<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A Amendment Number 3
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended March 31, 1996 or
|_|Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from ___________ to___________
Commission File No. 1-10151
THE CONTINUUM COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1609363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9500 Arboretum Boulevard
Austin, Texas 78759-6399
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (512) 345-5700
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.10 Par Value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.[x]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of July 15, 1996:
Common Stock, $.10 Par Value -- $957,206,000
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of July 15, 1996:
Common Stock, $.10 Par Value -- 24,443,000
<PAGE>
PART III
Part III is amended and restated in its entirety to reflect the following:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The Board of Directors of the registrant currently consists of eight
directors. Each of the eight directors was elected at the 1995 Annual Meeting
and will serve until the next Annual Meeting of Stockholders or until his
successor shall have been elected and qualified. If the merger described in Item
12 of this report occurs, the term of each current director will end at the time
such merger is effected.
There is no family relationship between the directors or executive officers
of the registrant.
The following table sets forth a brief description of the business
experience, including the present principal occupation of each director, and, if
different, such occupations during the preceding five years, and the year each
person first became a director.
2
<PAGE>
<TABLE>
<CAPTION>
Offices Held with the Director
Registrant and Business of the
Experience During the Registrant
Name Preceding Five Years(1) Age Since
- ---------------------- --------------------------------------------- --- ----------
<S> <C> <C> <C>
Ronald C. Carroll ................ Chairman of the Board of
Directors of the registrant .......................... 61 .............. 1975
Lowell C. Anderson ............... Chairman, President and Chief Execu-
tive Officer of Allianz Life
Insurance Company of North America
(life insurance) ....................................... 59 .............. 1994
Thomas G. Brown .................. President and Chief Executive Officer
of Duncanson & Holt, Inc. (rein-
surance managers) ...................................... 51 .............. 1994
W. Michael Long .................. Chief Executive Officer and President
of the registrant ...................................... 44 .............. 1983
Thomas A. McDonnell .............. President and Chief Executive Officer
of DST Systems, Inc. (mutual fund
administrative services); Director of
Nellcor-Puritan-Bennett Corporation,
Informix Corp., BHA Group, Inc., and
First of Michigan Capital Corporation,
and Cerner Corporation ................................. 50 .............. 1994
Carl S. Quinn .................... General Partner of Quinn Oil Company,
Ltd. (oil) (December 1994 to present);
Chairman of the Board, Chief Executive
Officer and President of Interstate
Natural Gas Company (natural gas)
(February 1992 to December 1994);
Chairman of the Board and Chief Execu-
tive Officer of Arkla Exploration
Company (oil and gas exploration and
development) (to January 1992);
Director of Atmos Energy Corporation
and Coho Energy, Inc. .................................. 65 .............. 1994
Edward C. Stanton, III ........... President of Cramon Corp. (private
investment corporation); General
Partner of Inwood Investors
Partnership, L.P. (private invest-
ment partnership); Managing Director
of Oppenheimer & Co., Inc. (investment
bankers) (to March 1992) ............................... 53 .............. 1988
E. Lee Walker .................... Private Investor; President and Chief
Operating Officer of Dell Computer
Corporation (to March 1990); Director
of Mobile Telecommunication
Technologies Corporation ............................... 55 .............. 1989
</TABLE>
3
<PAGE>
(1) Directorships are listed for other corporations which have a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or are subject to the requirements of Section 15(d) of that
Act, and for any company registered as an investment company under the
Investment Company Act of 1940.
DIRECTORS' COMPENSATION
Directors who are not also employees of the registrant receive $20,000 per
year as compensation for their services. Non-employee directors also receive
$500 for each committee meeting attended in person and $250 for each Board or
committee meeting conducted by telephone.
All non-employee directors of the registrant have received a one-time award
upon commencement of services as a director of an option to purchase 10,000
shares of the registrant's common stock, $0.10 par value ("Common Stock"),
except for Mr. Lowell Anderson who declined the option grant as a result of his
employer's management policies. The exercise price of the options is based on
the closing price of the stock on the date of grant. The options vest twenty
percent per year for five consecutive years, contingent on continued service as
a director of the registrant.
EXECUTIVE OFFICERS
Listed below are the executive officers of The Continuum Company, Inc. and
subsidiaries as of March 31, 1996. All officers serve until the next annual
election of officers or until a successor is duly elected and qualified.
4
<PAGE>
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE -- LAST FIVE YEARS
- -------------------- --- --------------------------------------
<S> <C> <C>
Ronald C. Carroll ................ 61 .............. Chairman of the Board
W. Michael Long .................. 44 .............. President and Chief Executive Officer
Neil R. Cullimore ................ 52 .............. Executive Vice President (July 1993 to present); Chief Executive
Officer of Paxus Corporation Limited (to July 1993)
Robert S. Maltempo ............... 55 .............. Executive Vice President (October 1993 to present); President of
Vantage Computer Systems, Inc. (to October 1993)
Michael W. Brinsford ............. 46 .............. Senior Vice President (February 1994 to present); Vice President and
Managing Director -- European Operations (to February 1994)
Piers G.D. Fox ................... 51 .............. Senior Vice President
Ronald A. Nowak .................. 43 .............. Senior Vice President (May 1993 to present); Vice President and
Managing Director of Continuum Australia Limited (to May 1993)
Kenneth L. Williams .............. 50 .............. Senior Vice President (November 1992 to present); Vice President (to
November 1992)
Michael H. Anderson .............. 57 .............. President and Chief Executive Officer of Hogan Systems, Inc. (June 1992 to
present); Executive Vice President of NEC Technologies, Inc. (hardware
manufacturer) (to February 1992)
Brian W. Barker .................. 48 .............. Executive Vice President of Hogan Systems, Inc. (March 1996 to present);
North American Life Division Executive Vice President (September 1995 to
March 1996); President of Storagetek Canada (computer hardware provider)
(February 1994 to September 1995); Senior Vice President (to February 1994)
Philip H. Small .................. 46 .............. Managing Director of Continuum Australia Limited (August 1993 to
present); Managing Director of Paxus Corporation Europe (to August 1993)
John L. Westermann III ........... 51 .............. Vice President, Secretary, Treasurer, and Chief Financial Officer
</TABLE>
5
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
the registrant's Chief Executive Officer and each of the four other most highly
compensated executive officers (hereinafter referred to as the named executives)
for each of the fiscal years ended March 31, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
SECURITIES
OTHER UNDER- ALL
ANNUAL LYING OTHER
NAME AND COMPEN- RESTRICTED STOCK COMPEN-
PRINCIPAL SALARY BONUS SATION(1) STOCK(2) OPTIONS SATION(3)
POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------ ---- -------- -------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
W.M. Long ............... 1996 357,083 548,000 -- -- 80,000 400,251
Chief .................. 1995 318,750 300,000 -- -- 100,000 181,425
Executive .............. 1994 247,917 150,000 49,172 75,000 100,000 7,959
Officer
R.C. Carroll ............ 1996 200,000 240,000 -- -- 20,000 169,951
Chairman of ............ 1995 195,833 150,000 -- -- 60,000 181,425
the Board .............. 1994 150,000 75,000 -- -- 50,000 7,959
N.R. Cullimore .......... 1996 230,167 233,000 -- -- 25,000 169,951
Executive Vice ......... 1995 208,333 100,000 -- -- 30,000 122,613
President .............. 1994 126,667 100,000 98,438 175,000 60,000 --
R.S. Maltempo ........... 1996 272,917 288,000 -- -- 30,000 169,951
Executive Vice ......... 1995 250,000 125,000 -- -- 30,000 122,613
President .............. 1994 125,000 -- 75,904 108,750 60,000 --
M. Brinsford ............ 1996 208,617 192,000 64,701 -- 25,000 148,532
Senior Vice ............ 1995 187,056 81,050 52,041 -- 27,500 103,545
President .............. 1994 166,334 104,895 38,066 56,250 50,000 13,307
</TABLE>
(1) All amounts in this column represent payments made directly to tax
authorities on behalf of each executive officer granted a restricted
stock award under the registrant's 1990 Restricted Stock and Bonus Plan
in an amount substantially sufficient to offset the executive's income
tax liabilities resulting from the award, except that the amounts for
Mr. Brinsford include automobile allowance of $20,762, $8,800 and
$13,626 for the years 1996, 1995, and 1994, respectively.
(2) The restricted stock awards were made pursuant to the registrant's 1990
Restricted Stock and Bonus Plan. All shares awarded are subject to a
five-year vesting period, commencing one year after grant. During the
restriction period, dividends, if any, are paid on the shares awarded.
The total number of unvested restricted stock holdings and fair market
value as of March 31, 1996, for the named executives are as follows:
6
<PAGE>
<TABLE>
<CAPTION>
UNVESTED
RESTRICTED MARCH 31, 1996
NAME SHARES VALUE
- -------- ---------- --------------
<S> <C> <C>
Mr. Long ............. 7,600 .............. $316,350
Mr. Carroll .......... 2,000 .............. $ 83,250
Mr. Cullimore ........ 6,000 .............. $249,750
Mr. Maltempo ......... 3,600 .............. $149,850
Mr. Brinsford ........ 5,000 .............. $208,125
</TABLE>
(3) The amounts reported in this column for the year 1994 represent
contributions by the registrant on behalf of the named executives to
the registrant's defined contribution retirement plan. The amounts
reported in this column for the 1996 and 1995 years include
contributions to the defined contribution retirement plan in the
following amounts:
<TABLE>
<CAPTION>
RETIREMENT PLAN AMOUNTS
NAME 1996 1995
- ------------- ------- -------
<S> <C> <C>
Mr. Long .................... $ 5,451 ...... $ 5,030
Mr. Carroll ................. $ 5,451 ...... $ 5,030
Mr. Cullimore ............... $ 5,451 ...... $ 5,030
Mr. Maltempo ................ $ 5,451 ...... $ 5,030
Mr. Brinsford ............... $16,932 ...... $14,965
</TABLE>
Otherwise, the amounts in this column for the fiscal years ended March
31, 1996 and 1995 represent amounts accrued to the named executives
under the registrant's deferred compensation plan.
STOCK OPTIONS
The following table sets forth certain information with respect to stock
options granted to the named executives during the fiscal year ended March 31,
1996. Further, in accordance with Securities and Exchange Commission rules,
hypothetical gains on the respective options are shown. These gains assume rates
of annual compounded stock price appreciation of five percent and ten percent
over the full option term. The hypothetical gains to the optionees are not
possible without an increase in the market value of the registrant's Common
Stock, which will likewise benefit all stockholders proportionately. In
assessing these hypothetical gains, it is important to emphasize that the
ultimate value of the options will depend on the market value of the
registrant's Common Stock at a future date.
7
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
% OF
NUMBER OF TOTAL POTENTIAL
SECURITIES OPTIONS REALIZABLE VALUE AT
UNDERLYING GRANTED EXERCISE ASSUMED ANNUAL RATES
OPTIONS IN PRICE OF STOCK PRICE APPRE-
GRANTED FISCAL ($ PER EXPIRATION CIATION FOR OPTION TERM
NAME (#) YEAR (%) SHARE) DATE 5% ($) 10% ($)
- ------------------ ---------- -------- ------ ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders(1) 19,143,624 -- 32.50(1) -- 391,277,974 991,575,208
Mr. Long 80,000 7.02 32.50 6/07/05(2) 1,635,126 4,143,730
Mr. Carroll 20,000 1.75 32.50 6/07/05(2) 408,782 1,035,933
Mr. Cullimore 25,000 2.19 32.50 6/07/05(2) 510,977 1,294,916
Mr. Maltempo 30,000 2.63 32.50 6/07/05(2) 613,172 1,553,899
Mr. Brinsford 25,000 2.19 32.50 6/07/05(2) 510,977 1,294,916
</TABLE>
(1) The potential realizable value for all stockholders is based on the
number of shares of Common Stock outstanding on June 7, 1995, and
assumes a per share price of $32.50, the closing price of Common Stock
on June 7, 1995, the date the options in this table were granted, and
assumes hypothetical gains resulting from annual compounded stock price
appreciation of five percent and ten percent over ten years, the term of
all the options in the table. This information is included to illustrate
how the stockholders will have fared compared to the named executives if
the assumed appreciation is achieved.
(2) Subject to early vesting as discussed under "Change in Control
Provisions" in Item 13 and early vesting based on achievement of
specified values of Common Stock over a set time period, options vest
twenty percent per year for five consecutive years beginning June 7,
1996.
The following table shows stock options exercised by the named executives
during the fiscal year ended March 31, 1996, including the market value of the
underlying securities at each exercise date minus the option exercise price. In
addition, this table sets forth information concerning exercisable and
unexercisable stock options as of March 31, 1996. Also reported are the values
of "in-the-money" options which represent the positive spread between the
exercise price of any such existing stock options and the Common Stock price as
of March 31, 1996.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR- FISCAL YEAR-
ACQUIRED ON VALUE END (#) END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
-------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Mr. Long 80,000 2,535,000 92,856/ 2,432,831/
257,144 4,332,169
Mr. Carroll -- -- 21,428/ 490,166/
108,572 1,901,085
Mr. Cullimore -- -- 27,716/ 660,149/
87,284 1,581,727
Mr. Maltempo -- -- 27,716/ 666,578/
92,284 1,635,923
Mr. Brinsford -- -- 22,928/ 519,978/
79,572 1,368,460
</TABLE>
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of common stock, $0.10 par value ("Common Stock"), of the registrant
as of July 15, 1996, by (i) any person or group (as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) known to the registrant to be
the beneficial owner of more than five percent of the outstanding registrant
Common Stock; (ii) all directors; (iii) each of the named executives; and (iv)
all executive officers and directors as a group. Unless otherwise noted, each of
the stockholders has sole voting and investment power with respect to the shares
beneficially owned, other than shared rights created under joint tenancy or
marital property laws as between such persons and their spouses, if any.
<TABLE>
<CAPTION>
PERCENT
DIRECTORS, NAMED EXECUTIVES NUMBER OF STOCK
AND 5% STOCKHOLDERS OF SHARES OUTSTANDING
- --------------------------- --------- -----------
<S> <C> <C>
DST Systems, Inc. .................................. 5,549,141 ........... 22.7%
1055 Broadway
Kansas City, MO 64105
FMR Corp. and Edward C. Johnson 3d ................. 2,871,200(1) ........ 11.8%
82 Devonshire Street
Boston, MA 02109
Lowell C. Anderson ................................. -- ........... --
Thomas G. Brown .................................... 4,000(2) ........ *
Ronald C. Carroll .................................. 180,173(2) ........ *
Michael Long ....................................... 167,729(2) ........ *
Thomas A. McDonnell ................................ 4,000(2)(3) ..... *
Carl S. Quinn ...................................... 9,000(2) ........ *
Edward C. Stanton, III ............................. 2,600(4) ........ *
E. Lee Walker ...................................... 12,000(2) ........ *
Neil R. Cullimore .................................. 99,337(2)(5) ..... *
Robert S. Maltempo ................................. 233,265(2) ........ *
Michael W. Brinsford ............................... 50,000(2) ........ *
All directors and executive
officers as a group (18 persons) ................. 1,304,044(2-5) ...... 5.3%
</TABLE>
* Represents less than 1%
10
<PAGE>
(1) This information, which is not within the direct knowledge of the
registrant, has been derived from a Schedule 13G dated December 31,
1995, and filed with the Securities and Exchange Commission on February
14, 1996. Based upon information contained in such Schedule 13G,
Fidelity Management & Research Company, an investment advisory and
subsidiary of FMR Corp. is the beneficial owner of 2,804,100 shares of
Common Stock as a result of acting as investment advisor to various
investment companies (the Fidelity Blue Chip Growth Fund's interest
amounted to 1,079,900 shares of Common Stock and the Fidelity Magellan
Fund's interest amounted to 1,711,400 shares). Another investment
manager and subsidiary of FMR Corp., Fidelity Management Trust Company,
is the beneficial owner of 67,100 shares of Common Stock. FMR Corp. and
its Chairman, Edward D. Johnson 3d, share dispositive power but have no
voting power of the shares reported herein. Mr. Johnson and his family
form a controlling group with respect to FMR Corp.
(2) The number stated represents options which are exercisable within 60
days in the following amounts:
<TABLE>
<CAPTION>
COMMON STOCK
UNDERLYING
BENEFICIAL OWNER OPTIONS
- ---------------- ------------
<S> <C>
Thomas G. Brown ................. 4,000
Ronald C. Carroll ............... 35,428
W. Michael Long ................. 158,856
Thomas A. McDonnell ............. 4,000
Carl S. Quinn ................... 4,000
E. Lee Walker ................... 10,000
Neil R. Cullimore ............... 49,216
Robert S. Maltempo .............. 52,716
Michael W. Brinsford ............ 43,428
All executive officers and
directors as a group ............ 606,785
</TABLE>
(3) The number stated excludes the shares owned by DST Systems, Inc., of
which Mr. McDonnell is President and a director. Mr. McDonnell
disclaims beneficial ownership of any shares of the registrant owned by
DST Systems, Inc.
(4) The number stated includes 200 shares owned by Mr. Stanton's spouse.
(5) The number stated includes 112 shares owned by Mr. Cullimore's
immediate family and 40,009 shares subject to a security interest as
described in Item 13.
As reported in the registrant's Current Report of Form 8-K dated May 1,
1996, on April 28, 1996 the registrant entered into an Agreement and Plan of
Merger providing for the merger (the "Merger") of a wholly-owned subsidiary of
Computer Sciences Corporation ("CSC") with and into the registrant, pursuant to
which the registrant will become a wholly-owned subsidiary of CSC and each
outstanding share of common stock of the registrant will be converted into 0.79
of a share of common stock of CSC. The registrant anticipates that the Merger
will be effected on or about August 1, 1996, provided the requisite stockholder
approvals are obtained and all other conditions to the Merger are satisfied or
waived. Upon consummation of the Merger, the directors of the registrant will be
replaced by nominees of CSC.
11
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN TRANSACTIONS
Mr. Cullimore, Executive Vice President of the registrant, was indebted to
the registrant in an aggregate amount of approximately $576,014 during the
fiscal year ended March 31, 1996. The indebtedness represents non-recourse loans
made by Paxus Corporation Limited, an entity acquired by the registrant in
August 1993, to Mr. Cullimore to fund the purchase of Paxus Corporation Limited
ordinary shares under Paxus Corporation Limited's Employee Share Plan. No
interest accrues on the loans and they have no stated maturity date. Mr.
Cullimore's loans are currently secured by 40,009 shares of Common Stock held in
the name of Mr. Cullimore.
CHANGE IN CONTROL PROVISIONS
Each of the named executives has received grants of options or restricted
stock awards. These restricted stock awards and options contain provisions
relating to a possible change in control of the registrant.
Each restricted stock award granted to a named executive on or before May
1, 1995, has included a vesting period whereby a portion of the restricted stock
vests over a five-year period. However, all of the restricted stock awards
immediately vest in the event the holder's employment is involuntarily
terminated after the occurrence of a change in control.
The option awards granted to the named executives also contain change in
control provisions. Such provisions provide that the options shall automatically
vest in the event the option holder's employment is terminated (as defined
therein), other than for cause, after a change in control of the registrant.
For purposes of the restricted stock awards, as well as for purposes of the
option awards granted to the named executives during the fiscal year ended March
31, 1996, a change in control is defined as having taken place when any third
party purchases or otherwise acquires beneficial ownership of more than thirty
percent of the Common Stock, or, as a result of a contested election of
directors, a majority of the Board of Directors of the registrant before such
election cease to be members of the Board of Directors. However, in the case of
the option grants during the last fiscal year, the required percentage of
beneficial ownership to constitute a change in control is thirty-two percent in
the event the acquiror is DST Systems, Inc. Consummation of the Merger will
result in a change in control.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CONTINUUM COMPANY, INC.
By: JOHN L. WESTERMANN III
Vice President and Chief
Financial Officer
Date: July 26, 1996
13
