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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1999 COMMISSION FILE NUMBER: 0-22737
ADVANCED COMMUNICATION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1421222
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10089 LEE HIGHWAY, FAIRFAX, VIRGINIA 22030
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
703-934-8130
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held by persons
considered by the registrant to be non-affiliates of the registrant on December
10, 1999, computed with reference to the closing price of the Common Stock on
the Nasdaq National Market as reported for December 10, 1999, was $116,077,545.
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As of the close of business December 10, 1999, the registrant had
outstanding 8,770,364 shares of Common Stock, par value $.01 per share.
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DOCUMENTS INCORPORATED BY REFERENCE
There are no documents incorporated by reference herein.
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AMENDMENT
The purpose of this Amendment is to provide the information required by
Items 10, 11, 12 and 13 of Part III of this report that the registrant intended
to incorporate by reference from the registrant's proxy statement for the annual
meeting of stockholders.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT.
Set forth below is certain information regarding the directors, executive
officers and key employees as of January 11, 2000:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS: AGE POSITION
<S> <C> <C>
George A. Robinson.............................. 61 President, Chief Executive Officer and Chairman of the Board
of Directors
Thomas A. Costello.............................. 52 Executive Vice President, Chief Operating Officer, Secretary
and Director
Terrence E. Hileman............................. 36 Vice President, Chief Financial Officer and Treasurer
Vincent G. Vidas................................ 68 Director
Charler R. Collins.............................. 68 Director
Charles G. Martinache........................... 59 Director
Wayne Shelton................................... 67 Director
</TABLE>
<TABLE>
<CAPTION>
KEY EMPLOYEES: AGE POSITION
<S> <C> <C>
Kevin R. Adams.................................. 42 President of ACS Technologies, Inc.
Dwayne Junker................................... 58 President of RF Microsystems, Inc. and ACS Services
Divisions
Ed Denion....................................... 52 President of ACS Information Technology Division
Tom Brennan..................................... 59 President of SEMCOR Aerospace Services Division
</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.
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 President and Technical Director,
and in 1995 was made Executive Vice President and Chief Technology Officer of
the Company. Mr. Costello was appointed Chief Operating Officer in October 1999.
TERRENCE E. HILEMAN. Mr. Hileman was appointed as the Chief Financial
Officer and Treasurer in October 1999. From August 1987 to September 1999, Mr.
Hileman served as the Vice President of Finance and Controller of the Company,
and as such, was responsible for all finance and accounting functions. From 1986
to 1987, Mr. Hileman was employed by Grumman-CTEC.
VINCENT G. VIDAS. Mr. Vidas served as the Executive Vice President and
Chief Operating Officer of the Company from December 1998 to September 1999 and
has served 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 Chief
Executive Officer of SEMCOR from 1987 until December 1999.
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.
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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 was 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 and Micro Star Company, Inc.
KEVIN R. ADAMS. 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.
In October 1997 Mr. Adams became President of ACS Technologies. 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. Before joining RFM, Mr. Junker served 30
years as a Navy Officer specializing in telecommunications and electronics.
EDWARD I. DENION. Mr. Denion joined SEMCOR, a wholly-owned subsidiary of
the Company, in 1995 and was appointed President of ACS Information Technology
in July 1999. From July 1995 to July 1999, Mr. Denion served as Vice President
of SEMCOR's Systems and Services Division. From 1992 to 1995, Mr. Denion served
as a Director in the Business Development division of Grumman Technical
Services.
THOMAS J. BRENNAN. Mr. Brennan joined SEMCOR in 1995 as the Corporate
Director of Operations. From 1996 to 1998, he served as SEMCOR's Vice President
for the Air Force and Army Aviation Programs. Mr. Brennan was the Vice President
of SEMCOR's Aerospace Services Division from 1998 until 1999, at which time he
was appointed as President of Company's SEMCOR Aerospace Services Division.
Before joining SEMCOR, Mr. Brennan served as a civilian engineer and senior
executive for the U.S. Navy at Warminster, Pennsylvania, Lakehurst, New Jersey
and Patuxent River, Maryland.
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 both 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, 1999, 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: Terrence E. Hileman, the
Chief Financial Officer and Treasurer of the Company, filed late his Initial
Statement of Beneficial Ownership of Securities on Form 3 on November 10, 1999.
ITEM 11. 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, 1999, 1998 and 1997 by the Chief Executive Officer and each
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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 (1)
------------------ ---- ------- ----- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
George A. Robinson 1999 $350,002 $0 $0 30,000 $4,740
President, Chief Executive 1998 $240,011 $0 $0 0 $4,302
Officer and Chairman of the Board 1997 $239,578 $113,266 $0 0 $4,112
Vincent G. Vidas (2)
Executive Vice President and
Chief Operating Officer 1999 $230,891 $0 $0 15,000 $4,800
Thomas A. Costello
Executive Vice President, 1999 $225,430 $0 $0 15,000 $4,507
Chief Technology Officer and 1998 $180,003 $0 $0 0 $3,973
Secretary 1997 $214,576 $113,266 $0 0 $4,112
Dev Ganesan (3) 1999 $230,006 $0 $0 15,000 $4,150
Executive Vice President, Chief 1998 $150,010 $0 $0 15,000 $3,480
Financial Officer and Treasurer 1997(4) $75,010 $75,000 $0 115,000 $0
</TABLE>
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(1) Represents matching 401(k) plan contributions by the Company.
(2) Mr. Vidas was appointed Chief Operating Officer effective January 1,
1999.
(3) Mr. Ganesan served as Executive Vice President, Chief Financial Officer
and Treasurer until October 1999 and was employed by the Company until
January 2000.
(4) Reflects compensation 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,
1999.
<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 1999 SHARE DATE 5% 10%
- ---- ------- ----------- ----- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
George A. Robinson 30,000 18% $11.75 2/26/06 $143,503 $334,423
Vincent G. Vidas 15,000 9% $11.75 2/26/06 $71,751 $167,211
Thomas A. Costello 15,000 9% $11.75 2/26/06 $71,751 $167,211
Dev Ganesan 15,000 9% $11.75 2/26/06 $71,751 $167,211
</TABLE>
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(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.
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FISCAL YEAR 1999 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, 1999 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 30,000 0 $20,625
Vincent G. Vidas 0 0 0 15,000 0 $10,313
Thomas A. Costello 0 0 0 15,000 0 $10,313
Dev Ganesan 0 0 66,250 25,000 $378,669 $40,308
</TABLE>
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(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, 1999 on the Nasdaq National
Market of $12.44.
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) an annual retainer of $1,000 if the Director is a
member of a committee, (iii) a stipend of $1,500 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 (iv) 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.
EMPLOYMENT AGREEMENTS
Effective August 27, 1999, the Company entered into an employment
agreement with Mr. Costello, Executive Vice President, Chief Operating Officer
and Secretary of the Company. Under the terms of this agreement Mr. Costello
will receive a base salary of $230,000 which will be reviewed annually by the
Compensation Committee and the Board of Directors as of each October 1. In
addition to the base salary, Mr. Costello will be eligible for a performance
bonus, with respect to each fiscal year that ends during the term of the
employment agreement. The performance bonus, which shall not be less than 50% of
Mr. Costello's base pay, will be calculated and approved annually by the
Compensation Committee in accordance with the bonus plan for compensating senior
executives. Mr. Costello will also receive equity compensation in such forms and
amounts as the Compensation Committee determines appropriate for the position,
industry practices, market conditions and other outside information considered
reasonable by the Committee.
Mr. Ganesan, the former Executive Vice President, Chief Financial
Officer and Treasurer of the Company, was employed pursuant to the terms of an
employment agreement, which continued in effect until Mr. Ganesan's separation
from the Company in January 2000. Under the terms of the employment agreement,
Mr. Ganesan received 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.
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Mr. Vidas, who was Executive Vice President and the Chief Operating
Officer and who currently is a Director of the Company, was employed pursuant to
an employment agreement which continued in effect until December 31, 1999. Under
the terms of the employment agreement, Mr. Vidas received an annual salary of
$200,000 and was eligible for an annual performance-based bonus of up to $50,000
based upon the accomplishment of certain mutually agreed upon performance goals.
Mr. Vidas resigned as Chief Operating Officer of the Company effective September
30, 1999, and continued to serve as the Chief Executive Officer of SEMCOR until
December 31, 1999.
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.
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, 1999 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 62.8% during the last five fiscal years, reaching $218.3 million
for fiscal 1999. In light of the leadership he demonstrated during fiscal year
1999, the Committee believes Mr. Robinson's salary of $350,002 was reasonable.
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.
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COMPENSATION COMMITTEE
Wayne Shelton
Charles R. Collins
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither member of the Compensation Committee was an officer or employee
of the Company during the fiscal year ended September 30, 1999. 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 Relationships
and Related Transactions."
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, 1999. 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.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
ADVANCED COMMUNICATION RUSSELL 2000 NASDAQ COMPUTER &
MEASUREMENT PERIOD SYSTEMS, INC. INDEX DATA PROCESSING INDEX
------------------ ------------- ----- ---------------------
<S> <C> <C> <C>
June 27, 1997 100 100 100
June 30, 1997 102 101 100
September 30, 1997 170 116 109
December 31, 1997 124 112 103
March 31, 1998 154 123 136
June 30, 1998 166 120 151
September 30, 1998 126 95 142
December 31, 1998 167 111 184
March 31, 1999 155 103 221
June 30, 1999 183 120 230
September 30, 1999 166 110 238
</TABLE>
ITEM 12. 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 January 11, 2000, by (i) each
person known by the Company to beneficially own five percent or more of the
outstanding shares of Common Stock, (ii) 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.
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<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES
- ---- ----- ------
<S> <C> <C>
EXECUTIVE OFFICERS, DIRECTORS:
George A. and Barbara Robinson(1)(2)................................ 857,500 9.3%
Thomas A. and Margaret M. Costello(2)3)............................. 852,500 9.3%
Terrence E. and Diane Hileman................................... 56,500 *
Wayne Shelton(5).................................................... 14,333 *
Charles G. Martinache(2)(4)......................................... 432,271 4.7%
Charles R. Collins(5)............................................... 14,333 *
Vincent G. Vidas(6)................................................. 263,410 2.9%
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP:
(8 persons)......................................................... 2,490,847 27.1%
</TABLE>
*Less than one percent of stock outstanding.
(1) Includes 333,371 shares owned by the Robinson 1997 Trust No. 1 and
333,371 shares owned by the Robinson 1997 Trust No. 2, both of which
George A. Robinson is the sole trustee, 180,758 shares owned by George
A. Robinson and Barbara Robinson as joint tenants and outstanding
options to purchase 10,000 shares of common stock that are exercisable
within 60 days.
(2) On December 9, 1999, The Titan Corporation ("Titan"), A T Acquisition
Corp.("Titan Sub") and the Company entered into an Agreement and Plan of
Merger ("Merger Agreement"). As a result of the merger, each outstanding
share of the Company's common stock will be converted into the right to
receive shares of Titan common stock at a prescribed exchange ratio. As
a condition and inducement to Titan's entering into the Merger
Agreement, Messrs. Robinson, Costello and Martinache who collectively
beneficially own 2,120,021 shares of the Company's common stock, each
granted an irrevocable proxy to Titan to vote their shares in favor of
the approval and adoption of the Merger Agreement.
(3) Includes: (i) 216,609 shares owned by the Costello 1997 Trust No. 1;
(ii) 216,609 shares owned by the Costello 1997 Trust No. 2; (iii)
207,141 shares owned by Thomas A. Costello Revocable Trust; (iv) 207,141
shares owned by Margaret M. Costello Revocable Trust; and (v)
outstanding options to purchase 5,000 shares of common stock that are
exercisable within 60 days. 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 136,274 shares owned by the Martinache 1997 Trust No. 1, of
which Charles G. Martinache is the sole trustee, 2,250 shares owned by
Sharon K. Martinache, 3,783 shares held in trust for the benefit of
Andrew Martinache and outstanding options to purchase 5,000 shares of
common stock that are exercisable within 60 days.
(5) Includes outstanding options to purchase 14,333 shares of common stock
that are exercisable within 60 days.
(6) Includes outstanding options to purchase 5,000 shares of common stock
that are exercisable within 60 days. In addition, such amount includes
254,777 shares of the Company's common stock, which the Company has
estimated Mr. Vidas may elect to receive pursuant to a Stock purchase
agreement by and among the Company, Mr. John Degnan and Mr. Vidas (the
"Selling Shareholders"), effective as of June 10, 1998 (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, the Company is
obligated to make a payment (the "Earn Out Payment") of up to
$10,000,000 on or before February 14, 2000 to the Selling Shareholders,
depending on the extent to which SEMCOR achieves certain performance
criteria for the period ending December 31, 1999. The Purchase Agreement
provides that the Selling Shareholders may elect to receive all or
part of their portion of the contigent payment in shares of the
Company's common stock. Based upon preliminary operating results, the
Company has estimated that the Selling Shareholders may be entitled to
receive the maximum amount of the Earn Out Payment. In such event,
based upon the closing price of 19.6875 of the Company's common stock
on January 20, 2000, Mr. Vidas may elect to receive up to 254,777
shares of common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 owned approximately 91% of 10089
Management. Under the terms of the lease, the Company leased 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 Company, as tenant, also paid for insurance for the
premises and for increases in real estate taxes over 1993 real estate taxes for
the building. The Company also provided management services for 10089 Management
at no cost.
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.
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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"). In July 1999, the headquarters building was sold to
a non-affiliated third party from whom the facility is currently leased.
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.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Fairfax, Virginia
on January 21, 2000.
ADVANCED COMMUNICATION SYSTEMS, INC.
By: /s/ GEORGE A. ROBINSON
----------------------
GEORGE A. ROBINSON
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------ ------------ ----------
<S> <C> <C>
/s/ GEORGE A. ROBINSON Chairman, President January 21, 2000
- --------------------------------------- and Chief Executive Officer
GEORGE A. ROBINSON (Principal Executive Officer)
/s/ TERRENCE E. HILEMAN Vice President, January 21, 2000
- --------------------------------------- Chief Financial Officer and
TERRENCE E. HILEMAN Treasurer
(Principal Financial and
Accounting Officer)
/s/ CHARLES R. COLLINS Director January 21, 2000
- ---------------------------------------
CHARLES R. COLLINS
/s/ THOMAS A. COSTELLO Director January 21, 2000
- ---------------------------------------
THOMAS A. COSTELLO
/s/ CHARLES G. MARTINACHE Director January 21, 2000
- ---------------------------------------
CHARLES G. MARTINACHE
/s/ WAYNE SHELTON Director January 21, 2000
- ---------------------------------------
WAYNE SHELTON
/s/ VINCENT VIDAS Director January 21, 2000
- ---------------------------------------
VINCENT VIDAS
</TABLE>
10
