THIS
AGREEMENT SHALL NOT BE BINDING ON THE COMPANY UNTIL OPTIONEE'S OPTION HAS BEEN
APPROVED BY THE BOARD OF DIRECTORS WHICH IS REFLECTED IN THE BOARD MEETING
MINUTES AND AN UNALTERED COPY OF THIS AGREEMENT HAS BEEN SIGNED, RETURNED,
RECEIVED AND APPROVED BY THE COMPANY.
- ---------------------------------------- -----------------
Signature of Optionee Date
PLEASE SIGN AND RETURN THIS COPY TO STOCK PROGRAMS. THE ATTACHED COPY IS FOR
YOUR RECORDS.
THIS AGREEMENT MUST BE SIGNED AND RETURNED WITHIN 120 DAYS OR THE OPTION WILL BE
FORFEITED.
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SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1992 STOCK OPTION PLAN
1. Purpose
Science Applications International Corporation (the "Company") hereby
establishes the Science Applications International Corporation 1992 Stock Option
Plan (the "Plan"). The purpose of the Plan is to advance the interests of the
Company and its stockholders by providing a means by which the Company and its
Subsidiaries shall be able to attract and retain qualified key employees,
directors and consultants and provide such personnel with an opportunity to
participate in the increased value of the Company which their effort, initiative
and skill have helped produce.
2. Definitions
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Class A Common Stock of the Company,
par value $.01.
(d) "Committee" shall mean the Company's Stock Option Committee
responsible for administering the Plan.
(e) "Employee/Optionee" shall mean an Optionee who is an employee of the
Company or any Subsidiary.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Exercise Price" shall mean the price per share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's option agreement.
(h) "Formula Price" shall mean the price per share of Common Stock as
established by the Board from time to time.
(i) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(j) "Optionee" shall mean any person who holds an Option pursuant to the
Plan.
(k) "Plan" shall mean this Science Applications International
Corporation 1992 Stock Option Plan, as it may be amended from time to time.
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(l) "Purchase Price" shall mean at any particular time the Exercise
Price times the number of shares for which an Option is being exercised.
(m) "Subsidiary" as used in the Plan means any corporation (other than
the Company) 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.
3. Administration
(a) THE COMMITTEE. The Plan shall be administered by the Committee
which shall consist of not less than three nor more than seven directors
appointed by the Board. Any vacancies on the Committee will be filled by the
Board or the Operating Committee of the Board. Each Committee member shall be a
"disinterested person" as defined in Rule 16b-3 under the Exchange Act. Members
of the Committee shall not be eligible to receive Options under the Plan while
they are serving on the Committee; however, service by a director on the
Committee shall not affect in any way Options which may be granted to such
director while not serving on the Committee. No member of the Committee shall be
liable for any action or determination in respect thereto, if made in good
faith.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have the authority, in its discretion and on behalf of the
Company:
(i) to grant Options;
(ii) to determine the Exercise Price per share of Options to be
granted;
(iii) to determine the individuals to whom, and the time or times at
which, Options shall be granted and the number of shares for which an
Option will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(vi) to determine the terms and provisions of each Option granted
and, with the consent of the Optionee, to modify or amend each Option;
(vii) to accelerate or defer, with the consent of the Optionee, the
exercise date of any Option;
(viii) with the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
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(ix) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) COMMITTEE DISCRETION. In exercising its authority, the Committee
shall have the broadest possible discretion and the Committee's determinations
under the Plan made in good faith shall be binding and conclusive on Optionees
and other persons claiming entitlements under the Plan. In no event shall a
Committee determination with respect to a particular Optionee or provision of
the Plan be binding with respect to any other Optionee (even if similarly
situated) nor with respect to any future determinations regarding the same or
other provisions of the Plan.
4. Eligibility
The individuals who shall be eligible to participate in the Plan and to
receive Options hereunder shall be such key employees, directors and consultants
of the Company and its Subsidiaries as the Committee shall from time to time
determine. The Committee may designate one or more directors who are not
eligible for participation in the Plan for a specified period of time. No
Option shall be granted to any person who, at the time the Option is granted,
owns (including stock owned by application of the constructive ownership rules
of Section 425(d) of the Code) stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or any
Subsidiary.
5. Stock Subject to the Plan
Options may be granted permitting the purchase of the aggregate of not
more than 12,000,000 shares of the Company's Common Stock, subject to adjustment
pursuant to Section 10 hereof. These shares may consist either in whole or in
part of shares of the Company's authorized but unissued Common Stock or shares
of the Company's authorized and issued Common Stock reacquired by the Company
and held in its treasury. If an Option granted under this Plan is surrendered,
expires or for any other reason ceases to be exercisable in whole or in part,
the shares which were subject to any such Option but as to which the Option
ceases to be exercisable shall be available for Options to be granted under the
Plan.
6. Stock Options
(a) NON-QUALIFIED OPTIONS. The Options granted pursuant to the Plan
shall be non-qualified stock options and specifically not incentive stock
options as that term is used in the Code.
(b) OPTION AGREEMENTS. Options shall be evidenced by written option
agreements between the Optionee and the Company in such form as the Committee
shall from time to time determine. No Option or purported Option shall be a
valid and binding obligation of the Company unless previously granted by the
Committee and evidenced in writing by such an option agreement. Appropriate
officers of the Company are hereby authorized to execute and deliver option
agreements in the name of the Company, as directed from time to time by the
Committee.
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(c) EXERCISE PRICE. The Exercise Price at which Options may be
granted under the Plan shall be not less than one hundred percent (100%) of the
fair market value of the Common Stock on the day the Option is granted, but may
be less than the Exercise Price or Prices of previously granted Options, whether
in effect, canceled or expired. As long as the Company's Common Stock is not
listed on any national securities exchange or traded on a regular basis (as
determined by the Company's Board or a Committee of the Board to which the Board
has delegated the authority to make such determination) on the over-the-counter
market, fair market value may be taken as the Formula Price as in effect at the
date of grant.
(d) DATE OF GRANT. The Committee shall, after it approves the
granting of an Option to a participant, cause the participant to be notified of
such action. The date on which the Committee approves the granting of an Option
shall be considered the date on which such Option is granted.
(e) TERMS OF EXERCISE. The right to purchase shares covered by any
Option or Options under the Plan shall be exercisable only in accordance with
the terms and conditions of the grant to such Optionee. The Committee may, in
its discretion, provide that such Option or Options may be exercised in whole or
in part in installments, cumulative or otherwise, for any period or periods of
time specified by the Committee of not more than ten years from the date of the
grant of the Option. Subject to the provisions of Paragraph 9, that portion of
an Option which is exercisable or an installment basis may not be exercised
prior to the expiration of the applicable installment period.
(f) NON-TRANSFERABILITY. An Option granted under the Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the Optionee to whom granted, may be exercised only by such
Optionee or his conservator or other legal representative.
7. Expiration and Termination
(a) EXPIRATION OF OPTION. Each Option and all rights and obligations
thereunder shall, subject to the provisions of Paragraph 9, expire on a date to
be determined by the Committee, such date, however, in no event to be later than
ten (10) years from the date an Option is granted.
(b) TERMINATION OF EMPLOYMENT OR AFFILIATION. Subject to the
provisions of Paragraph 9, that portion of an Option which is exercisable on an
installment basis may not be exercised unless the Optionee shall continue in the
employ or affiliation of the Company or any of its Subsidiaries during the
entire period to which such installment relates. Except as set forth below in
Paragraphs 7(c) through (e) or otherwise set forth in an option agreement, all
Options granted to an Optionee under this Plan shall terminate and no longer be
exercisable as of the date such Optionee ceases to be employed or affiliated
with the Company or any Subsidiary; provided, however, the Committee in its
discretion may extend the period of time that such Optionee may exercise such
Optionee's Options, but in no event may the Committee extend such period of time
beyond the expiration date of the Options or beyond ten (10) years from the date
of grant of such Options.
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(c) TERMINATION DUE TO RETIREMENT OR PERMANENT TOTAL DISABILITY. In
the event an Employee/Optionee's employment with the Company or any Subsidiary
shall terminate as the result of normal retirement, permanent total disability
or early retirement under the terms of a retirement or pension plan maintained
by the Company and in which such Employee/Optionee is a participant, such
Employee/Optionee may, at any time within ninety (90) days after such
termination of employment, exercise such Employee/Optionee's Options to the
extent that the Employee/Optionee was entitled to exercise them on the date of
such termination of employment, unless such Options would expire pursuant to
their terms at an earlier date, in which case such Options shall remain
exercisable only until the earlier expiration date.
(d) DEATH. If an Optionee dies while in the employ or affiliation of
the Company or of a Subsidiary without having fully exercised such Optionee's
Options, such Options may, within one (1) year of the Optionee's death (or
within such shorter period as may be specified in the Option by the Committee),
be exercised by the person or persons to whom the Optionee's rights under the
Option shall pass by will or by the applicable laws of descent and distribution
to the extent that such deceased Optionee was entitled to exercise the Options
on the date of death, unless such Options would expire pursuant to their terms
at an earlier date, in which case such Options shall remain exercisable only
until the earlier expiration date.
(e) LEAVES OF ABSENCE. An Employee/Optionee who is on a leave of
absence pursuant to the terms of the Company's Administrative Policy No. B-11
"Unpaid Personal Leave of Absence" or any amended or replacement policy thereof,
shall not, during the period of any such absence be deemed, by virtue of such
absence alone, to have terminated such Employee/Optionee's employment with the
Company or any Subsidiary except as the Committee may otherwise expressly
provide. Except as otherwise determined by the Committee, unless such
Employee/Optionee is on a Medical Leave (as hereinafter defined), all rights
which such Employee/Optionee would have had to exercise Options granted
hereunder will be suspended during the period of such leave of absence. Upon
such Employee/Optionee's return to the Company or any Subsidiary all rights to
exercise Options shall be restored to the extent such Options are exercisable at
that time. The Committee in its discretion may permit the exercise, while on a
leave of absence, of Options which would otherwise expire or may defer the
expiration date of such Options, but not beyond ten (10) years from their date
of grant. An Employee/Optionee who is on a Medical Leave shall have all rights
to exercise such Employee/Optionee's Options that such Employee/Optionee would
have had if such Employee/Optionee were not on a Medical Leave. For purposes of
this Paragraph 7(e), "Medical Leave" shall be defined as a leave of absence for
medical reasons which shall begin after ninety-one (91) consecutive calendar
days of total disability leave and shall remain in effect until the earlier of a
release by the attending physician for the Employee/Optionee to return to work
or until the termination of employment.
8. Exercise of Options
(a) The Purchase Price shall be paid in full when the Option is
exercised. The Purchase Price may be paid in whole or in part in (i) cash or
(ii) whole shares of Common Stock of the Company evidenced by negotiable
certificates, valued at the Formula Price in effect on the date of
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<PAGE>
exercise; provided, however, that unless an exception is granted by the
Secretary of this Corporation, shares of Common Stock of the Company acquired
through the exercise of a stock option must have been owned by the Optionee for
at least six months before such shares of Common Stock may be used to pay the
Purchase Price. The Company or any Subsidiary shall be entitled to deduct from
other compensation payable to each Optionee any sums required by federal, state
or local tax law to be withheld with respect to the exercise of an Option but,
in the alternative, may require the Optionee or other person exercising the
Option to pay, or the Optionee or such other persons may pay, such sums to the
employer corporation at the time of such exercise. The Committee shall have the
authority in its discretion to allow withholding on exercise of an Option
to be satisfied by withholding from the shares to be issued upon the exercise of
the Option a number of shares, valued at the Formula Price in effect on the date
of exercise of the Option, equal in value to the withholding requirement. In
allowing such withholding in Common Stock, the Committees may prescribe such
rules as may be required to satisfy Rule 16b-3 under the Exchange Act.
(b) An Optionee shall have no rights as a shareholder of the Company
with respect to any shares for which his or her Option is exercised until the
date of exercise of such Option and the issuance of a stock certificate for such
shares. No adjustment shall be made for dividends, ordinary or extraordinary or
whether in currency, securities or other property, distributions, or other
rights for which the record date is prior to the date such stock certificate is
issued.
9. Change In Control
Notwithstanding any provision of Paragraph 7 above to the contrary, any
Option granted pursuant to the Plan shall, in the case of a Change In Control
(as hereinafter defined) of the Company, become fully exercisable as to all
shares of Common Stock to which it relates from and after the date of such
Change In Control. For purposes of this Paragraph 9, the term "Change in
Control" shall be deemed to occur upon any "person" (as defined in Section 13(d)
of the Exchange Act), other than the Company or any Subsidiary or employee
benefit plan or trust maintained by the Company or any Subsidiary, becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 25% of the Common Stock of the Company outstanding
at such time, without the prior approval of the Board.
10. Capital Adjustments
The aggregate number of shares of the Company's Common Stock subject to
this Plan, the maximum number of shares as to which Options may be granted to
any one Optionee hereunder, and the number of shares and the Exercise Price
shall be appropriately adjusted, as determined by the Committee in its
discretion, for any increase or decrease in the number of shares of Common Stock
which the Company has issued resulting from any stock split, stock dividend,
combination of shares or any other change, or any exchange for other securities
or any reclassification, reorganization, redesignation, recapitalization, or
otherwise.
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<PAGE>
11. No Employment Obligation
An Employee/Optionee's employment with the Company or a Subsidiary is not
for any specified term and may be terminated by such Employee/Optionee or by the
Company or a Subsidiary at any time, for any reason, with or without cause.
Nothing in this Plan or in any option agreement pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ of, or affiliation
with, the Company or a Subsidiary nor constitute any promise or commitment by
the Company or a Subsidiary regarding future positions, future work assignments,
future compensation or any other term or condition of employment or affiliation.
12. Government and Stock Exchange Regulations
The Company shall not be required to issue any shares upon the exercise of
any Option unless and until the Company has fully complied with any then
applicable requirements by the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies having
jurisdiction, and of any exchanges upon which Common Stock of the Company may be
listed.
Upon the exercise of an Option at a time when there is not in effect a
registration statement under the Securities Act of 1933 or a similar statute
(the "Act") relating to the stock issuable upon exercise thereof and available
for delivery a prospectus meeting the requirements of Section 10(a)(3) of said
Act, or if the rules or interpretations of the Securities and Exchange
Commission so require, the stock may be issued only if the holder represents and
warrants in writing to the Company that the shares purchased are being acquired
for investment and not with a view to distribution thereof.
13. Amendment, Suspension or Termination of Plan
The Board or the Operating Committee of the Board may at any time suspend
or terminate the Plan and may amend it from time to time in such respects as the
Board or the Operating Committee may deem advisable in order that Options
granted thereunder shall conform to any change in the law, or in any other
respect which the Board or the Operating Committee may deem to be in the best
interests of the Company; provided, however, that no such amendment shall,
without the approval of the holders of outstanding shares of the Company having
a majority of the general voting power, (i) except as specified in Paragraph 10,
increase the maximum number of shares for which Options may be granted under the
Plan, (ii) change the provisions of Paragraph 6(c) relating to the establishment
of the Exercise Price other than to change the manner of determination the fair
market value of the Company's Common Stock to conform with any then applicable
provisions of the Code or regulations issued thereunder, or (iii) permit the
granting of Options to members of the Committee. No Option may be granted
during any suspension, or after termination of the Plan.
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14. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
Optionees or others claiming entitlements under the Plan or any obligations on
the part of the Company, any Subsidiary or the Committee, except as expressly
provided herein.
15. Effective Date
The effective date of the Plan shall be July 10, 1992.
16. Termination Date
Unless the Plan shall have been previously terminated by the Board or the
Operating Committee of the Board, the Plan shall terminate on July 31, 1995,
except as to Options theretofore granted and outstanding under the Plan at that
date, and no Option shall be granted after that date.
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Exhibit 4(o)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT AND CONFIRMATION
1992 STOCK OPTION PLAN
ACCOUNT NUMBER: OPTION NUMBER:
OPTION SHARES:
OPTION PRICE:
GRANT DATE:
EXPIRATION DATE:
THIS AGREEMENT is entered into as of the above stated Grant Date by and between
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation
("Company"), and the undersigned, who is affiliated with Company or a subsidiary
of Company ("Subsidiary") as an employee, director or consultant ("Optionee").
RECITALS
WHEREAS the Company's Board of Directors has approved the granting to Optionee
of an option to purchase shares of Company's Class A Common Stock, $.01 par
value per share ("Stock"), in the belief that the interests of Company and
Optionee will be advanced by encouraging and enabling Optionee to acquire a
proprietary interest in Company.
NOW, THEREFORE, in consideration of the mutual promises herein set forth, it is
agreed:
1. GRANT OF OPTION; NUMBER OF SHARES; OPTION PRICE. Subject to Optionee
executing and returning this Agreement to the Company's Stock Programs
Department within 120 days from the Grant Date (unless such delay is approved by
the Stock Option Committee, in its sole unreviewable discretion, upon a finding
of good cause), Company hereby grants to Optionee an option to purchase, on the
terms and conditions herein set forth, all or any part of the number of shares
of Stock ("Option Shares"), at the purchase price per share ("Option Price")
both set forth above. In the event, Optionee fails to execute and return this
Agreement as provided above, the option granted pursuant to this Agreement shall
be null and void.
2. TERM OF OPTION. This stock option shall expire five (5) years from
the Grant Date of this Agreement, except as and to the extent that the term of
the option may sooner terminate as provided in Section 4 hereof. Notice of
termination or expiration shall not be the responsibility of the Company.
3. EXERCISE OF OPTION. The right to exercise the option shall be in
accordance with the following schedule:
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(a) The option may not be exercised in whole or in part at any
time prior to the first-year anniversary of the Grant Date.
(b) The option may be exercised as to 20% of the Option Shares
after the first-year anniversary of the Grant Date.
(c) The option may be exercised as to an additional 20% of the
Option Shares after the second-year anniversary of the Grant
Date.
(d) The option may be exercised as to an additional 20% of the
Option Shares after the third-year anniversary of the Grant
Date.
(e) The option may be exercised as to an additional 40% of the
Option Shares after the fourth-year anniversary of the Grant
Date.
The rights to exercise the option, as specified in the preceding schedule, shall
be cumulative. Optionee may buy all, or from time to time, any part, of the
maximum number of Option Shares which are exercisable, but in no case may
Optionee exercise the option in regard to any fraction of a share. The option
granted hereby shall be exercised by giving not less than fifteen (15) days
written notice of exercise to the Stock Programs Department of the Company,
specifying the number of Option Shares in regard to which the option is being
exercised and accompanying such notice with payment of the full purchase price
therefor. Except as set forth in Section 4(c) below, this option shall be
exercisable only by Optionee.
4. TERMINATION OF OPTION. If Optionee shall cease to be affiliated
with Company or a Subsidiary as an employee, director or consultant, the
unexpired portion of this option shall terminate in accordance with the
following:
(a) If Optionee ceases to be affiliated with Company or a
Subsidiary and such affiliation ceases for any reason other
than death, retirement or permanent total disability, Optionee
may exercise this option within the thirty (30) day period
following such cessation of affiliation, but only to the
extent that this option was exercisable at the date of such
cessation of affiliation.
(b) If Optionee is an employee and ceases to be affiliated with
Company or a Subsidiary and such affiliation ceases as a
result of Optionee's normal retirement, permanent total
disability or early retirement under the terms of a retirement
or pension plan maintained by Company or a Subsidiary and in
which Optionee is a participant, Optionee may exercise this
option within the ninety (90) day period following such
cessation of affiliation, but only to the extent that this
option was exercisable at the date of such cessation of
affiliation.
(c) If Optionee ceases to be affiliated with Company or a
Subsidiary and such affiliation ceases as a result of
Optionee's death, this option may be exercised within the
one (1) year period following such death, and then only by the
person or persons to whom Optionee's rights under this option
shall pass by Optionee's will or by the laws of descent and
distribution, but only to the extent that this option was
exercisable at the date of Optionee's death.
(d) If Optionee is an employee of Company or a Subsidiary and is
on a leave of absence pursuant to the terms of Company's
Administrative Policy No. B-11 "Unpaid Personal Leave of
Absence", Optionee shall not during the
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period of such absence be deemed, by virtue of such absence
alone, to have terminated Optionee's employment with Company
or a Subsidiary. Unless Optionee is on a Medical Leave (as
hereinafter defined), all rights which Optionee would have had
to exercise the option will be suspended during the period of
such leave of absence. Upon Optionee's return to Company or a
Subsidiary, all rights to exercise the option shall be
restored to the extent the option is exercisable at that time.
If Optionee is on a Medical Leave, Optionee shall have all
rights to exercise the option that Optionee would have had if
Optionee were not on a Medical Leave. For purposes of this
Section 4(d), "Medical Leave" shall be defined as a leave of
absence for medical reasons which shall begin after ninety-one
(91) consecutive calendar days of total disability leave and
shall remain in effect until the earlier of a release by the
attending physician for Optionee to return to work or until
the termination of employment.
(e) If any portion of the option granted hereunder is not
exercised by the end of the applicable period specified in
(a), (b) or (c) of the Section 4, any such unexercised portion
and all of Optionee's rights with respect thereto shall
terminate at the end of such period. In no event shall this
option or any portion thereof be exercisable beyond the five
(5) year term stated in Section 2.
5. RIGHTS, RESTRICTIONS AND LIMITATIONS. All shares of Stock issued
upon exercise of this option are subject to the rights, restrictions and
limitations set forth in Article Fourth of Company's Restated Certificate of
Incorporation, as amended.
6. RESTRICTIONS UNDER SECURITIES LAW. All shares of Stock covered by
this Agreement are subject to any restrictions which may be imposed under
applicable state and federal securities laws and are subject to obtaining all
necessary consents which may be required by, or any condition which may be
imposed in accordance with, applicable state and federal securities laws or
regulations.
7. INVESTMENT. Optionee agrees that any and all shares of Stock
purchased upon the exercise of this option shall be acquired for investment and
not for distribution.
8. CAPITAL ADJUSTMENT. The Option Price and the number of Option
Shares shall be appropriately adjusted for any increase or decrease in the
number of shares of Stock which Company has issued and outstanding resulting
from any stock split, stock dividend, combination of shares or any other change,
or any exchange for other securities or any reclassification, reorganization,
redesignation, recapitalization or otherwise.
9. INCORPORATION OF STOCK OPTION PLAN. The option granted hereby is
granted pursuant to Company's 1992 Stock Option Plan ("Plan"), all the terms and
conditions of which are hereby made a part hereof and are incorporated herein by
reference. In the event of any inconsistency between the terms and conditions
contained herein and those set forth in the Plan, the terms and conditions of
the Plan shall prevail.
10. EMPLOYMENT AT WILL. If Optionee is an employee of Company or a
Subsidiary, such employment is not for any specified term and may be terminated
by employee or by Company or a Subsidiary at any time, for any reason, with
or without cause. Nothing in this Agreement or the Plan shall confer upon
employee any right to continue in the employ
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of Company or a Subsidiary nor constitute any promise or commitment by Company
regarding future positions, future work assignments, future compensation or any
other term or condition of employment.
11. MISCELLANEOUS. This Agreement contains the entire agreement between
the parties with respect to its subject matter. This Agreement shall be binding
upon and shall inure to the benefit of the respective parties, the successors
and assigns of Company, and the heirs, legatees and personal representatives of
Optionee. Optionee acknowledges that signing the Agreement constitutes an
unequivocal acceptance of this Agreement and any attempted modifications or
deletions will have no force or effect upon the Company's right to enforce the
terms and conditions stated herein.
12. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware without reference
to such State's principles of conflict of laws.
IN WITNESS WHEREOF, THE UNDERSIGNED OPTIONEE HEREBY AGREES TO ALL THE
TERMS AND CONDITIONS OF THIS AGREEMENT AND HEREBY ACKNOWLEDGES THAT THIS
AGREEMENT SHALL NOT BE BINDING ON THE COMPANY UNTIL OPTIONEE'S OPTION HAS BEEN
APPROVED BY THE BOARD OF DIRECTORS WHICH IS REFLECTED IN THE BOARD MEETING
MINUTES AND AN UNALTERED COPY OF THIS AGREEMENT HAS BEEN SIGNED, RETURNED,
RECEIVED AND APPROVED BY THE COMPANY.
- ------------------------------------ ------------------
Signature of Optionee Date
PLEASE SIGN AND RETURN THIS COPY TO STOCK PROGRAMS. THE ATTACHED COPY IS FOR
YOUR RECORDS.
THIS AGREEMENT MUST BE SIGNED AND RETURNED WITHIN 120 DAYS OR THE OPTION WILL BE
FORFEITED.
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<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1992 STOCK OPTION PLAN
1. Purpose
Science Applications International Corporation (the "Company") hereby
establishes the Science Applications International Corporation 1992 Stock Option
Plan (the "Plan"). The purpose of the Plan is to advance the interests of the
Company and its stockholders by providing a means by which the Company and its
Subsidiaries shall be able to attract and retain qualified key employees,
directors and consultants and provide such personnel with an opportunity to
participate in the increased value of the Company which their effort, initiative
and skill have helped produce.
2. Definitions
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Class A Common Stock of the Company,
par value $.01.
(d) "Committee" shall mean the Company's Stock Option Committee
responsible for administering the Plan.
(e) "Employee/Optionee" shall mean an Optionee who is an employee of the
Company or any Subsidiary.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Exercise Price" shall mean the price per share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's option agreement.
(h) "Formula Price" shall mean the price per share of Common Stock as
established by the Board from time to time.
(i) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(j) "Optionee" shall mean any person who holds an Option pursuant to the
Plan.
(k) "Plan" shall mean this Science Applications International
Corporation 1992 Stock Option Plan, as it may be amended from time to time.
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(l) "Purchase Price" shall mean at any particular time the Exercise
Price times the number of shares for which an Option is being exercised.
(m) "Subsidiary" as used in the Plan means any corporation (other than
the Company) 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.
3. Administration
(a) THE COMMITTEE. The Plan shall be administered by the Committee
which shall consist of not less than three nor more than seven directors
appointed by the Board. Any vacancies on the Committee will be filled by the
Board or the Operating Committee of the Board. Each Committee member shall be a
"disinterested person" as defined in Rule 16b-3 under the Exchange Act. Members
of the Committee shall not be eligible to receive Options under the Plan while
they are serving on the Committee; however, service by a director on the
Committee shall not affect in any way Options which may be granted to such
director while not serving on the Committee. No member of the Committee shall be
liable for any action or determination in respect thereto, if made in good
faith.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have the authority, in its discretion and on behalf of the
Company:
(i) to grant Options;
(ii) to determine the Exercise Price per share of Options to be
granted;
(iii) to determine the individuals to whom, and the time or times at
which, Options shall be granted and the number of shares for which an
Option will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(vi) to determine the terms and provisions of each Option granted
and, with the consent of the Optionee, to modify or amend each Option;
(vii) to accelerate or defer, with the consent of the Optionee, the
exercise date of any Option;
(viii) with the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
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(ix) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) COMMITTEE DISCRETION. In exercising its authority, the Committee
shall have the broadest possible discretion and the Committee's determinations
under the Plan made in good faith shall be binding and conclusive on Optionees
and other persons claiming entitlements under the Plan. In no event shall a
Committee determination with respect to a particular Optionee or provision of
the Plan be binding with respect to any other Optionee (even if similarly
situated) nor with respect to any future determinations regarding the same or
other provisions of the Plan.
4. Eligibility
The individuals who shall be eligible to participate in the Plan and to
receive Options hereunder shall be such key employees, directors and consultants
of the Company and its Subsidiaries as the Committee shall from time to time
determine. The Committee may designate one or more directors who are not
eligible for participation in the Plan for a specified period of time. No
Option shall be granted to any person who, at the time the Option is granted,
owns (including stock owned by application of the constructive ownership rules
of Section 425(d) of the Code) stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or any
Subsidiary.
5. Stock Subject to the Plan
Options may be granted permitting the purchase of the aggregate of not
more than 12,000,000 shares of the Company's Common Stock, subject to adjustment
pursuant to Section 10 hereof. These shares may consist either in whole or in
part of shares of the Company's authorized but unissued Common Stock or shares
of the Company's authorized and issued Common Stock reacquired by the Company
and held in its treasury. If an Option granted under this Plan is surrendered,
expires or for any other reason ceases to be exercisable in whole or in part,
the shares which were subject to any such Option but as to which the Option
ceases to be exercisable shall be available for Options to be granted under the
Plan.
6. Stock Options
(a) NON-QUALIFIED OPTIONS. The Options granted pursuant to the Plan
shall be non-qualified stock options and specifically not incentive stock
options as that term is used in the Code.
(b) OPTION AGREEMENTS. Options shall be evidenced by written option
agreements between the Optionee and the Company in such form as the Committee
shall from time to time determine. No Option or purported Option shall be a
valid and binding obligation of the Company unless previously granted by the
Committee and evidenced in writing by such an option agreement. Appropriate
officers of the Company are hereby authorized to execute and deliver option
agreements in the name of the Company, as directed from time to time by the
Committee.
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(c) EXERCISE PRICE. The Exercise Price at which Options may be
granted under the Plan shall be not less than one hundred percent (100%) of the
fair market value of the Common Stock on the day the Option is granted, but may
be less than the Exercise Price or Prices of previously granted Options, whether
in effect, canceled or expired. As long as the Company's Common Stock is not
listed on any national securities exchange or traded on a regular basis (as
determined by the Company's Board or a Committee of the Board to which the Board
has delegated the authority to make such determination) on the over-the-counter
market, fair market value may be taken as the Formula Price as in effect at the
date of grant.
(d) DATE OF GRANT. The Committee shall, after it approves the
granting of an Option to a participant, cause the participant to be notified of
such action. The date on which the Committee approves the granting of an Option
shall be considered the date on which such Option is granted.
(e) TERMS OF EXERCISE. The right to purchase shares covered by any
Option or Options under the Plan shall be exercisable only in accordance with
the terms and conditions of the grant to such Optionee. The Committee may, in
its discretion, provide that such Option or Options may be exercised in whole or
in part in installments, cumulative or otherwise, for any period or periods of
time specified by the Committee of not more than ten years from the date of the
grant of the Option. Subject to the provisions of Paragraph 9, that portion of
an Option which is exercisable or an installment basis may not be exercised
prior to the expiration of the applicable installment period.
(f) NON-TRANSFERABILITY. An Option granted under the Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the Optionee to whom granted, may be exercised only by such
Optionee or his conservator or other legal representative.
7. Expiration and Termination
(a) EXPIRATION OF OPTION. Each Option and all rights and obligations
thereunder shall, subject to the provisions of Paragraph 9, expire on a date to
be determined by the Committee, such date, however, in no event to be later than
ten (10) years from the date an Option is granted.
(b) TERMINATION OF EMPLOYMENT OR AFFILIATION. Subject to the
provisions of Paragraph 9, that portion of an Option which is exercisable on an
installment basis may not be exercised unless the Optionee shall continue in the
employ or affiliation of the Company or any of its Subsidiaries during the
entire period to which such installment relates. Except as set forth below in
Paragraphs 7(c) through (e) or otherwise set forth in an option agreement, all
Options granted to an Optionee under this Plan shall terminate and no longer be
exercisable as of the date such Optionee ceases to be employed or affiliated
with the Company or any Subsidiary; provided, however, the Committee in its
discretion may extend the period of time that such Optionee may exercise such
Optionee's Options, but in no event may the Committee extend such period of time
beyond the expiration date of the Options or beyond ten (10) years from the date
of grant of such Options.
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(c) TERMINATION DUE TO RETIREMENT OR PERMANENT TOTAL DISABILITY. In
the event an Employee/Optionee's employment with the Company or any Subsidiary
shall terminate as the result of normal retirement, permanent total disability
or early retirement under the terms of a retirement or pension plan maintained
by the Company and in which such Employee/Optionee is a participant, such
Employee/Optionee may, at any time within ninety (90) days after such
termination of employment, exercise such Employee/Optionee's Options to the
extent that the Employee/Optionee was entitled to exercise them on the date of
such termination of employment, unless such Options would expire pursuant to
their terms at an earlier date, in which case such Options shall remain
exercisable only until the earlier expiration date.
(d) DEATH. If an Optionee dies while in the employ or affiliation of
the Company or of a Subsidiary without having fully exercised such Optionee's
Options, such Options may, within one (1) year of the Optionee's death (or
within such shorter period as may be specified in the Option by the Committee),
be exercised by the person or persons to whom the Optionee's rights under the
Option shall pass by will or by the applicable laws of descent and distribution
to the extent that such deceased Optionee was entitled to exercise the Options
on the date of death, unless such Options would expire pursuant to their terms
at an earlier date, in which case such Options shall remain exercisable only
until the earlier expiration date.
(e) LEAVES OF ABSENCE. An Employee/Optionee who is on a leave of
absence pursuant to the terms of the Company's Administrative Policy No. B-11
"Unpaid Personal Leave of Absence" or any amended or replacement policy thereof,
shall not, during the period of any such absence be deemed, by virtue of such
absence alone, to have terminated such Employee/Optionee's employment with the
Company or any Subsidiary except as the Committee may otherwise expressly
provide. Except as otherwise determined by the Committee, unless such
Employee/Optionee is on a Medical Leave (as hereinafter defined), all rights
which such Employee/Optionee would have had to exercise Options granted
hereunder will be suspended during the period of such leave of absence. Upon
such Employee/Optionee's return to the Company or any Subsidiary all rights to
exercise Options shall be restored to the extent such Options are exercisable at
that time. The Committee in its discretion may permit the exercise, while on a
leave of absence, of Options which would otherwise expire or may defer the
expiration date of such Options, but not beyond ten (10) years from their date
of grant. An Employee/Optionee who is on a Medical Leave shall have all rights
to exercise such Employee/Optionee's Options that such Employee/Optionee would
have had if such Employee/Optionee were not on a Medical Leave. For purposes of
this Paragraph 7(e), "Medical Leave" shall be defined as a leave of absence for
medical reasons which shall begin after ninety-one (91) consecutive calendar
days of total disability leave and shall remain in effect until the earlier of a
release by the attending physician for the Employee/Optionee to return to work
or until the termination of employment.
8. Exercise of Options
(a) The Purchase Price shall be paid in full when the Option is
exercised. The Purchase Price may be paid in whole or in part in (i) cash or
(ii) whole shares of Common Stock of the Company evidenced by negotiable
certificates, valued at the Formula Price in effect on the date of
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<PAGE>
exercise; provided, however, that unless an exception is granted by the
Secretary of this Corporation, shares of Common Stock of the Company acquired
through the exercise of a stock option must have been owned by the Optionee for
at least six months before such shares of Common Stock may be used to pay the
Purchase Price. The Company or any Subsidiary shall be entitled to deduct from
other compensation payable to each Optionee any sums required by federal, state
or local tax law to be withheld with respect to the exercise of an Option but,
in the alternative, may require the Optionee or other person exercising the
Option to pay, or the Optionee or such other persons may pay, such sums to the
employer corporation at the time of such exercise. The Committee shall have the
authority in its discretion to allow withholding on exercise of an Option to be
satisfied by withholding from the shares to be issued upon the exercise of the
Option a number of shares, valued at the Formula Price in effect on the date of
exercise of the Option, equal in value to the withholding requirement. In
allowing such withholding in Common Stock, the Committees may prescribe such
rules as may be required to satisfy Rule 16b-3 under the Exchange Act.
(b) An Optionee shall have no rights as a shareholder of the Company
with respect to any shares for which his or her Option is exercised until the
date of exercise of such Option and the issuance of a stock certificate for such
shares. No adjustment shall be made for dividends, ordinary or extraordinary or
whether in currency, securities or other property, distributions, or other
rights for which the record date is prior to the date such stock certificate is
issued.
9. Change In Control
Notwithstanding any provision of Paragraph 7 above to the contrary, any
Option granted pursuant to the Plan shall, in the case of a Change In Control
(as hereinafter defined) of the Company, become fully exercisable as to all
shares of Common Stock to which it relates from and after the date of such
Change In Control. For purposes of this Paragraph 9, the term "Change in
Control" shall be deemed to occur upon any "person" (as defined in Section 13(d)
of the Exchange Act), other than the Company or any Subsidiary or employee
benefit plan or trust maintained by the Company or any Subsidiary, becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 25% of the Common Stock of the Company outstanding
at such time, without the prior approval of the Board.
10. Capital Adjustments
The aggregate number of shares of the Company's Common Stock subject to
this Plan, the maximum number of shares as to which Options may be granted to
any one Optionee hereunder, and the number of shares and the Exercise Price
shall be appropriately adjusted, as determined by the Committee in its
discretion, for any increase or decrease in the number of shares of Common Stock
which the Company has issued resulting from any stock split, stock dividend,
combination of shares or any other change, or any exchange for other securities
or any reclassification, reorganization, redesignation, recapitalization, or
otherwise.
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11. No Employment Obligation
An Employee/Optionee's employment with the Company or a Subsidiary is not
for any specified term and may be terminated by such Employee/Optionee or by the
Company or a Subsidiary at any time, for any reason, with or without cause.
Nothing in this Plan or in any option agreement pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ of, or affiliation
with, the Company or a Subsidiary nor constitute any promise or commitment by
the Company or a Subsidiary regarding future positions, future work assignments,
future compensation or any other term or condition of employment or affiliation.
12. Government and Stock Exchange Regulations
The Company shall not be required to issue any shares upon the exercise of
any Option unless and until the Company has fully complied with any then
applicable requirements by the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies having
jurisdiction, and of any exchanges upon which Common Stock of the Company may be
listed.
Upon the exercise of an Option at a time when there is not in effect a
registration statement under the Securities Act of 1933 or a similar statute
(the "Act") relating to the stock issuable upon exercise thereof and available
for delivery a prospectus meeting the requirements of Section 10(a)(3) of said
Act, or if the rules or interpretations of the Securities and Exchange
Commission so require, the stock may be issued only if the holder represents and
warrants in writing to the Company that the shares purchased are being acquired
for investment and not with a view to distribution thereof.
13. Amendment, Suspension or Termination of Plan
The Board or the Operating Committee of the Board may at any time suspend
or terminate the Plan and may amend it from time to time in such respects as the
Board or the Operating Committee may deem advisable in order that Options
granted thereunder shall conform to any change in the law, or in any other
respect which the Board or the Operating Committee may deem to be in the best
interests of the Company; provided, however, that no such amendment shall,
without the approval of the holders of outstanding shares of the Company having
a majority of the general voting power, (i) except as specified in Paragraph 10,
increase the maximum number of shares for which Options may be granted under the
Plan, (ii) change the provisions of Paragraph 6(c) relating to the establishment
of the Exercise Price other than to change the manner of determination the fair
market value of the Company's Common Stock to conform with any then applicable
provisions of the Code or regulations issued thereunder, or (iii) permit the
granting of Options to members of the Committee. No Option may be granted
during any suspension, or after termination of the Plan.
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14. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
Optionees or others claiming entitlements under the Plan or any obligations on
the part of the Company, any Subsidiary or the Committee, except as expressly
provided herein.
15. Effective Date
The effective date of the Plan shall be July 10, 1992.
16. Termination Date
Unless the Plan shall have been previously terminated by the Board or the
Operating Committee of the Board, the Plan shall terminate on July 31, 1995,
except as to Options theretofore granted and outstanding under the Plan at that
date, and no Option shall be granted after that date.
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Exhibit 4(p)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
BONUS COMPENSATION STOCK RESTRICTION AGREEMENT
ACCOUNT NUMBER:
COMMENCEMENT DATE:
SHARES AWARDED:
THIS BONUS COMPENSATION STOCK RESTRICTION AGREEMENT ("Agreement") is entered
into by and between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware
corporation ("SAIC" or "Company"), and the undersigned ("Stockholder"), who is
affiliated with Company or a subsidiary of Company ("Subsidiary") as an employee
or director.
WHEREAS, subject to the stockholder executing and returning this agreement to
the Company's Stock Programs Department within 120 days from the Commencement
Date, the Company has agreed to provide the above stated number of shares of
SAIC Class A Common Stock ("Bonus Stock") to Stockholder pursuant to the
Company's 1984 Bonus Compensation Plan and Stockholder has agreed that the
ownership interest in such stock shall be subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the parties have agreed to
the following:
1. VESTING SCHEDULE. In the event Stockholder's affiliation with
Company or any of its Subsidiaries as an employee or director is terminated for
any reason, including death, any unvested shares of Bonus Stock shall
automatically revert to Company without compensation as of the date of such
termination of affiliation in accordance with the following vesting schedule:
(a) Prior to the first-year anniversary of the Commencement Date
of this Agreement, all of the Bonus Stock shall be subject to
reversion.
(b) After the first-year anniversary of the Commencement Date, 20%
of the Bonus Stock shall be vested and the balance shall be
subject to reversion.
(c) After the second-year anniversary of the Commencement Date, an
additional 20% of the Bonus Stock shall be vested and the
balance shall be subject to reversion.
(d) After the third-year anniversary of the Commencement Date, an
additional 20% of the Bonus Stock shall be vested and the
balance shall be subject to reversion.
(e) After the fourth-year anniversary of the Commencement Date,
the final 40% of the Bonus Stock shall be vested.
The Company does not issue fractional shares and if the application of the
foregoing vesting schedule results in a fraction of a share being vested, such
fractional share shall be deemed to be subject to reversion. Stockholder shall
not sell, transfer, assign, hypothecate, pledge, grant a security interest in,
or in any other way alienate any of the Bonus Stock, or any interest or right
therein, which is subject to reversion to Company. If shares of Bonus Stock
revert in accordance with the foregoing vesting schedule, such shares shall
automatically be deemed to have been transferred to Company, shall no longer be
outstanding and all rights of Stockholder shall immediately terminate with
respect to such shares. In the event of such reversion, Stockholder agrees to
promptly return the stock certificate(s) that includes the reverted shares to
Company. Upon return of such stock certificate(s), Company will issue a new
stock certificate to Stockholder for the vested shares, if any, and to the
extent that they are
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not repurchased by Company pursuant to its right to repurchase as set forth in
Article Fourth of the Company's Restated Certificate of Incorporation.
Notwithstanding the foregoing, if Stockholder has not returned such stock
certificate(s) within sixty (60) days following the date the Bonus Stock
reverted to Company, in whole or in part, Stockholder hereby appoints Company or
its agents to take all such action needed to effect the cancellation of such
stock certificate(s).
2. FORFEITURE OF STOCK: In the event Stockholder fails to execute and
return this agreement within 120 days from the Commencement Date the shares
granted pursuant to this agreement shall be forfeited.
3. RIGHTS, RESTRICTIONS AND LIMITATIONS. All shares of Bonus Stock
issued to Stockholder pursuant to this Agreement are subject to the rights,
restrictions and limitations set forth in Article Fourth of the Company's
Restated Certificate of Incorporation.
4. RESTRICTIONS UNDER SECURITIES LAW. All shares of Bonus Stock
covered by this Agreement are subject to any restrictions which may be imposed
under applicable state and federal securities laws and are subject to obtaining
all necessary consents which may be required by, or any condition which may be
imposed in accordance with, applicable state and federal securities laws or
regulations.
5. INVESTMENT. Stockholder agrees that any and all shares of Bonus
Stock acquired hereunder shall be acquired for investment and not for
distribution.
6. EMPLOYMENT AT WILL. Stockholder's employment with Company is not
for any specified term and may be terminated by Stockholder or Company at any
time for any reason. Stockholder further acknowledges that this Agreement,
despite the fact that Stockholder is required to hold the Bonus Stock not yet
vested for up to four years, does not constitute a promise or commitment by the
Company regarding any future employment, work assignments, compensation, or any
other term or condition of employment.
7. CAPITAL ADJUSTMENT. The formula price and number of shares shall be
appropriately adjusted for any increase or decrease in the number of shares of
stock which Company has issued and outstanding resulting from any stock split,
stock dividend, combination of shares or any other change, or any exchange for
other securities or any reclassification, reorganization, redesignation,
recapitalization or otherwise.
8. INCORPORATION OF BONUS COMPENSATION PLAN. The Bonus Stock granted
hereby, is granted pursuant to the Company's 1984 Bonus Compensation Plan (the
"Plan"), and all the terms and conditions of which are hereby made a part
hereof and are incorporated herein by reference. In the event of any
inconsistency between the terms and conditions contained herein and those set
forth in the Plan, the terms and conditions of the Plan shall prevail.
9. MISCELLANEOUS. This Agreement contains the entire agreement of the
parties with respect to its subject matter. This Agreement shall be binding
upon and shall inure to the benefit of the respective parties, the successors
and assigns of Company, and to the heirs, legatees and personal representatives
of Stockholder.
10. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware without reference
to such state's principles of conflict of laws.
11. NOTICE OF RESTRICTION. The parties agree that any stock
certificate(s) issued representing the Bonus Stock granted hereunder shall
contain a legend indicating that such stock is subject to the restrictions of
this Agreement.
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12. ALTERATIONS. Stockholder acknowledges that signing this Agreement
constitutes an unequivocal acceptance of this Agreement and any attempted
modification or deletion will have no force and effect upon the Company's right
to enforce the terms and conditions heretofore stated.
IN WITNESS WHEREOF, Stockholder has executed this Agreement effective as
of the year and day above written.
- -------------------------------------- -------------------
Signature Date
PLEASE SIGN AND RETURN. A COPY FOR YOUR FILES WILL BE RETURNED WITH YOUR STOCK
CERTIFICATE.
THIS AGREEMENT MUST BE SIGNED AND RETURNED WITHIN 120 DAYS OR THE AWARD WILL BE
FORFEITED.
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Exhibit 4(q)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
Science Applications International Corporation (the "Company") hereby
establishes the Science Applications International Corporation 1995 Employee
Stock Purchase Plan (the "Plan"). The purpose of the Plan is to secure for the
Company and its stockholders the benefits inherent in the ownership of capital
stock of the Company by employees of the Company and its subsidiaries. The Plan
is intended to provide to all eligible employees of the Company and designated
subsidiaries an opportunity to purchase shares of Class A Common Stock through
payroll deductions. It is intended that the Plan shall qualify under Section
423(b) of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Company's Employee Stock Purchase
Committee responsible for administering the Plan.
(d) "Company Percent" shall mean the percent of the purchase price
contributed by the Company pursuant to the provisions of Paragraph 11. The
Company Percent shall be from zero percent (0%) to fifteen percent (15%) and
shall initially be five percent (5%) until changed by the Committee.
(e) "Formula Price" shall mean the formula price as defined in the
Company's Certificate of Incorporation.
(f) "Limited Market" shall mean the limited secondary market maintained
by Bull, Inc., a wholly-owned subsidiary of the Company.
(g) "Participant Percent" shall mean the difference between one hundred
percent and the Company Percent.
(h) "Plan Year" shall mean February 1 through January 31 of each year.
(i) "Trustee" shall mean the Trustee for the Plan and shall be either
the Company or its designee.
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3. Stock Subject to the Plan.
The capital stock which may be purchased under the Plan is the Class A
Common Stock, par value $.01 per share (the "Common Stock"), of the Company,
which may be either authorized and unissued shares or issued shares. The Common
Stock purchased by the Trustee for employee stock purchase accounts under the
Plan shall be subject to the terms, conditions and restrictions as set forth in
the Plan, as well as restrictions set forth in the Company's Certificate of
Incorporation. The Company has reserved 1,500,000 shares of Common Stock for
issuance under the Plan.
4. Administration.
(a) The Plan shall be administered by the Committee. The Committee
shall have the number of members as determined by the Board with a minimum of
three members. The members of the Committee shall be appointed by and serve at
the discretion of the Board. Each such Committee member shall be a stockholder
of the Company and may be a director. Vacancies occurring in the membership of
the Committee shall be filled by appointment of the Board.
(b) Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion and on behalf of the Company:
(i) to determine and change from time to time the Company Percent;
(ii) to prescribe, amend and rescind rules and regulations relating
to the Plan;
(iii) to prescribe forms for carrying out the provisions and
purposes of the Plan;
(iv) to interpret the Plan; and
(v) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) In exercising its authority, the Committee shall have the broadest
possible discretion and the Committee's determinations under the Plan made in
good faith shall be binding and conclusive on participating employees and other
persons claiming entitlements under the Plan. In no event shall a Committee
determination with respect to a particular employee or provision of the Plan be
binding with respect to any other employee (even if similarly situated) nor with
respect to any future determinations regarding the same or other provisions of
the Plan. No member of the Committee shall be liable for any action or
determination in respect thereto, if made in good faith.
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(d) The Committee shall maintain written minutes of its proceedings. A
majority of the Committee shall constitute a quorum. The acts of the majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all of the members, shall be the acts of the Committee.
5. Eligibility.
(a) Subject to the terms, provisions and conditions of the Plan, each
employee of the Company or of a participating subsidiary of the Company shall be
eligible to participate in the Plan except for an employee who owns capital
stock having five percent (5%) or more of the total combined voting power or
value of all classes of capital stock of the Company or its subsidiaries. The
subsidiaries whose employees may participate in the Plan shall be designated
from time to time by the Committee. The Committee may also impose additional
eligibility requirements consistent with Section 423(b) of the Code.
(b) An employee shall cease to be eligible to participate in the Plan
(i) upon termination of employment with the Company or with a subsidiary
thereof, whether by death, total disability, retirement or otherwise, (ii) upon
a change in employment status to Leave of Absence pursuant to the terms of the
Company's Administrative Policy No. B-11 "Unpaid Personal Leave of Absence,"
unless the participant is on Medical Leave (as hereinafter defined), or (iii)
upon transfer to a subsidiary of the Company designated by the Committee as
ineligible for participation. An employee shall again become eligible to
participate in the Plan as of the date of such person's re-employment by the
Company or by a participating subsidiary of the Company. For purposes of this
Paragraph 5(b), "Medical Leave" shall be defined as a leave of absence for
medical reasons which shall begin after ninety-one (91) consecutive calendar
days of total disability leave and shall remain in effect until the earlier of a
release by the attending physician for the employee to return to work or until
the termination of employment.
(c) No employee shall be entitled to purchase shares of Common Stock
with a fair market value (measured as of its purchase date) of more than
twenty-five thousand dollars ($25,000.00) in any Plan Year pursuant to the Plan
and any other "employee stock purchase plan" (as such term is defined in Section
423(b) of the Code and regulations issued thereunder) of the Company or any of
its subsidiaries, or at any other rate of purchase that exceeds the rate allowed
for plans qualifying under Section 423(b) of the Code.
6. Participation in the Plan.
(a) An eligible employee may enter the Plan at any time prior to its
termination by completing a payroll deduction authorization form and delivering
such form in the manner prescribed by the Committee. The employee's payroll
deduction authorization form shall authorize regular payroll deductions from the
employee's compensation.
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(b) The participating employee's payroll deduction authorization form
shall also designate the Company or the Company's designee to be Trustee for
participating employees with respect to all stock certificates for shares
purchased under the Plan. All such stock certificates representing shares
purchased for such participating employees shall be delivered to and held by the
Trustee. The Trustee will maintain an account for each participating employee
showing the number of shares credited to the participating employee's account.
Prior to any record date established by the Company for any vote of its
stockholders, the Trustee shall distribute to each participant a stock
certificate representing all shares purchased under the Plan and credited to the
participating employee's account and not yet distributed.
(c) A participating employee suffering from financial hardship shall be
eligible to apply to the Committee for an early distribution of such employee's
interest in the Plan. The decision for an early distribution based upon
financial hardship shall be at the sole discretion of the Committee. As soon as
practicable after the approval of an early distribution to an employee based
upon financial hardship, the Trustee shall distribute to the employee all cash
credited to his or her stock purchase account and shall release all shares
credited to his or her stock purchase account.
7. Payroll Deductions.
(a) Payroll deductions for employees shall be in an amount specified by
the employee in his or her payroll deduction authorization form, but not less
than three percent (3%) nor more than ten percent (10%) of his or her
compensation, expressed as a whole percentage of such compensation.
Compensation as used herein shall be as defined by the Committee; provided,
however, it shall include the regular wages, salary or commissions paid to the
employee. Payroll deductions shall be credited to the stock purchase account to
be maintained for each participating employee.
(b) A participating employee may at any time increase or decrease the
amount of his or her payroll deduction (within the minimum and maximum limits
provided for in Paragraph 7(a) above) by delivering a new payroll deduction
authorization form in the manner prescribed by the Committee. The change shall
become effective as soon as practicable after delivery of the payroll deduction
authorization form.
8. Stock Purchase Accounts.
(a) Amounts credited to a participating employee's stock purchase
account may not be assigned, transferred, pledged, hypothecated or otherwise
disposed of in any way by a participating employee other than by will or the
laws of descent and distribution and any attempt to do so shall be null and void
and without effect.
(b) No interest will be paid on the amounts credited to a participating
employee's stock purchase account, unless required by applicable law.
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9. Purchase Price of Shares.
Unless otherwise determined by the Board of Directors, the purchase price
of each share of Common Stock purchased under the Plan shall be the "Formula
Price" in effect as of the date of purchase.
10. Purchase of Shares.
(a) Shares will be purchased by the Trustee on the Company's Limited
Market maintained by Bull, Inc., a wholly-owned subsidiary of the Company, or
shares will be issued by the Company from the remaining balance of those shares
reserved for issuance under Paragraph 3 of the Plan.
(b) Stock purchases shall be made on predetermined purchase dates which
shall coincide with the dates that trades are conducted on the Limited Market
by Bull, Inc. If on any purchase date a participating employee has sufficient
funds credited to his or her stock purchase account to pay the Participant
Percent of the purchase price of one or more whole shares of Common Stock, the
Trustee shall then purchase such number of shares at the applicable price per
share. The employee's stock purchase account thereupon shall be charged with
the Participant Percent of the purchase price of such shares. Only whole
shares may be purchased. Any balance remaining in the participating employee's
stock purchase account will remain in such stock purchase account and be
treated as part of the accumulations for the succeeding purchase date.
(c) With respect to both newly issued shares of Common Stock which are
purchased for the account of participating employees under the Plan and shares
so purchased on the Limited Market, a stock certificate will be issued in the
name of the Trustee and held by the Trustee in accordance with Paragraph 6 of
the Plan. Notwithstanding that such shares are held by the Trustee for
participating employees, each participant shall have all the rights and
privileges of a stockholder with respect to the shares purchased for the
participating employee's account, subject to the provisions of Paragraphs 6 and
10(d).
(d) Shares held in the Plan by the Trustee may not be sold, transferred,
pledged as collateral or in any way encumbered for so long as the shares are
held by the Trustee.
11. Company Contributions.
The Company shall contribute the Company Percent of the purchase price of
each share of Common Stock purchased under the Plan. On each purchase date, the
Company will, through the Trustee and under the direction of the Committee, pay
the Company Percent of the purchase price of each share purchased by the
Trustee, whether purchased on the Limited Market or as a newly issued share. No
contribution shall be made by the Company into an employee's stock purchase
account.
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12. Termination of Participation and Re-entry.
(a) An employee may terminate participation in the Plan at any time by
completing a payroll deduction authorization form and delivering such form in
the manner prescribed by the Committee. Such employee's participation in the
Plan shall terminate as soon as practicable upon receipt of the payroll
deduction authorization form by the Company. An employee who terminates
participation in the Plan pursuant to this Paragraph 12(a) shall not be eligible
to reenter the Plan until the first business day of the following Plan Year.
(b) In the event that a participating employee ceases to be eligible to
participate in the Plan as described in Paragraph 5(b) or terminates
participation in the Plan or the Plan terminates or is terminated, any cash
credited to such employee's stock purchase account will be distributed to the
participating employee, or in the event of the death of the participating
employee, to his or her estate. Any shares held by the Trustee for an employee
whose employment with the Company or a subsidiary thereof is terminated will be
delivered by the Trustee to the Company for repurchase pursuant to the
provisions of Article Fourth of the Company's Certificate of Incorporation.
13. Government and Stock Exchange Regulations.
The Company shall not be required to sell or deliver any shares of Common
Stock under the Plan unless and until the Company has fully complied with any
then applicable requirements of the Securities and Exchange Commission, state
securities commissions, or other regulatory agencies having jurisdiction, and of
any exchanges upon which Common Stock of the Company may be listed.
14. Application of Funds.
All funds received or held by the Company or by any subsidiary under the
Plan as a result of the sale of newly issued shares of Common Stock under the
Plan may be used for any corporate purpose.
15. Recapitalization.
In the event any change, such as a stock split, reverse stock split, or
stock dividend, is made in the Company's capitalization which results in an
adjustment in the number of shares of capital stock outstanding without receipt
of consideration by the Company, appropriate adjustment as determined by the
Committee in its discretion, shall be made in the number of shares reserved for
issuance as provided in Paragraph 3 of the Plan and in the number of shares
allocated to an employee under the Plan.
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16. Withholding.
The Company shall be entitled to make appropriate arrangements to comply
with any withholding requirements imposed by federal, state or local law with
respect to the purchase or disposition of shares of Common Stock under the Plan,
including, without limitation, payroll withholding or withholding from proceeds
of a disposition of shares of Common Stock acquired under the Plan.
17. No Employment Obligation
An employee's employment with the Company or a subsidiary is not for any
specified term and may be terminated by such employee or by the Company or a
subsidiary at any time, for any reason, with or without cause. Nothing in this
Plan shall confer upon any employee any right to continue in the employ of, or
affiliation with, the Company or a subsidiary nor constitute any promise or
commitment by the Company or a subsidiary regarding future positions, future
work assignments, future compensation or any other term or condition of
employment or affiliation.
18. Amendment of the Plan.
The Board of Directors or Operating Committee of the Board of Directors of
the Company may at any time suspend or terminate the Plan and may at any time or
from time to time amend the Plan in such respects as the Board or the Operating
Committee may deem advisable in order that the Plan shall conform to any change
in the law, or in any other respect which the Board or the Operating Committee
may deem to be in the best interest of the Company; provided, however, no such
amendment of the Plan shall, without the approval of a majority of the voting
power of the capital stock of the Company present or represented and entitled to
vote at a duly constituted meeting of stockholders, (a) increase the maximum
number of shares available for purchase under the Plan, except as provided in
Paragraph 15 or (b) deny a participating employee the right to withdraw from the
Plan and obtain the balance of any monies held in the participating employee's
stock purchase account.
19. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
participating employees or others claiming entitlements under the Plan or any
obligations on the part of the Company, any subsidiary, the Trustee or the
Committee, except as expressly provided herein.
20. Employees Based Outside of the United States
Notwithstanding any provisions of the Plan to the contrary, in order to
foster and promote achievement of the purposes of the Plan or to comply with
provisions of laws or regulations in other countries in which the Company or a
participating subsidiary operates or
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has employees, the Committee, in its sole discretion, shall have the power and
authority to modify the eligibility for, and terms and conditions of,
participation in the Plan by employees employed outside the United States and to
establish subplans, modified Plan procedures and other terms and procedures
consistent with Section 423(b) of the Code to the extent such actions are deemed
necessary or desirable.
21. Effective Date and Termination of the Plan.
(a) The effective date of the Plan shall be July 14, 1995.
(b) Unless the Plan shall have been previously terminated by the Board,
the Plan shall terminate on July 31, 1998. In any case, termination shall be
deemed to be effective as of the close of business on the day of termination.
22. Governing Law
The Plan shall be construed in accordance with and governed by the laws of
the State of Delaware.
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Exhibit 4(r)
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1995 STOCK OPTION PLAN
1. Purpose
Science Applications International Corporation (the "Company") hereby
establishes the Science Applications International Corporation 1995 Stock Option
Plan (the "Plan"). The purpose of the Plan is to advance the interests of the
Company and its stockholders by providing a means by which the Company and its
Subsidiaries can attract and retain qualified key employees, directors and
consultants and provide such personnel with an opportunity to participate in
the increased value of the Company which their effort, initiative
and skill have helped produce.
2. Definitions
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Class A Common Stock of the Company,
par value $.01.
(d) "Committee" shall mean the Company's Stock Option Committee
responsible for administering the Plan.
(e) "Employee/Optionee" shall mean an Optionee who is an employee of the
Company or any Subsidiary.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Exercise Price" shall mean the price per share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's option agreement.
(h) "Formula Price" shall mean the price per share of Common Stock as
established by the Board from time to time.
(i) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(j) "Optionee" shall mean any person who holds an Option pursuant to the
Plan.
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(k) "Plan" shall mean this Science Applications International
Corporation 1995 Stock Option Plan, as it may be amended from time to time.
(l) "Purchase Price" shall mean at any particular time the Exercise
Price times the number of shares for which an Option is being exercised.
(m) "Subsidiary" as used in the Plan means any corporation (other than
the Company) 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.
3. Administration
(a) THE COMMITTEE. The Plan shall be administered by the Committee
which shall consist of not less than three nor more than seven directors
appointed by the Board. Any vacancies on the Committee will be filled by the
Board or the Operating Committee of the Board. Each Committee member shall be a
"disinterested person" as defined in Rule 16b-3 under the Exchange Act. Members
of the Committee shall not be eligible to receive Options under the Plan while
they are serving on the Committee; however, service by a director on the
Committee shall not affect in any way Options which may be granted to such
director while not serving on the Committee. No member of the Committee shall be
liable for any action or determination in respect thereto, if made in good
faith.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have the authority, in its discretion and on behalf of the
Company:
(i) to grant Options;
(ii) to determine whether the Options granted are intended to be
incentive stock options or non-qualified stock options;
(iii) to determine the Exercise Price per share of Options to be
granted;
(iv) to determine the individuals to whom, and the time or times at
which, Options shall be granted and the number of shares for which an
Option will be exercisable;
(v) to interpret the Plan;
(vi) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(vii) to determine the terms and provisions of each Option granted
and, with the consent of the Optionee, to modify or amend each Option;
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(viii) to accelerate or defer, with the consent of the Optionee,
the exercise date of any Option;
(ix) with the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
(x) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) COMMITTEE DISCRETION. In exercising its authority, the Committee
shall have the broadest possible discretion and the Committee's determinations
under the Plan made in good faith shall be binding and conclusive on Optionees
and other persons claiming entitlements under the Plan. In no event shall a
Committee determination with respect to a particular Optionee or provision of
the Plan be binding with respect to any other Optionee (even if similarly
situated) nor with respect to any future determinations regarding the same or
other provisions of the Plan.
4. Eligibility
(a) GENERAL. The individuals who shall be eligible to participate in
the Plan and to receive Options hereunder shall be such key employees, directors
and consultants of the Company and its Subsidiaries as the Committee shall from
time to time determine. The Committee may designate one or more directors who
are not eligible for participation in the Plan for a specified period of time.
No Option shall be granted to any person who, at the time the Option is granted,
owns (including stock owned by application of the constructive ownership rules
of Section 425(d) of the Code) stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company or any
Subsidiary.
(b) INCENTIVE STOCK OPTIONS. No Option which is designated as an
incentive stock option shall be granted to any person who, at the time the
Option is granted, is not an employee of the Company or a Subsidiary. The
aggregate fair market value (determined as of the time the Option is granted) of
the Common Stock with respect to which Options designated as incentive stock
options are exercisable for the first time by an employee shall not exceed
$100,000 during any calendar year (under all plans of the Company or any
Subsidiary which provide for the granting of an incentive stock option).
5. Stock Subject to the Plan
Options may be granted permitting the purchase of the aggregate of not
more than 12,000,000 shares of the Company's Common Stock, subject to adjustment
pursuant to Section 10 hereof. These shares may consist either in whole or in
part of shares of the Company's authorized but unissued Common Stock or shares
of the Company's authorized and issued Common Stock reacquired by the Company
and held in its treasury. If an Option
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granted under this Plan is surrendered, expires or for any other reason ceases
to be exercisable in whole or in part, the shares which were subject to any
such Option but as to which the Option ceases to be exercisable shall be
available for Options to be granted under the Plan.
6. Stock Options
(a) OPTIONS. The Options granted pursuant to the Plan may be
"incentive stock options" within the meaning of Section 422A of the Code or
non-qualified stock options. Options designated to be incentive stock options
shall be designated as such in the option agreements evidencing such Options.
(b) OPTION AGREEMENTS. Options shall be evidenced by written option
agreements between the Optionee and the Company in such form as the Committee
shall from time to time determine. No Option or purported Option shall be a
valid and binding obligation of the Company unless previously granted by the
Committee and evidenced in writing by such an option agreement. If an option
agreement is not executed by the Optionee and returned to the Company within the
time prescribed in the option agreement, the Option evidenced thereby will be
forfeited and the option agreement will be null and void. Appropriate officers
of the Company are hereby authorized to execute and deliver option agreements in
the name of the Company, as directed from time to time by the Committee.
(c) EXERCISE PRICE. The Exercise Price at which Options may be
granted under the Plan shall be not less than one hundred percent (100%) of the
fair market value of the Common Stock on the day the Option is granted, but may
be less than the Exercise Price or Prices of previously granted Options, whether
in effect, canceled or expired. As long as the Company's Common Stock is not
listed on any national securities exchange or traded on a regular basis (as
determined by the Company's Board or a Committee of the Board to which the Board
has delegated the authority to make such determination) on the over-the-counter
market, fair market value may be taken as the Formula Price as in effect at the
date of grant.
(d) DATE OF GRANT. The Committee shall, after it approves the
granting of an Option to a participant, cause the participant to be notified of
such action. The date on which the Committee approves the granting of an Option
shall be considered the date on which such Option is granted.
(e) TERMS OF EXERCISE. The right to purchase shares covered by any
Option or Options under the Plan shall be exercisable only in accordance with
the terms and conditions of the grant to such Optionee. The Committee may, in
its discretion, provide that such Option or Options may be exercised in whole or
in part, in installments, cumulative or otherwise, for any period or periods of
time specified by the Committee of not more than ten years from the date of the
grant of the Option. Subject to the provisions of Paragraph 9, that portion of
an Option which is exercisable on an installment basis may not be exercised
prior to the expiration of the applicable installment period.
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(f) NON-TRANSFERABILITY. An Option granted under the Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the Optionee to whom granted, may be exercised only by such
Optionee or his conservator or other legal representative.
(g) LIMIT ON OPTION GRANTS. In no event may any single Optionee
receive Option grants for more than 500,000 shares of Common Stock in the
aggregate.
7. Expiration and Termination
(a) EXPIRATION OF OPTION. Each Option and all rights and obligations
thereunder shall, subject to the provisions of Paragraph 9, expire on a date to
be determined by the Committee, such date, however, in no event to be later than
ten (10) years from the date an Option is granted.
(b) TERMINATION OF EMPLOYMENT OR AFFILIATION. Subject to the
provisions of Paragraph 9, that portion of an Option which is exercisable on an
installment basis may not be exercised unless the Optionee shall continue in the
employ or affiliation of the Company or any of its Subsidiaries during the
entire period to which such installment relates. Except as set forth below in
Paragraphs 7(c) through (e) or otherwise set forth in an option agreement, all
Options granted to an Optionee under this Plan shall terminate and no longer be
exercisable as of the date such Optionee ceases to be employed or affiliated
with the Company or any Subsidiary; provided, however, the Committee in its
discretion may extend the period of time that such Optionee may exercise such
Optionee's Options, but in no event may the Committee extend such period of time
beyond the expiration date of the Options or beyond ten (10) years from the date
of grant of such Options.
(c) TERMINATION DUE TO RETIREMENT OR PERMANENT TOTAL DISABILITY. In
the event an Employee/Optionee's employment with the Company or any Subsidiary
shall terminate as the result of normal retirement, permanent total disability
or early retirement under the terms of a retirement or pension plan maintained
by the Company and in which such Employee/Optionee is a participant, such
Employee/Optionee may, at any time within ninety (90) days after such
termination of employment, exercise such Employee/Optionee's Options to the
extent that the Employee/Optionee was entitled to exercise them on the date of
such termination of employment, unless such Options would expire pursuant to
their terms at an earlier date, in which case such Options shall remain
exercisable only until the earlier expiration date.
(d) DEATH. If an Optionee dies while in the employ or affiliation of
the Company or of a Subsidiary without having fully exercised such Optionee's
Options, such Options may, within one (1) year of the Optionee's death (or
within such shorter period as may be specified in the Option by the Committee),
be exercised by the beneficiary designated pursuant to Paragraph 8(c), or if
there is no such surviving beneficiary, by the person or persons to whom the
Optionee's rights under the Option shall pass by will or by the applicable laws
of descent
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and distribution to the extent that such deceased Optionee was entitled to
exercise the Options on the date of death, unless such Options would expire
pursuant to their terms at an earlier date, in which case such Options shall
remain exercisable only until the earlier expiration date.
(e) LEAVES OF ABSENCE. An Employee/Optionee who is on a leave of
absence pursuant to the terms of the Company's Administrative Policy No. B-11
"Unpaid Personal Leave of Absence" or any amended or replacement policy thereof,
shall not, during the period of any such absence be deemed, by virtue of such
absence alone, to have terminated such Employee/Optionee's employment with the
Company or any Subsidiary except as the Committee may otherwise expressly
provide. Except as otherwise determined by the Committee, or unless otherwise
required by applicable law, unless such Employee/Optionee is on a Medical Leave
(as hereinafter defined), all rights which such Employee/Optionee would have had
to exercise Options granted hereunder will be suspended during the period of
such leave of absence. Upon such Employee/Optionee's return to the Company or
any Subsidiary, all rights to exercise Options shall be restored to the extent
such Options are exercisable at that time. The Committee in its discretion may
permit the exercise, while on a leave of absence, of Options which would
otherwise expire or may defer the expiration date of such Options, but not
beyond ten (10) years from their date of grant. An Employee/Optionee who is on
a Medical Leave shall have all rights to exercise such Employee/Optionee's
Options that such Employee/Optionee would have had if such Employee/Optionee
were not on a Medical Leave. For purposes of this Paragraph 7(e), "Medical
Leave" shall be defined as a leave of absence for medical reasons which shall
begin after ninety-one (91) consecutive calendar days of total disability leave
and shall remain in effect until the earlier of a release by the attending
physician for the Employee/Optionee to return to work or until the termination
of employment. In the case of incentive stock options which would otherwise
cease to be incentive stock options during a leave of absence by virtue of the
operation of Treasury Regulations Section 1.421(7)(h)(2), the Committee, in its
sole discretion, may permit exercise of the incentive stock option while on such
a leave of absence or may permit conversion of such incentive stock option to a
non-qualified stock option with otherwise identical terms.
8. Exercise of Options
(a) The Purchase Price shall be paid in full when the Option is
exercised. The Purchase Price may be paid in whole or in part in (i) cash or
(ii) whole shares of Common Stock of the Company evidenced by negotiable
certificates, valued at the Formula Price in effect on the date of exercise;
provided, however, that unless an exception is granted by the Secretary of this
Corporation, shares of Common Stock of the Company acquired through the exercise
of a stock option must have been owned by the Optionee for at least six months
before such shares of Common Stock may be used to pay the Purchase Price. The
Company or any Subsidiary shall be entitled to deduct from other compensation
payable to each Optionee any sums required by federal, state or local tax law to
be withheld with respect to the exercise of an Option but, in the alternative,
may require the Optionee or other person exercising the Option to pay, or the
Optionee or such other persons may pay, such sums to the employer corporation at
the time of such exercise. The Committee shall have the authority in its
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<PAGE>
discretion to allow withholding on exercise of an Option to be satisfied by
withholding from the shares to be issued upon the exercise of the Option a
number of shares, valued at the Formula Price in effect on the date of exercise
of the Option, equal in value to the withholding requirement. In allowing such
withholding in Common Stock, the Committee may prescribe such rules as may be
required to satisfy Rule 16b-3 under the Exchange Act.
(b) An Optionee shall have no rights as a shareholder of the Company
with respect to any shares for which his or her Option is exercisable until the
date of exercise of such Option and the issuance of a stock certificate for such
shares. No adjustment shall be made for dividends, ordinary or extraordinary or
whether in currency, securities or other property, distributions, or other
rights for which the record date is prior to the date such stock certificate is
issued.
(c) Each Optionee may name a beneficiary or beneficiaries (who may be
named contingently or successively) to whom the right to exercise Options
following the Optionee's death (as provided in Paragraph 7(d)) shall pass. Each
designation will revoke any prior designations by the same Optionee, shall be on
a form prescribed by the Committee, and shall be effective only when filed by
the Optionee in writing with the Committee during the lifetime of the Optionee.
In the absence of any such designation, the right to exercise any unexercised
Options following the death of the Optionee shall pass to the person or persons
to whom the Optionee's rights under the Option pass by will or by the applicable
laws of descent and distribution.
9. Change In Control
Notwithstanding any provision of Paragraph 7 above to the contrary but
subject to the provisions of Paragraph 4(b) above, any Option granted pursuant
to the Plan shall, in the case of a Change In Control (as hereinafter defined)
of the Company, become fully exercisable as to all shares of Common Stock to
which it relates from and after the date of such Change In Control. For
purposes of this Paragraph 9, the term "Change in Control" shall be deemed to
occur upon any "person" (as defined in Section 13(d) of the Exchange Act), other
than the Company or any Subsidiary or employee benefit plan or trust maintained
by the Company or any Subsidiary, becoming the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 25% of
the Common Stock of the Company outstanding at such time, without the prior
approval of the Board. If the provisions of this Paragraph 9 are limited by
the $100,000 limit of Paragraph 4(b) above, the acceleration of exercisability
provided under this Paragraph 9 shall be first applied to those incentive stock
options having the lowest Exercise Price. Any remaining Options which would
have become exercisable but for the $100,000 limit shall become exercisable on
the first date on which they may become exercisable without exceeding the
$100,000 limit.
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10. Loans
The Company may, but shall not be obligated to, provide to any Optionee a
loan or guarantee on behalf of any Optionee a loan to facilitate the exercise of
Options on such terms and conditions as agreed to by the Committee.
11. Capital Adjustments
The aggregate number of shares of the Company's Common Stock subject to
this Plan, the maximum number of shares as to which Options may be granted to
any one Optionee hereunder, and the number of shares and the Exercise Price
shall be appropriately adjusted, as determined by the Committee in its
discretion, for any increase or decrease in the number of shares of Common Stock
which the Company has issued resulting from any stock split, stock dividend,
combination of shares or any other change, or any exchange for other securities
or any reclassification, reorganization, redesignation, recapitalization, or
otherwise.
12. No Employment Obligation
An Employee/Optionee's employment with the Company or a Subsidiary is not
for any specified term and may be terminated by such Employee/Optionee or by the
Company or a Subsidiary at any time, for any reason, with or without cause.
Nothing in this Plan or in any option agreement pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ of, or affiliation
with, the Company or a Subsidiary nor constitute any promise or commitment by
the Company or a Subsidiary regarding future positions, future work assignments,
future compensation or any other term or condition of employment or affiliation.
13. Government and Stock Exchange Regulations
The Company shall not be required to issue any shares upon the exercise of
any Option unless and until the Company has fully complied with any then
applicable requirements by the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies having
jurisdiction, and of any exchanges upon which Common Stock of the Company may be
listed.
Upon the exercise of an Option at a time when there is not in effect a
registration statement under the Securities Act of 1933 or a similar statute
(the "Act") relating to the stock issuable upon exercise thereof and available
for delivery a prospectus meeting the requirements of Section 10(a)(3) of said
Act, or if the rules or interpretations of the Securities and Exchange
Commission so require, the stock may be issued only if the holder represents and
warrants in writing to the Company that the shares purchased are being acquired
for investment and not with a view to distribution thereof.
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14. Amendment, Suspension or Termination of Plan
The Board or the Operating Committee of the Board may at any time suspend
or terminate the Plan and may amend it from time to time in such respects as the
Board or the Operating Committee may deem advisable in order that Options
granted thereunder shall conform to any change in the law, or in any other
respect which the Board or the Operating Committee may deem to be in the best
interests of the Company; provided, however, that no such amendment shall,
without the approval of a majority of the voting power of the capital stock of
the Company present or represented and entitled to vote at a duly constituted
meeting of the stockholders, (i) increase the maximum number of shares for which
Options may be granted under the Plan, except as specified in Paragraph 11, (ii)
change the provisions of Paragraph 6(c) relating to the establishment of the
Exercise Price other than to change the manner of determination the fair market
value of the Company's Common Stock to conform with any then applicable
provisions of the Code or regulations issued thereunder, or (iii) permit the
granting of Options to members of the Committee. No Option may be granted
during any suspension, or after termination of the Plan.
15. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
Optionees or others claiming entitlements under the Plan or any obligations on
the part of the Company, any Subsidiary or the Committee, except as expressly
provided herein.
16. Employees Based Outside of the United States
Notwithstanding any provision of the Plan to the contrary, in order to
foster and promote achievement of the purposes of the Plan or to comply with
provisions of laws or regulations in other countries in which the Company and
its subsidiaries operate or have employees, the Committee, in its sole
discretion, shall have the power and authority to (i) determine which employees
employed outside the United States are eligible to participate in the Plan, (ii)
modify the terms and conditions of any Options granted to employees who are
employed outside the United States and (iii) establish subplans, modified option
exercise procedures and other terms and procedures to the extent such actions
may be necessary or advisable.
17. Effective Date
The effective date of the Plan shall be July 14, 1995.
18. Termination Date
Unless the Plan shall have been previously terminated by the Board or the
Operating Committee of the Board, the Plan shall terminate on July 31, 1998,
except as to Options
9
<PAGE>
theretofore granted and outstanding under the Plan at that date, and no Option
shall be granted after that date.
19. Governing Law
The Plan and all option agreements shall be construed in accordance with
and governed by the laws of the State of Delaware.
10
<PAGE>
Exhibit 10(a)
KEYSTAFF DEFERRAL PLAN
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
(Amended 01-30-95)
<PAGE>
KEYSTAFF DEFERRAL PLAN
OF
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1. Purpose
1.1 The purpose of this Plan is to provide a means to enhance the
Company's capacity to attract and retain outstanding directors
and executives in key positions by assisting them in meeting
their future financial security objectives.
2. Definitions
2.1 Whenever the following terms are used in this document and the
attached Plan Agreement, they shall have the meaning specified
below.
2.2 "Deferral Account" shall mean a bookkeeping account established
by the Company for each Participant, in which shall be recorded
the amounts deferred in accordance with this Plan and the
attached Agreement. The Company shall credit to each
Participant's Deferral Account an amount equal to the
compensation which otherwise would have been paid had the
Participant not elected to defer compensation. Such credits
shall be made at the time compensation would have been paid to
the Participant. The Deferral Account shall also receive
quarterly earnings credits in accordance with provisions of
Section 5.
Separate Deferral Accounts shall be established to record amounts
deferred (and earnings credits thereon) with respect to Plan
Years beginning before and after December 31, 1990, to be
referred to herein as Pre-1991 Deferral Accounts and Post-1990
Deferral Accounts, respectively. Except as otherwise stated
herein, references to Deferral Account(s) shall include both the
Pre-1991 and Post-1990 Deferral Account(s).
2.3 "Anniversary Date" shall be the last day of a Plan Year.
2.4 "Beneficiary" shall mean the person or persons, or the estate of
a Participant, entitled to receive any benefits under this Plan
upon the death of a Participant.
(Amended 01-30-95)
1
<PAGE>
2.5 "Ceiling Excess Earnings" shall mean, for each Pre-1991 Deferral
Account, the difference between the Participant's Pre-1991
Deferral Account if interest had been credited at a rate of
Moody's plus 5% in each Plan Year and the Participant's actual
current Pre-1991 Deferral Account.
A separate calculation of Ceiling Excess Earnings shall be made
with respect to post-1990 Deferral Account(s) using a rate of
Moody's plus 3%.
2.6 "Commitment Period" shall mean that period of time beginning with
the subsequent Plan Year and extending for a number of Plan Years
as determined from time to time by the Committee.
2.7 "Covered Compensation" shall mean a Director's compensation, as a
Director of the Company, excluding expenses reimbursed, or an
Executive's merit bonus in each Plan Year. The Committee, in its
sole discretion, shall determine what constitutes a merit bonus.
2.8 "Committee" shall mean the administrative Committee appointed to
manage and administer the Plan in accordance with the provisions
of this Plan.
2.9 "Company" shall mean SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION, its subsidiaries, or any successor.
2.10 "Director" shall mean any person not in regular full-time
employment of the Company serving on the Board of Directors of
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION.
2.11 "Early Retirement Date" shall mean the date that the Participant
attains his or her fifty-fifth (55th) birthday.
2.12 "Effective Date" shall be January 1, 1986.
2.13 "Employer" shall mean the Company and any subsidiary having one
or more employees who are eligible to participate in the Plan and
have been selected by the Committee to participate. Where the
context dictates, the term "Employer" as used herein refers to
the particular Employer which has entered into a Plan Agreement
with a specific Participant.
2.14 "Executive" shall mean any person in the employment of the
Company who is determined by the Committee to be serving in an
executive
(Amended 01-30-95)
2
<PAGE>
capacity, excluding those persons meeting the definition set
forth in Section 2.10.
2.15 "Master Plan Document" is this legal instrument containing the
provisions of the Plan.
2.16 "Moody's Seasoned Corporate Bond Rate," sometimes referred to as
"Moody's," is an economic indicator; an arithmetic average of
yields of representative bonds: industrials, public utilities,
AAA, AA, A and BAA. For Plan purposes, Moody's Rate shall be
determined by the Committee based on financial services or
publications selected by the Committee.
2.17 "Normal Retirement Date" shall mean the date that the Participant
attains his or her sixty-fifth (65th) birthday.
2.18 "Participant" shall mean any Executive or Director who elects to
participate in the Keystaff Deferral Plan, signs a Plan
Agreement, and is accepted into the Plan.
2.19 "Plan" shall mean the Keystaff Deferral Plan of the Employer
which shall be evidenced by this instrument and by each Plan
Agreement.
2.20 "Plan Agreement" shall mean the written agreement(s) entered into
from time to time by and between an Employer and a Participant.
A separate Plan Agreement shall be entered into with respect to
the Pre-1991 Deferral Account and Post-1990 Deferral Account of a
Participant.
2.21 "Plan Year" shall begin on January 1 of each year.
2.22 "Retirement" and "Retire" shall mean severance from employment
with the Employer at or after the attainment of (i) age fifty-
five (55) and ten (10) years of Plan participation or (ii) age
sixty-five (65). The Committee shall have the sole discretion to
determine whether Retirement has occurred in the case of an
Executive who becomes a consulting employee or who continues to
be affiliated with the Company as a consultant or under some
other status.
2.23 "Termination of Employment" shall mean cessation of regular
employment, voluntarily or involuntarily, but excluding
Retirement or death, as determined by the Committee in its sole
discretion. In the case of a Director, "Termination of
Employment" shall mean the Director's ceasing to be a Director of
the Company. The Committee shall have the
(Amended 01-30-95)
3
<PAGE>
sole discretion to determine (i) whether a change in status
(e.g., from employee to consultant, from employee to consulting
employee, or from director to employee, consulting employee or
consultant) shall be considered a Termination of Employment, (ii)
whether a leave of absence shall be considered a Termination of
Employment, and (iii) when a consultant or consulting employee
will be considered to have a Termination of Employment.
3. Eligibility
3.1 The Committee will determine which Executives and Directors of
the Company are eligible to participate in the Plan.
4. Deferral Commitments
4.1 Deferral Elections
Each Executive and Director who wishes to participate in the Plan
must elect, prior to the first Plan Year of the Participant's
eligibility, to defer during each year of the Commitment Period a
fixed percentage of the Participant's Covered Compensation. This
election will be irrevocable and binding upon the Participant,
except as provided in Section 4.2, "Changes to Deferral
Elections." Participants may elect to defer up to 100% but not
less than 10% of Covered Compensation, in whole percentages, but
not less than $1,000 (before reductions, if any, under Section
4.2.1).
With respect to the Post-1990 Deferral Account elections, the
Committee shall specify annual election periods during which
irrevocable deferral elections by Participants shall be made.
4.2 Changes to Deferral Elections
4.2.1 The maximum allowable total deferral of Covered Compensation for
all Participants under this Plan for any Plan Year will be
determined by the Committee. In the event that Participant
deferral elections are estimated to result in this maximum being
exceeded, the following method will be used to reduce Participant
deferral percentages so that the total estimated deferral is less
than the maximum allowable.
a) All Executives who have elected to defer more than 50% of
Covered Compensation will be reduced, on an equal percentage
(Amended 01-30-95)
4
<PAGE>
basis, but not below 50% of Covered Compensation or $5,000,
whichever is greater.
b) If after implementation of subsection (a) above, the total
deferral is still greater than the maximum allowable total
deferral, all Executives' percentage deferrals will be
reduced on an equal percentage basis until the maximum
allowable total deferral is achieved.
4.2.2 In the event that a Participant rescinds, in whole or in part,
his or her election to defer a percentage of Covered Compensation
in any Plan Year, the Participant may not defer any Covered
Compensation for the balance of the Plan Year, nor in the
following Plan Year.
4.2.3 The Committee, in its sole discretion, may elect to terminate the
Plan at any time pursuant to Section 9; in such event, deferrals
will cease effective as of the termination date.
4.3 Rollover of Balances from Current Deferred Compensation Plan
4.3.1 Participants who hold a balance in the Company's current Deferred
Compensation Plan may elect to transfer that balance on a
bookkeeping basis into this Plan at the beginning of the first
Plan Year.
5. Earnings on Participants' Accounts
5.1 Base Earnings on Deferral
5.1.1 Covered Compensation deferred by a Participant shall be credited
to the Participant's Deferral Account as of the date of deferral.
Interest in each Plan Year will be credited quarterly on the
average Deferral Account balance for that quarter. The rate of
interest applied to the Pre-1991 Deferral Account shall be at a
base rate equivalent to an annual rate equal to Moody's Rate, and
the rate applicable to the Post-1990 Deferral Account shall be at
a base rate equivalent to an annual rate equal to the Moody's
Rate less 1%. In each case, the Moody's Rate in effect on each
Anniversary Date shall be used to determine the applicable rate
of interest applied during the subsequent Plan Year.
5.2 Earnings on Rollover Balances
5.2.1 The portion of a Participant's Pre-1991 Deferral Account
resulting from the transfer of a balance from the Company's
current Deferred
(Amended 01-30-95)
5
<PAGE>
Compensation Plan will be credited quarterly with a rate of
interest equivalent to 60% of the interest rate announced by Bank
of America as its "prime rate" on the previous Anniversary Date
for the first four (4) Plan Years. After the fourth Plan
Anniversary Date, this portion of the Pre-1991 Deferral Account
will be credited with interest quarterly at an effective annual
rate equal to Moody's Rate plus 9% until the cumulative interest
equals that amount of interest which would have been credited
assuming that Moody's Rate had been used since Plan inception.
At that time, the distinction between portions of the Pre-1991
Deferral Account from deferrals and from transfers will cease to
exist.
5.3 Additional Earnings
5.3.1 The Committee may, in its sole discretion, determine whether and
in what amount additional earnings shall be allocated to
Participants' Deferral Accounts. It is anticipated, but not
guaranteed, that for Pre-1991 Deferral Accounts, additional
earnings will be allocated beginning with the 10th Anniversary
Date of the Plan and that for Post-1990 Deferral Accounts,
additional earnings will be allocated beginning on January 1,
2001. Whether additional earnings will be credited and their
amount will depend upon several factors, including the Company's
future tax rate and its after-tax return on investments.
Additional earnings in any Plan Year, if any, as determined by
the Committee, will be allocated to each Participant's Deferral
Account (except as otherwise provided in Section 6.1.3 and except
for Deferral Accounts of Participants who have had a Termination
of Employment prior to ten years of participation in the Plan) by
the ratio of the Participant's Ceiling Excess Earnings to the sum
of all Participants' Ceiling Excess Earnings as of the end of the
Plan Year, with such additional earnings and Ceiling Excess
Earnings calculated separately for Pre-1991 and Post-1990
Deferral Accounts.
6. Payout of Participants' Accounts
6.1 Early Withdrawal Option
6.1.1 Participants may elect a one-time early withdrawal of up to 75%
of their Pre-1991 and/or Post-1990 Deferral Account(s) to be paid
within 90 days following any Anniversary Date starting with the
seventh Anniversary Date of Plan participation.
6.1.2 Participants shall make an annual election prior to each
Anniversary Date starting with the 6th Anniversary Date whether
to continue their deferral
(Amended 01-30-95)
6
<PAGE>
for one or more years or to receive the early withdrawal payment
following the subsequent Anniversary Date.
6.1.3 Participants who elect the one-time early withdrawal of up to 75%
of their Pre-1991 and/or Post-1990 Deferral Account(s) pursuant
to this Section 6.1 shall not be entitled to receive additional
earnings, if any, otherwise allocable under Section 5.3.1 to the
remaining portion of their applicable Deferral Account(s) from
which the withdrawal is made.
6.2 Termination Payouts
6.2.1 A Participant who has a Termination of Employment prior to one
year of Plan Participation shall receive an amount equal to his
or her Deferral Account, less any credited earnings. Payment
shall be make in a lump sum within twelve months following
Termination of Employment.
6.2.2 A Participant who has a Termination of Employment after one year
of Plan Participation but prior to 10 years of Plan participation
shall receive an amount equal to his or her Deferral Account(s)
at the date of termination in a lump sum within twelve months
following Termination of Employment.
6.2.3 A Participant who has a Termination of Employment after 10 years
of Plan participation shall be subject and entitled to the Normal
Payout provisions set forth in Section 6.4.
6.3 Survivor Payouts
6.3.1 If a Participant dies before Normal Payout commences and the Plan
Agreement is in effect at the time of death, the Employer shall
make a Survivor Payout, as defined in Section 6.3.2, to the
designated Beneficiary.
6.3.2 The Survivor Payout shall consist of the Participant's Deferral
Account(s) at the time of death.
6.3.3 The Survivor Payout shall be paid in a lump sum to the
Beneficiary within twelve months following verification of the
Participant's death.
6.3.4 Notwithstanding subsection 6.3.3 above, a Participant may elect
on the Beneficiary form provided by the Committee that the
Survivor Payout be made over a 20-, 40-, or 60-quarter period
rather than as a lump sum.
(Amended 01-30-95)
7
<PAGE>
6.4 Normal Payouts
6.4.1 Normal Payouts shall commence at the later of age sixty-five (65)
or 10 years of Plan participation.
6.4.2 A Participant who Retires may request that Normal Payout commence
upon such Retirement. The Committee in its sole discretion may
grant such request in the event that the Participant demonstrates
financial need and the cash flow of the Company permits such
early commencement.
6.4.3 The Participant shall elect to receive the Normal Payout over a
20-, 40- or 60-quarter period. The first payment will commence
within 90 days of the quarter end following Retirement.
6.4.4 If a Participant does not elect a payout option, the payments
shall be over a 20-quarter period.
6.4.5 Normal Payout shall consist of the Participant's Deferral
Account(s) spread equally over the elected payout period.
Earnings, and additional earnings, if applicable, as provided in
Subsection 5.3.1, shall continue to be credited to the remaining
Deferral Account(s) during the payout period and shall be
estimated so that approximately equal payments can be made.
6.4.6 If a Participant dies during the Normal Payout period, Normal
Payout shall continue as scheduled to the Participant's
Beneficiary.
6.4.7 The election provided in Section 6.4.3 shall be made during the
initial Commitment Period of Plan participation and shall become
irrevocable at the end of such period.
6.5 Payment for Notification of Death
6.5.1 If a Participant dies following either Retirement or Termination
of Employment, the Company will pay a $5,000 notification payment
of a lump sum to the Participant's Beneficiary within 90 days of
the quarter end following verification of the Participant's
death.
7. Beneficiary Designation
7.1 Upon forms provided by the Committee, each Participant shall
designate in writing the Beneficiary or Beneficiaries whom such
Participant desires
(Amended 01-30-95)
8
<PAGE>
to receive the benefits of this Plan, payable under Sections 6.3,
6.4 and/or 6.5, in the event of such Participant's death.
7.2 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.
7.3 If a married Participant wishes to designate an individual other
than his or her spouse as Beneficiary, such designation shall not
be effective (i.e., the surviving spouse shall be treated as the
sole Beneficiary) unless consented to in writing by the spouse,
which consent shall acknowledge the effect of the designation and
be witnessed by a member of the Committee (or an individual
designated by the Committee) or acknowledged before a notary
public. 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. The Company may rely upon the designation of Beneficiary
or Beneficiaries last filed by the Participant in accordance with
the terms of this Plan.
7.4 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 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 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 interstate succession
or other statutory provision in effect at the Participant's death
in the state in which the Participant resided.
7.5 In the event any amount is payable under the Plan to a minor,
payment shall not be made to the minor, but instead shall be paid
to that person's then living parent(s) to act as custodian, or,
if no parent of that person is living, to a custodian selected by
the Committee to hold the funds for the minor under the Uniform
Transfers to Minors Act, or similar law, in effect in the
jurisdiction in which the minor resides.
8. Acceleration Provisions
(Amended 01-30-95)
9
<PAGE>
8.1 Notwithstanding the provisions of Section 6 hereof, a Participant
shall be entitled to request a hardship withdrawal of all or any
portion of their Deferral Account or acceleration of payments of
their Deferral Account if payments have already commenced under
the payout option selected by the Participant. A Participant
must make a written request to the Committee for a hardship
withdrawal or request for accelerated payment, stating the
reasons such withdrawal or acceleration is necessary because of a
financial hardship. The Committee, in its sole discretion, shall
determine whether or not to grant the Participant's request and,
in so doing, may rely on the Participant's statements, and a
hardship withdrawal or accelerated payment may be approved
without further investigation unless the Committee has reason to
believe such statements are false.
The Participant shall specify from which of their Deferral
Account(s) (i.e., Pre-1991 or Post-1990, or both) the hardship
withdrawal shall be taken.
8.2 The Committee, acting in its sole discretion, may determine to
accelerate, in whole or in part, payments of some or all Deferral
Account(s) (including Deferral Account(s) as to which payments
have not yet commenced) in the event of a threatened or actual
change in control of the Company, or in the event that a change
in the legal, accounting, or tax treatment of amounts deferred
under the Plan are altered in a manner which would potentially
subject the Company, the Participants, or both, to adverse tax or
administrative burdens.
9. Amendment and Termination of Plan
9.1 The Company may, at its absolute and sole discretion, amend or
terminate the Plan at any time.
9.2 In the event of Company-initiated Plan termination, Participants'
entire Deferral Account(s), including credited interest, will be
paid to Participants within twelve months of the quarter end
following Plan termination.
10. Nature of Accounts
10.1 All amounts credited to the Deferral Account(s) shall remain the
sole property of the Company and shall be usable by it as part of
its general funds for any legal purpose whatsoever. The Deferral
Account(s) shall exist only as bookkeeping entries for the
purpose of facilitating the
(Amended 01-30-95)
10
<PAGE>
computation of earnings credits hereunder and such Deferral
Account(s) shall not constitute trust funds, escrow accounts, or
any other form of asset segregation in favor of anyone other than
the Company. No participant shall have any interest in any
specific asset of the Company by virtue of this Plan and each
Participant's rights under this Plan shall at all times be
limited to those of a general unsecured creditor of the Company.
Although sometimes referred to in this Plan as "interest,"
amounts credited to Deferral Account(s) pursuant to Section 5.1,
5.2 and 5.3 may be treated as compensation for tax and payroll
withholding purposes, pursuant to applicable Internal Revenue
Code and Treasury regulation requirements.
11. Limitation on Rights of Participants
11.1 If a Participant is an employee of the Company, such employment
is not for any specific term and may be terminated by the
Participant or Company at any time, for any reason, with or
without cause. Neither this Plan nor any election to defer
compensation hereunder shall be held or construed to confer on
any person any legal right to be continued as an employee,
consultant or Director of the Company; nor to 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.
12. Non-Transferability
12.1 No right to payment under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance,
or charge and any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same shall be void. No right to
payment shall in any manner be liable for, or subject to, the
debts, contracts, liabilities or torts of the person entitled
thereto.
13. Restriction Against Assignment
13.1 The Participant or Beneficiary shall not have the power to
transfer, assign, anticipate, modify, or otherwise encumber in
any manner whatsoever any of the payments that will become due
pursuant to this Plan, nor shall said payments be subject to
attachment, garnishment or execution, or be transferable by
operation of law in event of bankruptcy or insolvency.
(Amended 01-30-95)
11
<PAGE>
14. Binding Effect
14.1 The Plan Agreement or Agreements attached hereto, when executed,
is/are solely between the Company and the Participant. The
Participant and any Beneficiary shall have recourse only against
the Company for its enforcement, and any Plan Agreement shall be
binding upon the Beneficiary, heirs, and personal representative
of the Participant and upon the successors and assigns of the
Company.
15. Settlement of Disputes
15.1 If any disputes arise with regard to the interpretation of any of
the provisions of this Plan or with regard to the amount of any
payments due under this Plan and the Agreement, the Committee
shall make any resolution of such disputes which it deems, in its
sole discretion, to be in the best interest of the Company and
the Participants. Any such determinations made by the Committee
shall be final and binding on all Participants in the Plan.
15.2 The Committee shall adopt procedures, consistent with Section 503
of the Employee Retirement Income Security Act of 1974, with
respect to notice to Participants of claims denied under the Plan
and review of denied claims.
16. Administration
16.1 The Plan shall be administered by the Committee, as appointed by
the President of the Company.
17. Forfeiture
Any payment due to a Participant hereunder which is not claimed by the
Participant, his or her Beneficiary, his or her estate or other person
legally entitled thereto within four years after becoming payable shall be
forfeited and canceled and shall remain with the Company and no other
person shall have any right thereto or interest therein. The Company shall
have no duty under this Agreement to give notice to any person other than
the Participant or his or her designated Beneficiary that amounts are
payable hereunder.
(Amended 01-30-95)
12
<PAGE>
Exhibit 10(s)
THIRD AMENDMENT TO
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE LOAN AGREEMENT
This Third Amendment to Employee Stock Purchase Loan Agreement (the "Third
Amendment") dated as of June 28, 1994, 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, as
amended by the First Amendment dated as of July 22, 1993 and the Second
Amendment dated as of February 24, 1994 (as so amended, 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, 1994 and inserting June 29, 1995 in lieu thereof.
3. Representations and Warranties. The Company represents and warrants
to the Bank:
3.1 Authorization; Enforceable Agreement. This Third 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 Third Amendment is a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, and when
executed and delivered, will be similarly legal, valid, binding and enforceable.
This Third 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.
- 1 -
<PAGE>
4. Enforcing this Agreement; Miscellaneous.
4.1 California Law. This Third Amendment is governed by laws of the State
of California.
4.2 Successors and Assigns. This Third Amendment is binding on the
Company's and the Bank's successors and assignees. The Company agrees that it
may not assign this Third Amendment without the Bank's prior consent.
4.3 Effectiveness of this Agreement. Except as hereby amended, the
Agreement shall remain in full force and effect.
This Third Amendment is executed as of the date stated at the top of the
first page.
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By: s/William A. Roper Jr.
Title: Senior Vice President & CFO
By: s/Ward Reed
Title: Corporate Vice President & Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: s/Lori Kannegieter
Title: Vice President
- 2 -
<PAGE>
Exhibit 10(t)
SECOND AMENDMENT TO
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE LOAN AGREEMENT
This Second Amendment to Employee Stock Purchase Loan Agreement (the
"Second Amendment") dated as of February 24, 1994, 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,
as amended by the First Amendment dated as of July 22, 1993 (as so amended, 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.
2.1 Section 1(a) is hereby amended by deleting the amount "$250,000" in
the last line thereof, and inserting in substitution therefor $1,000,000".
2.2 Section 1(b) is hereby amended by deleting such section in its
entirety and restating it in full as follows:
"The proceeds of each Loan shall be used by the Eligible Employee
to purchase capital stock of the Company or exercise options to
purchase the capital stock of the Company. The Loans to purchase
stock shall be permitted up to 90% 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."
2.3 Section 1(d) is hereby amended by deleting such section in its
entirety and restating it in full as follows:
- 1 -
<PAGE>
"Loans may not be less than $5,000 or more than $250,000 and
shall be fully amortized on a monthly basis and have a maturity of up
to 60 months from the date of such Loan as agreed to by the Eligible
Employee and the Bank."
2.4 Section 1(e) is hereby amended by deleting such section in its
entirety and restating it in full as follows:
"The Company shall pay to the Bank an annual administrative fee
of 1/5 of 1% of the maximum amount which may be made available to
employees pursuant to Section 1(a) hereof, which fee shall be payable
quarterly in arrears."
3. Representations and Warranties. The Company represents and warrants
to the Bank:
3.1 Authorization; Enforceable Agreement. This Second 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 Second 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 Second 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 Second Amendment is governed by laws of the
State of California.
4.2 Successors and Assigns. This Second Amendment is binding on the
Company's and the Bank's successors and assignees. The Company agrees that it
may not assign this Second Amendment without the Bank's prior consent.
4.3 Notices. All notices required under this Second Amendment shall be
personally delivered or sent by first class mail, post prepaid, to the addresses
on the signature page of this Second Amendment, or to such other addresses as
the Bank and the Company may specify from time to time in writing.
5. Miscellaneous.
5.1 Effectiveness of the Agreement. Except as expressly amended hereby,
the Agreement shall remain in full force and effect.
- 2 -
<PAGE>
5.2 Counterparts. This Second 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 Second Amendment is executed as of the date stated at the top of the
first page.
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By: s/William A. Roper Jr.
Title: Senior Vice President & CFO
By: s/Ward Reed
Title: Corporate Vice President & Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: s/Lori Kannegieter
Title: Vice President
- 3 -
<PAGE>
EXHIBIT 11
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Year ended January 31
--------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY:
Net Income $ 49,052 $ 41,500 $ 38,075
Reduction of interest expense, net of income
tax expense on assumed retirement of
short-term and long-term debt 637 501 465
Interest earned, net of income tax expense on
assumed investment of U.S. government
securities or commercial paper -- 17 --
---------- ---------- ----------
Adjusted net income $ 49,689 $ 42,018 $ 38,540
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares outstanding 46,603 45,404 44,168
Dilutive stock options, based on the modified
treasury stock method, using average fair value 2,661 2,025 2,011
---------- ---------- ----------
Total average shares outstanding 49,264 47,429 46,179
---------- ---------- ----------
---------- ---------- ----------
Per Share Amount $ 1.01 $ .89 $ .83
---------- ---------- ----------
---------- ---------- ----------
FULLY DILUTED:
Net Income $ 49,052 $ 41,500 $ 38,075
Reduction of interest expense, net of income
tax expense on assumed retirement of
short-term and long-term debt 499 435 425
Interest earned, net of income tax expense on
assumed investment of U.S. government
securities or commercial paper -- 5 --
---------- ---------- ----------
Adjusted net income $ 49,551 $ 41,940 $ 38,500
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares outstanding 46,603 45,404 44,168
Dilutive stock options, based on the modified
treasury stock method, using year-end or
exercise date established price if higher
than average fair value 2,661 2,025 2,011
---------- ---------- ----------
Total average shares outstanding 49,264 47,429 46,179
---------- ---------- ----------
---------- ---------- ----------
Per Share Amount $ 1.01 $ .88 $ .83
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
Exhibit 21
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
WHOLLY-OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C>
American Systems Engineering Corporation Delaware
Andrew Palmer & Associates Limited England
(wholly-owned by SAIC UK Limited)
Bull, Inc. California
Campus Point Realty Corporation California
General Sciences Corporation Delaware
Hicks & Associates, Inc. Delaware
JHK & Associates, Inc. Delaware
JMD Development Corporation dba JDA California
Network Solutions, Inc. District of Columbia
R.E. Wright Environmental, Inc. Delaware
SAIC Colombia, Limitada Colombia
SAIC Commercial Enterprises, Inc. California
SAIC de Mexico, S.A. de C.V. Mexico
SAIC Engineering, Inc. California
SAIC Global Technology Corporation Delaware
SAIC in Novosibirsk Russia
SAIC-MIR Russia
SAIC Limited (wholly-owned by SAIC UK Limited) England
SAIC UK Limited England
Science Applications International (Barbados) Corporation Barbados
Science Applications International Corporation (SAIC Canada) Canada
Science Applications International, Europe S.A. France
Science Applications International Technology California
Syntonic Technology, Inc. Delaware
<PAGE>
Systems Control Technology, Inc. Delaware
TST International Pty., Ltd.
(wholly-owned by Syntonic Technology, Inc.) Australia
Wright Laboratory Services, Inc.
(wholly-owned by R.E. Wright Environmental, Inc.) Delaware
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and related consolidated statement of income and cash
flows for the year ended January 31, 1995 and is qualified in its entirety by
reference to such financial statement.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> FEB-01-1994
<PERIOD-END> JAN-31-1995
<CASH> 28,203
<SECURITIES> 0
<RECEIVABLES> 421,790
<ALLOWANCES> 1,214
<INVENTORY> 25,356
<CURRENT-ASSETS> 509,532
<PP&E> 260,274
<DEPRECIATION> 113,562
<TOTAL-ASSETS> 752,584
<CURRENT-LIABILITIES> 336,065
<BONDS> 28,955
<COMMON> 469
0
0
<OTHER-SE> 387,095
<TOTAL-LIABILITY-AND-EQUITY> 752,584
<SALES> 0
<TOTAL-REVENUES> 1,921,880
<CGS> 0
<TOTAL-COSTS> 1,692,623
<OTHER-EXPENSES> 146,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,468
<INCOME-PRETAX> 79,706
<INCOME-TAX> 30,654
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,052
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
<PAGE>
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
ANNUAL REPORT
JANUARY 31, 1995
<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, 1995
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
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 16, 1995 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, 1995 and 1994
F-3
Statement of Changes in Net Assets
Available for Benefits for the years ended
January 31, 1995, 1994, and 1993
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, 1995 and 1994, and the changes in
net assets
available for benefits for each of the three years in the period
ended January
31, 1995, 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.
As discussed in Note C, the Plan changed its method of accounting
for benefits
distributable to participating employees to comply with guidance
for accounting
and disclosure by employee benefit plans.
PRICE WATERHOUSE LLP
San Diego, California
March 16, 1995
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS
<TABLE>
<CAPTION>
---------------------------
01-31-95 01-31-94
------------ ------------
ASSETS:
<S> <C> <C>
Investments at fair value:
SAIC Class A Common Stock
(Cost $3,018,000 and
$2,358,000, respectively) $ 3,229,000 $ 2,601,000
Receivables:
Participant contributions
withheld 696,000 727,000
Employer contributions
receivable 37,000 38,000
------------ ------------
Net Assets Available for Benefits $ 3,962,000 $ 3,366,000
------------ ------------
------------ ------------
</TABLE>
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
<TABLE>
<CAPTION>
Year ended
----------- ----------- -----------
01-31-95 01-31-94 01-31-93
----------- ----------- -----------
<S> <C> <C> <C>
Unrealized appreciation
of investments in SAIC
Common Stock $ 210,000 $ 242,000 $ 74,000
Participant contributions 3,958,000 3,061,000 2,456,000
Employer contributions 210,000 163,000 129,000
Benefits paid -3,782,000 -2,668,000 -2,282,000
----------- ----------- -----------
Increase in net assets 596,000 798,000 377,000
Net assets at beginning of year 3,366,000 2,568,000 2,191,000
----------- ----------- -----------
Net assets at end of year $ 3,962,000 $ 3,366,000 $ 2,568,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
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 available for benefits and changes in net assets available for
benefits 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, 1993.
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 January 31, 1995 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 the fair market value of the Common Stock determined pursuant to
a stock price formula and valuation process (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. Periodic determinations of fair
market value of the Common Stock are made by the Board of Directors with the
assistance of an appraisal prepared by an independent appraisal firm. The Board
of Directors reserves the right to alter the formula.
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, 1995, 409,537 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
purchased during the year or the Formula Price of shares held at the beginning
of the year. Unrealized appreciation or depreciation is computed as the Formula
Price of the Common Stock held at the end of the year less the Formula Price of
the Common Stock held at the beginning of the year or acquisition cost for
Common Stock acquired during the year. As of January 31, 1995 and 1994, the
Formula Price per share was $15.72 and $14.19, respectively, for Class A Common
Stock. The number of shares held by the Plan was 205,380 and 183,278 on January
31, 1995 and 1994, respectively.
BENEFITS DISTRIBUTABLE
Investments in Common Stock are distributed from the Plan after the end of
the Plan's fiscal year. Benefits distributable at January 31, 1995 and 1994 were
$3,229,000 and $2,601,000, respectively.
ADMINISTRATIVE EXPENSES OF THE PLAN
All expenses incurred in the administration of the Plan are paid out of the
Plan assets unless the Company elects to pay such costs. During Plan years ended
January 31, 1995, 1994, and 1993, 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.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior year financial statements
to conform to the presentation used in 1995.
F-7
<PAGE>
NOTE C - CHANGE IN ACCOUNTING POLICY
Prior to Plan year 1995, the Plan recognized a liability for the Common Stock
purchased for the accounts of participants prior to year end but not distributed
until subsequent to year end.
During Plan year 1995, the Plan changed its method of accounting for obligations
for Common Stock to be distributed to comply with guidance for accounting and
disclosure by employee benefit plans and now does not present such obligations
as a liability in the statement of net assets available for benefits or as
additions to benefits distributable in the statement of changes in net assets
available for benefits. Accordingly, the net assets available for benefits at
January 31, 1994 were increased by $2,601,000 and benefits paid and additions to
benefits distributable for the years ended January 31, 1994 and 1993 were
decreased by $712,000 and $239,000, respectively, to reflect the change in
accounting policy.
NOTE D - 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-8
<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 AND EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the calendar year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [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 and 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 April 17, 1995 /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, 1994 AND 1993
<PAGE>
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 - F-13
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
March 31, 1995
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, 1994 and 1993, 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 LLP
San Diego, California
March 31, 1995
F-2
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C>
ASSETS
Investments:
Mutual funds, at market value $ 157,183,000 $ 127,253,000
SAIC Common Stock, at fair market value 84,571,000 64,225,000
Short-term investments, at market value 125,000 20,000
Participant loans 8,604,000 6,646,000
------------- -------------
250,483,000 198,144,000
------------- -------------
Receivables:
Participant contributions 1,771,000 1,478,000
Company contributions 2,446,000 473,000
------------- -------------
4,217,000 1,951,000
------------- -------------
Total assets 254,700,000 200,095,000
------------- -------------
LIABILITIES
Accrued Plan expenses 38,000 38,000
------------- -------------
Total liabilities 38,000 38,000
------------- -------------
Net assets available for benefits $ 254,662,000 $ 200,057,000
------------- -------------
------------- -------------
</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,
1994 1993
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Mutual funds:
Realized gain $ 702,000 $ 1,189,000
Unrealized (depreciation) appreciation (10,027,000) 4,287,000
Dividends and interest 9,252,000 6,946,000
SAIC Common Stock:
Realized gain 6,000 2,000
Unrealized appreciation 9,884,000 5,115,000
Interest 612,000 533,000
Participant contributions 47,599,000 39,462,000
Company contributions 10,977,000 7,674,000
------------ ------------
Total additions 69,005,000 65,208,000
------------ ------------
Deductions from net assets attributed to:
Distributions to participants (14,240,000) (8,694,000)
Plan expenses (160,000) (145,000)
------------- ------------
Total deductions (14,400,000) (8,839,000)
------------ ------------
Net increase 54,605,000 56,369,000
Net assets at beginning of year 200,057,000 143,688,000
------------ ------------
Net assets at end of year $ 254,662,000 $ 200,057,000
------------ ------------
------------ ------------
</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 $9,240 and $8,994 for the years ended
December 31, 1994 and 1993, respectively. Amounts deferred by participants,
including rollovers from qualified plans, totaled $47,599,000 and $39,462,000
for the years ended December 31, 1994 and 1993, 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 1994 and 1993, 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 $9,063,000 and $7,674,000,
respectively. During 1994 and 1993, 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 participant's accounts as prescribed by the
Company. During 1994, additional Company contributions of $1,914,000 were
invested in the Vanguard Money Market Reserves-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 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.
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, 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 could be exchanged into one of the Vanguard Funds subject to
certain restrictions. Effective January 1, 1994, the entire amount each
participant defers is invested directly into the participant's choice of
investment funds offered by the Plan.
THE SEVEN VANGUARD FUNDS OFFERED ARE AS FOLLOWS:
1) Vanguard Fixed Income Securities Fund - 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 Money Market
Reserves - Prime Portfolio, which invests in money market instruments; 4)
Vanguard Fixed Income Securities Fund - 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 the Company's 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting.
F-6
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
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. Vanguard Fund shares are valued at the net asset value
per share as of each valuation date.
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
A general public market for the Company's common stock does not exist;
therefore, the fair market value of the common stock is determined pursuant to a
stock price formula and valuation process which includes an appraisal prepared
by an independent appraisal firm. Periodic determinations of fair market value
of the common stock are made by the Board of Directors, with the assistance of
the independent appraisal firm. The Board of Directors reserves the right to
alter the formula.
The gains or losses realized on distributions of investments and the increases
or decreases in unrealized appreciation are calculated as the difference between
the current fair market value and the fair market value of the investments at
the beginning of the year or purchase price if purchased during the year. As
of December 31, 1994 and 1993, the fair market value of the Company's Class A
Common Stock was $15.07 and $13.12 and the Plan held approximately 5,612,000
shares and 4,895,000 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 Money Market Reserve - 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).
DISTRIBUTIONS TO PARTICIPANTS
Distributions to participants are recorded when paid. Distributions to be paid
at a future date as elected by terminated or retired participants at December
31, 1994 and 1993 were $24,828,000 and $18,234,000, respectively.
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 $34,000 and
$27,000 were paid or accrued to the Trustee by the Plan during 1994 and 1993,
respectively. Other Plan expenses totaling $126,000 and $118,000 were paid or
accrued by the Plan during 1994 and 1993, 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 indicating 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 FUND
Financial information by investment fund as of December 31, 1994 and 1993, 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 FUND - CONTINUED
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GNMA Index Prime Wellesley Windsor Int'l Growth
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ 14,826,000 $ 22,714,000 $ 22,534,000 $ 14,299,000 $ 52,511,000 $ 15,242,000
SAIC Common Stock
Short-term investments
Participant loans
------------ ------------ ------------ ------------ ------------ ------------
14,826,000 22,714,000 22,534,000 14,299,000 52,511,000 15,242,000
------------ ------------ ------------ ------------ ------------ ------------
Receivables:
Participant contributions 115,000 230,000 150,000 179,000 442,000 194,000
Company contributions 1,914,000
------------ ------------ ------------ ------------ ------------ ------------
115,000 230,000 2,064,000 179,000 442,000 194,000
------------ ------------ ------------ ------------ ------------ ------------
Total assets 14,941,000 22,944,000 24,598,000 14,478,000 52,953,000 15,436,000
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Accrued Plan expenses
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities
------------ ------------ ------------ ------------ ------------ ------------
Net assets available
for benefits $ 14,941,000 $ 22,944,000 $ 24,598,000 $ 14,478,000 $ 52,953,000 $ 15,436,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
VANGUARD SAIC COMMON PARTICIPANT STATE STREET
STFED Stock Loans STIF Total
Assets
<S> <C> <C> <C> <C> <C>
Investments:
Mutual funds $ 12,761,000 $ 2,296,000 $157,183,000
SAIC Common Stock 84,571,000 84,571,000
Short-term investments $ 125,000 125,000
Participant loans $ 8,604,000 8,604,000
------------ ----------- ------------ ---------- ------------
12,761,000 86,867,000 8,604,000 125,000 250,483,000
------------ ----------- ------------ ---------- ------------
Receivables:
Participant contributions 94,000 367,000 1,771,000
Company contributions 532,000 2,446,000
------------ ----------- ------------ ---------- ------------
94,000 899,000 4,217,000
------------ ----------- ------------ ---------- ------------
Total assets 12,855,000 87,766,000 8,604,000 125,000 254,700,000
------------ ----------- ------------ ---------- ------------
LIABILITIES
Accrued Plan expenses 38,000 38,000
------------ ----------- ------------ ---------- ------------
Total liabilities 38,000 38,000
------------ ----------- ------------ ---------- ------------
Net assets available
for benefits $ 12,855,000 $ 87,766,000 $ 8,604,000 $ 87,000 $254,662,000
------------ ----------- ------------ ---------- ------------
------------ ----------- ------------ ---------- ------------
</TABLE>
F-9
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT FUND - CONTINUED
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GNMA Index Prime Wellesley Windsor Int'l Growth
<S> <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
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
------------ ------------ ------------ ------------ ------------ ------------
Receivables:
Participant contributions 123,000 198,000 127,000 154,000 372,000 107,000
Company contributions
------------ ------------ ------------ ------------ ------------ ------------
123,000 198,000 127,000 154,000 372,000 107,000
------------ ------------ ------------ ------------ ------------ ------------
Total assets 13,967,000 17,990,000 16,865,000 12,136,000 43,658,000 8,318,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
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
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
VANGUARD SAIC COMMON PARTICIPANT STATE STREET
STFED Stock Loans STIF Total
<S> <C> <C> <C> <C> <C>
Investments:
Mutual funds $ 12,882,000 $ 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
------------ ----------- ------------ ---------- ------------
12,882,000 66,743,000 6,646,000 20,000 198,144,000
------------ ----------- ------------ ---------- ------------
Receivables:
Participant contributions 98,000 299,000 1,478,000
Company contributions 443,000 30,000 473,000
------------ ----------- ------------ ---------- ------------
98,000 742,000 30,000 1,951,000
------------ ----------- ------------ ---------- ------------
Total assets 12,980,000 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 $12,980,000 $67,485,000 $6,646,000 $12,000 $200,057,000
------------ ----------- ------------ ---------- ------------
------------ ----------- ------------ ---------- ------------
</TABLE>
F-10
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT FUND - CONTINUED
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD VANGUARD
GNMA Index Prime Wellesley Windsor Int'l Growth
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
Investment income:
Mutual funds:
Realized (loss) gain $(55,000) $350,000 $ (127,000) $ 318,000 $306,000
Unrealized depreciation (1,049,000) (737,000) (1,444,000) (5,517,000) (539,000)
Dividends and interest 987,000 663,000 $796,000 1,007,000 4,891,000 197,000
SAIC Common Stock:
Realized gain
Unrealized appreciation
Interest
Participant contributions 3,051,000 5,450,000 3,482,000 4,492,000 10,549,000 4,086,000
Company contributions 1,914,000
------------ ------------ ------------ ------------ ------------ ------------
Total additions 2,934,000 5,726,000 6,192,000 3,928,000 10,241,000 4,050,000
------------ ------------ ------------ ------------ ------------ ------------
Deductions from net assets
Distributions to participants 1,035,000 1,111,000 1,385,000 894,000 2,644,000 896,000
Plan expenses
------------ ------------ ------------ ------------ ------------ ------------
Total deductions 1,035,000 1,111,000 1,385,000 894,000 2,644,000 896,000
------------ ------------ ------------ ------------ ------------ ------------
Net increase prior to exchanges 1,899,000 4,615,000 4,807,000 3,034,000 7,597,000 3,154,000
Exchanges (925,000) 339,000 2,926,000 (692,000) 1,698,000 3,964,000
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 974,000 4,954,000 7,733,000 2,342,000 9,295,000 7,118,000
Net assets available for benefits
Beginning of year 13,967,000 17,990,000 16,865,000 12,136,000 43,658,000 8,318,000
------------ ------------ ------------ ------------ ------------ ------------
End of year $14,941,000 $22,944,000 $24,598,000 $14,478,000 $52,953,000 $15,436,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
Vanguard SAIC Common Participant State Street
STFED Stock Loans STIF Total
<S> <C> <C> <C> <C> <C>
Additions to net assets
Investment income:
Mutual funds
Realized (loss) gain $(90,000) $702,000
Unrealized dpreciation (741,000) (10,027,000)
Dividends and interest 711,000 9,252,000
SAIC Common Stock:
Realized gain $ 6,000 6,000
Unrealized appreciation 9,884,000 9,884,000
Interest 87,000 $499,000 $26,000 612,000
Participant contributions 2,407,000 9,402,000 4,680,000 47,599,000
Company contributions 8,938,000 125,000 10,977,000
------------ ----------- ------------ ---------- ------------
Total additions 2,287,000 28,317,000 499,000 4,831,000 69,005,000
------------ ----------- ------------ ---------- ------------
Deductions fron net assets
Distributions to participants 834,000 5,138,000 303,000 14,240,000
Plan expenses 160,000 160,000
------------ ----------- ------------ ---------- ------------
Total deductions 834,000 5,138,000 303,000 160,000 14,400,000
------------ ----------- ------------ ---------- ------------
Net increase prior to exchanges 1,453,000 23,179,000 196,000 4,671,000 54,605,000
Exchanges (1,578,000) (2,898,000) 1,762,000 (4,596,000)
------------ ----------- ------------ ---------- ------------
Net increase (decrease) (125,000) 20,281,000 1,958,000 75,000 54,605,000
Net assets available for benefits
Beginning of year 12,980,000 67,485,000 6,646,000 12,000 200,057,000
------------ ----------- ------------ ---------- ------------
End of year $12,855,000 $87,766,000 $8,604,000 $87,000 $254,662,000
------------ ----------- ------------ ---------- ------------
------------ ----------- ------------ ---------- ------------
</TABLE>
F-11
<PAGE>
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - FINANCIAL INFORMATION BY INVESTMENT FUND - 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
GNMA INDEX PRIME WELLESLEY WINDSOR INT'L GROWTH
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
Investment income:
Mutual funds:
Realized gain $116,000 $427,000 $101,000 $469,000 $13,000
Unrealized (depreciation)
appreciation (193,000) 621,000 126,000 2,198,000 1,516,000
Dividends and interest 854,000 444,000 $499,000 764,000 3,556,000 66,000
SAIC Common Stock:
Realized gain
Unrealized appreciation
Interest
Participant contributions 1,903,000 2,763,000 1,857,000 1,734,000 5,078,000 1,027,000
Company contributions 8,000 8,000 6,000 10,000 17,000 4,000
------------ ------------ ------------ ------------ ------------ ------------
Total additions 2,688,000 4,263,000 2,362,000 2,735,000 11,318,000 2,626,000
------------ ------------ ------------ ------------ ------------ ------------
Deductions from net assets
Distributions to participants 648,000 713,000 1,114,000 438,000 1,762,000 115,000
Plan expenses
------------ ------------ ------------ ------------ ------------ ------------
Total deductions 648,000 713,000 1,114,000 438,000 1,762,000 115,000
------------ ------------ ------------ ------------ ------------ ------------
Net increase prior to exchanges 2,040,000 3,550,000 1,248,000 2,297,000 9,556,000 2,511,000
Exchanges (1,315,000) 404,000 (2,372,000) 4,266,000 4,143,000 3,434,000
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 725,000 3,954,000 (1,124,000) 6,563,000 13,699,000 5,945,000
Net assets available for benefits
Beginning of year 13,242,000 14,036,000 17,989,000 5,573,000 29,959,000 2,373,000
------------ ------------ ------------ ------------ ------------ ------------
End of year $13,967,000 $17,990,000 $16,865,000 $12,136,000 $43,658,000 $8,318,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
VANGUARD SAIC COMMON PARTICIPANT STATE STREET
STFED Stock Loans STIF Total
<S> <C> <C> <C> <C> <C>
Additions to net assets
Investment income:
Mutual Funds:
Realized gain $ 63,000 $1,189,000
Unrealized (depreciation)
appreciation 19,000 4,287,000
Dividends and interest 763,000 6,946,000
SAIC Common Stock:
Realized gain $ 2,000 2,000
Unrealized appreciation 5,115,000 5,115,000
Interest 103,000 $416,000 $14,000 533,000
Participant contributions 1,420,000 19,112,000 4,568,000 39,462,000
Company contributions 3,000 7,510,000 108,000 7,674,000
------------ ----------- ------------ ---------- ------------
Total additions 2,268,000 31,842,000 416,000 4,690,000 65,208,000
------------ ----------- ------------ ---------- ------------
Deductions from net assets
Distributions to participants 851,000 2,876,000 177,000 8,694,000
Plan expenses 145,000 145,000
------------ ----------- ------------ ---------- ------------
Total deductions 851,000 2,876,000 177,000 145,000 8,839,000
------------ ----------- ------------ ---------- ------------
Net increase prior to exchanges 1,417,000 28,966,000 239,000 4,545,000 56,369,000
Exchanges (1,044,000) (4,669,000) 1,750,000 (4,597,000)
------------ ----------- ------------ ---------- ------------
Net increase (decrease) 373,000 24,297,000 1,989,000 (52,000) 56,369,000
Net assets available for benefits
Beginning of year 12,607,000 43,188,000 4,657,000 64,000 143,688,000
------------ ----------- ------------ ---------- ------------
End of year $12,980,000 $67,485,000 $6,646,000 $12,000 $200,057,000
------------ ----------- ------------ ---------- ------------
------------ ----------- ------------ ---------- ------------
</TABLE>
<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, 1994 and 1993, are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------
NUMBER NUMBER
INVESTMENT SALES OF UNITS OF SALES COST PROCEEDS
<S> <C> <C> <C> <C>
State Street Bank & Trust
Short-Term Investment Fund 605,000 70 $ 60,466,000 $ 60,466,000
SAIC Class A Common Stock 3,000 1 $ 44,000 $ 50,000
NUMBER NUMBER
INVESTMENT PURCHASES OF UNITS OF PURCHASES COST PROCEEDS
State Street Bank & Trust
Short-Term Investment Fund 605,000 84 $ 60,571,000
SAIC Class A Common Stock 720,000 6 $ 10,506,000
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------
NUMBER NUMBER
INVESTMENT SALES OF UNITS OF SALES COST PROCEEDS
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
NUMBER NUMBER
INVESTMENT PURCHASES OF UNITS OF PURCHASES COST PROCEEDS
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>
F-13
<PAGE>
SCIENCE APLLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT DECEMBER 31, 1994
- -------------------------------------------------------------------------------
<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 Vanguard Fixed Income
Investment Companies Securities Fund -
GNMA Portfolio 1,547,000 $ 15,486,000 $ 14,826,000
Vanguard Index Trust -
500 Portfolio 529,000 20,562,000 22,714,000
Vanguard Money
Market Reserves -
Prime Portfolio 24,830,000 24,830,000 24,830,000
Vanguard Fixed Income
Securities Fund -
Short-Term Federal
Portfolio 1,317,000 13,419,000 12,761,000
Vanguard/Wellesley
Income Fund 839,000 15,493,000 14,299,000
Vanguard/Windsor
Fund 4,171,000 55,724,000 52,511,000
Vanguard Intl. Growth
Portfolio 1,135,000 14,546,000 15,242,000
-------------- --------------
160,060,000 157,183,000
Common Stock:
SAIC* Class A 5,612,000 74,687,000 84,571,000
Short-term investment:
State Street Short-Term Investment
Bank & Trust* Fund 125,000 125,000 125,000
Participant Loans,
Due 1/7/1995 to 12/7/2019;
6% - 12% 8,604,000 8,604,000
-------------- --------------
$ 243,476,000 $ 250,483,000
-------------- --------------
-------------- --------------
<FN>
* Represents a party-in-interest.
</TABLE>
F-14
<PAGE>
ADDITIONAL INFORMATION
SCHEDULE II
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CASH OR DEFERRED ARRANGEMENT
ITEM 27D FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NUMBER OF PURCHASE SELLING
PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS PRICE PRICE
<S> <C> <C> <C> <C>
State Street Bank & Trust Short-term Investment Fund 84 $60,571,000
State Street Bank & Trust Short-term Investment Fund 70 $60,466,000
SAIC Class A Common Stock 6 $10,506,000
<CAPTION>
CURRENT
VALUE ON
LEASE EXPENSE COST OF TRANSACTION NET GAIN)
PARTY INVOLVED DESCRIPTION OF ASSET RENTAL INCURRED ASSET DATE OR (LOSS)
<S> <C> <C> <C> <C> <C> <C>
State Street Bank & Trust Short-term Investment Fund $60,571,000
State Street Bank & Trust Short-term Investment Fund $60,466,000 $60,466,000 $0
SAIC Class A Common Stock $10,506,000
<FN>
*Transactions or series of transactions in excess of 5 percent of the current
value of the Plan's assets as of December 31, 1993 as defined in Section
2520.103-6 of the Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA.
</TABLE>
F-15
