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SCHEDULE 14A INFORMATION
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SAIC LOGO
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 14, 2000
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Science
Applications International Corporation, a Delaware corporation (the "Company"),
will be held in the Grand Ballroom of the Hilton La Jolla Torrey Pines Hotel,
10950 North Torrey Pines Road, San Diego, California, on Friday, July 14, 2000,
at 10:00 A.M. (local time), for the following purposes:
1. To elect seven Class I Directors, each for a term of three years; and
2. To transact such other business as may properly come before the meeting
or any adjournments, postponements or continuations thereof.
Only stockholders of record at the close of business on May 17, 2000, are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments, postponements or continuations thereof. A list of stockholders
entitled to vote at the meeting will be available for inspection at the office
of the Corporate Secretary of the Company at 10010 Campus Point Drive, San
Diego, California for at least 10 days prior to the meeting and will also be
available for inspection at the meeting.
By Order of the Board of Directors
/s/ J. DENNIS HEIPT
J. Dennis Heipt
Corporate Executive
Vice President and Secretary
San Diego, California
June 9, 2000
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, TO ASSURE
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU FROM
ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON, IF YOU SO DESIRE, BUT WILL
HELP THE COMPANY SECURE A QUORUM AND REDUCE THE EXPENSE OF ADDITIONAL PROXY
SOLICITATION.
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SAIC LOGO
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 14, 2000
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being furnished to the stockholders of Science
Applications International Corporation, a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held in the Grand Ballroom of the Hilton La Jolla Torrey
Pines Hotel, 10950 North Torrey Pines Road, San Diego, California, on Friday,
July 14, 2000, at 10:00 A.M. (local time), and at any and all adjournments,
postponements or continuations thereof. At the Annual Meeting, the stockholders
of the Company are being asked to consider and vote upon:
1. The election of seven Class I Directors, each for a term of three years;
and
2. Such other business as may properly come before the meeting or any
adjournments, postponements, or continuations thereof.
This Proxy Statement and the enclosed form of proxy are first being mailed
to the stockholders of the Company on or about June 9, 2000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
SHARES ELIGIBLE TO VOTE
Only stockholders of record of the Company's Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), and/or Class B Common Stock,
par value $.05 per share (the "Class B Common Stock"), as of the close of
business on May 17, 2000 (the "Record Date"), are entitled to notice of and to
vote at the Annual Meeting. As of the Record Date, the Company had 232,514,397
shares of Class A Common Stock and 291,208 shares of Class B Common Stock
outstanding. The Company has no other class of capital stock outstanding.
QUORUM REQUIREMENTS
The Class A Common Stock and the Class B Common Stock are collectively
referred to herein as the "Common Stock." The presence, either in person or by
proxy, of the holders of a majority of the total voting power of the shares of
Common Stock outstanding on the Record Date is necessary to constitute a quorum
and to conduct business at the Annual Meeting. Although abstentions may be
specified on all proposals (other than the election of Directors), abstentions
will only be counted as present for purposes of determining the presence of a
quorum but will not be voted.
VOTES
Each holder of Class A Common Stock will be entitled to one vote per share,
and each holder of Class B Common Stock will be entitled to 20 votes per share,
in person or by proxy, for each share of Common Stock
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held in such stockholder's name as of the Record Date on any matter submitted to
a vote of stockholders at the Annual Meeting, except that in the election of
Directors, all shares are entitled to be voted cumulatively. Accordingly, in
voting for Directors: (i) each share of Class A Common Stock is entitled to as
many votes as there are Directors to be elected, (ii) each share of Class B
Common Stock is entitled to 20 times as many votes as there are Directors to be
elected and (iii) each stockholder may cast all of such votes for a single
nominee or distribute them among any two or more nominees as such stockholder
chooses. Unless otherwise directed, shares represented by properly executed
proxies will be voted at the discretion of the proxy holders so as to elect the
maximum number of the Board of Directors' nominees that may be elected by
cumulative voting.
VOTING OF SHARES HELD BY RETIREMENT PLANS AND BENEFIT PLANS
On the Record Date, Vanguard Fiduciary Trust Company (the "Trustee"), as
trustee of the Employee Stock Retirement Plan ("ESRP"), Cash or Deferred
Arrangement ("CODA") and Profit Sharing Retirement Plan ("Profit Sharing Plan")
of the Company, the Telcordia Technologies Savings and Security Plan and the
Telcordia Technologies Savings Plan for Salaried Employees (collectively, the
"Telcordia Savings Plans") of Telcordia Technologies, Inc., a wholly-owned
subsidiary of the Company, the AMSEC Employees 401(k) Profit Sharing Plan (the
"AMSEC Plan"), the TransCore 401(k) Retirement Savings Plan ("TransCore Plan")
and the NSI 401(k) Retirement Plan (the "NSI Plan") (collectively, the
"Retirement Plans"), held 105,134,959 shares of Class A Common Stock and 24,926
shares of Class B Common Stock. Each participant in the Retirement Plans has the
right to instruct the Trustee on a confidential basis how to vote his or her
proportionate interests in all allocated shares of Common Stock held in the
Retirement Plans. The Trustee will vote all allocated shares held in the
Retirement Plans as to which no voting instructions are received, together with
all unallocated shares held in the Retirement Plans, in the same proportion, on
a plan by plan basis, as the allocated shares for which voting instructions have
been received. The Trustee's duties with respect to voting the Common Stock in
the Retirement Plans are governed by the fiduciary provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). These fiduciary
provisions of ERISA may require, in certain limited circumstances, that the
Trustee override the votes of participants with respect to the Common Stock held
by the Trustee and to determine, in the Trustee's best judgment, how to vote the
shares.
On the Record Date, Wachovia Bank, N.A. ("Wachovia"), as trustee of the
Company's Stock Compensation Plan, Management Stock Compensation Plan and Key
Executive Stock Deferral Plan (collectively, the "Stock Plans") held 5,418,298
shares of Class A Common Stock. Under the terms of the Stock Plans, Wachovia has
the power to vote the shares of Class A Common Stock held by Wachovia in the
Stock Plans. Wachovia will vote all such shares of Class A Common Stock in the
same proportion that the other stockholders of the Company vote their shares of
Common Stock.
VOTING BY PROXY
Shares of Common Stock represented by properly executed proxies received in
time for voting at the Annual Meeting will, unless such proxies have previously
been revoked, be voted in accordance with the instructions indicated thereon. In
the absence of specific instructions, the shares represented by properly
executed proxies will be voted FOR the election of Directors so as to elect the
maximum number of the Board of Directors' nominees that may be elected by
cumulative voting. No business other than that set forth in the accompanying
Notice of Annual Meeting is expected to come before the Annual Meeting; however,
should any other matter requiring a vote of stockholders properly come before
the Annual Meeting, it is the intention of the proxy holders to vote such shares
in accordance with their best judgment on such matter. For information with
respect to advance notice requirements applicable to stockholders who wish to
propose any matter for consideration at the next Annual Meeting, see
"Stockholder Proposals for the 2001 Annual Meeting."
Execution of the enclosed proxy will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked at
any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy bearing a later date to the Corporate
Secretary of the Company,
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10260 Campus Point Drive, San Diego, California 92121, or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
however, in and of itself constitute a revocation of a proxy.
PROXY SOLICITATION
This solicitation of proxies is made by the Company and the cost thereof
will be borne by the Company, including the charges and expenses of persons
holding shares in their name as nominee for forwarding proxy materials to the
beneficial owners of such shares. In addition to the use of the mails, proxies
may be solicited by officers, Directors and employees of the Company in person,
by telephone or by telegram. Such individuals will not be additionally
compensated for such solicitation but may be reimbursed for reasonable
out-of-pocket expenses incurred in connection with such solicitation.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a "classified"
Board of Directors consisting of three classes which shall be as equal in number
as possible. The number of authorized Directors is currently fixed at 20
Directors, with seven Directors in each of Class I and Class III and six
Directors in Class II.
At the Annual Meeting, seven Class I Directors are to be elected to serve
three-year terms ending in 2003 or until their successors are elected and
qualified or their earlier retirement, death, resignation or removal or
disqualification from service as a Director pursuant to any current or future
provision of the Bylaws. Currently, D.P. Andrews, D.A. Cox, W.H. Demisch, J.E.
Glancy, H.M.J. Kraemer, Jr., C.B. Malone and J.A. Welch serve as Class I
Directors. All such Class I Directors will be standing for reelection. The seven
nominees who receive the most votes will be elected as Class I Directors. It is
intended that, unless otherwise indicated, the persons named in the enclosed
form of proxy will vote FOR the election of Directors so as to elect the maximum
number of the Board of Directors' nominees that may be elected by cumulative
voting. To the best knowledge of the Board of Directors, all of the nominees
are, and will be, able and willing to serve. In the event that any of the seven
nominees listed below should become unavailable to stand for election at the
Annual Meeting, the proxy holders intend to vote for such other person, if any,
as may be designated by the Board of Directors, in the place and stead of any
nominee unable to serve. Alternatively, the Board of Directors may elect,
pursuant to Section 3.02 of the Company's Bylaws, to fix the authorized number
of Directors at a lower number so as to give the Nominating Committee of the
Board of Directors additional time to evaluate candidates.
Set forth below is a brief biography of each nominee for election as a
Class I Director and of all other members of the Board of Directors who will
continue in office:
NOMINEES FOR ELECTION AS
CLASS I DIRECTORS
TERM ENDING 2003
D.P. ANDREWS, age 55 Director since 1996
Corporate Executive Vice President and Director
Mr. Andrews joined the Company in 1993 and has served as a Corporate
Executive Vice President since January 1998. Prior thereto, Mr. Andrews served
as Executive Vice President for Corporate Development from 1995 to 1998. Prior
to joining the Company, Mr. Andrews served as Assistant Secretary of Defense
from 1989 to 1993.
D.A. COX, age 52 Director since 1999
Executive Vice President and Director
Mr. Cox joined the Company in 1988 and has served as an Executive Vice
President since January 1998. Prior thereto, Mr. Cox served as a Sector Vice
President from 1996 to 1998.
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W.H. DEMISCH, age 55 Director since 1990
Director
Mr. Demisch has been a Managing Director of Wasserstein Perella Securities,
Inc. since 1998. From 1993 to 1998, he was Managing Director of BT Alex. Brown
and from 1988 to 1993, he was Managing Director of UBS Securities, Inc.
J.E. GLANCY, age 54 Director since 1994
Executive Vice President and Director
Dr. Glancy joined the Company in 1976 and has served as an Executive Vice
President since April 2000. Prior thereto, Dr. Glancy served as a Corporate
Executive Vice President from 1994 to 2000. Dr. Glancy is also a member of the
Board of Directors of CoorsTek, Inc.
H.M.J. KRAEMER, JR., age 45 Director since 1997
Director
Mr. Kraemer has served as the Chairman of the Board of Baxter
International, Inc. ("Baxter"), a health-care products, systems and services
company, since January 2000, as Chief Executive Officer of Baxter since January
1999 and as President of Baxter since April 1997. Prior thereto, Mr. Kraemer
served as the Senior Vice President and Chief Financial Officer of Baxter from
November 1993 to April 1997. Mr. Kraemer is also a member of the Board of
Directors of Comdisco, Inc.
C.B. MALONE, age 64 Director since 1993
Director
Ms. Malone has served as the President of Financial & Management
Consulting, Inc., a consulting company, since 1982. Ms. Malone is also a member
of the Board of Directors of Dell Computer Corporation, Hannaford Bros. Co.,
Houghton Mifflin Company, Lafarge Corporation, Lowe's Companies and Mallinckrodt
Inc.
J.A. WELCH, age 69 Director since 1984
Director
Dr. Welch joined the Company as a part-time employee in July 1990 and is
involved in a number of scientific endeavors and strategic planning issues. Dr.
Welch also serves as the President of Jasper Welch Associates, a consulting firm
which he founded in 1983. Prior thereto, Dr. Welch was a Major General in the
United States Air Force, from which he retired in 1983 after serving for 31
years.
CLASS II DIRECTORS
TERM ENDING 2001
D.W. DORMAN, age 46 Director since 1998
Director
Mr. Dorman has been the Chief Executive Officer of Concert Communications
Company (formerly ATT/BT Global Venture) since April 1999. Prior thereto, he was
the President and Chief Executive Officer of PointCast Incorporated
("PointCast") from November 1997 to April 1999 and Chairman of the Board of
PointCast from February 1998 to April 1999. Previously, Mr. Dorman was the
Executive Vice President of SBC Communications, Inc., a diversified
telecommunications company, from August 1997 to November 1997, the President and
Chief Executive Officer of Pacific Bell Corporation ("Pacific Bell") from 1994
to 1997 and Chairman of the Board of Pacific Bell from 1996 to 1997. Mr. Dorman
is also a member of the Board of Directors of 3Com Corporation, ETEK Dynamics
and Scientific Atlanta Corporation.
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B.R. INMAN, age 69 Director since 1982
Director
Admiral Inman, USN (Ret.) joined the Company in 1990 as a part-time
employee and, in that capacity, advises the Company on a wide variety of
strategic planning issues. Admiral Inman was the Chairman of the Board,
President and Chief Executive Officer of Westmark Systems, Inc., an electronics
industry holding company, from 1986 through 1989. From 1983 to 1986, Admiral
Inman served as Chairman, President and Chief Executive Officer of
Microelectronics and Computer Technology Corporation. Admiral Inman retired from
the United States Navy in 1982. During his career as a United States Naval
Officer, Admiral Inman served in a number of high-level positions in the U.S.
Government, including Director of the National Security Agency and Deputy
Director of Central Intelligence. Admiral Inman is also a member of the Board of
Directors of Fluor Corporation, SBC Communications, Inc., Temple-Inland, Inc.
and Xerox Corporation.
E.A. STRAKER, age 62 Director since 1992
Executive Vice President and Director
Dr. Straker joined the Company in 1971 and has served as an Executive Vice
President since 1994.
M.E. TROUT, age 69 Director since 1995
Director
Dr. Trout served as the interim Chief Executive Officer of Cytran, Inc., a
bio-technology company, from April 1996 to July 1996. Prior thereto, Dr. Trout
was associated with American Healthcare Systems, Inc. from 1986 until his
retirement in 1995. Prior to his retirement, Dr. Trout served as Chairman,
President and Chief Executive Officer and is currently serving as Chairman
Emeritus of American Healthcare Systems, Inc. He is also a member of the Board
of Directors of Baxter International, Cytyc Corporation and West Pharmaceutical
Services, Inc.
J.H. WARNER, JR., age 59 Director since 1988
Corporate Executive Vice President and Director
Dr. Warner joined the Company in 1973 and has served as a Corporate
Executive Vice President since 1996. Prior thereto, Dr. Warner served as an
Executive Vice President from 1989 to 1996.
A.T. YOUNG, age 62 Director since 1995
Director
Mr. Young served as an Executive Vice President of Lockheed Martin Corp.
from March 1995 to July 1995. Prior to its merger with Lockheed Corporation, Mr.
Young served as the President and Chief Operating Officer of Martin Marietta
Corp. from 1990 to 1995. Mr. Young is also on the Board of Directors of the B.F.
Goodrich Company and Potomac Electric Power Company.
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CLASS III DIRECTORS
TERM ENDING 2002
J.R. BEYSTER, age 75 Director since 1969
Chairman of the Board, Chief Executive Officer and President
Dr. Beyster founded the Company in 1969 and has served as Chairman of the
Board and Chief Executive Officer since that time and has served as President
since June 1998. Dr. Beyster also served as President of the Company from 1969
to 1988. Dr. Beyster is also a member of the Board of Directors of Network
Solutions, Inc.
W.A. DOWNING, age 60 Director since 1996
Director
General Downing, USA (Ret.) joined the Company as a part-time employee in
March 1996 and advises the Company on a wide variety of matters, including its
long-term strategy for domestic and international business development. General
Downing retired from the United States Army in 1996. Prior to his retirement,
General Downing served as the Commander in Chief of U.S. Special Operations
Command. General Downing has also served as the Commanding General of U.S. Army
Special Operations Command and Commanding General of Joint Special Operations
Command.
A.K. JONES, age 58 Director since 1998
Director
Dr. Jones has been a professor at the University of Virginia since 1989.
From 1993 to 1997, Dr. Jones was on leave of absence from the University to
serve as Director Defense Research and Engineering in the U.S. Department of
Defense. Dr. Jones also served as a Director of the Company from June 1987 to
May 1993.
S.D. ROCKWOOD, age 57 Director since 1996
Executive Vice President and Director
Dr. Rockwood joined the Company in 1986 and has served as an Executive Vice
President since 1997. Prior thereto, Dr. Rockwood served as a Sector Vice
President from 1987 to 1997.
L.A. SIMPSON, age 63 Director since April 1999
Director
Mr. Simpson has been the President and Chief Executive Officer, Capital
Operations of GEICO Corporation, an insurance company, since 1993. He is also a
member of the Board of Directors of MediaOne Group, Inc., Pacific American
Income Shares, Inc. and Potomac Electric Power Co.
R.C. SMITH, age 58 Director since 1998
Director
R.C. Smith has served as the Chief Executive Officer of Telcordia
Technologies, Inc., a wholly-owned subsidiary of the Company ("Telcordia"),
since January 1998. Prior to joining Telcordia, Mr. Smith was the Senior Vice
President -- Quality Development and Public Relations for Sprint Corporation
from 1991 to January 1998.
J.P. WALKUSH, age 48 Director since 1996
Sector Vice President and Director
Mr. Walkush joined the Company in 1976 and has served as a Sector Vice
President since 1994.
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BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the year ended January 31, 2000 ("Fiscal 2000"), the Board of
Directors held four meetings. Average attendance at such meetings of the Board
of Directors was 92%. During Fiscal 2000, all Directors attended at least 75% of
the aggregate of the meetings of the Board of Directors and committees of the
Board of Directors on which they served.
The Board of Directors has various standing committees, including an Audit
Committee, a Compensation Committee, an Executive Committee, a Nominating
Committee and an Operating Committee.
Audit Committee
The Audit Committee is primarily concerned with the Company's financial
condition and its responsibilities include: (i) reviewing and evaluating the
work and performance of the Company's internal auditors and its independent
accountants and making recommendations to the Board of Directors regarding the
selection of the Company's independent accountants; (ii) conferring with the
Company's independent accountants and its internal auditors and financial and
accounting officers to evaluate the Company's internal accounting methods and
procedures and the recommended changes therein; (iii) reviewing circumstances
which may have a major impact on the Company's financial controls and future
profitability and (iv) overseeing the activities of the Company's Employee
Ethics and Risk Committees. The Audit Committee held five meetings during Fiscal
2000. The current members of the Audit Committee are C.B. Malone (Chairperson),
J.R. Beyster (ex-officio), A.K. Jones, H.M.J. Kraemer, Jr., and L.A. Simpson.
Compensation Committee
The Compensation Committee's responsibilities include: (i) approving the
salaries of the Chief Executive Officer and all executive officers named
pursuant to Section 16 of the Securities Exchange Act of 1934 ("Executive
Officers"); (ii) approving any compensation contracts or severance packages for
Executive Officers; (iii) establishing objective performance goals for the
Executive Officers under the Company's Bonus Compensation Plan and the amounts
potentially payable if such goals are satisfied; (iv) administering such
objective performance goals and determining the amounts to be paid if such goals
are satisfied; (v) issuing reports required by the Securities and Exchange
Commission regarding the Company's compensation policies applicable to the Chief
Executive Officer and the four other most highly compensated executive officers
and (vi) approving and recommending to the full Board of Directors the
compensation paid to outside Directors for their services as members of the
Company's Board of Directors. The Compensation Committee held three meetings
during Fiscal 2000. The Compensation Committee consists of Directors who are
"outside directors" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended. The current members of the Compensation Committee are
M.E. Trout (Chairman), W.H. Demisch, D.W. Dorman, H.M.J. Kraemer, Jr., C.B.
Malone, L.A. Simpson and A.T. Young.
Executive Committee
The Executive Committee's charter provides that, to the extent permitted by
Delaware law, it shall have and may exercise all powers and authorities of the
Board of Directors with respect to the following: (i) taking action on behalf of
the Board of Directors during intervals between regularly scheduled meetings of
the Board of Directors if it is impractical to delay action on a matter until
the next regularly scheduled meeting of the Board of Directors and (ii)
overseeing and assisting in the formulation and implementation of human resource
management, scientific research policies and financial matters. The Executive
Committee held five meetings during Fiscal 2000. The current members of the
Executive Committee are B.R. Inman (Chairman), D.P. Andrews, J.R. Beyster, J.E.
Glancy, R.C. Smith, M.E. Trout, J.H. Warner, Jr. and A.T. Young.
Nominating Committee
The Nominating Committee's responsibilities include: (i) establishing a
procedure for identifying nominees for election as Directors to the Board of
Directors, (ii) reviewing and recommending to the Board of Directors criteria
for membership on the Board and (iii) proposing nominees to fill vacancies on
the Board of
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Directors as they occur. The Nominating Committee held three meetings during
Fiscal 2000. The current members of the Nominating Committee are J.R. Beyster
(Chairman), D.W. Dorman, B.R. Inman, H.M.J. Kraemer, Jr., M.E. Trout, J.A. Welch
and A.T. Young.
Any stockholder may nominate a person for election as a Director of the
Company by complying with the procedure set forth in the Company's Bylaws.
Pursuant to Section 3.03 of the Company's Bylaws, in order for a stockholder to
nominate a person for election as a Director, such stockholder must give timely
notice to the Corporate Secretary of the Company prior to the meeting at which
Directors are to be elected. To be timely, notice must be received by the
Corporate Secretary not less than 50 days nor more than 75 days prior to the
meeting (or if fewer than 65 days' notice or prior public disclosure of the
meeting date is given or made to stockholders, not later than the 15th day
following the day on which the notice of the date of the meeting was mailed or
such public disclosure was made). Such notice must contain certain information
about the nominee, including his or her name, age, business and residence
addresses and principal occupation during the past five years, the class and
number of shares of Common Stock beneficially owned by such nominee and such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of the proposed nominee. The notice must
also contain certain information about the stockholder proposing to nominate
that person. Pursuant to Section 3.03 of the Company's Bylaws, the Company may
also require any proposed nominee to furnish other information reasonably
required by the Company to determine the proposed nominee's eligibility to serve
as a Director.
Operating Committee
The Operating Committee has the authority to (i) approve offers by the
Company to sell shares of Class A Common Stock, (ii) approve contracts to be
entered into by the Company for the purchase or lease of goods, services and
facilities, (iii) approve the amendment of the Company's employee benefit and
incentive compensation plans, the Company's contributions to any such plan and
the participation by the Company's subsidiaries in any such plan, (iv) authorize
the filing of registration statements, reports and other documents with the
Securities and Exchange Commission and state securities commissions, (v) call
the annual meeting of stockholders, fix the purposes, place, time, date and
record date for such meeting and approve the proxy materials to be used in
connection therewith, (vi) review preliminary agendas for meetings of the Board
of Directors, (vii) adopt supplemental resolutions which modify or amend
resolutions theretofore adopted by the Board of Directors which, in the opinion
of the Company's counsel, do not materially change the purpose and intent of the
underlying resolutions and (viii) authorize the merger between the Company and
one or more of its subsidiaries. The Operating Committee held four meetings
during Fiscal 2000. The current members of the Operating Committee are J.R.
Beyster (Chairman), D.P. Andrews, J.E. Glancy, S.D. Rockwood, E.A. Straker, J.P.
Walkush and J.H. Warner, Jr.
Directors' Compensation
Except as otherwise described below, all Directors, other than those who
are employees of the Company, are paid an annual retainer of $25,000 and receive
$1,000 for each day on which they attend meetings of the Board of Directors or
of the committees on which they serve; provided, however, if a committee meeting
is held on the same day as a Board of Directors or other committee meeting, the
fee for each additional meeting is $500. In addition, C.B. Malone is paid
$10,000 annually for her services as the Chairperson of the Audit Committee and
M.E. Trout is paid $10,000 annually for his services as the Chairman of the
Compensation Committee, the Health Care Committee and the Litigation Committee.
Because W.A. Downing is not a full-time employee of the Company, he is paid the
annual retainer and meeting fees in addition to his compensation as an employee.
Directors are also reimbursed for expenses incurred while attending meetings or
otherwise performing services for the Company. Directors are eligible to receive
stock options under the Company's 1999 Stock Incentive Plan. For services
rendered as a Director during Fiscal 2000, W.H. Demisch, D.W. Dorman, A.K.
Jones, H.M.J. Kraemer, Jr., C.B. Malone, L.A. Simpson, M.E. Trout and A.T. Young
each received options to purchase 14,000 shares of Class A Common Stock at
$25.92 per share. All such options were granted at a price equal to the market
value of the Class A Common Stock (as reflected by the
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Formula Price) on the date of grant, become exercisable one year after the date
of grant and vest as to 20%, 20%, 20% and 40% on the first, second, third and
fourth year anniversaries of the date of grant, respectively.
The Company has agreements with certain Directors whereby such Directors
perform consulting and other services for the Company. In Fiscal 2000, A.K.
Jones earned $6,400 for consulting services under a consulting arrangement which
provided for remuneration of $200 per hour. The amount paid to Dr. Jones under
such consulting arrangement was in addition to the annual retainer and meeting
fees.
See "Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions" for information with respect to
transactions between the Company and certain entities in which certain Directors
of the Company may be deemed to have an interest.
9
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table (the "Summary Compensation Table") sets forth
information regarding the annual and long-term compensation for services in all
capacities to the Company for the fiscal years ended January 31, 2000, 1999 and
1998, of those persons who were, at January 31, 2000 (i) the Chief Executive
Officer and (ii) the other four most highly compensated executive officers of
the Company (collectively, the "Named Executive Officers"). The Summary
Compensation Table sets forth the annual and long-term compensation earned by
the Named Executive Officers for the relevant fiscal year, whether or not paid
in such fiscal year. Information regarding the SAIC Class A Common Stock for the
time period prior to August 31, 1999 has been restated to reflect the
four-for-one stock split which became effective on such date.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION --------------------------
FISCAL --------------------------- RESTRICTED OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK(2) (SHARES) COMPENSATION
--------------------------- ------ --------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster............ 2000 $726,923 $1,000,000 $ 0 0 $ 15,012(3)
Chairman of the 1999 $623,077 $ 700,000 $ 0 0 $ 15,293(3)
Board, Chief 1998 $509,615 $ 600,000 $300,010(4) 0 $ 14,867(3)
Executive Officer and
President
R.C. Smith.............. 2000 $550,000(5) $ 663,008(5)(6) $299,998(5)(7) 140,000(5) $ 6,895(8)
Chief Executive 1999 $500,000(5) $ 650,012(5)(9) $200,034(5)(10) 140,200(5) $ 224,113(5)(11)
Officer of Telcordia 1998 $ 37,879(5)(12) $ 92,016(5)(13) $ 0 160,000(5) $1,687,638(5)(14)
Technologies, Inc.
S. Ahuja................ 2000 $420,833(15) $ 464,020(15) $ 0 0 $ 6,808(8)
Former President and 1999 $385,733(16) $ 466,258(17) $ 0 240,000 $ 7,220(8)
Chief Operating 1998 $300,000 $1,748,953(18) $ 0 200,200 $ 7,220(8)
Officer of Telcordia
Technologies, Inc.(15)
W.A. Roper, Jr. ........ 2000 $363,462 $ 500,023(19) $279,988(20) 120,000 $ 15,012(3)
Corporate Executive 1999 $311,539 $ 296,989(21) $260,010(22) 120,000 $ 40,273(23)
Vice President and 1998 $251,347 $ 224,982(24) $259,980(25) 100,000 $ 64,864(26)
Chief Financial Officer
J.D. Heipt.............. 2000 $361,779 $ 499,999(27) $279,988(28) 120,000 $ 15,012(3)
Corporate Executive 1999 $317,308 $ 290,034(29) $220,003(30) 120,000 $ 15,293(3)
Vice President and 1998 $252,500 $ 219,983(31) $219,989(32) 40,000 $ 14,867(3)
Secretary
</TABLE>
---------------
(1) Includes amounts paid in lieu of unused comprehensive leave.
(2) The amount reported represents the market value on the date of grant
(calculated by multiplying the Formula Price of the Company's Class A
Common Stock on the date of grant by the number of shares awarded), without
giving effect to the diminution in value attributable to the restrictions
on such stock. As of January 31, 2000, the aggregate restricted stock
holdings (other than restricted stock which has been deferred into the Key
Executive Stock Deferral Plan) for the Named Executive Officers and for all
other employees were as follows: J.R. Beyster: 24,535 shares with a market
value as of such date of $635,947; R.C. Smith: 11,460 shares, with a market
value as of such date of $297,043; S. Ahuja: 0 shares; W.A. Roper, Jr.: 0
shares; J.D. Heipt: 21,219 shares, with a market value as of such date of
$549,996; and all other employees: 2,673,251 shares, with a market value as
of such date of $69,290,666. Dividends are payable on such restricted stock
if and when declared. However, the Company has never declared or paid a
cash dividend on its capital stock and no cash dividends on its capital
stock are contemplated in the foreseeable future.
(3) Represents amounts contributed or accrued by the Company for the Named
Executive Officers under the Company's Profit Sharing Plan, ESRP and CODA.
10
<PAGE> 13
(4) Represents 30,668 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(5) The Company and R. C. Smith are parties to an Employment Agreement dated
December 18, 1997, as amended on February 2, 1998 (the "Smith Agreement"),
pursuant to which Mr. Smith serves as Chief Executive Officer of Telcordia.
Pursuant to the terms of the Smith Agreement, Mr. Smith was entitled to
receive (i) an inducement vesting stock award pursuant to the Key Executive
Stock Deferral Plan of deferred vesting shares having a value of $1,500,000
and (ii) an inducement award of options to purchase 160,000 shares of Class
A Common Stock. The Smith Agreement provides that Mr. Smith will receive
(i) a base salary of $500,000 per year, which base salary will be
re-evaluated and determined by Telcordia's Board of Directors following
Fiscal 1999, (ii) an annual incentive bonus in an amount determined by
Telcordia's Board of Directors, with a target amount of $500,000 per year,
beginning in Fiscal 1999, (iii) an annual option award in an amount
determined by Telcordia's Board of Directors, with a target amount of
options to purchase 120,000 shares of the Company's Class A Common Stock
per year, beginning in Fiscal 1999, (iv) reimbursement of expenses incurred
in connection with the relocation of Mr. Smith and his family to
Telcordia's principal place of business and (v) a company automobile or
automobile allowance in accordance with Telcordia's officer automobile
policy as long as Telcordia maintains such a policy. Mr. Smith is also
entitled to participate in various salary and bonus deferral plans or
programs and receive certain health and welfare benefits maintained by
Telcordia. In the event Mr. Smith is at any time involuntarily terminated
without Cause or is subject to Constructive Termination (as such terms are
defined in the Smith Agreement), Mr. Smith is entitled to receive (i) a
severance payment of $2,000,000, payable in 24 installments and (ii) an
additional severance payment equal to the value of his unvested stock
options (calculated by multiplying the difference between the Formula Price
in effect on the date of his termination and the exercise price or prices
of such stock options by the number of shares covered by such unvested
options). Upon any termination of Mr. Smith's employment with Telcordia at
any time, in addition to the usual and customary payments, Mr. Smith is
also entitled to receive a payment equal to the value of a portion of his
unvested shares of Class A Common Stock (calculated by multiplying the
Formula Price in effect on the date of his termination by the number of
such unvested shares). In the event any payment or distribution by or on
behalf of Telcordia and the Company to or for the benefit of Mr. Smith as a
result of a Change In Control (as defined in the Smith Agreement) would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended, or any interest or penalties resulting from such
excise tax, Mr. Smith is entitled to an additional payment in the amount of
all such excise taxes, interest or penalties paid. Pursuant to the terms of
the Smith Agreement, Mr. Smith is subject to a covenant not to compete
against Telcordia or the Company for a period of one year after the
termination of his employment with Telcordia. The Company has
unconditionally guaranteed prompt performance of Telcordia's obligations
under the Smith Agreement.
(6) Includes the award of 12,789 vested shares of Class A Common Stock which
had a market value on the date of grant (calculated by multiplying the
Formula Price of the Class A Common Stock on the date of grant by the
number of shares awarded) of $331,491.
(7) Represents 11,574 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(8) Represents amounts contributed or accrued by the Company for the Named
Executive Officer under the Telcordia Technologies, Inc. Savings Plan for
Salaried Employees.
(9) Includes the award of 18,620 vested shares of Class A Common Stock which
had a market value on the date of grant (calculated by multiplying the
Formula Price of the Class A Common Stock on the date of grant by the
number of shares awarded) of $325,012.
(10) Represents 11,460 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(11) Represents $192,655 for relocation expenses, $16,549 for financial
counseling, a credit towards his health and welfare benefits of $4,909 and
a car allowance of $10,000. See Footnote 5.
11
<PAGE> 14
(12) Mr. Smith joined the Company in January 1998. R. C. Smith's annual salary
for fiscal year 1998 would have been $500,000. See Footnote 5.
(13) Includes the award of 4,260 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $50,289.
(14) Represents the award of 172,516 Stock Units (each of which generally
corresponds to one share of Class A Common Stock) pursuant to the Key
Executive Stock Deferral Plan. Pursuant to the Smith Agreement, Mr. Smith
was entitled to receive Stock Units having a market value of $1,500,000 as
of January 17, 1998. On the date of grant, the 172,516 Stock Units had a
value of $1,687,638. See Footnote 5.
(15) Mr. Ahuja resigned as President and Chief Executive Officer of Telcordia
effective as of March 31, 2000.
(16) Includes $2,399 for the payment of taxes.
(17) Includes the award of 13,352 vested shares of Class A Common Stock which
had a market value on the date of grant (calculated by multiplying the
Formula Price of the Class A Common Stock on the date of grant by the
number of shares awarded) of $233,059.
(18) Includes the payment of $1,137,000 as a bonus payable to Mr. Ahuja upon the
completion of the acquisition of Telcordia by the Company and the award of
30,964 vested shares of Class A Common Stock which had a market value on
the date of grant (calculated by multiplying the Formula Price of the Class
A Common Stock on the date of grant by the number of shares awarded) of
$308,940.
(19) Includes the award of 3,858 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $99,999.
(20) Represents 10,802 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(21) Includes the award of 2,692 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $46,989.
(22) Represents 14,896 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(23) Represents a total of $15,293 contributed or accrued by the Company for Mr.
Roper under the Company's Profit Sharing Plan, ESRP and CODA and the award
of 1,820 Stock Units (each of which generally corresponds to one share of
Class A Common Stock) pursuant to the Company's Management Stock
Compensation Plan which had a market value on the date of grant (calculated
by multiplying the Formula Price of the Class A Common Stock on the date of
grant by the number of Stock Units awarded) of $24,980.
(24) Includes the award of 3,576 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $34,982.
(25) Represents 26,576 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(26) Represents a total of $14,867 contributed or accrued by the Company for Mr.
Roper under the Company's Profit Sharing Plan, ESRP and CODA and the award
of 6,664 Stock Units (each of which generally corresponds to one share of
Class A Common Stock) pursuant to the Company's Management Stock
Compensation Plan which had a market value on the date of grant (calculated
by multiplying the Formula Price of the Class A Common Stock on the date of
grant by the number of Stock Units awarded) of $49,997.
12
<PAGE> 15
(27) Includes the award of 3,858 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $99,999.
(28) Represents 10,802 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(29) Includes the award of 2,580 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $45,034.
(30) Represents 12,604 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
(31) Includes the award of 3,576 vested shares of Class A Common Stock which had
a market value on the date of grant (calculated by multiplying the Formula
Price of the Class A Common Stock on the date of grant by the number of
shares awarded) of $34,983.
(32) Represents 22,488 shares of Class A Common Stock which vest as to 20%, 20%,
20% and 40% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.
OPTION GRANTS
The following table sets forth information regarding grants of options to
purchase shares of Class A Common Stock pursuant to the Company's 1998 Stock
Option Plan made during Fiscal 2000 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO FOR OPTION TERM(2)
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME (SHARES)(1) FISCAL 2000 (PER SHARE) DATE 5% 10%
---- ----------- ------------ -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster................ 0 N/A N/A N/A N/A N/A
R.C. Smith.................. 140,000(3) * $17.455 3/21/04 $675,149 $1,491,903
S. Ahuja.................... 140,000(3) * $17.455 3/21/04 $675,149 $1,491,903
W.A. Roper, Jr. ............ 120,000(3) * $17.455 3/21/04 $578,699 $1,278,774
J.D. Heipt.................. 120,000(3) * $17.455 3/21/04 $578,699 $1,278,774
</TABLE>
---------------
* Less than 1% of the total options granted to employees in Fiscal 2000.
(1) All such options become exercisable one year after the date of grant and
vest as to 20%, 20%, 20% and 40% on the first, second, third and fourth year
anniversaries of the date of grant, respectively.
(2) The potential realizable value is based on an assumption that the Formula
Price of the Class A Common Stock will appreciate at the annual rate shown
(compounded annually) from the date of grant until the end of the 5-year
option term. These values are calculated based on the regulations
promulgated by the Securities and Exchange Commission and should not be
viewed in any way as an estimate or forecast of the future performance of
the Class A Common Stock. There can be no assurance that (i) the values
realized upon the exercise of the stock options will be at or near the
potential realizable values listed in this table, (ii) the Class A Common
Stock will in the future provide returns comparable to historical returns or
(iii) the Formula Price will not decline.
(3) Although the listed grants of options were made during Fiscal 2000, such
grants relate to the individual's service for the fiscal year ended January
31, 1999.
13
<PAGE> 16
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information regarding the exercise of
options during Fiscal 2000 and unexercised options to purchase Class A Common
Stock granted during Fiscal 2000 and prior years under the Company's 1992 Stock
Option Plan, 1995 Stock Option Plan, 1998 Stock Option Plan and 1999 Stock
Incentive Plan to the Named Executive Officers and held by them at January 31,
2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JANUARY 31, 2000 AT JANUARY 31, 2000(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Beyster........... 0 N/A 120,000 80,000 $2,425,500 $1,617,000
R.C. Smith............. 0 N/A 64,040 236,160 $1,033,365 $2,736,558
S. Ahuja............... 0 N/A 100,080 340,120 $1,603,341 $4,150,237
W.A. Roper, Jr......... 16,000 $227,120 64,000 244,000 $1,218,040 $3,174,980
J. D. Heipt............ 32,000 $606,690 36,000 184,000 $ 693,030 $2,167,220
</TABLE>
---------------
(1) Based on the Formula Price of the Class A Common Stock as of such date less
the exercise price of such options.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Since its inception, the Company has been an employee-owned corporation
based upon the philosophy that "those who contribute to the Company should own
it, and ownership should be commensurate with that contribution and performance
as much as feasible." The Company's compensation policies, plans and programs
seek to implement this employee ownership philosophy by closely aligning the
financial interest of the Company's employees, including executive officers,
with the financial interest of its stockholders.
As members of the Compensation Committee, it is our responsibility to
approve the salaries paid to the Company's Chief Executive Officer and the four
other most highly paid executive officers of the Company and to recommend to the
Bonus Compensation Committee of the Board of Directors the amount of grants to
be made to the Chief Executive Officer and the four other most highly
compensated executive officers under the Company's Bonus Compensation Plan.
These determinations are made in light of individual, corporate and business
unit performance, the performance of our competitors and other similar
businesses and relevant market compensation data. To assist the Compensation
Committee in carrying out these responsibilities, Towers Perrin, an
internationally recognized executive compensation consulting firm, was retained
by the Compensation Committee to review the compensation paid to the Company's
Chief Executive Officer and the four other highest paid executive officers of
the Company during the fiscal year ended January 31, 2000, and to provide a
competitive assessment of the various components of such compensation.
The compensation policy of the Company, which is endorsed by the
Compensation Committee, is that a substantial portion of the total compensation
of executive officers be related to and contingent upon their individual
contribution and performance, the performance of business units under their
management and the performance of the Company as a whole. In this way, the
Company seeks to encourage continuing focus on increasing the Company's revenue,
profitability and stockholder value, while at the same time motivating its
executive officers to perform to the fullest extent of their abilities.
The Company has continued to set the annual base salaries of its executive
officers at or below competitive levels and continues to cause a significant
portion of an executive officer's compensation to consist of annual and
longer-term incentive compensation which are variable and closely tied to
corporate, business unit and individual performance. For the fiscal year ended
January 31, 2000, the executive officers' incentive
14
<PAGE> 17
compensation was an average of approximately 55% of the executive officers'
total compensation (salary and bonus). As a result, much of an executive
officer's total compensation was "at risk" and dependent on performance during
the prior fiscal year.
An executive officer's incentive compensation may consist of cash, fully
vested stock, vesting stock, stock options, stock units or a combination of
these components. Generally, an annual bonus is given after the end of the
fiscal year based on individual, corporate and business unit performance for
such fiscal year and an executive officer's respective responsibilities,
strategic and operational goals and levels of historic and anticipated
performance. By awarding bonuses of vesting stock and vesting stock options, the
Company seeks to encourage individuals to remain with the Company and continue
to focus on the long-term technical and financial performance of the Company and
on increasing stockholder value. Further, the exercise price of all stock
options granted is equal to the Formula Price of the Class A Common Stock on the
date of grant. Therefore, such stock options only have value to the extent that
the Formula Price of the Company's Class A Common Stock increases during the
term of the stock option. The Company's general philosophy is to encourage
employees to have significant stockholdings in the Company so that they have
sufficient economic incentive to maximize the Company's long-term performance
and stock value.
In evaluating the performance and establishing the incentive compensation
of the Chief Executive Officer and the Company's other executive officers, the
Compensation Committee recognized that the Company continued to increase its
revenue and profitability during the past fiscal year. For the fiscal year ended
January 31, 2000, the Company's revenues increased to $5.5 billion, a 17%
increase from the prior fiscal year revenues of $4.7 billion. The Company's net
income for this same period was $620 million, or a 311% increase over the prior
fiscal year net income of $150.7 million. Although this significant increase in
net income is partially due to the Company's sale of a part of its ownership
interest in Network Solutions, Inc. ("NSI"), the Compensation Committee noted
the Company's net income exclusive of the income related to the sale of its NSI
stock increased by 39% from the prior year. The Compensation Committee also has
noted that despite increasing competition, the Company has continued to
successfully increase and expand its business base with government customers and
to business areas such as telecommunications, health, commercial and
international.
Finally, notwithstanding the strong performance of the equity markets
during the past year, the performance of the Company's Class A Common Stock
exceeded the performance of both the broad market index of Standard and Poor's
Composite 500 Stock Index and the Company's peer group index of the Goldman
Sachs Technology Services Index. The Company's Class A Common Stock realized an
annual return of 48.5% for the one year period ended January 31, 2000,
significantly exceeding the annual return of both the Standard and Poor's
Composite 500 Stock Index and the Goldman Sachs Technology Services Index of
10.3% and 9.6%, respectively, during the same period. The Compensation Committee
also noted that over the past five and ten years, the Class A Common Stock
realized annualized returns of 45.8% and 27.2%, respectively.
During the past fiscal year, Dr. Beyster was paid a base salary of
$700,000(1), which represented a 17% increase over his base salary for the prior
year. Despite this salary increase, Towers Perrin has concluded that Dr.
Beyster's base salary fell below the 25th percentile in its compensation survey
data base for chief executive officers for general industry, high technology,
aerospace/defense and communications companies.
Dr. Beyster was paid a cash bonus of $1,000,000 for the fiscal year ended
January 31, 2000. Considering the Company's successful performance during the
past fiscal year, the fact that the Company's Class A Common Stock outperformed
both the broad market index and the Company's peer group index and the continued
diversification of the Company's business base, the Compensation Committee
believes that Dr. Beyster's cash bonus was well warranted.
Towers Perrin has also advised the Compensation Committee that Dr.
Beyster's total compensation (base salary and bonus) paid for the last fiscal
year also fell below the 25th percentile in its compensation survey
---------------
1 The variance between this amount and Dr. Beyster's base salary reported in the
Summary Compensation Table is attributable to payment for his unused
comprehensive leave.
15
<PAGE> 18
data base of Chief Executive Officers for general industry, high technology,
aerospace/defense and communications companies. The Compensation Committee would
like to emphasize that Dr. Beyster's below market compensation level is not a
reflection of the Compensation Committee's opinion of Dr. Beyster's ability or
his relative value. It is, however, a reflection of Dr. Beyster's personal
reluctance to accept compensation anywhere near the median compensation levels
provided to the Chief Executive Officers of the comparable companies surveyed by
Towers Perrin.
Towers Perrin has reviewed the compensation for each of the other four
highest paid executive officers of the Company during its last fiscal year and
has reported to the Compensation Committee that, based on industry survey data
collected by Towers Perrin, the compensation of these executive officers was
within an acceptable range of competitive market levels for individuals with
comparable duties and responsibilities.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits the deductibility of certain compensation in excess of $1 million paid in
any one year to the chief executive officer and the other four highest paid
executive officers. In order to maintain maximum tax deductibility of executive
compensation, the Company obtained stockholder approval of the 1999 Stock
Incentive Plan and the amendment and restatement of the 1984 Bonus Compensation
Plan. The Compensation Committee will continue to monitor compensation programs
in light of Section 162(m); however, the Compensation Committee considers it
important to retain the flexibility to design compensation programs that are in
the best long-term interests of the Company and its stockholders.
The Compensation Committee believes that the compensation policies, plans
and programs the Company has implemented, and which the Compensation Committee
endorses, have encouraged management's focus on the long-term financial
performance of the Company and have contributed to achieving the Company's
technical and financial success.
<TABLE>
<S> <C>
M.E. Trout (Chairman) C.B. Malone
W.H. Demisch L.A. Simpson
D.W. Dorman A.T. Young
H.M.J. Kraemer
</TABLE>
April 13, 2000
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During Fiscal 2000, W.H. Demisch, D.W. Dorman, A.K. Jones, H.M.J. Kraemer,
Jr., C.B. Malone, J.W. McRary, L.A. Simpson, M.E. Trout, J.B. Wiesler and A.T.
Young served as members of the Compensation Committee. None of such persons
served as an officer or employee of the Company or any of its subsidiaries
during Fiscal 2000 or formerly served as an officer of the Company or any of its
subsidiaries, except for J.W. McRary who was an employee of the Company from
1971 to 1994 and served as an Executive Vice President of the Company from 1979
to 1994.
See also "Election of Directors -- Directors' Compensation."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Foundation for Enterprise Development, a non-profit organization (the
"Foundation"), was established in 1986 by J.R. Beyster, Chairman of the Board,
Chief Executive Officer and President of the Company, to promote employee
ownership. Dr. Beyster is the President and a member of the Board of Trustees of
the Foundation. In Fiscal 2000, the Company made a cash contribution of $650,000
to the Foundation. The Board of Directors has approved a contribution of
$650,000 to the Foundation for Fiscal 2001.
M.A. Walkush, sister of J.P. Walkush, a Director and a Sector Vice
President of the Company, is an employee of the Company. For services rendered
during Fiscal 2000, M.A. Walkush received $84,308 in cash
16
<PAGE> 19
compensation, 193 shares of vesting Class A Common Stock which had a market
value on the date of grant of $5,003 and options to acquire 8,000 shares at
$25.92 per share, which was the market value of the Class A Common Stock (as
reflected by the Formula Price) on the date of grant. Such shares of vesting
Class A Common Stock and options both vest as to 20%, 20%, 20% and 40% on the
first, second, third and fourth year anniversaries of the date of grant,
respectively. M.A. Walkush has been an employee of the Company for over 14 years
and is the Director of Employee Owner Relations.
See also "Compensation Committee Interlocks and Insider Participation."
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors and executive officers to file
reports of their ownership and changes in ownership of Class A Common Stock with
the Commission. Personnel of the Company generally prepare these reports on the
basis of information obtained from each director and officer. Based on such
information, the Company believes that all reports required by Section 16(a) of
the Exchange Act to be filed by its directors and executive officers during the
last fiscal year were filed on time.
17
<PAGE> 20
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the Class A Common Stock against the cumulative
total return of the Standard & Poor's Composite-500 Stock Index and the Goldman
Sachs Technology Services Index for the five (5) fiscal years commencing
February 1, 1995 and ending January 31, 2000. The comparison of total return
shows the change in year-end stock price, assuming the immediate reinvestment of
all dividends for each of the periods.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
SAIC Class A Common Stock vs. S&P 500 and
Goldman Sachs Technology Services Index
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SAIC CLASS A COMMON
STOCK S&P 500 INDEX GOLDMAN SACHSTECHNOLOGY
------------------- ------------- -----------------------
<S> <C> <C> <C>
1/95 100 100 100
1/96 123 140 147
1/97 165 175 154
1/98 249 222 181
1/99 444 294 238
1/00 660 325 261
</TABLE>
18
<PAGE> 21
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
CLASS A COMMON STOCK
To the best of the Company's knowledge, as of the Record Date, no person
(other than Vanguard Fiduciary Trust Company ("Vanguard") in its capacity as
trustee of the Retirement Plans) beneficially owned more than 5% of the
outstanding shares of Class A Common Stock. The following table sets forth, as
of the Record Date, to the best of the Company's knowledge, the number of shares
of Class A Common Stock beneficially owned by each Director, each nominee for
Director, the Named Executive Officers and all executive officers and Directors
as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
------------------------ ------------ -----------
<S> <C> <C>
S. Ahuja.................................................... 190,596 *
D.P. Andrews................................................ 239,592 *
J.R. Beyster................................................ 3,110,122 1.3%(3)
D.A. Cox.................................................... 148,608 *
W.H. Demisch................................................ 160,316 *
D.W. Dorman................................................. 8,000 *
W.A. Downing................................................ 49,825 *
J.E. Glancy................................................. 656,855 *
J.D. Heipt.................................................. 360,233 *
B.R. Inman.................................................. 370,559 *
A.K. Jones.................................................. 30,000 *
H.M.J. Kraemer, Jr.......................................... 36,400 *
C.B. Malone................................................. 112,884 *
S.D. Rockwood............................................... 275,770 *
W.A. Roper, Jr.............................................. 287,537 *
L.A. Simpson................................................ 25,620 *
R.C. Smith.................................................. 122,715 *
E.A. Straker................................................ 418,854 *
M.E. Trout.................................................. 100,000 *
J.P. Walkush................................................ 424,178 *
J.H. Warner, Jr............................................. 510,252 *
J.A. Welch.................................................. 160,636 *
A.T. Young.................................................. 75,080 *
Vanguard Fiduciary Trust Company............................ 105,134,959 45.2%(4)
400 Vanguard Boulevard
Malvern, PA 19355
All executive officers and Directors as a group (27
persons).................................................. 8,648,125 3.6%(5)
</TABLE>
---------------
* Less than 1% of the outstanding shares of Class A Common Stock and less than
1% of the voting power of the Common Stock.
(1) The beneficial ownership depicted in the table includes: (i) the approximate
number of shares allocated to the account of the individual by the Trustee
of the Company's ESRP, Profit Sharing Plan, CODA and/or the Telcordia
Savings Plans as follows: S. Ahuja (8,345 shares), D.P. Andrews (13,129
shares), J.R. Beyster (5,750 shares), D.A. Cox (28,408 shares), W.A. Downing
(2,293 shares), J.E. Glancy (110,238 shares), J.D. Heipt (53,532 shares),
B.R. Inman (40 shares), S.D. Rockwood (27,350 shares), W.A. Roper, Jr.
(22,477 shares), R.C. Smith (247 shares), E.A. Straker (151,551 shares),
J.P. Walkush (57,268 shares), J.H. Warner, Jr. (119,641 shares), J.A. Welch
(19,432 shares) and all executive officers and Directors as a group (714,692
shares); (ii) shares subject to options exercisable within
19
<PAGE> 22
60 days following the Record Date, as follows: S. Ahuja (128,080 shares),
D.P. Andrews (100,000 shares), J.R. Beyster (120,000 shares), D.A. Cox
(53,360 shares), W.H. Demisch (40,400 shares), D.W. Dorman (8,000 shares)
W.A. Downing (25,200 shares), J.E. Glancy (86,000 shares), J.D. Heipt
(84,000 shares), B.R. Inman (56,000 shares), A.K. Jones (26,000 shares),
H.M.J. Kraemer, Jr. (16,400 shares), C.B. Malone (56,000 shares), S.D.
Rockwood (80,800 shares), W.A. Roper, Jr. (120,000 shares), L.A. Simpson
(1,620 shares), R.C. Smith (92,080 shares), E.A. Straker (62,400 shares),
M.E. Trout (12,000 shares), J.P. Walkush (92,800 shares), J.H. Warner, Jr.
(96,000 shares), J.A. Welch (40,400 shares), A.T. Young (64,000 shares) and
all executive officers and Directors as a group (1,554,660 shares); (iii)
shares held by spouses, minor children or other relatives sharing a
household with the individual, as follows: E.A. Straker (38,872 shares),
J.H. Warner, Jr. (5,460 shares), J.A. Welch (20,000 shares) and all
executive officers and Directors as a group (74,332 shares); and (iv) shares
held by certain trusts or foundations established by the individual, as
follows: J.R. Beyster (2,959,836 shares), W.A. Downing (19,256 shares), J.D.
Heipt (198,781 shares), C.B. Malone (30,000 shares), S.D. Rockwood (146,619
shares), L.A. Simpson (24,000 shares), M.E. Trout (88,000 shares), J.H.
Warner, Jr. (270,060 shares) and all executive officers and Directors as a
group (4,009,240 shares).
(2) Based on 232,514,397 shares of Class A Common Stock outstanding as of the
Record Date.
(3) Represents 1.3% of the voting power of the Common Stock.
(4) At the Record Date, Vanguard, as Trustee for the Retirement Plans,
beneficially owned the following percentage of the outstanding shares of
Class A Common Stock and Class B Common Stock and voting power of the Common
Stock under the following plans for the benefit of plan participants: ESRP:
25.7% Class A Common Stock, 8.6% Class B Common Stock and 25.3% of the
voting power of the Common Stock; CODA: 12.8% Class A Common Stock and 12.5%
of the voting power of the Common Stock; Profit Sharing Plan: .08% Class A
Common Stock, .01% Class B Common Stock and .08% of the voting power of the
Common Stock; AMSEC Plan: .2% Class A Common Stock and .2% of the voting
power of the Common Stock; NSI Plan: .07% Class A Common Stock and .07% of
the voting power of the Common Stock; Telcordia Savings Plans: 6.2% Class A
Common Stock and 6.0% of the voting power of the Common Stock; and TransCore
Plan: .1% Class A Common Stock and .1% of the voting power of the Common
Stock. The shares beneficially owned by Vanguard are also included in the
amounts held by individuals and the group set forth in this table.
(5) Represents 3.5% of the voting power of the Common Stock.
20
<PAGE> 23
CLASS B COMMON STOCK
The following table sets forth, as of the Record Date, to the best of the
Company's knowledge, those persons who were beneficial owners of 5% or more of
the outstanding shares of Class B Common Stock. None of the Directors, nominees
for Director, the Named Executive Officers or executive officers of the Company
own any shares of Class B Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OWNERSHIP OF CLASS(1)
---------------------------------------- ---------- -----------
<S> <C> <C>
Vanguard Fiduciary Trust Company..................... 24,926(2) 8.6%(3)
400 Vanguard Boulevard
Malvern, PA 19355
R.C. Cavanagh........................................ 16,002 5.5%(3)
2007 Carrhill Road
Vienna, VA 22181
J.D. Cramer.......................................... 14,615 5.0%(3)
P.O. Box 30691
Albuquerque, NM 87190
J.L. Griggs, Jr. .................................... 20,267(4) 7.0%(3)
1516 Sagebrush Trail, S.E.
Albuquerque, NM 87123
</TABLE>
---------------
(1) Based on 291,208 shares of Class B Common Stock outstanding as of the Record
Date.
(2) Represents shares of Class B Common Stock beneficially owned by Vanguard in
its capacity as Trustee for the ESRP and Profit Sharing Plan. Vanguard's
total ownership of Common Stock is set forth in Note (4) to the previous
table above.
(3) Represents less than 1% of the voting power of the Common Stock.
(4) Includes 803 shares held for the account of J.L. Griggs, Jr. by the Trustee
of the Company's ESRP.
21
<PAGE> 24
INDEPENDENT PUBLIC ACCOUNTANTS
On November 16, 1998, the Company notified PricewaterhouseCoopers LLP that
it was dismissing such firm as its independent accountants effective upon the
completion of the audit of the January 31, 1999 financial statements of the
Company. On November 17, 1998, the Company notified Deloitte & Touche LLP that
it would engage such firm as its new independent accountants for the audit of
the January 31, 2000 financial statements. The decision to change accountants
was approved by the Audit Committee of the Company's Board of Directors.
The audit of the Company's financial statements for the year ended January
31, 1999 was completed by PricewaterhouseCoopers LLP, and on April 29, 1999, the
Company filed its Annual Report on Form 10-K with the Securities and Exchange
Commission.
During the fiscal years ended January 31, 1999 and January 31, 1998 and
through April 29, 1999, there were no disagreements with PricewaterhouseCoopers
LLP on any matter of accounting principles or practices, financial statement
disclosure or audit scope or procedure which disagreements, if not resolved to
the satisfaction of PricewaterhouseCoopers LLP, would have caused them to make
reference to the subject matter of such disagreement in their reports on the
financial statements for such years. The reports of PricewaterhouseCoopers LLP
on the financial statements for the fiscal years ended January 31, 1999 and
January 31, 1998 did not contain an adverse opinion or a disclaimer of opinion,
nor were such reports qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the fiscal years ended January 31, 1999 and January 31, 1998 and
through April 29, 1999, Deloitte & Touche LLP was not engaged as an independent
accountant to audit either the Company's financial statements or the financial
statements of any of its subsidiaries, nor had it been consulted regarding the
application of the Company's accounting principles to a specified transaction
other than those transactions occurring after February 1, 1999, or the type of
audit opinion that might be rendered on the Company's financial statements.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Any stockholder proposals intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company no later than February
9, 2001 in order to be considered for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting. In addition, Section 2.07 of the
Company's Bylaws provides that in order for a stockholder to propose any matter
for consideration at an annual meeting of the Company (other than by inclusion
in the Company's Proxy Statement), such stockholder must have given timely prior
written notice to the Corporate Secretary of the Company of his or her intention
to bring such business before the meeting. To be timely, notice must be received
by the Company not less than 50 days nor more than 75 days prior to the meeting
(or if fewer than 65 days' notice or prior public disclosure of the meeting date
is given or made to stockholders, not later than the 15th day following the day
on which the notice of the date of the meeting was mailed or such public
disclosure was made). Such notice must contain certain information, including a
brief description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at the annual meeting, the
name and record address of the stockholder proposing such business, the class
and number of shares of Common Stock beneficially owned by such stockholder and
any material interest of such stockholder in the business so proposed.
22
<PAGE> 25
ANNUAL REPORT
The Company's 2000 Annual Report to Stockholders for the year ended January
31, 2000, which includes audited financial statements, is being mailed with this
Proxy Statement to stockholders of record as of the Record Date.
The Company will provide without charge to any stockholder, upon request, a
copy of its Annual Report on Form 10-K for the year ended January 31, 2000
(without exhibits) as filed with the Securities and Exchange Commission.
Requests should be directed in writing to Science Applications International
Corporation, 10260 Campus Point Drive, San Diego, California 92121, Attention:
Corporate Secretary.
By Order of the Board of Directors
/s/ J. DENNIS HEIPT
J. Dennis Heipt
Corporate Executive
Vice President and Secretary
June 9, 2000
23
<PAGE> 26
[LOGO]
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JULY 14, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.R. BEYSTER, J.D. HEIPT and D.E. SCOTT, and
each of them, with full power of substitution, as proxies to represent the
undersigned and to vote all of the shares of Class A Common Stock and/or Class B
Common Stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Science Applications International Corporation (the "Company")
to be held in the Grand Ballroom of the Hilton La Jolla Torrey Pines Hotel,
10950 North Torrey Pines Road, San Diego, California, on Friday, July 14, 2000,
at 10:00 A.M. (local time), and at any adjournment, postponement or continuation
thereof, as indicated below.
This proxy will be voted as directed. If this proxy card is properly signed
and returned but no directions are specified, the shares represented by this
proxy will be voted FOR the election of Directors so as to elect the maximum
number of the Board of Directors' nominees that may be elected by cumulative
voting, and, in the discretion of the proxy holders, on any other matters
properly coming before the meeting and any adjournment, postponement or
continuation thereof. This proxy card, if properly executed and delivered in a
timely manner, will revoke all prior proxies.
1. Election of seven Class I Directors.
[ ] FOR all nominees listed below (EXCEPT as marked to the
contrary below) INSTRUCTIONS: To withhold authority to vote for
any individual nominee, strike a line through such nominee's
name and your votes will be distributed among the remaining
nominee(s).
D.P. Andrews, D.A. Cox, W.H. Demisch, J.E. Glancy,
H.M.J. Kraemer, Jr., C.B. Malone and J.A. Welch
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed above.
2. In the discretion of the proxy holders, on any other matters properly
coming before the meeting and any adjournment, postponement or
continuation thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE.
Dated , 2000
XXXXXXXXXX --------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature
Please sign EXACTLY as name or names appear
hereon. When signing as attorney, executor,
trustee, administrator or guardian, please
give your full title.
PROXY NUMBER: XXXXX XXX "A" SHARES XXX "B" SHARES
<PAGE> 27
[LOGO]
VOTING INSTRUCTION CARD FOR ANNUAL MEETING OF STOCKHOLDERS - JULY 14, 2000
THIS VOTING INSTRUCTION CARD IS PROVIDED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE BOARD OF DIRECTORS.
The undersigned hereby instructs the Trustee, Vanguard Fiduciary Trust
Company, and any successor, under the Cash or Deferred Arrangement, Employee
Stock Retirement Plan and Profit Sharing Retirement Plan of Science Applications
International Corporation (the "Company"), the Telcordia Technologies Savings
and Security Plan and the Telcordia Technologies Savings Plan for Salaried
Employees of Telcordia Technologies, Inc., a wholly-owned subsidiary of the
Company, the AMSEC Employees 401(k) Profit Sharing Plan, the TransCore 401(k)
Retirement Savings Plan and the NSI 401(k) Retirement Plan (collectively, the
"Plans"), to vote all of the shares of Class A Common Stock and/or Class B
Common Stock held for the undersigned's account in each of the Plans at the
Annual Meeting of Stockholders of the Company to be held in the Grand Ballroom
of the Hilton La Jolla Torrey Pines Hotel, 10950 North Torrey Pines Road, San
Diego, California, on Friday, July 14, 2000, at 10:00 A.M. (local time), and at
any adjournment, postponement or continuation thereof, as follows.
The shares of Class A Common Stock and/or Class B Common Stock to which this
voting instruction card relates will be voted as directed. If this card is
signed and returned but no instructions are indicated with respect to a
particular item, the vote of such shares as to any such item will be deemed to
have been instructed to vote, and such shares will be voted FOR the election of
Directors so as to elect the maximum number of the Board of Directors' nominees
that may be elected by cumulative voting, and, in the discretion of the proxy
holders, on any other matters properly coming before the meeting and any
adjournment, postponement or continuation thereof. All allocated shares of Class
A Common Stock and/or Class B Common Stock held in the Plans as to which no
voting instruction cards are received, together with all shares held in the
Plans which have not yet been allocated to the accounts of participants, will be
voted, on a plan-by-plan basis, in the same proportion as the shares held in
each Plan for which voting instructions have been received are voted. This
voting instruction card, if properly executed and delivered, will revoke all
prior voting instruction cards.
1. Election of seven Class I Directors.
[ ] FOR all nominees listed below (EXCEPT as marked to the
contrary below) INSTRUCTIONS: To withhold authority to vote for
any individual nominee, strike a line through such nominee's
name and your votes will be distributed among the remaining
nominee(s).
D.P. Andrews, D.A. Cox, W.H. Demisch, J.E. Glancy,
H.M.J. Kraemer, Jr., C.B. Malone and J.A. Welch
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed above.
2. In the discretion of the proxy holders, on any other matters properly
coming before the meeting and any adjournment, postponement or
continuation thereof.
Please complete, date, sign and mail promptly in the enclosed envelope which
requires no postage. In order to be counted, voting instruction cards must be
received by the proxy counter by JULY 10, 2000.
Dated , 2000
XXXXXXX ------------------------------
---------------------------------------------
Signature
Please sign EXACTLY as name or names appear
hereon. When signing as attorney, executor,
trustee, administrator or guardian, please
give your full title.
PROXY NUMBER: XXXX XXXX "A" SHARES XXXX "B" SHARES
