<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Advanced Communication Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
ADVANCED COMMUNICATION SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 25, 1999
TO THE STOCKHOLDERS OF ADVANCED COMMUNICATION SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Advanced Communication Systems, Inc. (the "Company"),
will be held at the offices of the Company at 10089 Lee Highway, Fairfax,
Virginia, 22030, at 10:30 a.m. on Thursday, February 25, 1999 for the following
purposes:
1. To elect six directors to serve for the following year and until their
successors are duly elected;
2. To approve an amendment to the Company's 1997 Stock Incentive Plan;
3. To approve the Company's Employee Stock Purchase Plan;
4. To ratify the appointment of Arthur Andersen LLP as independent
accountants of the Company for the fiscal year ending September 30,
1999; and
5. To consider and transact such other business as may properly and
lawfully come before the Annual Meeting or any adjournment thereof.
All of the foregoing is more fully set forth in the Proxy Statement
accompanying this Notice.
The transfer books of the Company will close as of the end of business on
January 11, 1999 for purposes of determining stockholders who are entitled to
notice of and to vote at the Annual Meeting, but will not be closed for any
other purpose.
All stockholders are cordially invited to attend the Annual Meeting in
person. IF YOU CANNOT ATTEND THE ANNUAL MEETING, PLEASE TAKE THE TIME TO
PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE WE HAVE
PROVIDED. If you attend the Annual Meeting and decide that you want to vote in
person, you may revoke your proxy.
By Order of the Board of Directors
January 26, 1999 Dev Ganesan, Executive Vice President,
Fairfax, Virginia Chief Financial Officer and Treasurer
<PAGE> 3
ADVANCED COMMUNICATION SYSTEMS, INC.
10089 LEE HIGHWAY
FAIRFAX, VIRGINIA, 22030
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 25, 1999
--------------------------
PROXY STATEMENT
--------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of Advanced Communication
Systems, Inc. (the "Company") for the annual meeting of stockholders (the
"Annual Meeting") to be held at 10:30 a.m. on Thursday, February 25, 1999 at
the Company's headquarters, located at 10089 Lee Highway, Fairfax, Virginia or
any adjournment or adjournments thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting.
These proxy solicitation materials were mailed on or about January 26,
1999 to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on January 11, 1999
(the "Record Date"), are entitled to receive notice of and to vote at the
Annual Meeting. The outstanding voting securities of the Company as of such
date consisted of 8,626,176 shares of Common Stock, $.01 par value (the "Common
Stock"). For information regarding holders of more than 5% of the outstanding
Common Stock, see "Securities Ownership of Certain Beneficial Owners and
Management."
REVOCABILITY OF PROXIES
The enclosed proxy is revocable at any time before its use by delivering
to the Company a written notice of revocation or a duly executed proxy bearing
a later date. If a person who has executed and returned a proxy is present at
the Annual Meeting and wishes to vote in person, he or she may elect to do so
and thereby suspend the power of the proxy holders to vote his or her proxy.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. In
the election of directors, each stockholder will be entitled to vote for six
nominees and the six nominees with the greatest number of votes will be
elected. Proposals 2, 3 and 4 will require the affirmative vote of a majority
of the shares of the Company's Common Stock present or represented and entitled
to vote at the Annual Meeting.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their
<PAGE> 4
expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally or by
telephone, telecopy, or electronic mail.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of a majority of the
shares entitled to be voted generally at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Under the Delaware General
Corporation Law (the "DGCL"), an abstaining vote and a broker "non-vote" are
counted as present and entitled to vote and are, therefore, included for
purposes of determining whether a quorum of shares exists. Abstentions are
also counted in tabulating the total number of votes cast on matters voted on
by the stockholders at the Annual Meeting. Broker "non-votes" are not counted
for purposes of determining the number of votes cast on any matter voted on by
stockholders.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 2000 annual meeting must be
received by the Company no later than September 28, 1999 in order that they may
be included in the proxy statement and form of proxy relating to that meeting.
Any such proposal should be addressed to the Company's Chief Financial Officer
and delivered to the Company's principal executive offices at 10089 Lee
Highway, Fairfax, Virginia, 22030.
ANNUAL REPORT
The Company's Annual Report to Stockholders, which includes its Annual
Report on Form 10-K for the fiscal year ended September 30, 1998, is enclosed
with this Proxy Statement.
ELECTION OF DIRECTORS
(PROPOSAL 1)
GENERAL
A Board of Directors consisting of six directors is to be elected at the
Annual Meeting. Unless otherwise instructed, the proxy holders will vote all of
the proxies received by them for the Company's six nominees. The six directors
nominated for election at the Annual Meeting are: Charles R. Collins, Thomas A.
Costello, Charles G. Martinache, George A. Robinson, Wayne Shelton and Vincent
G. Vidas (collectively, the "Nominees"). In the event that any of the Nominees
shall become unavailable, the proxy holders will vote in their discretion for a
substitute nominee. It is not expected that any nominee will be unavailable.
The term of office of each person elected as a director will continue until the
next annual meeting of stockholders and until his successor has been elected
and qualified.
The Amended and Restated Bylaws of the Company provide that the number of
members of the Board of Directors shall consist of six directors. Each
director is elected for a one-year term at each annual meeting of the
stockholders. Officers are elected by the Board of Directors. Each officer
serves at the discretion of the Board of Directors. There are no family
relationships among any of the directors or executive officers.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES.
2
<PAGE> 5
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below is certain information regarding the directors (including
the Nominees), executive officers and key employees.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS: AGE POSITION
<S> <C> <C>
George A. Robinson ..................60 President, Chief Executive Officer and Chairman of
the Board of Directors
Dev Ganesan..........................40 Executive Vice President, Chief Financial Officer
and Treasurer
Vincent G. Vidas ....................67 Executive Vice President, Chief Operating Officer
and Director
Thomas A. Costello ..................51 Executive Vice President, Chief Technology Officer,
Secretary and Director
Charles R. Collins ..................67 Director
Charles G. Martinache................58 Director
Wayne Shelton........................66 Director
</TABLE>
<TABLE>
<CAPTION>
KEY EMPLOYEES: AGE POSITION
<S> <C> <C>
Kevin R. Adams ....................41 President of ACS Technologies
Dwayne Junker......................57 President of RF Microsystems, Inc.
John Lin ..........................53 President of Advanced Management Incorporated
Carl A. Mazzan ....................60 President of SEMCOR, Inc.
Kenneth D. Regan ..................56 President of ACS Services
Howard Sparks......................61 President of Integrated Systems Control, Inc.
</TABLE>
GEORGE A. ROBINSON. Mr. Robinson is a founder of the Company and has
served as President, Chief Executive Officer and Chairman of the Board of
Directors of the Company since its inception in 1987. From 1986 to 1987, Mr.
Robinson held the position of Vice President for East Coast Operations of
Advanced Digital Systems, Inc., a military communication software development
company. Prior to working at Advanced Digital Systems, Inc., Mr. Robinson
spent over 20 years as a civilian employee in the U.S. Navy Satellite
communication program, most recently as Deputy Director.
DEV GANESAN. Mr. Ganesan has served as the Chief Financial Officer of the
Company since February 1997 and as Executive Vice President and Treasurer since
August 1997. From June 1994 to January 1997, Mr. Ganesan was employed by GSE
Systems, Inc., a publicly held international software systems and technology
solutions developer, as Vice President of Finance and Accounting. From 1990 to
June 1994, Mr. Ganesan served as the Treasurer and Corporate Controller of U.S.
Lime & Minerals, Inc., a publicly held mineral resources company. From 1987 to
1990, Mr. Ganesan was with Deloitte & Touche, most recently as an audit
manager.
VINCENT G. VIDAS. Mr. Vidas has served as the Executive Vice President and
Chief Operating Officer of the Company since December 1998 and as a Director
since August 1998. Mr. Vidas is a founder of SEMCOR, Inc. ("SEMCOR"), a
wholly-owned subsidiary of the Company and served as President of SEMCOR from
1987 until January 1999.
THOMAS A. COSTELLO. Mr. Costello is a founder of the Company and has
served as Secretary and a Director of the Company since 1987. Mr. Costello
also served as Treasurer of the Company from 1987 to August 1997. From 1987 to
1994, Mr. Costello held the positions of Senior Vice
3
<PAGE> 6
President and Technical Director, and in 1995 was made Executive Vice President
and Chief Technology Officer of the Company. From 1983 to 1987, Mr. Costello
was a Senior Systems Engineer for Advanced Digital Systems, Inc. where, among
other things, he led the Integrated Navy SATCOM Architecture study to upgrade
existing information exchange subsystems.
CHARLES R. COLLINS. Mr. Collins has served on the Board of Directors
since August 1997. He is also currently an advisory partner with the law firm
Gibson, Dunn & Crutcher LLP and has held such position since April 1, 1996.
From 1984 to such date, Mr. Collins was a partner with Gibson, Dunn & Crutcher
LLP. Mr. Collins is a general partner of a real estate partnership that filed
for reorganization under Chapter 11 of the U.S. Bankruptcy Code in 1995. The
partnership emerged from reorganization in 1996 and currently is performing
under its obligations, as reorganized. Mr. Collins was not the managing
general partner of the partnership at the time it was put into Chapter 11 and
currently is not the managing general partner.
CHARLES G. MARTINACHE. Mr. Martinache is a founder of the Company and has
served as a Director of the Company since 1987. Mr. Martinache also served as
Chief Operating Officer of the Company from 1987 to December 1998, as Vice
President from 1987 to July 1992 and as Executive Vice President from 1992 to
December 1998. From 1986 to 1987, Mr. Martinache was a program manager for
Advanced Digital Systems, Inc. Prior to that, Mr. Martinache served 23 years
in the U.S. Navy as a cryptologic officer.
WAYNE SHELTON. Mr. Shelton has served on the Board of Directors since
August 1997. From January 1995 to June 1997, he served as president of Hughes
Information Systems and as a senior vice president of Hughes Aircraft Company.
From December 1990 to January 1995, Mr. Shelton was president of Hughes
Information Technology Corporation and corporate vice president of Hughes
Aircraft Company. Mr. Shelton is currently a member of the Board of Directors
of ADI Technology, Inc., a software engineering company.
KEVIN R. ADAMS. Mr. Adams has served as President of ACS Technologies
since October 1997. Mr. Adams joined the Company in September 1993 as a Systems
Engineer, and in September 1994 he was made Manager of VME Technologies. In
April 1996, Mr. Adams was promoted to Director of ACS Technologies, a business
unit of the Company focusing on systems integration work, and in May 1997, Mr.
Adams was appointed to the position of Vice President of the Company. From
December 1991 to August 1993, Mr. Adams was employed as an engineer by VisiCom
Laboratories, Inc., a software development company.
DWAYNE JUNKER. Mr. Junker joined RF Microsystems, Inc. ("RFM"), a
wholly-owned subsidiary of the Company, in 1989 and has served as RFM's
President since November 1997. Prior to becoming President, Mr. Junker served
as Vice President from 1996 to November 1997, C4I Division Vice President from
1994 to 1996, head of the C3I Department from 1992 to 1994 and as Milstar
Satellite Program Manager from 1989 to 1992. Prior to working at RFM, Mr.
Junker served 30 years as a Navy Officer specializing in telecommunications and
electronics.
JOHN LIN. Mr. Lin is a founder of Advanced Management Incorporated
("AMI") and has been President of AMI since its inception in 1981. Mr. Lin has
over 25 years experience as a systems engineer, facilities manager, operating
system programmer, application programmer, office automation designer and
network designer and installer. Prior to founding AMI, Mr. Lin worked for
Electronic Data Systems and Planning Research Corporation.
CARL A. MAZZAN. Mr. Mazzan joined SEMCOR in 1980 and was appointed
President in December 1998. Prior to becoming President, Mr. Mazzan served in
a variety of positions including
4
<PAGE> 7
Chief Operating Officer from March 1998 to December 1998, Vice President and
Deputy C4I Division Head from 1995 to March 1998 and Vice President and Manager
Washington Operations from 1988 to 1995. In addition, Mr. Mazzan was the
Program/Contract Manager for multimillion dollar contracts in support of the
Space and Naval Warfare Systems Command from 1982 through 1997. Prior to
joining SEMCOR in 1980, Mr. Mazzan served 20 years as a Navy Officer with a
subspecialty in Command, Control and Communications.
KENNETH D. REGAN. Mr. Regan joined the Company in October 1997 as Vice
President for International Development and assumed the position of President
of ACS Services, a business unit of the Company focusing on information
technology services, in January 1998. Before joining the Company, Mr. Regan
served for seven years as head of the Communication and Information Systems
Department at the Navy Research and Development Laboratory Center in San Diego,
California. Prior to becoming head of the department, he was division head,
branch head and program manager for large communication and surveillance
programs at the Naval Ocean Systems Center and predecessor organizations.
HOWARD SPARKS. Mr. Sparks is a founder of Integrated Systems Control,
Inc. ("ISC"), a wholly-owned subsidiary of the Company, and has been President
and a Director of ISC since its inception in 1983. Prior to founding ISC, Mr.
Sparks was a Senior Analyst and Business Manager for Sonalysts, Inc. Mr.
Sparks has 38 years of C3I experience.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than 10% of the Company's Common Stock to file reports of ownership
and changes in ownership of the Company's Common Stock with the Securities and
Exchange Commission and Nasdaq. Based solely on a review of the copies of such
reports and written representations from the reporting persons that no other
reports were required, the Company believes that during the fiscal year ended
September 30, 1998, its executive officers, directors and greater than ten
percent stockholders filed on a timely basis all reports due under Section
16(a) of the Exchange Act, with the following exception: Vince Vidas filed his
Statement of Changes in Beneficial Ownership on Form 4 on September 17, 1998 in
connection with 2,000 shares purchased in August 1998.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met eight times in the fiscal year ended September
30, 1998. The Audit Committee met four times and the Compensation Committee met
three times in the fiscal year ended September 30, 1998. Each of the directors
attended at least 75% of all meetings of the Board of Directors and all
committees on which he served during the year.
The Compensation Committee and Audit Committee are comprised of Messrs.
Shelton and Collins. The Compensation Committee determines the compensation of
the Company's executive officers and administers the 1996 Stock Incentive Plan,
the 1997 Stock Incentive Plan and the Employee Stock Purchase Plan. The Audit
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plan and
results of the audit engagement, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls.
5
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Neither
member of the Compensation Committee was an officer or employee of the Company
during the fiscal year ending September 30, 1998. Prior to the formation of
the Compensation Committee in August 1997, the functions of the Compensation
Committee were performed by the Board of Directors as a whole. For information
concerning certain transactions and relationships among the Company and the
current members of the Board of Directors, see "Certain Transactions."
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive any compensation
for their service as directors. The Company pays each director who is not an
employee of the Company (i) an annual retainer of $15,000, which is paid
quarterly in cash, (ii) a stipend of $1,200 for attending each meeting of the
Board of Directors and each meeting of a committee of the Board of Directors if
such committee meeting is held on a date separate from a meeting of the Board
of Directors and (iii) reimbursement for his out-of-pocket expenses for
attending these meetings. In addition, Directors who are not employees of the
Company receive options to purchase 5,000 shares of the Company's Common Stock
upon election to the Board of Directors and an additional 5,000 shares upon
each reelection to the Board of Directors. Such options have an exercise price
equal to the current market price on the date of the grant, a term of five
years and vest in three equal annual installments beginning on the date of the
grant and on the first and second anniversary of the grant. All non-vested
options are terminated six months after a member leaves the Board of Directors,
other than by death or disability. On death or disability, all non-vested
options automatically vest.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date by (i)
each person known by the Company to beneficially own five percent or more of
the outstanding shares of Common Stock, (ii) each Nominee, director and
executive officer of the Company and (iii) all executive officers and directors
as a group. The address of the stockholders listed below as beneficially
owning more than five percent of the Common Stock is that of the Company's
principal executive offices. Except as indicated in the footnotes to the
table, the persons named in the table have sole voting and investment power
with respect to all shares beneficially owned.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES
---- ---------------- --------------
EXECUTIVE OFFICERS, DIRECTORS:
<S> <C> <C>
George A. and Barbara Robinson(1) .................. 847,500 9.8%
Charles G. Martinache(2)............................ 489,321 5.7%
Thomas A. and Margaret M. Costello(3) .............. 847,500 9.8%
Dev Ganesan(4)...................................... 66,950 *
Wayne Shelton(5).................................... 7,667 *
Charles R. Collins(6) .............................. 7,667 *
Vincent G. Vidas.................................... 2,000 *
ALL DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
AS A GROUP:
(7 persons) ........................................ 2,268,605 26.3%
</TABLE>
*Less than one percent of stock outstanding.
6
<PAGE> 9
(1) Includes 396,305 shares owned by the Robinson 1997 Trust No. 1 and
396,305 shares owned by the Robinson 1997 Trust No. 2, both of which
George A. Robinson is the sole trustee, and 54,890 shares owned by
George A. Robinson and Barbara Robinson as joint tenants.
(2) Includes 176,782 shares owned by the Martinache 1997 Trust No. 1, of
which Charles G. Martinache is the sole trustee, and 2,250 shares
owned by Sharon K. Martinache and 2,222 shares held in trust for the
benefit of Andrew Martinache. Excludes 190,729 shares owned by the
Martinache 1997 Trust No. 2, of which Charles G. Martinache is no
longer the trustee.
(3) Includes: (i) 250,000 shares owned by the Costello 1997 Trust No. 1;
(ii) 250,000 shares owned by the Costello 1997 Trust No. 2; (iii)
173,750 shares owned by Thomas A. Costello Revocable Trust; and (iv)
173,750 shares owned by Margaret M. Costello Revocable Trust.
Margaret M. Costello and Thomas A. Costello are trustees for the
Costello 1997 Trust No. 1 and Costello 1997 Trust No. 2; Thomas A.
Costello is the trustee for the Thomas A. Costello Revocable Trust;
and Margaret M. Costello is the trustee for Margaret M. Costello
Revocable Trust.
(4) Includes outstanding options to purchase 66,250 shares of Common Stock
which are exercisable within 60 days.
(5) Includes outstanding options to purchase 6,667 shares of Common Stock
which are exercisable within 60 days.
(6) Includes outstanding options to purchase 6,667 shares of Common Stock
which are exercisable within 60 days.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents certain information concerning
compensation earned for services rendered in all capacities to the Company for
the years ended September 30, 1996, 1997 and 1998 by the Chief Executive
Officer and each of the other most highly compensated executive officers of the
Company whose salaries and bonuses exceeded $100,000 (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ --------------
OTHER NUMBER OF ALL
NAME ANNUAL SHARES OTHER
AND FISCAL COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS SATION
------------------ ---- ------- ----- ------ ------- ------
<S> <C> <C> <C> <C> <C>
George A. Robinson 1998 $240,011 $0(1) $0 0 $4,302(2)
President, Chief Executive 1997 $239,578 $113,266 $0 0 $4,112(2)
Officer and Chairman of the 1996 $250,000 $79,440 $0 0 $4,333(2)
Board
Charles G. Martinache 1998 $197,740 $0(1) $0 0 $4,302(2)
Executive Vice President and 1997 $214,576 $113,266 $0 0 $4,112(2)
Chief Operating Officer 1996 $225,000 $79,440 $0 0 $23,233(3)
Thomas A. Costello 1998 $180,003 $0(1) $0 0 $3,973(2)
Executive Vice President, 1997 $214,576 $113,266 $0 0 $4,112(2)
Chief Technology Officer and 1996 $225,000 $79,440 $0 0 $4,967(2)
Secretary
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dev Ganesan 1998 $150,010 $0(1) $0 15,000 $3,480
Executive Vice President, Chief 1997(4) $75,010 $75,000 $0 115,000 $0
Financial Officer and Treasurer
</TABLE>
- -----------------
(1) Messrs. Robinson, Martinache, Costello and Ganesan declined to
participate in the Company's executive officer bonus awards
program. If Messrs. Robinson, Martinache, Costello and Ganesan had
not declined to participate in such program, such officers would
have been entitled to bonuses of $190,000, $100,000, $80,000 and
$97,500, respectively.
(2) Represents matching 401(k) plan contributions by the Company.
(3) Includes matching 401(k) plan contributions by the Company of
$4,967 and $18,266 in moving expenses paid by the Company.
(4) Reflects compensation earned from Mr. Ganesan's date of hire,
February 1, 1997, through September 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents certain information concerning the stock
option grants made to the Named Officers for the fiscal year ended September
30, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES
SHARES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED FISCAL 1998 SHARE DATE 5% 10%
---- ------- ----------- ----- ---- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
George A. Robinson 0 0 0 N/A N/A N/A
Charles G. Martinache 0 0 0 N/A N/A N/A
Thomas A. Costello 0 0 0 N/A N/A N/A
Dev Ganesan 15,000 4% $9.44 2/1/05 $67,593 $161,898
</TABLE>
- -----------------
(1) Amounts are based on the hypothetical 5% and 10% annual compounded
rates of appreciation of the Common Stock price as prescribed by the
Securities and Exchange Commission and are not intended to forecast
future appreciation of the Company's Common Stock. The Company
expresses no opinion regarding whether this level of appreciation will
be realized and expressly disclaims any representation to that effect.
8
<PAGE> 11
FISCAL 1998 STOCK OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table presents certain information concerning the exercise
of options during the fiscal year ended September 30, 1998 by each of the Named
Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON VALUE YEAR-END FISCAL YEAR-END(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
George A. Robinson 0 0 0 0 0 0
Charles G. Martinache 0 0 0 0 0 0
Thomas A. Costello 0 0 0 0 0 0
Dev Ganesan 53,750 $281,113 0 61,250/15,000 $179,921 $0
</TABLE>
- -----------
(1) Value for "in-the-money" options represent the positive spread between the
exercise prices of outstanding options and the closing price of the
Company's Common Stock on September 30, 1998 on the Nasdaq National Market
of $9.44.
EMPLOYMENT AGREEMENTS
Mr. Ganesan serves as the Executive Vice President, Chief Financial
Officer and Treasurer of the Company pursuant to the terms of an employment
agreement which continues in effect until Mr. Ganesan's termination or
separation from the Company. Under the terms of the employment agreement, Mr.
Ganesan receives an annual salary of $150,000 and was given a one-time signing
bonus of $25,000 upon commencing work with the Company on February 1, 1997.
Mr. Ganesan received a first-year bonus of $25,000 upon the accomplishment of
certain mutually agreed upon objectives.
Mr. Vidas, the Executive Vice President, Chief Operating Officer and
Director of the Company, has an employment agreement which continues in effect
until December 31, 1999 unless earlier terminated. Under the terms of the
employment agreement, Mr. Vidas receives an annual salary of $200,000 and may
be eligible for an annual performance-based bonus of up to $50,000 based upon
the accomplishment of certain mutually agreed upon performance goals.
There are no other employment agreements in effect with respect to any
directors or executive officers of the Company.
INDEMNIFICATION ARRANGEMENTS
The Company has entered into indemnification agreements pursuant to which
it agreed to indemnify certain of its directors and officers against judgments,
claims, damages, losses and expenses incurred as a result of the fact that any
director or officer, in his capacity as such, is made or threatened to be made
a party to any suit or proceeding. Such persons will be indemnified to the
fullest extent now or hereafter permitted by the DGCL, as amended. The
indemnification agreements provide for the advancement of certain expenses to
such directors and officers in connection with any such suit or proceeding.
The Company's Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws provide for the indemnification of officers and directors to
the fullest extent authorized by the DGCL.
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<PAGE> 12
COMPENSATION COMMITTEE REPORT
The Company's executive officer compensation policy is to offer a package
including a competitive salary, an incentive bonus based upon achievement of
the Company's financial objectives and competitive benefits. The Company's
compensation policy for officers is similar to that for other employees, and is
designed to promote continued performance and attainment of corporate and
personal goals.
The Compensation Committee of the Board of Directors (comprised of two
non-employee independent directors) reviews and approves individual executive
officer salaries, bonus plan financial performance goals, bonus plan
allocations and stock option grants. The Company's compensation structure is
designed to: (i) enable the Company to attract highly qualified executives and
management talent from within the communications and information technology
services industry and other relevant industries, (ii) retain top performers and
ensure future management continuity, (iii) reward achievement of the Company's
strategic goals and financial targets and (iv) provide compensation that is
consistent with marketplace competitiveness for companies of similar size,
Company and individual performance and stockholder returns. Executive officers
of the Company are paid salaries in line with their responsibilities and
experience.
The Compensation Committee developed a plan for the fiscal year ending
September 30, 1998 designed to award bonuses based upon achievement by the
Company of revenues and earnings per share objectives. Stock option grants to
officers are designed to promote success by aligning the officers' financial
interests with long-term stockholder value and by providing an incentive for
individual long-term performance and the achievement of short-term financial
performance by the Company. Grants of stock options are based on various
subjective factors primarily relating to the responsibilities of the individual
officers, and also to their expected future contributions and prior option
grants.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") imposes a limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to executive officers. The Committee
currently believes that the Company should be able to continue to manage its
executive compensation program for executive officers so as to preserve the
related federal income tax deductions.
The Compensation Committee annually reviews and approves the compensation
of George A. Robinson, the Chief Executive Officer and Chairman of the Board of
Directors. Mr. Robinson continues to provide outstanding personal leadership of
the Company. Under Mr. Robinson's direction, the Company's revenues have
increased each year since fiscal 1987 and grew at a compound annual rate of
54.6% during the last five fiscal years, reaching $107.8 million for fiscal
1998. In addition, the Company completed four strategic acquisitions during
fiscal 1998. In light of the leadership he demonstrated during fiscal year
1998, the Committee believes Mr. Robinson's salary of $240,011 was reasonable.
Mr. Robinson and each of the other executive officers declined to participate
in the Company's executive officer bonus awards program. Mr. Robinson is also
a significant stockholder in the Company, and to the extent his performance as
Chief Executive Officer translates into an increase in the value of the
Company's stock, all stockholders, including Mr. Robinson, share the benefits.
COMPENSATION COMMITTEE
Wayne Shelton
Charles R. Collins
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<PAGE> 13
STOCK PERFORMANCE CHART
The line graph set forth below compares the cumulative total return of the
Company's Common Stock to the cumulative total returns on the Russell 2000
Index and the Nasdaq Computer & Data Processing Index for the period commencing
June 27, 1997, the date of the Company's initial public offering, and ending
September 30, 1998. The comparison assumes $100 was invested on June 27, 1997
in the Company's Common Stock and each of the foregoing indices and that all
dividends were reinvested. The stock price performance shown on the graph
below is not necessarily indicative of future performance.
<TABLE>
<CAPTION>
[LINE GRAPH APPEARS HERE]
- -----------------------------------------------------------------------------------------------------
Advanced Communication Nasdaq Computer & Data
Measurement Period Systems, Inc. Russell 2000 Index Processing Index
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June 27, 1997 100.00 100.00 100.00
- -----------------------------------------------------------------------------------------------------
June 30, 1997 101.67 104.30 102.19
- -----------------------------------------------------------------------------------------------------
September 30, 1997 170.00 119.82 111.76
- -----------------------------------------------------------------------------------------------------
December 31, 1997 124.17 115.81 105.47
- -----------------------------------------------------------------------------------------------------
March 31, 1998 154.17 127.45 139.33
- -----------------------------------------------------------------------------------------------------
June 30, 1998 165.83 123.87 154.62
- -----------------------------------------------------------------------------------------------------
September 30, 1998 125.83 98.91 145.82
- -----------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 14
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In 1993, the Company entered into a ten year lease with 10089 Management,
the members of which include, among others, Messrs. Robinson, Martinache and
Costello, who collectively own approximately 91% of 10089 Management. Under
the terms of the lease, the Company leases approximately 23,148 square feet at
10089 Lee Highway, Fairfax, Virginia from 10089 Management for use as the
Company's headquarters at a current rental rate of approximately $15.23 per
square foot. The monthly rental rate increases annually based upon the annual
increase in the Consumer Price Index. The Company, as tenant, also pays for
insurance for the premises and for increases in real estate taxes over 1993
real estate taxes for the building. The Company also provides management
services for 10089 Management at no cost. The lease expires on August 31, 2003.
The Company believes that the terms of the lease, including the rental rate,
are at least as favorable to the Company as those which could have been
negotiated with an unaffiliated third party.
10089 Management purchased the Company's headquarters building in 1993
using, in part, a loan in the amount of $1,125,000 from a third party
institutional lender, which loan was previously guaranteed by the Company.
Pursuant to the loan agreement, as amended, the guarantee was canceled upon the
Company's initial public offering in June 1997. Also in connection with 10089
Management's acquisition of the Company's headquarters building, the Company
lent to each of Messrs. Robinson, Martinache and Costello approximately
$119,000 for use as part of the purchase price for the building. All loans were
repaid in full from the proceeds received by the makers from the $6.6 million
dividend of the Company's previously undistributed S corporation earnings
declared by the Board of Directors in connection with the termination of the
Company's S corporation status and its initial public offering (the "S
Corporation Distribution").
Mr. Martinache received a loan from the Company in 1996 in the amount of
$50,000, bearing interest at a rate equal to 8.75% per annum. This loan was
repaid by Mr. Martinache in full with proceeds received by him from the S
Corporation Distribution.
Charles R. Collins, a director of the Company, is an advisory partner at
the law firm of Gibson, Dunn & Crutcher LLP and prior to his election to the
Board of Directors was a partner with the same firm. Gibson, Dunn & Crutcher
LLP received legal fees from the Company during the Company's fiscal year ended
September 30, 1998 in connection with the Company's initial public offering in
June 1997 and for certain other legal services.
TERMINATION AGREEMENTS
Immediately prior to the consummation of the Company's initial public
offering, the Company, Messrs. Robinson, Martinache and Costello, as the
majority stockholders, Thomas and Margaret M. Costello and the trusts
controlled by them, Charles and Helen Martinache and the trusts controlled by
them and George and Barbara Robinson and the trusts controlled by them entered
into Termination Agreements pursuant to which certain Stock Redemption
Agreements previously entered into by and between the Company and each other
party to the Termination Agreements were terminated.
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<PAGE> 15
APPROVAL OF THE AMENDMENT TO THE
1997 STOCK INCENTIVE PLAN
(PROPOSAL 2)
At the Annual Meeting, the Company's stockholders are being asked to
approve an amendment to the Company's 1997 Stock Incentive Plan (the "1997
Plan") which amendment provides for automatic annual increases in the number of
shares reserved for issuance thereunder such that, effective on the first
trading day of each of January 1999 and January 2000, the number of shares
available for issuance under the 1997 Plan shall increase by a number of shares
equal to the lesser of (i) two percent (2%) of the total number of shares of
the Company's Common Stock issued and outstanding on the last trading day of
the preceding December or (ii) 400,000 shares. (Such number shall be subject
to adjustment by the Company's Board of Directors under the terms of the 1997
Stock Incentive Plan to take into account the effect of extraordinary corporate
transactions such as reorganization, merger, consolidation, recapitalization,
restructuring or other distribution, stock split, spin-off or sale of
substantially all of the Company's assets). The proposed automatic share
increase feature will assure that a sufficient reserve of Common Stock is
available under the 1997 Plan to attract and retain the services of key
employees essential to the Company's long-term growth and success.
The essential terms of the 1997 Plan are summarized below. The following
discussion is qualified in its entirety by reference to the 1997 Plan. The
Company will provide, upon request, a copy of the full text of the 1997 Plan to
each person to whom a copy of this Proxy Statement is delivered. Requests
should be directed to the Chief Financial Officer of the Company and delivered
to the Company's principal executive offices at 10089 Lee Highway, Fairfax,
Virginia, 22030.
GENERAL INFORMATION. The 1997 Plan was adopted by the Company's Board of
Directors on March 25, 1997 and approved by the Company's stockholders on the
same date. In November 1998, the Board of Directors approved the automatic
share increase mechanism referenced above subject to stockholder approval. The
1997 Plan authorizes the Board of Directors (or Committee of the Board of
Directors pursuant to its delegated authority) to grant stock options, stock
appreciation rights, restricted or unrestricted stock or "performance shares"
("Awards") to directors, employees (including officers), consultants and
advisors of the Company and its subsidiaries. The 1997 Plan is structured to
allow the Board of Directors broad discretion in creating equity incentives in
order to assist the Company in attracting, retaining and motivating the best
available personnel for the successful conduct of the Company's business.
The 1997 Plan has various provisions so that Awards under it may, but need
not, qualify for an exemption from the "short swing liability" provisions of
Section 16(b) of the Exchange Act, pursuant to Rule 16b-3. The 1997 Plan is
not subject to any of the provisions of ERISA and is not required to be
qualified under Section 401(a) of the Code.
Section 162(m) of the Code limits the deduction that may be taken by the
Company for compensation payable to the Chief Executive Officer and the other
four highest paid officers to $1,000,000 each per taxable year. The Code and
applicable regulations provides an exception from that limitation for
performance based compensation. The Company believes that any Awards under the
1997 Plan made after the approval of its amendment will not qualify for that
exception.
PURPOSE. The purpose of the 1997 Plan is to encourage ownership of Common
Stock by key employees, directors, consultants and advisors of the Company as
well as to provide increased
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<PAGE> 16
incentive for such individuals to render services and to exert maximum effort
for future growth and success of the Company.
ADMINISTRATION. The 1997 Plan is administered by the Compensation
Committee. The Compensation Committee has the authority to make Awards and to
adopt, amend and repeal such administrative rules, guidelines and practices
relating to the 1997 Plan as it deems advisable from time to time.
ELIGIBILITY. The persons eligible to participate in the 1997 Plan include
all employees, officers, directors, consultants and advisors of the Company or
its subsidiary corporations at the time the Award is granted, other than those
persons who have irrevocably elected not to be eligible.
OUTSIDE DIRECTORS. The Board may provide for options to be granted to
non-employee directors of the Company ("Outside Directors") in consideration
for their service to the Company. The maximum number of shares of Common Stock
subject to options granted under the 1997 Plan during any calendar year to any
person on account of his or her service as an Outside Director, other than
options that an Outside Director has elected to receive in lieu of cash
retainer or other fees, may not exceed 20,000 shares. The option exercise
price per share for each option granted to Outside Directors is equal to the
closing price per share of the Company's Common Stock on the Nasdaq National
Market on the date of the grant. Each option may be exercised at any time and
from time to time, in whole or in part, prior to the fifth anniversary of the
date of grant, except that no option may be exercised more than three months
after the optionee ceases to serve as a director of the Company for any reason.
COMMON STOCK SUBJECT TO THE 1997 PLAN. A maximum of 450,000 shares of the
Company's Common Stock (plus the number of shares authorized under the proposed
automatic increases) may be issued under the 1997 Plan. Options for a total of
407,100 shares of Common Stock were granted under the 1997 Plan, of which
401,767 remain outstanding. The number of shares subject to the 1997 Plan and
to outstanding awards under the 1997 Plan are subject to adjustment by the
Board of Directors if the Company's Common Stock is affected by an
extraordinary corporate transaction such as a reorganization, merger,
consolidation, recapitalization, restructuring or other distribution, stock
split, spin-off or sale of substantially all of the Company's assets.
AMENDMENTS AND TERMINATION. The 1997 Plan may be amended, altered or
discontinued by the Board of Directors at any time. However, no such amendment
may impair the rights of any Award holder, unless it is with the consent of the
Award holder. If any amendment or alteration to the 1997 Plan would affect the
ability of the Awards to comply with Rule 16b-3 of the Exchange Act or Section
422 or other applicable provisions of the Code, the amendment shall be approved
by the Company's stockholders to the extent required by Rule 16b-3 of the
Exchange Act, Section 422 of the Code, or other applicable provisions of, or
rules under, the Code.
NEW PLAN BENEFITS. Awards, if any, that will be paid to participants for
any fiscal year are subject to the discretion of the Compensation Committee.
Consequently, it is not possible to determine at this time the amount of Awards
that will be paid in fiscal 1999.
STOCK OPTIONS. Stock Option Awards may be in either Incentive Stock
Options ("ISOs") qualifying under Code Section 422 or in options not intended
to qualify as ISOs ("Nonqualified Options"). The 1997 Plan provides that the
Compensation Committee shall have discretion to determine the option term and
the schedule for the vesting of options awarded under the 1997 Plan and may
determine events which will cause the options to expire as well as any other
terms and conditions of the options. The Compensation Committee may, with the
consent of the person entitled
14
<PAGE> 17
to exercise any outstanding option, amend such option, including changing the
exercise price. The Compensation Committee may also accelerate the vesting of
an option. The options are not transferable by the participant, other than by
the participant's will or the laws of descent and distribution. A participant
has no rights as a stockholder until Common Stock is distributed after the
exercise of any option granted under the 1997 Plan, the payment of the exercise
price and the satisfaction of any tax obligations.
ISOs may be granted only to employees of the Company and its subsidiaries.
The term of an ISO may not be more than 10 years from its grant date. The
exercise price of the options is determined by the Compensation Committee;
however, if an option is intended to be an ISO, the exercise price may not be
less than 100% of the fair market value of the Company's Common Stock on the
date such option is granted. The value of stock (measured at date of grant)
subject to ISOs which are first exercisable by any individual during any one
calendar year may not exceed $100,000.
FEDERAL TAX CONSEQUENCES
The following is a brief summary of the tax consequences of the grant and
exercise of stock options, stock appreciation rights and restricted stock
awards under the federal income tax laws. This summary does not, among other
things, purport to describe state or local tax consequences or to describe all
federal income tax consequences.
ISO'S AND NON-QUALIFIED OPTIONS. Recipients of ISOs generally are not
subject to income tax at the time the Award is granted or exercised. However,
upon the exercise of any ISO, any excess of the fair market value of shares
received over the exercise price may be subject to the alternative minimum tax.
Upon disposition of any shares obtained through the exercise of an ISO,
long-term capital gain or loss will be recognized in an amount equal to the
difference between the sales price and the aggregate exercise price, provided
that the participant has held the shares for at least one year from the date
the ISO was exercised and at least two years from the date the ISO was granted.
If the participant disposes of the shares within that time period (a
"Disqualifying Disposition"), the participant will recognize ordinary income to
the extent of the difference between the exercise price and the lesser of the
fair market value on the date the ISO is exercised or the amount realized on
the Disqualifying Disposition. Any remaining gain or loss is treated as a
short-term or long-term capital gain or loss, depending on the period the
shares were held by the participant. The Company is not entitled to any tax
deduction upon either the exercise of any such ISO or upon any subsequent
disposition of the shares acquired pursuant to such exercise, except to the
extent that the participant recognizes ordinary income pursuant to a
Disqualifying Disposition.
A participant receiving Nonqualified Options does not recognize income at
the time the option is granted. However, when the option is exercised, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the exercise date and the exercise price.
The Company receives a tax deduction equal to the amount of ordinary income
recognized by the participant. The participant's basis in the shares is equal
to the exercise price plus any recognized ordinary income.
To the extent that the participant pays some or all of the exercise price
of an ISO or Nonqualified Option by tendering shares already owned, the tax
consequences will remain the same as discussed above except that a like number
of shares received will have the same basis and holding period as the shares
tendered and the remaining shares received shall have a basis equal to the cash
tendered plus the ordinary income recognized, if any, on the exercise. If the
tendered shares were received pursuant to the exercise of an ISO, such tender
may be a Disqualifying Disposition if made prior to the end of the required
holding periods.
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<PAGE> 18
STOCK APPRECIATION RIGHTS. An employee will not recognize taxable income
at the time of the grant of a stock appreciation right ("SAR"). A SAR is the
right to cash or stock in the amount of the appreciation of a share of the
Common Stock from the grant date to the exercise date. Upon exercise, however,
the employee will generally recognize ordinary income for each SAR in the
amount that the fair market value of the Common Stock on the exercise date
exceeds its fair market value on the date of grant. The Company generally will
be entitled to a corresponding deduction in the year of exercise.
RESTRICTED STOCK AWARDS. No income will be recognized by an employee in
connection with the grant of a restricted stock award. When the restrictions
lapse, the employee would be required to include as taxable ordinary income the
fair market value of such shares at the time the restrictions lapse. The
Company would be entitled to a deduction for federal income tax purposes equal
to the amount so included in such employee's income. An employee may, by making
a Section 83(b) election within 30 days after the transfer of stock, choose to
recognize income upon the grant of a restricted stock award. If a Section 83(b)
election is made, any appreciation in the stock value after the grant date may
be eligible for capital gain treatment upon the subsequent sale of the stock.
However, if the stock is forfeited later, the loss allowable is limited to the
price paid for the stock (if any) minus any amounts received upon such
forfeiture.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1997 PLAN.
APPROVAL OF THE
EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL 3)
At the Annual Meeting, the Company's stockholders are being asked to
approve the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan").
The essential terms of the Stock Purchase Plan are summarized below. The
following discussion is qualified in its entirety by reference to the Stock
Purchase Plan. The Company will provide, upon request, a copy of the full text
of the Stock Purchase Plan to each person to whom a copy of this Proxy
Statement is delivered. Requests should be directed to the Chief Financial
Officer of the Company and delivered to the Company's principal executive
offices at 10089 Lee Highway, Fairfax, Virginia, 22030.
GENERAL INFORMATION. The Board of Directors adopted the Stock Purchase
Plan in March 1998, subject to approval by the stockholders at the Annual
Meeting. The Stock Purchase Plan, which is intended to qualify under Section
423 of the Code, permits eligible employees to purchase the Company's Common
Stock through payroll deductions at a price equal to 90% of the lower of the
fair market value of the Common Stock on the first business day or on the last
business day of each quarterly offering period.
PURPOSE. The purpose of the Stock Purchase Plan is to promote the
long-range success of the Company, and certain designated subsidiaries of the
Company ("Designated Subsidiaries"). The Stock Purchase Plan gives eligible
employees of the Company and Designated Subsidiaries an opportunity to purchase
Common Stock of the Company through payroll deductions in order to provide them
with a personal stake in the Company and to assist the Company in securing new
employees and retaining the services of existing employees.
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<PAGE> 19
ADMINISTRATION. The Stock Purchase Plan is administered by the
Compensation Committee of the Board of Directors. All questions of
interpretation or application of the Stock Purchase Plan are determined by the
Compensation Committee.
ELIGIBILITY AND PARTICIPATION. The Stock Purchase Plan provides that
employees are eligible if they are employed by the Company, or a Designated
Subsidiary, on the first day of a quarterly offering period (and continue to be
employed on the last day of such offering period). No person who owns stock
and/or holds options (including under the Stock Purchase Plan) for in excess of
5% of the outstanding Common Stock of the Company is eligible to participate in
the Stock Purchase Plan.
SHARES SUBJECT TO THE STOCK PURCHASE PLAN. Up to a maximum of 325,000
shares of the Company's Common Stock may be sold pursuant to options granted
under the Stock Purchase Plan. If any option granted under the Stock Purchase
Plan terminates without having been exercised, the stock not purchased under
the option shall again become available for the Stock Purchase Plan. The stock
subject to the Stock Purchase Plan may be unissued shares, reacquired shares
bought on the market or otherwise or shares purchased by a designated broker.
GRANTS OF OPTIONS AND PURCHASE PRICE. Prior to the beginning of each
calendar quarter, the Company grants to eligible employees options to purchase
shares of the Company's Common Stock under the Stock Purchase Plan through an
after-tax payroll deduction program. The purchase price is 90% of the fair
market value of the Common Stock on the first business day (the "Commencement
Date") or on the last business day (the "Exercise Date") of the quarterly
offering period, whichever is less.
EXERCISE OF OPTIONS. Under the Stock Purchase Plan, an eligible employee's
option to purchase Common Stock will be exercised automatically on the Exercise
Date unless the employee has notified the Company, in writing on such form as
the Compensation Committee prescribes, that the employee wishes to withdraw his
or her account prior to that date.
LIMITATION ON NUMBER OF SHARES AND TREATMENT OF DIVIDENDS. No eligible
employee may purchase more than 500 shares of the Common Stock under the Stock
Purchase Plan in any one quarterly offering period. Additionally, the maximum
number of shares that may be purchased by all employees during an offering
period is 80,000, plus any carryover from a prior period. If the maximum
shares available during an offering would otherwise be exceeded, a pro rata
allocation of the shares available will be made among eligible participants in
a uniform and equitable manner, as determined by the Committee. Any cash in an
employee's payroll deduction account in excess of the amount needed to purchase
the maximum number of shares available to him or her in an offering will be
refunded following the offering period.
Any cash dividends paid on Common Stock allocated to an eligible
employee's account at a designated brokerage firm shall be automatically
reinvested in Company Common Stock as soon as administratively practicable by
purchases on the open market at prevailing market prices.
WITHDRAWAL AND TERMINATION. An employee's participation in the Stock
Purchase Plan will be terminated when he or she (i) voluntarily withdraws from
the Stock Purchase Plan by giving written notice to the appropriate Human
Resources Department or (ii) terminates employment with the Company or a
Designated Subsidiary for any reason. Upon such termination, all payroll
deductions in a participant's account which have not been used to purchase
stock will be refunded without interest to the participant. In the event of
the participant's death, such refund will be made to his or her designated
beneficiary, if any, or otherwise to the participant's estate. A participant
who voluntarily
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<PAGE> 20
withdraws from the current offering period will be eligible to participate
again in the next offering period, if such participant is otherwise eligible.
TRANSFER AND ASSIGNMENT. A participant may not assign, transfer, pledge
or otherwise dispose of in any way any rights to purchase Common Stock under
the Stock Purchase Plan, except by will or the laws of descent and
distribution. Any such attempt may be treated by the Company as an election to
withdraw from the Stock Purchase Plan.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the outstanding shares of
Common Stock of the Company have increased, decreased, changed into, or been
exchanged for a different number or kind of shares or securities of the Company
as a result of reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split or similar transaction, appropriate and
proportionate adjustments may be made by the Compensation Committee in the
number and/or kind of shares which are subject to purchase under outstanding
options and on the option exercise price or prices applicable to such
outstanding options. In addition, in any such event, the maximum number and/or
kind of shares which may be offered in the offerings may also be
proportionately adjusted by the Compensation Committee. No adjustments shall
be made for stock dividends. For this purpose, any distribution of shares to
stockholders in an amount aggregating 20% or more of the outstanding shares
shall be deemed a stock split and any distributions of shares aggregating less
than 20% of the outstanding shares shall be deemed a stock dividend.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the Compensation Committee may take such action as it
deems appropriate and equitable, including any of the following: (i) refund of
payroll deductions for such offering period (ii) shortening of the offering
period or (iii) entitling each option holder to receive at the next Exercise
Date upon the exercise of such option, the cash, securities and/or property
which a holder of a like number of shares of the Common Stock was entitled to
receive in such transaction.
AMENDMENT AND TERMINATION OF THE STOCK PURCHASE PLAN. The Board of
Directors of the Company may amend or terminate the Stock Purchase Plan at any
time. Unless sooner terminated, the Stock Purchase Plan will continue in
effect only so long as shares authorized by the stockholders remain available
for issuance thereunder, but no later than March 31, 2008. No amendment may be
made to the Stock Purchase Plan without approval of the stockholders of the
Company if the amendment would (i) cause the Stock Purchase Plan to fail to
meet the requirements of Section 423 of the Code, or to fail to comply with
Rule 16b-3 of the Securities and Exchange Commission or (ii) except as provided
under the section entitled "Adjustment Upon Changes in Capitalization,"
increase the maximum number of shares available under the Stock Purchase Plan.
Upon termination, the Stock Purchase Plan permits the Company to refund payroll
deductions or accelerate the grant and exercise date of options. Except as
provided above, the termination or amendment of the Stock Purchase Plan will
not adversely affect an employee's rights under an outstanding option without
his or her consent.
ERISA AND OTHER QUALIFICATIONS. The Stock Purchase Plan is not subject to
the provisions of the Employee Retirement Income Security Act of 1974 and is
not qualified as a pension or a profit-sharing plan under Section 401(a) of the
Code.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. No income will be taxable to a
participant until the shares purchased under the Stock Purchase Plan are sold
or otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed
of more than
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<PAGE> 21
two (2) years from the first day of the offering period and more than one (1)
year from the date of transfer of the stock to the participant (the "Statutory
Holding Periods"), then the participant will recognize ordinary income measured
as the lesser of (i) the excess of the fair market value of the shares at the
time of such sale or disposition over the purchase price or (ii) an amount
equal to 10% of the fair market value of the shares as of the first day of the
offering period. Any additional gain will be treated as long-term capital
gain, currently taxed at a maximum federal rate of 20%. If the shares are sold
after the Statutory Holding Period for less than the purchase price, any loss
recognized would be a long term capital loss. If the shares are sold or
otherwise disposed of before the expiration of the Statutory Holding Periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased
over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term if the stock was held for more than 12 months and
short term if not. The Company is not entitled to a deduction for amounts
taxed as ordinary income or capital gain to a participant except to the extent
ordinary income is recognized by participants upon a sale or disposition of
shares prior to the expiration of the Statutory Holding Periods described
above.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE STOCK PURCHASE PLAN.
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT ACCOUNTANTS
(PROPOSAL 4)
Management has selected Arthur Andersen LLP as the independent accountants
to audit the books, records and accounts of the Company for the current fiscal
year ending September 30, 1999. Arthur Andersen LLP has audited the Company's
financial statements since 1997.
The affirmative vote of the holders of a majority of the Company's Common
Stock represented and voting at the meeting will be required to ratify the
Board of Director's selection of Arthur Andersen LLP.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement, and will be
available to answer questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
There is no reason to believe that any other business will be presented at
the Annual Meeting; however, if any other business should properly and lawfully
come before the Annual Meeting, the proxies will vote in accordance with their
best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
January 26, 1998 Dev Ganesan, Executive Vice President,
Fairfax, Virginia Chief Financial Officer and Treasurer
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APPENDIX A TO PROXY STATEMENT
ADVANCED COMMUNICATION SYSTEMS, INC.
1997 STOCK INCENTIVE PLAN
(as amended in November 1998)
Section 1. Purpose
The purpose of this 1997 Stock Incentive Plan (the "Plan") is to
advance the interests of Advanced Communication Systems, Inc. by enhancing its
ability to attract and retain directors, executive officers and other key
employees, consultants and others who are in a position to contribute to the
Company's future growth and success.
Section 2. Definitions
"Award" means any Option, Stock Appreciation Right, Performance
Share, Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means a committee of not less than two members of the
Board appointed by the Board to administer the Plan, provided that if and when
the Common Stock is registered under Section 12 of the Securities Exchange Act
of 1934, each member of the Committee shall be a "non-employee director" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule
16b-3").
"Common Stock" or "Stock" means the Common Stock, $.01 par value
per share, of the Company.
"Company" means Advanced Communication Systems, Inc. and, except
where the content otherwise requires, all present and future subsidiaries of
the Company as defined in Sections 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts due or to
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated
Beneficiary shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any
other property, the fair market value of such property as determined by the
Board in good faith or in the manner established by the Board from time to
time.
"Incentive Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is intended to meet
the requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is not intended to
be an Incentive Stock Option.
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"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Outside Director" means a non-employee director of the Company.
"Participant" means a person selected by the Board to receive an
Award under the Plan.
"Performance Shares" mean shares of Common Stock which may be
earned by the achievement of performance goals awarded to a Participant under
Section 8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the
Board during which shares subject to a Restricted Stock Award may be
repurchased by or forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a
Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any
excess in Fair Market Value of shares of Common Stock over the exercise price
awarded to a Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a
Participant under Section 9(c).
Section 3. Administration
The Plan will be administered by the Board. The Board shall have
authority to make Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith. To
the extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and to make all determinations under the Plan with
respect thereto, provided that the Board shall fix the maximum amount of such
Awards to be made by such executive officers and a maximum amount for any one
Participant. To the extent permitted by applicable law, the Board may appoint
a Committee to administer the Plan and, in such event, all references to the
Board in the Plan shall mean such Committee or the Board. All decisions by the
Board or the Committee pursuant to the Plan shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award.
Section 4. Eligibility
All of the Company's employees, officers, directors, consultants
and advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible,
are eligible to be Participants in the Plan. Incentive Stock Options may be
awarded only to persons eligible to receive Incentive Stock Options under the
Code.
Section 5. Stock Available for Awards
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(a) Subject to adjustment under subsection (b) below, Awards
may be made under the Plan for up to 450,000 shares of Common Stock. If any
Award in respect of shares of Common Stock expires or is terminated unexercised
or is forfeited, in whole or in part, for any reason, the shares subject to
such Award, to the extent of such expiration, termination or forfeiture, shall
again be available for award under the Plan, subject, however, in the case of
Incentive Stock Options, to any limitation required under the Code. If shares
of Stock are tendered to the Company in payment of the exercise price of an
Option pursuant to Section 6(a)(iv) or in satisfaction of tax withholding
requirements pursuant to Section 10(g), such tendered shares shall again be
available for subsequent Awards under the Plan; provided, however, that (i) in
no event shall the total number of shares issued pursuant to the exercise of
Incentive Stock Options under the Plan, on a cumulative basis, exceed the
maximum number of shares authorized for issuance under the Plan exclusive of
shares made available for issuance pursuant to this sentence and (ii) shares
made available for issuance pursuant to this sentence shall not be available
for Awards to Reporting Persons. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
(b) If the Board, in its sole discretion, determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably
adjust any or all of (i) the number and kind of shares in respect of which
Awards may be made under the Plan, (ii) the number and kind of shares subject
to outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
(c) The Board may grant Awards under the Plan in substitution
for stock and stock based awards held by employees of another corporation who
concurrently become employees of the Company as a result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a subsidiary of property or stock of the
employing corporation. The substitute Awards shall be granted on such terms
and conditions as the Board considers appropriate under the circumstances.
(d) The number of shares of Common Stock available for issuance
pursuant to Awards under the Plan shall automatically increase on the first
trading day of each of January 1999 and January 2000 by a number of shares
equal to the lesser of (i) two percent (2%) of the total number of shares of
Common Stock outstanding on the last trading day of the preceding December or
(ii) 400,000 shares (which number shall be subject to adjustment under
subsection (b) above).
Section 6. Stock Options
(a) General.
(i) Subject to the provisions of the Plan, the Board may award
Incentive Stock Options and Nonstatutory Stock Options, and determine the
number of shares to be covered by each Option, the option price therefor and
the conditions and limitations applicable to the exercise of the Option. The
terms and conditions of Incentive Stock Options shall be subject to and comply
with Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(ii) The Board shall establish the exercise price at the time
each Option is
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awarded. In the case of Incentive Stock Options, such price shall not be less
than 100% of the Fair Market Value of the Common Stock on the date of award.
(iii) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
Award or thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the payment
of the exercise price by delivery of cash or check in an amount equal to the
exercise price of such Options or, to the extent permitted by the Board at or
after the award of the Option, by (A) delivery of shares of Common Stock owned
by the optionee for at least six months (or such shorter period as is approved
by the Board), valued at their Fair Market Value, (B) delivery of a promissory
note of the optionee to the Company on terms determined by the Board, (C)
delivery of an irrevocable undertaking by a broker to deliver promptly to the
sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
(v) The Board may provide for the automatic award of an Option
upon the delivery of shares to the Company in payment of the exercise price of
an Option for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at which all
or any part of an Option may be exercised.
For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations).
(b) Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and
conditions:
(i) All Incentive Stock Options granted under the Plan
shall, at the time of grant, be specifically designated as such in the option
agreement covering such Incentive Stock Options. The Option exercise period
shall not exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all (after taking into account the attribution of Section 424(b) and of the
Code), then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(x) The purchase price per share of the Common
Stock subject to such Incentive Stock Option shall not be less than 110% of the
Fair Market value of one share of Common Stock at the time of grant; and
(y) The option exercise period shall not exceed
five years from the date of grant.
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(iii) For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company, if any) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value
(determined as of the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at
the time of such exercise, the Participant is, and has been continuously since
the date of grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised
within the period of three months after the date the Participant ceases to be
an employee of the Company (or within such lesser period as may be specified in
the applicable option agreement), provided that the agreement with respect to
such Option may designate a longer exercise period and that the exercise after
such three-month period shall be treated as the exercise of a Nonstatutory
Stock Option under the Plan;
(y) if the Participant dies while in the employ
of the Company, or within three months after the Participant ceases to be such
an employee, the Incentive Stock Option may be exercised by the Participant's
Designated Beneficiary within the period of one year after the date of death
(or within such lesser period as may be specified in the applicable Option
agreement); and
(z) if the Participant becomes disabled (within
the meaning of Section 22(e)(3) of the Code or any successor provision thereto)
while in the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date of disability (or within such
lesser period as may be specified in the Option agreement).
Notwithstanding the foregoing provisions, no Incentive Stock Option may be
exercised after its expiration date.
(v) Incentive Stock Options shall not be assignable or
transferable by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution, and,
during the life of the optionee, shall be exercisable only by the optionee.
Section 7. Stock Appreciation Rights
(a) The Board may grant Stock Appreciation Rights entitling
recipients on exercise of the Stock Appreciation Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Board), determined in whole or in part by reference to appreciation in the Fair
Market Value of the Stock between the date of the Award and the exercise of the
Award. A Stock Appreciation Right shall entitle the Participant to receive,
with respect to each share of Stock as to which the Stock Appreciation Right is
exercised, the excess of the share's Fair Market Value on the date of exercise
over its Fair Market Value on the date the Stock Appreciation Right was
granted. The Board may also grant Stock Appreciation Rights that provide that,
following a change in control of the Company (as defined by the Board at the
time of the Award), the holder of such Stock Appreciation Right will be
entitled to receive, with respect to each share of Stock subject to the Stock
Appreciation Right, an amount equal to the excess of a specified value (which
may
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include an average of values) for a share of Stock during a period preceding
such change in control over the Fair Market Value of a share of Stock on the
date the Stock Appreciation Right was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an Option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option may be granted only at
the time the Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with
Options, the following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only
at such time or times, and to the extent, that the related Option is
exercisable and will be exercisable in accordance with the procedure required
for exercise of the related Option.
(ii) The Stock Appreciation Right will terminate and no
longer be exercisable upon the termination or exercise of the related Option,
except that a Stock Appreciation Right granted with respect to less than the
full number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has terminated
exceeds the number of shares not covered by the Stock Appreciation Right.
(iii) The Option will terminate and no longer be
exercisable upon the exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable
only with the related Option.
(v) A Stock Appreciation Right granted in tandem with an
Incentive Stock Option may be exercised only when the market price of the Stock
subject to the Option exceeds the exercise price of such option.
(d) A Stock Appreciation Right not granted in tandem with an
Option will become exercisable at such time or times, and on such conditions,
as the Board may specify.
(e) The Board may at any time accelerate the time at which all
or any part of the Stock Appreciation Right may be exercised.
Section 8. Performance Shares
(a) The Board may make Performance Share Awards entitling
recipients to acquire shares of Stock upon the attainment of specified
performance goals. The Board may make Performance Share Awards independent of
or in connection with the granting of any other Award under the Plan. The
Board in its sole discretion shall determine the performance goals applicable
under each such Award, the periods during which performance is to be measured,
and all other limitations and conditions applicable to the awarded Performance
Shares; provided, however, that the Board may rely on the performance goals and
other standards applicable to other performance plans of the Company in setting
the standards for Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to
such Awards may not be sold, assigned, transferred, pledged or otherwise
encumbered.
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(c) A Participant receiving a Performance Share Award shall
have the rights of a stockholder only as to shares actually received by the
Participant under the Plan and not with respect to shares subject to an Award
but not actually received by the Participant. A Participant shall be entitled
to receive a stock certificate evidencing the acquisition of shares of Stock
under a Performance Share Award only upon satisfaction of all conditions
specified in the agreement evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of
the goals, restrictions or conditions imposed under any Performance Share
Award.
Section 9. Restricted and Unrestricted Stock
(a) The Board may grant Restricted Stock Awards entitling
recipients to acquire shares of Stock, subject to the right of the Company to
repurchase all or part of such shares at their purchase price (or to require
forfeiture of such shares if purchased at no cost) from the recipient in the
event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable Restricted Period or Restricted
Periods established by the Board for such Award. Conditions for repurchase (or
forfeiture) may be based on continuing employment or service or achievement of
pre-established performance or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the Board,
during the applicable Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Board may determine. Any certificates issued
in respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company
(or its designee). At the expiration of the Restricted Period, the Company (or
such designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a
purchase price determined by the Board, which shall not be lower than 85% of
Fair Market Value on the date of sale) to Participants shares of Stock free of
any restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and
Unrestricted Stock shall be determined by the Board of Directors and may not be
less than the par value of the Common Stock. Such purchase price may be paid
in the form of past services or such other lawful consideration as is
determined by the Board.
(e) The Board may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.
Section 10. General Provisions Applicable to Awards
(a) Applicability of Rule 16b-3. Those provisions of the Plan
which make an express reference to Rule 16b-3 shall apply to the Company only
at such time as the Company's Common Stock is registered under the Securities
Exchange Act of 1934, or any successor provision, and then only to Reporting
Persons.
(b) Reporting Person Limitations. Notwithstanding any other
provision of the Plan, to the extent required to qualify for the exemption
provided by Rule 16b-3, (i) any Option,
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SAR, Performance Share Award or other similar right related to an equity
security issued under the Plan to a Reporting Person shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I or the
Employee Retirement Income Security Act ("ERISA"), or the rules thereunder, and
shall be exercisable during the Participant's lifetime only by the Participant
or the Participant's guardian or legal representative, and (ii) the selection
of a Reporting Person as a Participant and the terms of his or her Award shall
be determined only in accordance with the applicable provisions of Rule 16b-3.
(c) Documentation. Each Award under the Plan shall be
evidenced by an instrument delivered to the Participant specifying the terms
and conditions thereof and containing such other terms and conditions not
inconsistent with the provisions of the Plan as the Board considers necessary
or advisable. Such instruments may be in the form of agreements to be executed
by both the Company and the Participant, or certificates, letters or similar
documents, acceptance of which will evidence agreement to the terms thereof and
of this Plan.
(d) Board Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Board need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time of
award or at any time thereafter.
(e) Termination of Status. Subject to the provisions of
Section 6(b)(iv), the Committee shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other termination
of employment or other status of a Participant and the extent to which, and the
period during which, the Participant's legal representative, guardian or
Designated Beneficiary may exercise rights under such Award.
(f) Adjustments. If at any time the shares of Common Stock
subject the Plan is changed into or exchanged for a different number or kind of
shares or securities, as the result of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or
similar events, other than those events described by Section 10(g), an
appropriate adjustment shall be made in the number, exercise or sale price
and/or type of shares or securities for which Options, Performance Shares or
Stock Appreciation Rights may thereafter be granted and Restricted Stock or
Unrestricted Stock may thereafter be sold or granted under the Plan. The
Committee also shall designate the appropriate changes that shall be made in
Options, Performance Shares or Stock Appreciation Rights, or rights to purchase
Restricted Stock or Unrestricted Stock under the Plan, and the Committee may do
so either at the time of the Option, Performance Share or Stock Appreciation
Right is granted or Restricted Stock or Unrestricted Stock is offered or at
that time of the event causing the adjustment. Any such adjustment in
outstanding Options shall be made without changing the aggregate exercise price
applicable to the unexercised portions of such Options. Any such adjustments in
outstanding rights to purchase Restricted Stock or Unrestricted Stock shall be
made without changing the aggregate purchase price of such Restricted Stock or
Unrestricted Stock.
(g) Mergers, Etc. In the event of a consolidation, merger or
other reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition"), or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of
any corporation assuming the obligations of the Company, may, in its
discretion, take any one or more of the following actions as to outstanding
Awards: (i) provide that such Awards shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines to
be appropriate, (ii) upon written notice to
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Participants, provide that all unexercised Options or SARs will terminate
immediately prior to the consummation of such transaction unless exercised by
the Participant within a specified period following the date of such notice,
(iii) in the event of an Acquisition under the terms of which holders of the
Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Acquisition (the "Acquisition
Price"), make or provide for a cash payment to Participants equal to the
difference between (A) the Acquisition Price times the number of shares of
Common Stock subject to outstanding Options or SARs (to the extent then
exercisable at prices not in excess of the Acquisition Price) and (B) the
aggregate exercise price of all such outstanding Options or SARs in exchange
for the termination of such Options and SARs, and (iv) provide that all or any
outstanding Awards shall become exercisable or realizable in full prior to the
effective date of such Acquisition.
(h) Withholding. The Participant shall pay to the Company, or
make provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Board's discretion, and
subject to such conditions as the Board may establish, such tax obligations may
be paid in whole or in part in shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair
Market Value. The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the Participant.
(i) Foreign Nationals. Awards may be made to Participants who
are foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(j) Amendment of Award. The Board may amend, modify or
terminate any outstanding Award, including substituting therefor another Award
of the same or a different type, changing the date of exercise or realization
and converting an Incentive Stock Option to a Nonstatutory Stock Option,
provided that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
(k) Cancellation and New Grant of Options. The Board of
Directors shall have the authority to effect, at any time and from time to
time, with the consent of the affected optionees, (i) the cancellation of any
or all outstanding Options under the Plan and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers
of shares of Common Stock and having an option exercise price per share which
may be lower or higher than the exercise price per share of the canceled
Options or (ii) the amendment of the terms of any and all outstanding Options
under the Plan to provide an option exercise price per share which is higher or
lower than the then current exercise price per share of such outstanding
Options.
(l) Conditions on Delivery of Stock. The Company will not be
obligated to deliver any shares of Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan (i) until all
conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may
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require, as a condition to exercise of the Award, such representations or
agreements as the Company may consider appropriate to avoid violation of such
Act and may require that the certificates evidencing such Stock bear an
appropriate legend restricting transfer.
Section 11. Terms, Conditions and Form of Outside Directors Options
(a) The Board may provide for options to be granted to Outside
Directors in consideration for their service to the Company. The Board shall
determine to which Outside Directors options shall be granted hereunder (any
such person, a "Participant"). The Board shall specify the number of shares
subject to each option grant provided for under this Section 11, or the formula
pursuant to which such number shall be determined, the Participants to receive
any such grant, the date of grant and the vesting and expiration terms
applicable to such options. The grant of options hereunder may, but need not,
be conditioned on the Outside Director electing to forego his right to all or
any part of his or her cash retainer or other fees. The maximum number of
shares of Common Stock subject to options granted under this Plan during any
calendar year to any person on account of his or her service as an Outside
Director, other than options that an Outside Director has elected to receive in
lieu of cash retainer or other fees, shall not exceed 20,000 shares. Each
option granted under this Section to Outside Directors shall be evidenced by a
written agreement in such form as the Board of Directors shall from time to
time approve, which agreements shall comply with and be subject to the terms
and conditions set forth in this Section 11.
(b) Option Exercise Price. The option exercise price per share
for each option granted under this Section 11 shall equal (i) the closing price
per share of the Company's Common Stock on the principal exchange on which the
Common Stock is listed, on the date of grant (or if no such price is reported
on such date, such price as reported on the nearest preceding date on which
such price is reported), (ii) if the Common Stock is not listed on an exchange,
the bid price per share of Common Stock at the close of trading on the date of
the grant, or (iii) if the Common Stock is not listed on an exchange or
otherwise publicly traded on the date of such grant, the fair market value of
the Company's Common Stock as last determined by the Board of Directors of the
Company.
(c) Options Non-Transferable. Each option granted under the
Plan by its terms shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined in Section 414(p) of the Code) and shall
be exercised during the lifetime of the optionee only by such optionee.
(e) Exercise Period. Each option may be exercised at any time
and from time to time, in whole or in part, prior to the fifth anniversary of
the date of grant, except that no option may be exercised more than three
months after the optionee ceases to serve as a director of the Company for any
reason.
(f) Exercise Procedure. Options may be exercised only by
written notice to the Company at its principal office accompanied by payment of
the full consideration for the shares as to which they are exercised.
(g) Payment of Purchase Price. Payment of the exercise price
may be made, at the election of the optionee, (i) by delivery of cash or a
check to the order of the Company in an amount equal to the exercise price,
(ii) by delivery to the Company of shares of Common Stock of the Company
already owned and held by the optionee for at least twelve months and having a
fair market value equal in amount to the exercise price of the options being
exercised, or (iii) by any combination of such methods of payment. The fair
market value of any shares of Common Stock which may be delivered upon exercise
of an option shall be determined by the Company as of the date that
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such shares are delivered.
Section 12. Miscellaneous
(a) No Right to Employment or Other Status. No person shall
have any claim or right to be granted an Award, and the grant of an Award shall
not be construed as giving a Participant the right to continued employment with
or service for the Company. The Company expressly reserves the right at any
time to dismiss a Participant free from any liability or claim under the Plan,
except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she becomes the record holder thereof.
(c) Exclusion from Benefit Computations. No amounts payable
upon exercise of Awards granted under the Plan shall be considered salary,
wages or compensation to Participants for purposes of determining the amount or
nature of benefits that Participants are entitled to under any insurance,
retirement or other benefit plans or programs of the Company.
(d) Effective Date and Term.
(i) Effective Date. The Plan shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option granted under
the Plan shall become exercisable unless and until the Plan shall have been
approved by the Company's stockholders. If such stockholder approval is not
obtained within twelve months after the date of the Board's adoption of the
Plan, no Options previously granted under the Plan shall be deemed to be
Incentive Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring stockholder approval pursuant
to Section 12(e) below shall become effective when adopted by the Board of
Directors; amendments requiring stockholder approval shall become effective
when adopted by the Board of Directors, but no Incentive Stock Option granted
after the date of such amendment shall become exercisable (to the extent that
such amendment to the Plan was required to enable the Company to grant such
Incentive Stock Option to a particular optionee) unless and until such
amendment shall have been approved by the Company's stockholders. If such
stockholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such Option to a particular
optionee. Subject to the limitations set forth in this Section 11(d), Awards
may be made under the Plan at any time after the effective date and before the
date fixed for termination of the Plan.
(ii) Termination. The Plan shall terminate upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to Awards under the Plan. Awards outstanding on such date
shall continue to have force and effect in accordance with the provisions of
the instruments evidencing such Awards.
(e) Amendment of Plan. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement,
including any requirements for compliance with Rule 16b-3. Prior to any such
approval, Awards may be made under the Plan expressly subject to such approval.
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(f) Governing Law. The provisions of the Plan shall be
governed by and interpreted in accordance with the laws of the Commonwealth of
Virginia.
Adopted by the Board of Directors on March 25, 1997
Approved by the Stockholders on March 25, 1997
APPENDIX B TO PROXY STATEMENT
ADVANCED COMMUNICATION SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE
1.01. PURPOSE. The Advanced Communication Systems, Inc. Employee Stock
Purchase Plan is intended to provide a method whereby employees of Advanced
Communication Systems, Inc. (the "Company") and its subsidiary corporations
will have an opportunity to acquire a proprietary interest in the Company
through the purchase of shares of the Common Stock of the Company. It is the
intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
ARTICLE II
DEFINITIONS
2.01 BASE PAY. "Base Pay" means regular straight-time earnings
excluding payments for overtime, shift premium, bonuses and other special
payments, commissions and other marketing incentive payments.
2.02 BOARD. "Board of Directors" or "Board" means the Board of
Directors of the Company.
2.03 COMMITTEE. "Committee" means the individuals described in
Article XI.
2.04 COMMON STOCK. "Common Stock" means the common stock of the
Company.
2.05 DESIGNATED SUBSIDIARY CORPORATION. "Designated Subsidiary
Corporation" means a Subsidiary Corporation which is designated by the
Company's Board of Directors to participate in the Plan.
2.06 EMPLOYEE. "Employee" means any person who is employed by the
Company or a Designated Subsidiary Corporation.
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2.07 SUBSIDIARY CORPORATION. "Subsidiary Corporation" means any
present or future corporation which would be a "subsidiary corporation" of the
Company as that term is defined in Section 424 of the Code.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 INITIAL ELIGIBILITY. All Employees are eligible to participate
hereunder, commencing on any Commencement Date.
3.02 COMMENCEMENT OF PARTICIPATION. An eligible Employee may become a
participant by completing an authorization for payroll deduction on the form
provided by the Company and filing it with the office of the Human Resources
Director of the Company prior to the Commencement Date for the Offering (as
such terms are defined below) or, in the case of the first Offering, prior to
such other enrollment deadline established by the Committee. Payroll
deductions for a participant shall commence on the applicable Commencement Date
when his authorization for a payroll deduction becomes effective and shall end
on the Exercise Date of the Offering to which such authorization is applicable
unless sooner terminated by the participant as provided in Article VIII.
3.03 RESTRICTIONS ON PARTICIPATION. Notwithstanding any provision of
the Plan to the contrary, no Employee shall be granted an option to participate
in the Plan:
(a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or any Subsidiary Corporation. (For purposes of this paragraph, the
rules of Section 424(d) of the Code shall apply in determining stock ownership
of any Employee); or
(b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiary Corporations to
accrue at a rate which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding.
3.04 LEAVE OF ABSENCE. For purposes of participation in the Plan, a
person on leave of absence shall be deemed to be an Employee for the first 90
days of such leave of absence and such Employee's employment shall be deemed to
have terminated at the close of business on the 90th day of such leave of
absence unless such Employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on
such 90th day. Termination by the Company of any Employee's leave of absence,
other than termination of such leave of absence on return to full time or part
time employment, shall terminate an Employee's employment for all purposes of
the Plan and shall terminate such Employee's participation in the Plan and
right to exercise any option.
ARTICLE IV
OFFERINGS
4.01 QUARTERLY OFFERING PERIODS.
(a) Offering Periods. The Plan will be implemented by
Offerings in consecutive Offering Periods, each constituting a calendar
quarter. Such Offering Periods shall continue until the
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termination of the Plan in accordance with Section 12.05. The first such
Offering Period shall begin on the later of (i) April 1, 1998, or (ii) the
effective date of the registration statement filed by the Company for the Plan
with the Securities and Exchange Commission.
(b) Commencement Date. The Commencement Date is the first
business day of an Offering Period.
(c) Exercise Date. The Exercise Date is the last business day
of an Offering Period.
4.02 REVISED OFFERING PERIODS. In the discretion of the Committee,
quarterly Offering Periods may be divided into monthly Offering Periods or
combined into annual or semi-annual Offering Periods. The maximum number of
shares available during an Offering Period under Section 10.01 shall be
adjusted appropriately.
ARTICLE V
PAYROLL DEDUCTIONS
5.01 AMOUNT OF DEDUCTION. At the time a participant files his
authorization for payroll deduction, he shall elect to have after-tax
deductions made from his pay on each payday during the Offering Period at the
rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his base pay in effect at any such
payday, subject to a minimum of $20 per month.
5.02 PARTICIPANT'S ACCOUNT. All payroll deductions made for a
participant shall be credited to his account under the Plan. A participant may
not make any separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.04.
5.03 CHANGES IN PAYROLL DEDUCTIONS. A participant may discontinue his
participation in the Plan as provided in Article VIII, but no other change can
be made during an Offering and, specifically, a participant may not alter the
amount of his payroll deductions for that Offering. The payroll deduction form
may provide that it shall continue from Offering Period to Offering Period
unless changed by a participant before the beginning of a subsequent Offering
Period.
5.04 LEAVE OF ABSENCE. If a participant goes on a leave of absence,
such participant shall have the right to elect: (a) to withdraw the balance in
his or her account pursuant to Section 7.02, (b) to discontinue contributions
to the Plan but remain a participant in the Plan, or (c) remain a participant
in the Plan during such leave of absence, authorizing deductions to be made
from payments by the Company or its Subsidiary Corporations to the participant
during such leave of absence and undertaking to make cash payments to the Plan
at the end of each payroll period to the extent that amounts payable by the
Company and its Subsidiary Corporations to such participant are insufficient to
meet such participant's authorized Plan deductions.
ARTICLE VI
GRANTING OF OPTION
6.01 NUMBER OF OPTION SHARES. On the Commencement Date of each
Offering, subject to the maximum in Section 10.01, a participating Employee
shall be deemed to have been granted a qualified option to purchase on the
Exercise Date of such Offering Period (at the Purchase Price in Section 6.02)
the number of shares of the Company's Common Stock determined by dividing such
Employee's after-tax payroll deductions accumulated during such
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Offering Period and retained in the participant's account as of the Exercise
Date by the applicable Purchase Price.
6.02 PURCHASE PRICE. The Purchase Price of Common Stock purchased
with payroll deductions made during an Offering Period for a participant
therein shall be the lower of: (a) 90% of the Fair Market Value of the stock
on the Commencement Date, or (b) 90% of the Fair Market Value of the stock on
the Exercise Date. The Fair Market Value of the stock for this purpose is the
closing price of the stock on the NASDAQ National Market System on that date,
or (in the event the stock was not traded on such date) the nearest prior
business day on which trading of the Company's Common Stock occurred. If the
Common Stock is not listed on the NASDAQ National Market System, Fair Market
Value shall be similarly determined with reference to the principal U.S. Stock
Exchange on which the Common Stock is listed. If the Company's Common Stock is
not admitted to trading on the NASDAQ National Market System or other U.S.
Stock Exchange on any of the aforesaid dates for which closing prices of the
stock are to be determined, then reference shall be made to the fair market
value of the stock on that date, as determined on such basis as shall be
established or specified for the purpose by the Committee.
ARTICLE VII
EXERCISE OF OPTION
7.01 AUTOMATIC EXERCISE. Unless a participant gives written notice to
the Company as hereinafter provided, his option for the purchase of stock with
payroll deductions made during any Offering will be deemed to have been
exercised automatically on the Exercise Date applicable to such Offering, for
the purchase of the number of shares of Common Stock which the accumulated
payroll deductions in his account at that time will purchase at the applicable
Purchase Price, subject to the maximum stated in Section 10.01. Any excess
payroll deductions in his account at that time not utilized to purchase Common
Stock will be refunded to him.
7.02 WITHDRAWAL OF ACCOUNT. By written notice to the Human Resources
Director of the Company, at any time prior to the Exercise Date applicable to
any Offering, a participant may elect to withdraw all of the accumulated
payroll deductions in his account at such time.
7.03 TRANSFERABILITY OF OPTION. During a participant's lifetime,
options held by such participant shall be exercisable only by that participant.
7.04 DELIVERY OF STOCK. As promptly as practicable after the Exercise
Date of each Offering, the Company will arrange for delivery of the stock
purchased upon exercise of his option to an account established for the
participant at a brokerage firm designated by the Company.
7.05 DIVIDENDS. Any cash dividends paid on Company Common Stock held
in a participant's account at a designated brokerage firm shall be
automatically reinvested in Company Common Stock as soon as administratively
practicable by purchases on the open market at prevailing market prices. Such
purchases shall not count towards the limits in Section 10.01.
ARTICLE VIII
WITHDRAWAL
8.01 IN GENERAL. As indicated in Section 7.02, a participant may
withdraw payroll deductions credited to his account under the Plan at any time
by giving written notice to the Human Resources Director of the Company. All
of the participant's payroll deductions credited to his account will be paid to
him promptly after receipt of his notice of withdrawal, and no further payroll
deductions will
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be made from his pay during such Offering. The Company may, at its option,
treat any attempt to borrow by an Employee on the security of his accumulated
payroll deductions as an election, under Section 7.02, to withdraw such
deductions.
8.02 EFFECT ON SUBSEQUENT PARTICIPATION. A participant's withdrawal
from any Offering will not have any effect upon his eligibility to participate
in any succeeding Offering or in any similar plan which may hereafter be
adopted by the Company.
8.03 TERMINATION OF EMPLOYMENT. Upon termination of the participant's
employment for any reason, including retirement or death (but excluding
continuation of a leave of absence for a period beyond 90 days), the payroll
deductions credited to his account will be returned to him, or, in the case of
his death, to the person or persons entitled thereto under Section 12.01.
ARTICLE IX
INTEREST
9.01 NO PAYMENT OF INTEREST. No interest will be paid or allowed on
any money paid into the Plan or credited to the account of any participating
Employee.
ARTICLE X
STOCK
10.01 SHARES SUBJECT TO PLAN. The stock subject to the Plan shall be
shares of the Company's Common Stock, which may be (i) authorized but unissued
shares, (ii) treasury shares and/or (iii) shares purchased on the open market
by a broker designated by the Company. The maximum number of shares of Common
Stock which shall be issued under the Plan, subject to adjustment upon changes
in capitalization of the Company as provided in Section 12.04, shall be Eighty
Thousand (80,000) shares in each Offering plus in each Offering all unissued
shares from prior Offerings, whether offered or not, not to exceed Three
Hundred Twenty-Five Thousand (325,000) shares for all Offerings. No
participant may purchase more than Five Hundred (500) shares in any one
Offering. If the total number of shares for which options are exercised on any
Exercise Date in accordance with Article VI exceeds the maximum number of
shares for the applicable offering, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in as nearly a
uniform manner as shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to the account of
each participant under the Plan shall be returned to him as promptly as
possible.
10.02 PARTICIPANT'S INTEREST IN OPTION STOCK. The participant will
have no interest in stock covered by his option until such option has been
exercised.
10.03 ISSUANCE OF STOCK. Stock purchased under the Plan will be issued
in a street name and held at a brokerage firm designated by the Company, which
brokerage firm shall maintain an account for each participant reflecting his or
her allocable shares of the Common Stock and any earnings thereon. A
participant may at any time request such brokerage firm to issue a certificate
for the shares of Common Stock allocated to the participant's account.
10.04 RESTRICTIONS ON EXERCISE. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall
have been duly listed, upon official notice of issuance, upon a stock exchange,
and that either:
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(a) a registration statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective, or
(b) the participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his
intention to purchase the shares for investment and not for resale or
distribution.
ARTICLE XI
ADMINISTRATION
11.01 APPOINTMENT OF COMMITTEE. The Board of Directors shall appoint a
committee (the "Committee") to administer the Plan, which shall consist of
either (a) the full Board of Directors or (b) no fewer than two members of the
Board of Directors.
11.02 AUTHORITY OF COMMITTEE. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive.
11.03 RULES GOVERNING THE ADMINISTRATION OF THE COMMITTEE. The Board
of Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee may select one of
its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable and may hold telephonic meetings. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan, in the manner
and to the extent it shall deem desirable. Any decision or determination
reduced to writing and signed by a majority of the members of the Committee
shall be as fully effective as if it had been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary and shall
make such rules and regulations for the conduct of its business as it shall
deem advisable.
11.04 LIMITED LIABILITY; INDEMNIFICATION. To the maximum extent
permitted by Virginia law, neither the Company, Board or Committee nor any of
its members shall be liable for any action or determination made in good faith
with respect to this Plan. In addition to such other rights of indemnification
that they may have, the members of the Board and Committee shall be indemnified
by the Company to the maximum extent permitted by Virginia law against any and
all liabilities and expenses incurred in connection with their service in
connection with the Plan in such capacity.
ARTICLE XII
MISCELLANEOUS
12.01 DESIGNATION OF BENEFICIARY. A participant may file a written
designation of a beneficiary who is to receive any cash which is in the
participant's account at the time of the participant's death. Such designation
of beneficiary may be changed by the participant at any time by written notice
to the Human Resources Director of the Company. Upon the death of a
participant and upon receipt by the Company of proof of identity and existence
at the participant's death of a beneficiary validly designated by him under the
Plan, the Company shall deliver such cash to such beneficiary. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall
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deliver such cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
cash to the spouse or to any one or more dependents of the participant as the
Company may designate. No beneficiary shall, prior to the death of the
participant by whom he has been designated, acquire any interest in the account
of the participant under the Plan.
12.02 TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
7.02.
12.03 USE OF FUNDS. All payroll deductions received or held by the
Company under this Plan may be used by the Company for any corporate purpose
and the Company shall not be obligated to segregate such payroll deductions.
12.04 ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) If, while any options are outstanding, the outstanding
shares of Common Stock of the Company have increased, decreased, changed into,
or been exchanged for a different number or kind of shares or securities of the
Company through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split or similar transaction, appropriate and
proportionate adjustments may be made by the Committee in the number and/or
kind of shares which are subject to purchase under outstanding options and on
the option exercise price or prices applicable to such outstanding options. In
addition, in any such event, the maximum number and/or kind of shares which may
be offered in the Offerings described in Articles IV and Section 10.01 hereof
shall also be proportionately adjusted. No adjustments shall be made for stock
dividends. For the purposes of this Paragraph, any distribution of shares to
shareholders in an amount aggregating 20% or more of the outstanding shares
shall be deemed a stock split and any distributions of shares aggregating less
than 20% of the outstanding shares shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or upon
a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the Committee shall take such action as it deems
appropriate and equitable, which action may include, without limitation, one of
the following: (i) refund of payroll deductions for such Offering Period; (ii)
shortening of the Offering Period or (iii) providing that the holder of each
option then outstanding under the Plan will thereafter be entitled to receive
at the next Exercise Date upon the exercise of such option for each share as to
which such option shall be exercised, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of one share of
the Common Stock was entitled to receive upon and at the time of such
transaction. In the event the Plan is continued after such event, the Board of
Directors shall take such steps in connection with such transactions as the
Board shall deem necessary to assure that the provisions of this Section 12.04
shall thereafter be applicable, as nearly as reasonably may be determined, in
relation to the said cash, securities and/or property as to which such holder
of such option might thereafter be entitled to receive.
12.05 AMENDMENT AND TERMINATION.
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(a) Action by Board. The Board of Directors shall have
complete power and authority to terminate or amend the Plan; provided, however,
that the Board of Directors shall not, without the approval of the stockholders
of the Company (i) amend the Plan in a manner to cause the Plan to fail to meet
the requirements of Code Section 423 or fail to comply with Rule 16b-3 of the
Securities and Exchange Commission, or (ii) increase the maximum number of
shares which may be issued under the Plan or under any Offering (except
pursuant to Sections 4.02 and 12.04). Upon termination of the Plan during an
Offering Period, at the discretion of the Committee, cash balances in
participants accounts may be refunded or the Exercise Date may be accelerated.
Except as provided above, no termination, modification, or amendment of the
Plan may, without the consent of an Employee then having an option under the
Plan to purchase stock, adversely affect the rights of such Employee under such
option.
(b) Automatic Termination. The Plan shall automatically
terminate on the earlier of March 31, 2008, or the issuance of the maximum
number of shares available under the Plan pursuant to Section 10.01.
12.06 TAX WITHHOLDING. At the time an option is exercised or at the
time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any
time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations.
12.07 DISQUALIFYING DISPOSITION. The Committee may require that a
participant notify the Company of any disposition of shares of Common Stock
purchased under the Plan within a period of two (2) years subsequent to the
respective Commencement Date or one (1) year from the Exercise Date.
12.08 EFFECTIVE DATE. The Plan shall become effective as of April 1,
1998, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the shareholders held
on or before March 31, 1999. If the Plan is not so approved, the Plan shall be
discontinued, any options which had been issued shall be considered
nonqualified options and any payroll deductions then held by the Company shall
be refunded to the respective Employees.
12.09 NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create in any Employee or class of Employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise
modify, an Employee's employment at any time.
12.10 EXCLUSION FROM RETIREMENT AND FRINGE BENEFIT COMPUTATION. No
portion of the award of options under this Plan, or the proceeds from the sale
of stock purchased under the Plan, shall be taken into account as "wages,"
"salary" or "compensation" for any purpose, whether in determining eligibility,
benefits or otherwise, under (i) any pension, retirement, profit sharing or
other qualified or non-qualified plan of deferred compensation, (ii) any
employee welfare or fringe benefit plan including, but not limited to, group
insurance, hospitalization, medical, and disability, or (iii) any form of
extraordinary pay including, but not limited to, bonuses, sick pay and vacation
pay.
12.11 EFFECT OF PLAN. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees
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thereof, heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
12.12 EXPENSES. Expenses of administering the Plan shall be borne by
the Company except that brokerage expenses incurred in connection with the
purchase of shares shall be included as part of the cost of the shares to
participating Employees.
12.13 GOVERNING LAW. The law of the Commonwealth of Virginia will
govern all matters relating to this Plan except to the extent it is superseded
by the laws of the United States.
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PROXY ADVANCED COMMUNICATION SYSTEMS, INC.
10089 LEE HIGHWAY, FAIRFAX, VIRGINIA, 22030
The undersigned hereby appoints George A. Robinson and Dev Ganesan, or
either of them, as proxies with full powers of substitution, to vote all shares
of the Common Stock of Advanced Communication Systems, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held on February 25, 1999 (the "Annual Meeting") and at
any adjournment thereof, upon the items described in the Proxy Statement. The
undersigned acknowledges receipt of notice of the meeting and the Proxy
Statement.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except [ ] WITHHOLD AUTHORITY for
as marked to the contrary below) all nominees listed below
Nominees: Charles R. Collins, Thomas A. Costello, Charles G. Martinache, George
A. Robinson, Wayne Shelton and Vincent G. Vidas.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE PRINT
THAT NOMINEE'S NAME:
---------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S 1997 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed and dated on other side)
<PAGE> 43
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED HEREIN. IF NO
INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
"FOR" ALL OF THE NOMINEES SET FORTH IN PROPOSAL NO. 1, "FOR" PROPOSAL NO. 2,
PROPOSAL NO. 3 AND PROPOSAL NO. 4 AND IN THE DISCRETION OF THE PROXY HOLDERS AS
TO OTHER BUSINESS.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
---------------------------------------------------
Date
---------------------------------------------------
Signature of Owner
---------------------------------------------------
Additional Signature of Joint Owner (if any)
If stock is jointly held, each joint owner should
sign. When signing as attorney-in-fact, executor,
administrator, trustee, guardian, corporate officer
or partner, please give full title.
