<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997
POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO. 33-51523
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 8731 95-3630868
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
10260 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 546-6000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
COPY TO:
DOUGLAS E. SCOTT, ESQ.
Senior Vice President and General Counsel
Science Applications International Corporation
10260 Campus Point Drive
San Diego, California 92121
(619) 546-6000
(name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC:
FROM TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
---------------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If the Securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CROSS-REFERENCE SHEET
BETWEEN
ITEMS IN FORM S-4 AND LOCATION IN PROSPECTUS
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
-------------------------------- ----------------------
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus...................... Facing Page; Cross-Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors, Ratio of
Earnings to Fixed Charges and Other
Information................................................. Information Incorporated by Reference;
Risk Factors; The Company;
Government Contracts; Selected
Financial Data*
4. Terms of the Transaction....................................... The Offering; Description of Capital
Stock; Market Information*
5. Pro Forma Financial Information................................ *
6. Material Contracts with the Company Being
Acquired.................................................... *
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................................ Resales by Affiliates of Acquired
Companies*
8. Interests of Named Experts and Counsel......................... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.............. *
10. Information with Respect to S-3 Registrants.................... Information Incorporated by Reference;
The Company; Dividend Policy; Market
Information; Selected Financial Data;
Description of Capital Stock
11. Incorporation of Certain Information by
Reference................................................... Information Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants................................................. *
13. Incorporation of Certain Information by
Reference................................................... *
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants................................. *
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<PAGE> 3
<TABLE>
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C> <C>
15. Information with Respect to S-3 Companies...................... *
16. Information with Respect to S-2 or S-3
Companies................................................... *
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies................................... *
18. Information if Proxies, Consents or
Authorizations Are to be Solicited.......................... *
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or in
an Exchange Offer........................................... *
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* Not applicable (in whole or in part) or answer negative upon the date
of filing of this Registration Statement. The registrant may be
required to provide information (or further information) in response to
one or more of such items under certain circumstances by means of a
post-effective amendment to this Registration Statement or supplement
to the Prospectus contained herein.
<PAGE> 4
PROSPECTUS
3,000,000 SHARES OF CLASS A COMMON STOCK
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Science Applications International Corporation ("SAIC" or the
"Company") has registered 3,000,000 shares of its Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), which may be offered from
time to time by this Prospectus in connection with one or more acquisition
transactions (each, an "Acquisition").
The consideration to be offered by the Company in Acquisitions may
consist of shares of the Class A Common Stock ("Acquisition Shares"), cash,
promissory notes, the assumption of liabilities, commitments to make future
capital contributions to the business to be acquired or any combination thereof.
Acquisitions may be accomplished by one or more methods, including but not
limited to the acquisition by the Company of stock, partnership interests,
limited liability company interests or assets of a business or entity to be
acquired or the merger or consolidation of such corporation or entity with the
Company or a subsidiary of the Company. The amount and type of consideration to
be offered and the other terms of each Acquisition will be determined by
negotiations between the Company and the owners or controlling persons of the
business or assets to be acquired and will be set forth in a definitive
agreement among such parties governing such Acquisition.
This Prospectus, as amended or supplemented if appropriate, has also
been prepared for use by persons who will receive shares issued by the Company
in Acquisitions and who wish to offer and sell such shares, on terms then
obtainable, in transactions in which they may be deemed underwriters within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). Any
profits realized on such sales by such persons may be regarded as underwriting
compensation under the Securities Act. See "Resales by Affiliates of Acquired
Companies." In addition, if permitted by law, the Company may pay finders' fees
from time to time in connection with specific Acquisitions. Finders' fees may be
in the form of cash but will not be paid in shares of the Class A Common Stock
offered hereby. Any person receiving any such fees may be deemed underwriters
within the meaning of the Securities Act, and such fees may be regarded as
underwriting compensation under the Securities Act. Other than as provided
above, the Company does not expect to pay underwriting commissions or discounts
in connection with this Offering.
All of the Acquisition Shares will be subject to certain restrictions
(including restrictions on their transferability) set forth in the Company's
Certificate of Incorporation and may be subject to certain contingencies. See
"Description of Capital Stock -- Common Stock -- Restrictions on Class A Common
Stock." SEE "RISK FACTORS" ON PAGES 3 TO 6 FOR A DESCRIPTION OF THIS AND CERTAIN
OTHER RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
This Prospectus contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company or its officers with respect to, among other things, trends affecting
the Company's financial condition or results of operations and the impact of
competition.
Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties and that actual results may differ materially from those in the
forward-looking statements as a result of various factors. The accompanying
information contained in this Prospectus, including, without limitation, the
information under "Risk Factors" and "Use of Proceeds" identifies important
factors that could cause such differences.
THE DATE OF THIS PROSPECTUS IS ________, 1997
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement under the Securities
Act with respect to the securities offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits thereto. For further information, reference is made to such
Registration Statement and exhibits. Statements contained in this Prospectus as
to the contents of any contract or any other document are not necessarily
complete, and in each instance reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. Copies of the Registration
Statement and the exhibits thereto may be inspected without charge at the
offices of the Commission listed below, and copies of all or any part thereof
may be obtained from the Commission upon payment of prescribed fees.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
with the requirements of the Exchange Act, the Company files with the Commission
reports, proxy statements and other information which can be inspected and
copied at the offices of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661-2511; and World Trade Center, New York, New York
10048. Copies of such materials can be obtained at prescribed rates from the
Commission's Public Reference Section, Washington, D.C. 20549. The Commission
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference: (1) the
Company's Annual Report on Form 10-K/A for the fiscal year ended January 31,
1997 (the "1997 10-K"); (2) the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1997; (3) the Company's Proxy Statement dated June 5,
1997 in connection with the Annual Meeting of Stockholders held on July 11,
1997; (4) the Company's Current Report on Form 8-K dated June 30, 1997; (5) the
Company's Current Report on Form 8-K dated July 9, 1997; (6) the Company's
Current Report on Form 8-K dated July 14, 1997; and (7) the Company's Current
Report on Form 8-K dated July 21, 1997. In addition, all documents subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the termination of this offering shall be deemed to be
incorporated herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes any such statement. Any such statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS, WITHOUT EXHIBITS
(UNLESS SUCH EXHIBITS ARE INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS), ARE
AVAILABLE, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST FROM SCIENCE
APPLICATIONS INTERNATIONAL CORPORATION, 10260 CAMPUS POINT DRIVE, SAN DIEGO,
CALIFORNIA 92121, ATTENTION: CORPORATE SECRETARY (TELEPHONE 619-535-7323). IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT
LEAST FIVE BUSINESS DAYS PRIOR TO THE DATE ON WHICH A FINAL INVESTMENT DECISION
IS TO BE MADE.
2
<PAGE> 6
RISK FACTORS
Prior to purchasing the Class A Common Stock offered in the Prospectus,
purchasers should carefully consider all of the information contained in the
Prospectus and in particular should carefully consider the following factors:
CONCENTRATION OF REVENUE/DEPENDENCE ON GOVERNMENT CONTRACTS
Revenues generated from the sale of the Company's Technical Services
and Products (as such terms are defined on page 6) to the U.S. Government as a
prime contractor or subcontractor accounted for 79%, 83% and 86% of revenues in
fiscal years 1997, 1996 and 1995, respectively. U.S. Government spending has
declined in recent years, and the current Congress and presidential
administration have indicated that they intend to further reduce U.S. Government
spending. In addition, revenues from the U.S. Government continues to shift
toward lower cost service type contracts. The loss of a substantial amount of
government business could have a material adverse effect on the Company's
results of operations and financial condition. Although the Company has made
progress in its efforts to diversify into non-governmental business, it remains
heavily dependent upon business with the U.S. Government, and there can be no
assurances that the Company will be successful in expanding its customer base or
that any new customers will place orders for the Company's Technical Services or
Products in amounts comparable to those of the U.S. Government. See "The
Company."
POTENTIAL IMPACT OF ACQUISITION OF BELLCORE
On November 20, 1996, the Company entered into a definitive agreement
to acquire Bell Communications Research, Inc. ("Bellcore"), a provider of
telecommunications services, information networking software and consulting
services. As of December 31, 1996, Bellcore had approximately 5,500 employees
and annual revenues of approximately $1 billion. The acquisition is subject to
certain conditions, including regulatory approvals, and there is no assurance
that it will be completed. The acquisition, if completed, would result in a
substantial growth in both the employee base and commercial revenues of the
Company. The Company intends to finance a substantial portion of the purchase
price of Bellcore with debt financing. Such growth and additional debt may place
a significant strain on the Company's management, operational and financial
resources. There can be no assurance that the Company will be able to
effectively manage the expansion of its operations or that the Company's
systems, procedures or controls will be adequate to support the integration of
the acquired business. Any inability to effectively integrate the acquired
business or manage the growth could have a material adverse effect on the
Company's results of operations and financial condition. See "The Company."
DEPENDENCE ON ACQUISITIONS FOR GROWTH
A significant portion of the growth in the Company's revenues in recent
years has been achieved through acquisitions of businesses that complement the
Company's Technical Services and Products. Although the Company intends to make
additional acquisitions in the future, the number and size of the acquisitions
that the Company can complete may be limited due to the Company's proposed
acquisition of Bellcore. In addition, while the Company has been successful in
identifying and consummating acquisitions in the past, there can be no assurance
that it will be able to continue to make such acquisitions in the future at
prices that it considers reasonable or, if the acquisitions are consummated,
that the Company will be able to integrate the acquired business without
adversely affecting the Company's results of operations and financial condition.
See "The Company."
3
<PAGE> 7
COMPETITION
The businesses in which the Company is engaged are highly competitive.
The Company's competitors include larger organizations with substantially
greater financial resources and larger technical staffs, smaller, more highly
specialized entities and the U.S. Government's own in-house capabilities and
federal non-profit contract research centers. The Company's continued success is
dependent upon its ability to provide superior service and performance on a
cost-effective basis. See 1997 10-K, Item 1, "Business -- Competition."
EARLY TERMINATION OF 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. Modification, termination or curtailment of major programs or
contracts of the Company could have a material adverse effect on the Company's
results of operations and financial condition. Although such contract and
program modifications, terminations or curtailments have not had a material
adverse effect on the Company in the past, no assurance can be given that they
will not have such an effect in the future. See "Government Contracts."
POTENTIAL GOVERNMENT INQUIRIES AND INVESTIGATIONS
The Company is from time to time subject to certain U.S. Government
inquiries and investigations of its business practices. No assurance can be
given that any such inquiry or investigation would not have a material adverse
effect on the Company's results of operations and financial condition.
CONTRACT REVENUES SUBJECT TO AUDITS BY GOVERNMENT AGENCIES
Contract costs for services or products supplied to the U.S.
Government, including allocated indirect costs, are subject to audit and
adjustments by negotiations between the Company and U.S. Government
representatives. Substantially all of the Company's indirect contract costs have
been agreed upon through the fiscal year ended January 31, 1995. 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. See "Government Contracts."
FIXED PRICE CONTRACT EXPOSURE
During the fiscal years ended January 31, 1997, 1996 and 1995,
approximately 20%, 16% and 13%, respectively, of the Technical Services revenues
were from firm fixed-price type contracts, while the majority of Products
revenues in these three years were derived from such contracts. 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 reduced profits or losses for particular firm fixed-price
contracts. See "Government Contracts."
AT RISK CONTRACT COSTS
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 Technical Services and Products revenues at
January 31, 1997 were $13,009,000 and $967,000, respectively. The Company
expects to recover substantially all such costs; however, no assurance can be
given that the contracts or contract amendments will be received or that the
related costs will be recovered. See "Government Contracts."
4
<PAGE> 8
ABSENCE OF A PUBLIC MARKET
There is no public market for the Common Stock. The Company and the
trustees of the Company's and certain of its subsidiaries' employee benefit
plans are currently authorized, but not obligated, to purchase shares of Class A
Common Stock in the Limited Market on any Trade Date (as such terms are defined
on page 14), but only if and to the extent that they, in their discretion,
determine to make such purchases. To the extent that purchases by such trustees
or the Company are not sufficient, the ability of stockholders to resell their
shares in the Limited Market will likely be adversely affected. In each trade
occurring during the last two fiscal years, all shares of Class A Common Stock
offered for sale in the Limited Market were matched with buy orders and sold in
the Limited Market. No assurance, however, can be given that a stockholder
desiring to sell all or a portion of his or her shares of the Class A Common
Stock in any trade will be able to do so. See "Market Information -The Limited
Market."
OFFERING PRICE DETERMINED BY BOARD OF DIRECTORS
The offering price and the price at which the Class A Common Stock
trades in the Limited Market are, and subsequent prices will be, determined by
the Board of Directors pursuant to the valuation process described in the
Prospectus which utilizes the Formula (as such term is defined on page 16). The
Board of Directors generally has broad discretion to modify or even delete the
Formula. The Formula was last modified in 1995. The stock price is not
determined by the operation of a market of bargaining buyers and sellers.
Instead, the price is a value established by the Board of Directors pursuant to
the Formula and valuation process described on pages 16 through 18 which the
Board of Directors believes represents a fair market value. The Formula does not
specifically include variables reflecting all relevant financial and valuation
criteria. The mechanical application of the Formula, assuming a constant Market
Factor (as such term is defined on page 16), tends to smooth the impact on the
stock price of quarterly fluctuations in the Company's operating results because
the Formula takes into account the net income of the Company for the four
preceding quarters. See "Market Information -- Price Range of Class A Common
Stock and Class B Common Stock."
POSSIBLE VOLATILITY OF STOCK PRICE
The Formula Price of the Class A Common Stock could be subject to
greater fluctuations in the future than it has experienced in the past. The
increased volatility is expected to result from a number of factors, including
(i) plans to increase the proportion of the Company's business involving private
sector customer, international customers and information technology and the
greater stock price volatility associated with companies in such business areas,
(ii) the financial leverage impact of increased debt levels of the Company if
debt financing is used to finance the Bellcore acquisition or for other purposes
and (iii) other equity transactions that the Company may pursue, including
public offerings of securities of the Company's subsidiaries or affiliates.
NO ASSURANCES REGARDING FUTURE RETURNS
There can be no assurance that the Class A Common Stock will in the
future provide returns comparable to historical returns or that the Formula
Price will not decline. See "Market Information -- Price Range of Class A Common
Stock and Class B Common Stock."
NO CASH DIVIDENDS
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. See
"Dividend Policy."
5
<PAGE> 9
RESTRICTIONS ON CLASS A COMMON STOCK
Certain of the shares of Class A Common Stock presently outstanding
are, and all shares of Class A Common Stock offered hereby will be, subject to
certain restrictions (including a right of first refusal and a right of
repurchase upon termination of employment or affiliation and other restrictions
on their transferability) set forth in the Company's Certificate of
Incorporation. See "Description of Capital Stock -- Common Stock -Restrictions
on Class A Common Stock."
DEPENDENCE UPON KEY PERSONNEL
The Company's success will depend upon the continued contributions of
its founder, J.R. Beyster, its officers and key personnel, the loss of which
could materially adversely affect the Company's operations. The Company has not
generally entered into long-term employment contracts with its officers and key
employees. In addition, the Company does not maintain "key man" life insurance
for its officers or key employees.
ATTRACTION AND RETENTION OF SKILLED EMPLOYEES
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. Because of the
Company's growth and competitive business environment, it has become more
difficult to meet all of the Company's needs for such employees in a timely
manner. The Company intends to continue to devote significant resources to
recruit and retain qualified employees; however, no assurance can be given that
the Company will be able to attract and retain such employees on acceptable
terms. Any failure to do so could have a material adverse effect on the
Company's operations.
ANTI-TAKEOVER EFFECTS
Consistent with and in furtherance of the Company's employee ownership
philosophy, certain provisions of the Company's Certificate of Incorporation and
Bylaws may discourage, delay, or prevent attempts to acquire control of the
Company that are not approved by the Company's Board of Directors. The
provisions may, individually or collectively, have the effect of discouraging
takeover attempts that some stockholders might deem to be in their best
interests, including tender offers in which stockholders might receive a premium
for their shares over the Formula Price, as well as making it more difficult for
individual stockholders or a group of stockholders to elect directors. See
"Description of Capital Stock -- Anti-Takeover Effects."
THE COMPANY
Since its founding in 1969, the Company has been engaged in providing
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, Department of
Veterans Affairs ("VA"), Environmental Protection Agency and National
Aeronautics and Space Administration. Revenues generated from the sale of
Technical Services and Products to the U.S. Government as a prime contractor or
subcontractor accounted for 79%, 83% and 86% of revenues in fiscal years 1997,
1996 and 1995, 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. See "Risk Factors --
Concentration of Revenue/Dependence on Government Contracts."
The percentage of revenues attributable to Technical Services has
increased since fiscal year 1995 while Product revenues have correspondingly
decreased. Technical Services revenues and Product revenues were 94% and 6%,
respectively, for fiscal year 1997; 93% and 7%, respectively, for fiscal year
1996; and 91% and 9%,
6
<PAGE> 10
respectively, for fiscal year 1995. On March 7, 1997, the Company sold its
Science Applications International Technologies business unit, which designed,
manufactured and sold certain ruggedized computers and display products and
accounted for 49% of the Company's Product revenues in fiscal year 1997. The
Company provides Technical Services primarily in the areas of "National
Security," "Health," "Environment," "Energy" and "Other Technical Services," the
last of which includes the Company's transportation, commercial information
technology and space business areas. The percentage of Technical Services
revenues attributable to National Security-related work has gradually declined
to 44% of total revenues for fiscal year 1997. For fiscal year 1997, the Health,
Environment, Energy and Other Technical Services business areas accounted for
14%, 11%, 5% and 20%, respectively, of total revenues.
A significant portion of the growth in the Company's revenues in recent
years has been achieved through acquisitions of businesses that complement the
Company's Technical Services. Acquisitions of businesses in fiscal years 1997
and 1995 were primarily financed with cash and in fiscal year 1996 were made
primarily with issuance of Class A Common Stock. On November 20, 1996, the
Company entered into a definitive agreement to acquire Bellcore, a provider of
telecommunications services, information networking software and consulting
services. As of December 31, 1996, Bellcore had approximately 5,500 employees
and annual revenues of approximately $1 billion. The acquisition is subject to
certain conditions, including regulatory approvals, and there is no assurance
that it will be completed. The acquisition, if completed, would result in a
substantial growth in both the employee base and commercial revenues of the
Company. The Company intends to finance a substantial portion of the purchase
price of Bellcore with debt financing. Such growth and additional debt may place
a significant strain on the Company's management, operational and financial
resources. Although the Company expects to continue to acquire businesses and
equity interests in other businesses in the future, the number and size of such
transactions that the Company can complete may be limited due to the Company's
proposed acquisition of Bellcore. In addition, while the Company has been
successful in identifying and consummating acquisitions in the past, there can
be no assurance that it will be able to continue to make such acquisitions in
the future at prices that it considers reasonable or, if the acquisitions are
consummated, that the Company will be able to integrate the acquired businesses
(including the businesses acquired from Bellcore, if that transaction is
consummated) without adversely affecting the Company's results of operations.
See "Risk Factors -- Potential Impact of Acquisition of Bellcore " and "--
Dependence on Acquisitions for Growth."
As of March 14, 1997, the Company had approximately 22,600 employees
and did business at over 330 locations throughout the world. The Company's
principal executive offices are located at 10260 Campus Point Drive, San Diego,
CA 92121, telephone (619) 546-6000. As used in this Prospectus, all references
to the Company include, unless the context indicates otherwise, Science
Applications International Corporation 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; the range of services includes architectural
definition, systems and software engineering, systems
installation, training and site support.
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<PAGE> 11
- Information and telecommunication 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 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 for a wide variety of
government customers.
- Design, integration, implementation and operation of
battlefield simulation training ranges on land, air and sea.
- Systems engineering and technical assistance for cruise
missiles, unmanned aerial vehicles, 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.
- 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 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.
- System engineering, development, integration and related
services for the intelligence community.
8
<PAGE> 12
HEALTH
The Company provides health-related Technical Services to government
and commercial customers, including medical information systems, technology
development and research support services. Examples of the Company's Technical
Services in the health area include the following:
- 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.
- Information engineering, software development and program
support for the Department of Health and Human Services and
the National Institutes of Health.
- Design, development and operation of health information
networks for integrated healthcare delivery systems for
commercial healthcare clients.
- Research support services to the National Cancer
Institute-Frederick Cancer Research and Development Center,
including management and operations support, quality and
safety operations, ongoing research and research support
tasks.
- 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, as well as
biomedical service and management of government facilities.
- Preclinical product development services for the
pharmaceutical, biotechnology and medical device community,
including veterinary pathology, Food and Drug Administration
requirements analysis, quality assurance and Good Laboratory
Practices consulting, special toxicological assay development
and performance, client site services, and the development and
management of complete product development programs (virtual
product development).
ENVIRONMENT
In the environmental area, the Company performs site assessments,
remedial investigations 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,
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
9
<PAGE> 13
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.
- 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 transportation, commercial information
technology and space. Examples of other Technical Services provided by the
Company include the following:
10
<PAGE> 14
- Development, installation and operation of computer and
telecommunications systems for various transportation
applications, including automated toll revenue collection,
rail asset and freight management, internodal 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.
- 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.
- Information technology and automatic data processing
outsourcing services for commercial clients.
- 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 and information security, technical surveillance
countermeasures, intrusion detection, access control and
physical plant threat assessments and vulnerability analysis.
- Safety, reliability and quality assurance engineering support
for NASA's Space Shuttle and Space Station programs.
- Internet domain name registration and related services and
Intranet consulting and network design and implementation
services.
- Undersea data collection and transmission systems and
services, including deep water systems, telecommunications
cable systems and hydrographic survey systems and other
services in the areas of hydrography, physical oceanography,
diving, vessel operation and management, marine studies and
other maritime studies and analysis.
PRODUCTS
The Company designs, develops and manufactures high-technology products
for government and commercial customers. Examples of the Company's Products
include the following:
- Automatic equipment identification technology for rail, truck,
air and sea transportation modes.
- Digital and analog recording products, signal reconnaissance
data processors and telecommunications products for the
intelligence community.
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 generally would
be reimbursed for its allowable costs through the date
11
<PAGE> 15
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. See "Risk
Factors -- Early Termination of Government Contracts."
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 customer reimburses 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 reduced profits or losses for particular
firm fixed-price contracts. See "Risk Factors -- Fixed Price Contract Exposure."
During the fiscal years ended January 31, 1997, 1996 and 1995,
approximately 57%, 57% and 63%, respectively, of Technical Services revenues
were derived from cost-reimbursement type contracts and approximately 20%, 16%
and 13%, 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
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 and Product
revenues, exclusive of related fees, at January 31, 1997 were approximately
$13,009,000 and $967,000 respectively. The Company expects to recover
substantially all such costs; however, no assurance can be given that the
contracts or contract amendments will be received or that the related costs will
be recovered. See "Risk Factors -- At Risk Contract Costs."
Contract costs for services or products supplied to the U.S.
Government, including allocated indirect costs, are subject to audit and
adjustments by negotiations between the Company and U.S. Government
representatives. Substantially all of the Company's indirect contract costs have
been agreed upon through the fiscal year ended January 31, 1995. 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. See "Risk Factors -Contract Revenues
Subject to Audits by Government Agencies."
The Company is from time to time subject to certain U.S. Government
inquiries and investigations of its business practices. The Company does not
anticipate any action as a result of such inquiries and investigations that
would have a material adverse effect on its consolidated financial position or
results of operations or its ability to conduct business. See "Risk Factors --
Potential Government Inquiries and Investigations."
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<PAGE> 16
THE OFFERING
The offering consists of up to 3,000,000 shares of Class A Common Stock
which may be offered by the Company from time to time pursuant to this
Prospectus in connection with one or more Acquisitions (the "Offering"). The
consideration to be offered by the Company in Acquisitions may include
Acquisition Shares, cash, promissory notes, the assumption of liabilities,
commitments to make future capital contributions to the business to be acquired
or any combination thereof. Acquisitions may be accomplished by one or more
methods, including but not limited to the acquisition by the Company of stock,
partnership interests, limited liability company interests or assets of a
business or entity to be acquired or the merger or consolidation of such
corporation or entity with the Company or a subsidiary of the Company. The
amount and type of consideration to be offered and the other terms of each
Acquisition will be determined by negotiations between the Company and the
owners or controlling persons of the business or assets to be acquired and will
be set forth in a definitive agreement among such parties governing such
Acquisition (an "Acquisition Agreement"). The Company expects that, in most
cases, the aggregate market value of the Acquisition Shares to be issued in
connection with any Acquisition will be determined upon signing or closing of
the Acquisition Agreement relating to such Acquisition (subject to post-closing
adjustments, if any). Such Acquisition Shares may be issued in installments or
subject to contingencies or vesting requirements. It is not expected that any
individual who is or has been an officer, director, employee or affiliate of
SAIC or any of its subsidiaries will be receiving any shares of Class A Common
Stock offered hereby.
The Company's acquisition strategy is primarily to target companies or
business operations that would add new or complementary technologies,
capabilities or customers. In circumstances where it is financially attractive
to the Company, the Company may also acquire companies or business operations
involving existing capabilities or customers in order to increase its presence
in the relevant markets.
The Company anticipates that none of the Acquisitions will require the
approval of the stockholders of SAIC. Therefore, under Delaware law, holders of
the Class A Common Stock and the Class B Common Stock, par value $.05 per share
(the "Class B Common Stock"), would not have any dissenters' rights with respect
to any of the Acquisitions. Generally, to the extent that any Acquisition
involves the sale of all or substantially all of the assets of the company to be
acquired (the "Acquired Company") or the merger or consolidation of the Acquired
Company with SAIC or a subsidiary of SAIC, such Acquisition would require the
approval of the stockholders of the Acquired Company in accordance with the laws
of the state of incorporation of the Acquired Company and/or its certificate or
articles of incorporation. The availability of appraisal or similar rights to
dissenting stockholders of the Acquired Company will also be a matter to be
determined under the law of the state of incorporation of the Acquired Company
and/or its certificate or articles of incorporation.
The Offering will be conducted primarily through the efforts of the
Company's management. No officer, director, employee or affiliate of the Company
is expected to receive any direct or indirect compensation relating to the
Offering, nor is any such person expected to have any material interest, direct
or indirect, in any Acquisition under consideration by the Company. Under
certain circumstances, persons who receive Acquisition Shares and who wish to
offer and sell such shares, on terms then obtainable, may be deemed to be
underwriters within the meaning of the Securities Act. In addition, if permitted
by law, the Company may pay finders' fees from time to time in connection with
specific Acquisitions. Finders' fees may be in the form of cash but will not be
paid in shares of Class A Common Stock offered hereby. Any person receiving any
such fees may be deemed underwriters within the meaning of the Securities Act
and such fees may be regarded as underwriting compensation under the Securities
Act.
The Company expects to account for the Acquisitions by the purchase
method of accounting in which case the stock or assets acquired will be valued
based on the fair market value of the consideration, including the Acquisition
Shares, paid or payable therefor.
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<PAGE> 17
The federal income tax consequences of Acquisitions are likely to
differ as a function of the structure of each specific Acquisition, the terms of
the governing Acquisition Agreement and other factors. Until each specific
Acquisition is structured, it is not possible to determine the federal income
tax consequences of such Acquisition to the Company, the Acquired Company or its
stockholders. However, it is expected that no Acquisition will have significant
federal income tax consequences to the Company. On the other hand, the federal
income tax consequences to the Acquired Company or its stockholders may be
significant. Therefore, before deciding whether to participate in or to approve,
consent or otherwise authorize an Acquisition in which the Acquired Company or
its stockholders would receive Acquisition Shares (in total or partial
consideration thereof), the Acquired Company and each such stockholder should
consult their own tax advisors as to the tax consequences of such transaction.
RESALES BY AFFILIATES OF ACQUIRED COMPANIES
This Prospectus, as appropriately amended or supplemented, has also
been prepared for use by those persons who may receive Acquisition Shares from
the Company and who are deemed to control, be controlled by or under common
control with the Acquired Company. Such persons (referred to under this caption
as "Affiliates") may be entitled to offer and sell such Class A Common Stock, on
terms then obtainable, under circumstances requiring the use of a Prospectus;
provided, however, that no such Affiliate will be authorized to use this
Prospectus for any offer or sale of such Class A Common Stock without first
obtaining the consent of the Company. The Company may consent to the use of this
Prospectus, together with a Prospectus Supplement, if required (as discussed
below), for a limited period of time by such Affiliates and subject to
limitations and conditions which may be varied by agreement between the Company
and such Affiliates. Resales of such shares may be on the Limited Market (as
defined below) or in private transactions. In connection with such transactions,
such Affiliates may be deemed to be underwriters within the meaning of the
Securities Act. Any profits realized on such sales by such Affiliates may be
regarded as underwriting compensation. When resales on behalf of such Affiliates
are to be made through the Limited Market, the Affiliates, like all stockholders
selling shares in the Limited Market (other than the Company and certain
employee benefit plans of the Company), will pay the Company's wholly-owned,
broker-dealer subsidiary, Bull, Inc., a commission equal to two percent of the
proceeds from their sales. See "Market Information -- The Limited Market." In
connection with such sales, Bull, Inc. may be deemed to be an underwriter within
the meaning of the Securities Act and any commissions earned by Bull, Inc. may
be deemed to be underwriting compensation under the Securities Act. A Prospectus
Supplement, if required, will be filed under Rule 424(c) under the Securities
Act, disclosing the number of shares involved, the price at which such shares
were sold by such Affiliate, the commissions to be paid by such Affiliate to
Bull, Inc. and information about the Affiliate.
MARKET INFORMATION
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, broker-dealer subsidiary, Bull,
Inc., which was organized in 1973 for the purpose of maintaining the Limited
Market.
The Limited Market generally permits existing stockholders to sell
shares of Class A Common Stock on four predetermined days each year (each a
"Trade Date"). All shares of Class B Common Stock to be sold in the Limited
Market must first be converted into five times as many shares of Class A Common
Stock. All sales are made at the prevailing Formula Price to employees,
directors and consultants 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 up to a specified number of shares of Class A Common Stock. In
addition, the trustees of the
14
<PAGE> 18
Company's Employee Stock Ownership Plan ("ESOP"), Cash or Deferred Arrangement
("CODA"), 1995 Stock Purchase Plan, Stock Compensation Plan, Management Stock
Compensation Plan, Key Executive Stock Deferral Plan, and the Syntonic
Technology, Inc. Retirement Savings Plan ("Syntonic Savings Plan")
(collectively, the "Benefit Plans") 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 certain employee benefit plans of the
Company), pay Bull, Inc. a commission equal to two percent of the proceeds from
such sales. No commission is paid by purchasers in the Limited Market.
In the event that the aggregate number of shares offered for sale in
the Limited Market on any Trade Date is greater than the aggregate number of
shares sought to be purchased by authorized buyers and the Company, offers by
stockholders 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 such stockholder, will be accepted first. Offers to sell 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.
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 years 1997 and 1996, the Company purchased 117,163 shares
and 33,372 shares, respectively, in the Limited Market. The Company's purchases
in fiscal years 1997 and 1996 accounted for 6.2% and 2.2%, respectively, of the
total shares purchased by all buyers in the Limited Market during those years.
During the 1997 and 1996 fiscal years, the trustees of the CODA, 1993
Employee Stock Purchase Plan, 1995 Employee Stock Purchase Plan and the Syntonic
Savings Plan purchased an aggregate of 1,148,829 shares and 1,045,711 shares,
respectively, in the Limited Market. These purchases accounted for approximately
60.9% and 67.2% of the total shares purchased by all buyers in the Limited
Market during fiscal years 1997 and 1996, 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. Although all shares of Class A Common
Stock offered for sale were sold in the Limited Market on each Trade Date
occurring during the last two fiscal years, 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 future trade will be able to do so. See
"Risk Factors -- Absence of a Public Market."
To the extent that the aggregate number of shares sought to be
purchased by authorized buyers exceeds the aggregate number of shares offered
for sale by stockholders, the Company may, but is not obligated to, sell
authorized but unissued shares of Class A Common Stock in the Limited Market. In
fiscal years 1997 and 1996, the Company sold an aggregate of 85,505 and 246,831
authorized but unissued shares of Class A Common Stock, respectively, in the
Limited Market. The Company's sales in fiscal years 1997 and 1996 accounted for
4.5% and 15.9%, respectively, of the total shares sold by all sellers in the
Limited Market during such years. To the extent that the Company chooses not to
sell authorized but unissued shares of Class A Common Stock in the Limited
Market, the ability of individuals to purchase shares on the Limited Market may
be adversely affected. No assurance can be given that an individual desiring to
buy shares of the Company's Class A Common Stock in any trade will be able to do
so.
15
<PAGE> 19
PRICE RANGE OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The price of the Class A Common Stock is established by the Board of
Directors pursuant to the valuation process described below, which includes the
formula set forth below. The Board of Directors sets the Market Factor at the
value which causes the Formula to yield the price which the Board of Directors
believes represents a fair market value. The Formula Price is the price at which
the Class A Common Stock trades in the Limited Market and 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 Company's Certificate of Incorporation, the
price applicable to shares of Class B Common Stock is equal to five times the
Formula Price. See "Risk Factors -- Offering Price Determined by Formula."
The following formula (the "Formula") is one element of the valuation
process 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 determination 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 ("W1") 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 determination ("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 to cause the price
generated by the Formula to equal the fair market value of the Class A Common
Stock as determined by the Board of Directors following an amendment of the
Formula. The 5.66 multiplier has not been assessed for change since that time.
The Market Factor is a numerical factor which is reviewed and set by the Board
of Directors as part of the valuation process. Historical values for each
variable contained in the Formula are set forth in the table on pages 17 and 18.
In determining the price of the Class A Common Stock, the Board of
Directors considers the performance of the general securities markets and
relevant industry groups, the historical financial performance of the Company
versus comparable public companies, the prospects for the Company's future
performance, general economic conditions, input from an independent appraisal
firm and other relevant factors. The Board of Directors sets the Market Factor
at the value which causes the Formula to yield a price equal to the Board of
Directors' assessment of a fair market value for the Class A Common Stock. In
conjunction with the Board of Directors' valuation process, an appraisal of the
Class A Common Stock is prepared by an independent appraisal firm for the
committees administering the qualified retirement plans of the Company and
certain of its subsidiaries (collectively, the "Committee"). Valuation input
from the appraiser is one of the factors considered by the Board of Directors in
establishing the Formula Price. The Formula Price and Market Factor, as
determined by the Board of Directors, remains in effect until subsequently
changed by the Board of Directors. The price of the Class A Common Stock and the
Market Factor could be subject to greater fluctuations in the future than in the
past due to the Company's plans to increase (i) the proportion of the Company's
business involving private sector customers, international customers and
information technology, (ii) the financial leverage impact of increased debt
levels of the Company if debt financing is used to finance the Bellcore
acquisition or for other purposes and (iii) other equity transactions that the
Company may pursue. See "Risk Factors -- Possible Volatility of Stock Price."
The Formula Price of the Class A Common Stock, expressed as an
equation, is as follows:
Formula Price = E + 5.66MP
------ ----------
W1 W
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<PAGE> 20
A valuation formula containing consideration of stockholder equity and
earnings per share was first used by the Board of Directors in establishing the
stock price of the Class A Common Stock in 1972. The formula was amended in
1973, by inclusion of the Market Factor, to reflect the broad range of business,
financial and market forces that also affect the fair market value of the Class
A Common Stock. The Board of Directors has a fiduciary responsibility to
establish a value for the Class A Common Stock which it believes to represent a
fair market value. The formula is one element of the valuation process used by
the Board of Directors. As the nature of the Company's business and financial
position has evolved, and as the nature of the market has evolved, the value
assigned by the Board of Directors to the Market Factor has been subject to
larger and more frequent changes. Nonetheless, the Board of Directors has found
that the formula continues to be a useful element in the valuation process.
The Board of Directors has broad discretion to modify or even delete
the Formula in its entirety. Nevertheless, 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. 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 Common 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. See "Risk Factors -- Offering Price Determined by Board of
Directors."
The following table sets forth information concerning the Formula Price
for the Class A Common Stock, the applicable price for the Class B Common Stock
and each of the variables contained in the Formula, including 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. See "Risk Factors -- No
Assurances Regarding Future Returns." The Board of Directors believes that the
valuation process results in a fair market value for the Class A Common Stock
within a broad range of financial criteria.
<TABLE>
<CAPTION>
"W" or Price Price
"M" or "E" or "W1" or Weighted Per Share Per Share
Market Stockholders' Shares "P" or Avg. Shares of Class A of Class B
Date Factor Equity(1) Outstanding(2) Earnings(3) Outstanding(4) Common Stock Common Stock
---- ------ ------------ -------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
July 14, 1995...... 1.60 411,359,000 49,631,252 52,195,000 49,743,769 $ 17.79 $ 88.95
October 13, 1995... 1.60 430,713,000 50,443,296 53,983,000 50,218,431 $ 18.27 $ 91.35
January 12, 1996... 1.70 447,858,000 50,880,566 55,511,000 50,752,815 $ 19.33 $ 96.65
April 12, 1996..... 1.80 459,097,000 50,848,815 57,296,000 51,306,036 $ 20.41 $ 102.05
July 12, 1996...... 2.00 476,734,000 51,526,715 57,601,000 51,594,455 $ 21.89 $ 109.45
October 11, 1996... 2.10 482,172,000 51,418,186 58,657,000 51,830,619 $ 22.83 $ 114.15
January 10, 1997... 2.40 507,235,000 52,094,779 62,098,000 52,003,218 $ 25.96 $ 129.80
April 11, 1997..... 2.40 527,459,000 52,682,394 63,680,000 52,308,789 $ 26.55 $ 132.75
July 11, 1997...... 2.70 559,284,000 53,556,198 67,459,000 52,695,291 $ 30.01 $ 150.05
</TABLE>
-------------------------------------------
17
<PAGE> 21
(1) "E" or Stockholders' Equity is the stockholders' equity of the Company at
the end of the fiscal quarter immediately preceding the date on which a
price determination is to occur.
(2) "W1" or Shares Outstanding is the number of outstanding common shares and
common share equivalents at the end of that fiscal quarter.
(3) "P" or Earnings is the earnings of the Company for the four fiscal quarters
immediately preceding the price determination.
(4) "W" or Weighted Average Shares Outstanding is the weighted average number
of outstanding common shares and common share equivalents for the four
fiscal quarters immediately preceding the price determination, as used by
the Company in computing primary earnings per share.
18
<PAGE> 22
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. See "Risk
Factors -- No Cash Dividends."
SELECTED FINANCIAL DATA
The following table sets forth certain consolidated financial data for
the Company for the periods indicated and should be used in conjunction with the
Consolidated Financial Statements and Financial Statement Schedules, related
notes and other financial information appearing in the documents incorporated
herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
===================================================================================
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Amounts in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues............................... $2,402,224 $2,155,657 $1,921,880 $1,670,882 $1,504,112
Cost of revenues....................... 2,092,254 1,875,072 1,692,623 1,477,701 1,327,992
Selling, general and
administrative expenses.............. 191,836 173,742 146,083 120,387 113,174
Interest expense....................... 4,925 4,529 3,468 2,966 2,841
Provision for income taxes............. 49,529 45,018 30,654 28,328 22,030
---------- ---------- ---------- ---------- ----------
Net income............................. $ 63,680 $ 57,296 $ 49,052 $ 41,500 $ 38,075
==========
Earnings per share(1).................. $ 1.23 $ 1.13 $ 1.01 $ .89 .83
========== ========== ========== ========== ==========
Average number of shares
outstanding, including
common stock equivalents............. 52,309 51,306 49,264 47,429 46,179
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31
===================================================================================
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Total assets......................... $1,012,462 $859,290 $752,584 $611,575 $523,613
Working capital...................... 270,553 227,185 173,467 206,580 174,797
Long-term liabilities................ 44,341 34,116 29,759 25,965 25,851
Stockholders' equity................. 527,459 458,132 386,760 334,597 280,047
</TABLE>
- ---------------------------
(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.
19
<PAGE> 23
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 100,000,000 shares of Class A Common
Stock, par value $.01 per share, 5,000,000 shares of Class B Common Stock, par
value $.05 per share, and 3,000,000 shares of Preferred Stock, par value $.05
per share (the "Preferred Stock"). As of April 11, 1997, there were 49,473,672
shares of Class A Common Stock, 322,319 shares of Class B Common Stock and no
shares of Preferred Stock issued and outstanding. The Class A Common Stock and
the Class B Common Stock are sometimes collectively or individually referred to
as the "Common Stock."
COMMON STOCK
GENERAL
Except as otherwise provided by law, the holders of shares of Class A
Common Stock and Class B Common Stock vote together as a single class in all
matters, with each holder of Class A Common Stock having one vote per share and
each holder of Class B Common Stock having five votes per share. The holders of
shares of Class A Common Stock and Class B Common Stock are entitled to cumulate
their votes for the election of directors. Cumulative voting entitles each
stockholder to cast the number of votes that equals the number of shares of
Class A Common Stock or five times the number of shares of Class B Common Stock
held by such stockholder multiplied by the number of directors to be elected.
Each stockholder may cast all of such votes for a single nominee or may
distribute them among any two or more nominees as such stockholder sees fit. The
Certificate of Incorporation provides for a classified Board of Directors
consisting of three classes of directors, as nearly as equal in number as
practicable. The number of authorized directors is currently fixed at 22
directors, of which eight are Class I and the remaining positions are evenly
divided between Class II and Class III directors. Each year the stockholders
elect a different class of directors to serve a three-year term. As a result of
the classification of the Board of Directors, the votes of a greater number of
shares would be required to ensure the election of a director than would be
required without such classification.
Subject to the prior rights of the holders of any Preferred Stock then
outstanding, the holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends, out of funds legally available therefor, when and
as declared by the Board of Directors and to participate equally and ratably in
the net assets of the Company available for distribution in the event of
liquidation, dissolution or winding up, after payment of any amounts due to
creditors; provided, however, that any dividend or distribution with respect to
a share of Class B Common Stock must be five times the dividend or distribution,
as the case may be, with respect to a share of Class A Common Stock.
Holders of Class A Common Stock have no conversion rights and holders
of Class A Common Stock and Class B Common Stock have no preemptive or
subscription rights. Neither class of Common Stock may be subdivided,
consolidated, reclassified or otherwise changed unless the relative powers,
preferences, rights, qualifications, limitations and restrictions applicable to
the other class of Common Stock are maintained. In any merger, consolidation or
business combination to which the Company is a party (other than a merger,
consolidation or business combination in which the Company is the surviving
corporation and which does not result in any reclassification of or change in
the outstanding shares of Common Stock), the consideration to be received with
respect to each share of Class B Common Stock must be equal to five times the
consideration to be received with respect to each share of Class A Common Stock,
except that if capital stock is distributed in any such transaction, such shares
may differ as to the rights of the holders thereof only to the extent that such
rights differ pursuant to Article FOURTH of the Certificate of Incorporation.
All shares of Class A Common Stock and Class B Common Stock presently
outstanding are, and the shares offered hereby upon full payment therefor will
be, fully paid and nonassessable.
20
<PAGE> 24
Pursuant to the terms of the Certificate of Incorporation, the Company
is prohibited from issuing any additional shares of Class B Common Stock. Each
share of Class B Common Stock is convertible at any time, at the option of the
holder thereof, into five shares of Class A Common Stock, and all shares of
Class B Common Stock reacquired by the Company will be retired and will not be
available for reissuance.
Article FOURTEENTH of the Certificate of Incorporation generally
requires that mergers and certain other business combinations ("Business
Combinations") between the Company and any holder of 5% or more of the Company's
outstanding voting power (a "Related Person") must be approved by the holders of
securities having 80% of the Company's outstanding voting power, as well as by
the holders of a majority of such securities that are not owned by the Related
Person. Under Delaware law, unless the Certificate of Incorporation provides
otherwise, only a majority of the Company's outstanding voting power is required
to approve certain of these transactions, such as mergers and consolidations,
while certain other of these transactions would not require stockholder
approval.
The 80% and majority of independent voting power requirements of
Article FOURTEENTH (the "Supermajority Vote Requirements") will not apply,
however, to a Business Combination with a Related Person, if (i) the transaction
is approved by the Board of Directors prior to the time the Related Person
becomes a Related Person (i.e., prior to the time the Related Person acquired
beneficial ownership of 5% or more of the Company's outstanding voting power),
(ii) the transaction is approved by at least a majority of the members of the
Board of Directors who are unaffiliated with the Related Person and who were
directors before the Related Person became a Related Person or (iii) the
Business Combination involves only the Company and one or more of its
subsidiaries and certain other conditions are satisfied.
Article FOURTEENTH also provides that in the event a Business
Combination with a Related Person subject to the Supermajority Vote Requirements
is consummated, stockholders of the Company who voted against the Business
Combination, at their option, will have the right to receive a price which is
equal to (i) the price offered by the Related Person in the Business Combination
or (ii) the greater of (a) the highest price per share paid by the Related
Person in acquiring shares of capital stock of the Company or (b) a price which
bears the same percentage relationship to the market price of the Company's
capital stock immediately preceding the announcement of the Business Combination
as the highest price paid by the Related Person for any of the Company's capital
stock bears to the market price of the Company's capital stock immediately
before the Related Person initially acquired any shares of the Company's capital
stock.
Article FOURTEENTH was adopted by the stockholders of the Company at
the 1983 Annual Meeting of Stockholders and the full text of such Article
appeared as Exhibit B to the Company's Proxy Statement for that meeting.
Additional copies of Article FOURTEENTH may be obtained, upon request, by
writing the Company at 10260 Campus Point Drive, San Diego, CA 92121, Attention:
Corporate Secretary.
The amendment of certain provisions of the Certificate of Incorporation
and Bylaws require the approval of not less than two-thirds of the total voting
power of all outstanding shares of voting stock of the Company. Such provisions
relate to the number of directors, the election of directors and the vote of
stockholders required to modify the provisions of the Certificate of
Incorporation and Bylaws requiring such approvals.
The Company acts as its own transfer agent for the Class A Common Stock
and the Class B Common Stock.
As of April 11, 1997, there were 13,766 record holders of Class A
Common Stock and 146 record holders of Class B Common Stock.
21
<PAGE> 25
RESTRICTIONS ON CLASS A COMMON STOCK
All the shares of Class A Common Stock presently outstanding are, and
all shares of Class A Common Stock offered hereby will be, subject to certain
restrictions (including restrictions on their transferability) set forth in
Article FOURTH of the Certificate of Incorporation, which restrictions provide
substantially as follows:
Right of Repurchase upon Termination of Employment or Affiliation
All shares of Class A Common Stock owned by a person who is an employee
or director of, or a consultant to, the Company (except for shares of Class A
Common Stock that are held by a stockholder who received such shares (i) in
connection with the reorganization of the Company in 1984 in exchange for shares
of the Company which immediately prior thereto were not subject to a right of
repurchase upon termination of employment or affiliation on the part of the
Company, (ii) upon exercise of a non-qualified stock option granted prior to
October 1, 1981 under the Company's 1979 Stock Option Plan which were not
converted into ISOs, (iii) in exchange for shares of Class B Common Stock that
were not subject to a right of repurchase upon termination of employment or
affiliation on the part of the Company or (iv) pursuant to a stock dividend or a
stock split on the outstanding shares of Class A Common Stock which have been
theretofore issued under any of the circumstances described in clauses (i),
(ii), (iii) or this clause (iv)) will be subject to the Company's right of
repurchase upon the termination of such holder's employment or affiliation with
the Company. Such right of repurchase will also be applicable to all shares of
Class A Common Stock which such person has the right to acquire after his or her
termination of employment or affiliation pursuant to any of the Company's
employee benefit plans (other than the Employee Stock Ownership Plan or any
other retirement or pension plan adopted by the Company or any of its
subsidiaries which by its terms does not provide for the Company's right to
repurchase shares issued thereunder upon termination of employment or
affiliation) or pursuant to any option or other contractual right to acquire
shares of Class A Common Stock which was outstanding at the date of such
termination of employment or affiliation.
The Company's right of repurchase is exercised by mailing a written
notice to such holder within 60 days following termination of employment or
affiliation. If the Company repurchases the shares, the price will be the
Formula Price per share (i) on the date of such termination of employment or
affiliation, in the case of shares owned by the holder at that date and shares
issuable to the holder after that date pursuant to any option or other
contractual right to acquire shares of Class A Common Stock which were
outstanding at that date or (ii) on the date such shares are distributed to the
holder, in the case of shares distributable to the holder after his or her
termination of employment or affiliation pursuant to any of the Company's
employee benefit plans. The Company will, in the event it exercises its right of
repurchase upon termination of employment or affiliation, pay for such shares in
cash within 90 days after the date referred to in (i) or (ii) above, as the case
may be.
Notwithstanding the provisions of the Certificate of Incorporation and
the Employee Benefit Plans, a retiring employee of the Company who meets certain
criteria can elect to defer the repurchase of the employee's shares for five
years under the Company's Alumni Program. Under the Alumni Program, an employee
who is over 59 1/2 and has more than 10 years of employment with the Company at
the date of his or her retirement can elect to have the Company defer its right
to repurchase by executing and delivering to the Company an agreement within 60
days following the date of employee's termination. If the employee makes such an
election, transferees of the employee's shares are also eligible to make the
same deferral election with respect to shares of stock transferred to them by
the employee. During the five-year deferral period, the stockholder may offer
shares of stock for sale in the Limited Market or make transfers to family
members. At the end of the five-year deferral period, all such shares will be
subject to repurchase by the Company at the then current Formula Price. The
Alumni Program pertains only to the deferral of the Company's right of
repurchase and does not provide the employee any rights with respect to the
vesting or forfeiture of any shares or options held by the employee at the date
of his or her retirement or guarantee the repurchase at the end of the deferral
period.
22
<PAGE> 26
Right of First Refusal
In the event that a holder of Class A Common Stock desires to sell any
of his or her shares to a third party other than in the Limited Market, such
person must first give notice to the Corporate Secretary of the Company
consisting of: (i) a signed statement setting forth such holder's desire to sell
his or her shares of Class A Common Stock and that he or she has received a bona
fide offer to purchase such shares; (ii) a statement signed by the intended
purchaser containing (a) the intended purchaser's full name, address and
taxpayer identification number, (b) the number of shares to be purchased, (c)
the price per share to be paid, (d) the other terms under which the purchase is
intended to be made and (e) a representation that the offer, under the terms
specified, is bona fide and (iii) if the purchase price is payable in cash, in
whole or in part, a copy of a certified check, cashier's check or money order
payable to such holder from the purchaser in the amount of the purchase price to
be paid in cash.
Upon receiving such notice, the Company will have the right,
exercisable within 14 days, to purchase all of the shares specified in the
notice at the offer price and upon the same terms as set forth in the notice. In
the event the Company does not exercise such right, the holder may sell the
shares specified in the notice within 30 days thereafter to the person specified
in the notice at the price and upon the terms and conditions set forth therein.
The holder may not sell such shares to any other person or at any different
price or on any different terms without first re-offering the shares to the
Company.
Transfers Other than by Sale
Except for sales in the Limited Market and as described above, no
holder of Class A Common Stock may sell, assign, pledge, transfer or otherwise
dispose of or encumber any shares of Class A Common Stock without the prior
written approval of the Company. Any attempt to do so without such prior
approval will be null and void. The Company may condition its approval of a
transfer of any shares of Class A Common Stock, other than by sale by an
employee, director or a consultant of the Company or by a person who acquired
such shares other than by purchase, directly or indirectly, from an employee,
director or consultant of the Company, upon the transferee's agreement to hold
such shares subject to the Company's right to repurchase such shares upon the
termination of employment or affiliation of the employee, director or
consultant.
Lapse or Waiver of Restrictions
All restrictions upon the shares of Class A Common Stock will
automatically terminate (i) if the Company makes an underwritten offering of
either class of its Common Stock, or securities convertible into any class of
its Common Stock, to the general public or (ii) if the Company applies to have
any class of its Common Stock, or securities convertible into any class of its
Common Stock, listed on a national securities exchange. In addition, the Board
of Directors may waive any or all of the restrictions on shares of Class A
Common Stock in such other circumstances as the Board deems appropriate. See
"Risk Factors -- Restrictions on Class A Common Stock."
RESTRICTIONS ON CLASS B COMMON STOCK
Substantially all of the presently outstanding shares of Class B Common
Stock are subject to a right of first refusal on the part of the Company in the
event a stockholder desires to sell his or her shares of Class B Common Stock
other than in the Limited Market. Such right is exercisable by the Company at
the third-party offer price. In addition, all of the presently outstanding
shares of Class B Common Stock that were issued subsequent to October 1, 1981
(other than shares issued subsequent to that date which were distributed out of,
or are presently held in, the Profit Sharing Retirement Plan, Employee Stock
Ownership Plan and CODA or that were issued upon the exercise of stock options
granted prior to that date) are subject to a right of repurchase on the part of
the Company upon termination of the stockholder's employment or affiliation with
the Company. This
23
<PAGE> 27
right is generally exercisable by the Company at a price equal to five times the
Formula Price for Class A Common Stock prevailing at the time of such
termination. By their terms, all such restrictions will terminate in the event
that either class of the Common Stock is listed on any national securities
exchange or is traded on a regular basis, as determined by the Company, in the
over-the-counter market.
PREFERRED STOCK
Pursuant to the Certificate of Incorporation, the Board of Directors
may, from time to time, authorize the issuance of one or more series of
Preferred Stock and fix by resolution or resolutions adopted at the time of
issuance the designations, preferences and relative rights, qualifications and
limitations of each series. Each series of Preferred Stock could, as determined
by the Board of Directors at the time of issuance, rank senior to the Class A
Common Stock and Class B Common Stock with respect to dividend, redemption and
liquidation rights.
The Certificate of Incorporation authorizes the Board of Directors to
determine, among other things, with respect to each series of Preferred Stock
which may be issued: (i) the dividend rates, conditions and preferences, if any,
in respect of the Class A Common Stock and Class B Common Stock and among the
series of Preferred Stock, (ii) whether dividends would be cumulative and, if
so, the date from which dividends on the series would accumulate, (iii) whether,
and to what extent, the holders of the series would have voting rights in
addition to those prescribed by law, (iv) whether, and upon what terms, the
series would be convertible into or exchangeable for other securities, (v)
whether, and upon what terms, the series would be redeemable, (vi) the
preference, if any, to which the series would be entitled in the event of
voluntary or involuntary liquidation, dissolution or winding up of the Company
and (vii) whether or not a sinking fund would be provided for the redemption of
the series and, if so, the terms and conditions thereof. With regard to
dividend, redemption and liquidation rights, the Board of Directors may
determine that any particular series of Preferred Stock may rank junior to, on a
parity with or senior to any other series of Preferred Stock.
Holders of shares of Preferred Stock will have no preferential or
preemptive right to purchase any shares of the Company's capital stock. The
Company has no present intention or plan to issue any shares of Preferred Stock.
ANTI-TAKEOVER EFFECTS
The combined effect of the classification of the Board of Directors
into three different classes, the cumulative voting rights of the stockholders,
the Supermajority Vote Requirements, the provisions of the Certificate of
Incorporation and Bylaws of the Company requiring the approval of at least
two-thirds of the voting power of all outstanding shares of Common Stock for
certain amendments to the Certificate of Incorporation or Bylaws, the Company's
right of first refusal, and the Company's right of repurchase upon termination
of employment or affiliation, may discourage, delay or prevent attempts to
acquire control of the Company that are not approved by the Company's Board of
Directors. The provisions may, individually or collectively, have the effect of
discouraging takeover attempts that some stockholders might deem to be in their
best interests, including tender offers in which stockholders might receive a
premium for their shares over the Formula Price available in the Limited Market,
as well as making it more difficult for individual stockholders or a group of
stockholders to elect directors. However, the Board of Directors believes that
these provisions are in the best interests of the Company and its stockholders,
because such provisions may encourage potential acquirors to negotiate directly
with the Board of Directors which is in the best position to act on behalf of
all stockholders. See "Risk Factors -- Anti-Takeover Effects."
24
<PAGE> 28
LEGAL MATTERS
The legality of the Class A Common Stock offered hereby has been passed
upon for the Company by Douglas E. Scott, Esquire, Senior Vice President and
General Counsel of the Company. As of June 30, 1997, Mr. Scott owned of record
15,548 shares of Class A Common Stock, had the right to acquire an additional
19,000 shares pursuant to previously granted stock options and beneficially
owned a total of 4,366 shares through the Company's retirement plans.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Company's Annual Report on Form 10-K/A for the fiscal year
ended January 31, 1997, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
25
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C>
======================================================= =======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY 3,000,000 SHARES
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CLASS A COMMON STOCK
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, [ LOGO ]
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION.
TABLE OF CONTENTS
PAGE
----
Available Information..................... 2 -------------------
Information Incorporated by Reference..... 2 P R O S P E C T U S
Risk Factors.............................. 3 -------------------
The Company............................... 6
Government Contracts...................... 11
The Offering.............................. 13
Resales by Affiliates of Acquired
Companies............................. 14
Market Information........................ 14
Dividend Policy........................... 19
Selected Financial Data................... 19
Description of Capital Stock.............. 20
Legal Matters............................. 25
Experts................................... 25
_____________, 1997
======================================================= =======================================================
</TABLE>
26
<PAGE> 30
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware grants each
corporation organized thereunder, such as the Registrant, the power to indemnify
its directors and officers against certain circumstances. Article FIFTEENTH of
the Registrant's Restated Certificate of Incorporation requires the Registrant
to indemnify its directors and officers to the fullest extent permitted by law.
The Company also has directors and officers liability insurance, with
policy limits of $50 million, under which directors and officers of the Company
are insured against certain liabilities which they may incur in such capacities.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS INCORPORATED BY REFERENCE TO
------- ----------------------- ----------------------------
<S> <C> <C>
4(a) Article FOURTH of the Registrant's Exhibit 3 to the Registrant's Post-Effective
Certificate of Incorporation. Amendment No. 1 to Form S-2 as filed on
August 21, 1987 with the SEC.
4(b) Form of Non-Qualified Stock Option Exhibit 4(c) to the Registrant's Annual
Agreement of the Registrant's 1992 Stock Report on Form 10-K for the fiscal year
Option Plan (form dated August 1992). ended January 31, 1993 (the "1993 10-K").
4(c) Form of Non-Qualified Stock Option Exhibit 4(p) to the Registrant's Annual
Agreement of the Registrant (Employee, Report on Form 10-K for the fiscal year
Director and Consultant of the ended January 31, 1991 (the "1991 10-K").
Registrant's 1982 Stock Option Plan
(form dated October 1990)).
4(d) Form of Stock Restriction Agreement of Exhibit 4(e) to the Registrant's Annual
the Registrant's Employee Stock Report on Form 10-K for the fiscal year
Ownership Plan (form dated March 1, ended January 31, 1985 (the "1985 10-K").
1985).
4(e) Form of Stock Restriction Agreement of Exhibit 4(f) to the 1991 10-K.
the Registrant's Bonus Compensation
Plan (form dated October 1990).
4(f) Form of Stock Restriction Agreement of Exhibit 4(g) to the 1985 10-K.
the Registrant's Cash or Deferred
Arrangement (TRASOP Account) (form
dated March 1, 1985).
4(g) Registrant's Bonus Compensation Plan, as Exhibit 4(l) to the 1991 10-K.
amended through April 2, 1991.
</TABLE>
II-1
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS INCORPORATED BY REFERENCE TO
------- ----------------------- ----------------------------
<S> <C> <C>
4(h) Registrant's 1982 Stock Option Plan, as Exhibit 4(n) to the Registrant's Annual
amended through June 9, 1989. Report on Form 10-K for the fiscal year
ended January 31, 1990 (the "1990 10-K").
4(i) Form of Stock Restriction Agreement of Exhibit 4(r) to the 1991 10-K.
the Registrant's Employee Stock
Ownership Plan (TRASOP Account)
(form dated April 1, 1991).
4(j) Registrant's 1992 Stock Option Plan, as Exhibit 4(g) to the Registrant's Annual
amended through November 3, 1994. Report on Form 10-K for the fiscal year
ended January 31, 1995 (the "1995 10-K").
4(k) Form of Stock Restriction Agreement of Exhibit 4(v) to the 1993 10-K.
the Registrant's Bonus Compensation
Plan (form dated July 1992).
4(l) Registrant's Stock Compensation Plan, as Exhibit 4(k) to the Registrant's Annual
amended through April 3, 1996. Report on Form 10-K for the fiscal year
ended January 31, 1996 (the "1996 10-K").
4(m) Registrant's Management Stock Exhibit 4(l) to the 1996 10-K.
Compensation Plan, as amended through
April 3, 1995.
4(n) Form of Non-Qualified Stock Option Exhibit 4(n) to the 1995 10-K.
Agreement of the Registrant's 1992 Stock
Option Plan (form dated February 1995.)
4(o) Form of Non-Qualified Stock Option Exhibit 4(o) to the 1995 10-K.
Agreement of the Registrant's 1992 Stock
Option Plan (form dated February 1995).
4(p) Form of Stock Restriction Agreement of Exhibit 4(p) to the 1995 10-K.
the Registrant's Bonus Compensation
Plan (form dated March 1995).
4(q) 1995 Employee Stock Purchase Plan. Annex II of the Registrant's Proxy Statement
for the 1995 Annual Meeting of
Stockholders as filed June 1995 with the
SEC (the "1995 Proxy").
4(r) 1995 Stock Option Plan. Annex I to the 1995 Proxy.
4(s) Keystaff Deferral Plan, as amended Exhibit 4(r) to the 1996 10-K.
through November 1, 1995.
4(t) Key Executive Stock Deferral Plan. EXHIBIT 4(s) to the 1996 10-K.
</TABLE>
II-2
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS INCORPORATED BY REFERENCE TO
------- ----------------------- ----------------------------
<S> <C> <C>
4(u) Form of Non-Qualified Stock Option Exhibit 4(t) to the 1996 10-K.
Agreement of the Registrant's 1995 Stock
Option Plan (form dated August 1995).
4(v) Form of Incentive Stock Option Exhibit 4(u) to the 1996 10-K.
Agreement of the Registrant's 1995 Stock
Option Plan (form dated August 1995).
4(w) Form of Restriction Agreement of the Exhibit 4(v) to the 1996 10-K.
Registrant's Key Executive Stock
Deferral Plan (form dated March 1996).
4(x) Form of Alumni Agreement. Exhibit 4(w) to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended January 31, 1997.
5 Opinion of Douglas E. Scott, Esq. Exhibit 5 to the Registrant's Registration
Statement No. 33-51523 on Form S-4 as
filed May 6, 1996 with the SEC.
21 Subsidiaries of the Registrant. **
23(a) Consent of Douglas E. Scott, Esq. Contained in Exhibit 5 to the Registrant's
Registration Statement No. 33-51523 on
Form S-4 as filed May 6, 1996 with the SEC.
23(b) Consent of Independent Accountants. **
</TABLE>
- --------------------
** Filed herewith.
II-3
<PAGE> 33
ITEM 22. UNDERTAKINGS
(a) Rule 415 Offering
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; excluding information contained in periodic reports
filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration
Statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the Offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Registration on Form S-4 of Securities Offered for Resale
(1) The Registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
II-4
<PAGE> 34
(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Securities and Exchange Commission Policy Regarding
Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions of Section 145 of the General
Corporation Law of Delaware and Article FIFTEENTH of the Registrant's
Certificate of Incorporation, or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of the expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) Requests for Information
The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(f) Post-Effective Amendments
The Registrant hereby undertakes to supply by means of post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-5
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this
Post-Effective Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of San Diego, State of
California on July 21, 1997.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
*
-----------------------------------
J.R. Beyster
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and July 21, 1997
- ---------------------------------- Principal Executive Officer
J.R. Beyster
* Principal Financial Officer July 21, 1997
- ----------------------------------
W.A. Roper, Jr.
* Principal Accounting July 21, 1997
- ---------------------------------- Officer
P.N. Pavlics
Director
- ----------------------------------
D.P. Andrews
* Director July 21, 1997
- ----------------------------------
V.N. Cook
Director
- ----------------------------------
C.K. Davis
* Director July 21, 1997
- ----------------------------------
W.H. Demisch
* Director July 21, 1997
- ----------------------------------
W.A. Downing
</TABLE>
II-6
<PAGE> 36
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director July 21, 1997
- ----------------------------------
E.A. Frieman
* Director July 21, 1997
- ----------------------------------
J.E. Glancy
* Director July 21, 1997
- ----------------------------------
B.R. Inman
Director
- ----------------------------------
H.M.J. Kraemer, Jr.
* Director July 21, 1997
- ----------------------------------
W.M. Layson
* Director July 21, 1997
- ----------------------------------
C.B. Malone
* Director July 21, 1997
- ----------------------------------
J.W. McRary
* Director July 21, 1997
- ----------------------------------
W.A. Owens
Director
- ----------------------------------
S.D. Rockwood
* Director July 21, 1997
- ----------------------------------
E.A. Straker
* Director July 21, 1997
- ----------------------------------
M.E. Trout
* Director July 21, 1997
- ----------------------------------
J.P. Walkush
* Director July 21, 1997
- ----------------------------------
J.H. Warner, Jr.
</TABLE>
II-7
<PAGE> 37
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director July 21, 1997
- ----------------------------------
J.A. Welch
* Director July 21, 1997
- ----------------------------------
J.B. Wiesler
* Director July 21, 1997
- ----------------------------------
A.T. Young
</TABLE>
* By /s/ J.D. HEIPT
------------------------------
J.D. Heipt
as Attorney-in-Fact
II-8
<PAGE> 1
PAGE 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C>
AMSEC Corporation Delaware
Andrew Palmer & Associates Limited (wholly-owned by
SAIC UK Limited) England
AW Software and Technologie GmbH Austria
Bull, Inc. California
Campus Point Realty Corporation California
Energy and Technology Management Corporation Delaware
Environmental Restoration Systems, Inc. Delaware
General Sciences Corporation Delaware
Hicks & Associates, Inc. Delaware
JHK & Associates, Inc. Delaware
JMD Development Corporation dba JDA California
Network Solutions, Inc. Delaware
Pathology Associates International Corporation Delaware
PT Science Applications International Corporation Indonesia Indonesia
R.E. Wright Environmental, Inc. Delaware
Sachse Engineering Associates, Inc. California
SAIC (Bermuda) Ltd. Bermuda
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 Limited (subsidiary of SAIC UK Limited) England
</TABLE>
<PAGE> 2
PAGE 2
<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C>
SAIC - MIR Russia
SAIC UK Limited England
SAIC Ukraine Corporation Delaware
Science Applications International (Barbados) Corporation Barbados
Science Applications International Corporation (SAIC Canada) Canada
Science Applications International Corporation de Venezuela, S.A. Venezuela
Science Applications International Corporation (Singapore) Pte. Ltd. Singapore
Science Applications International Deutschland GmbH Germany
Science Applications International, Europe S.A. France
Science Applications International Pty. Ltd. Australia
Science Applications International Technology California
Syntonic Technology, Inc. dba TransCore Delaware
Systems Control Technology, Inc. Delaware
Tenth Mountain Systems, Inc. Delaware
Wright Laboratory Services, Inc. (wholly-owned by
R.E. Wright Environmental, Inc.) Delaware
</TABLE>
<PAGE> 1
PAGE 1
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
April 4, 1997 appearing on page F-2 of Science Applications International
Corporation's Annual Report on Form 10-K/A for the year ended January 31, 1997.
We also consent to the incorporation by reference in such Prospectus of our
report dated February 25, 1997 appearing on page F-2 of the Annual Report of the
Science Applications International Corporation Employee Stock Purchase Plan for
the year ended January 31, 1997 appearing in the Science Applications
International Corporation Annual Report on Form 10-K/A. In addition, we hereby
consent to the incorporation by reference in such Prospectus of our report dated
March 21, 1997 appearing on page F-2 of the Annual Report of the Science
Applications International Corporation Cash or Deferred Arrangement for the year
ended December 31, 1996 appearing in the Science Applications International
Corporation Annual Report on Form 10-K/A. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
San Diego, California
July 18, 1997
