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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
-----------------------------------------------
Amendment No. 1 to
Annual Report on Form 10-K
on Form 10-K/A
-----------------------------------------------
MARK ONE ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number 0-24787
AFFILIATED COMPUTER SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0310342
- --------------------------------- --------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
2828 NORTH HASKELL
DALLAS, TEXAS 75204
(Address of principal executive offices)
(Zip Code)
214-841-6111
(Registrant's telephone number, including area code)
----------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of exchange on
Title of each class which registered
------------------- -------------------
Class A common stock, par
value $.01 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements 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. [ X ]
As of September 24, 1997, 29,495,859 shares of Class A common stock were
outstanding. The aggregate market value of the 29,430,047 shares of Class A
common voting stock held by nonaffiliates of Affiliated Computer Services, Inc.
as of such date, approximated $796,450,647.
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AFFILIATED COMPUTER SERVICES, INC.
FORM 10-K/A
<TABLE>
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PAGE
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<S> <C>
PART III
Item 10. Directors and Executive Officers of the Registrant....................... 1
Item 11. Executive Compensation ................................................. 3
Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 7
Item 13. Certain Relationships and Related Transactions.......................... 8
</TABLE>
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EXPLANATORY NOTE
This Form 10-K/A amends Items 10, 11, 12 and 13 of Affiliated Computer
Services, Inc.'s ("ACS") Annual Report on Form 10-K for the year ended June 30,
1997. In that report, these items were incorporated by reference from the
Company's proxy statement which was expected to be filed by October 28, 1997. As
a result of a proposed merger to be considered by the stockholders of ACS, the
annual proxy statement will not be finalized by October 28, 1997; therefore,
Items 10, 11, 12 and 13 of Form 10-K are being filed with the Commission via
this 10-K/A.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the current
directors, nominees for director, and executive officers of ACS.
Nominees for Election as Director
The following table lists the name and principal occupation of each nominee
and the year in which each nominee was first elected as a director of ACS.
Messrs. Kendall and Bracken are currently serving as Chairman of the Board and
Chief Executive Officer of Computer Data Systems, Inc. ("CDSI"), respectively,
and their election to the ACS Board of Directors is contingent upon shareholder
approval of the issuance of ACS Class A Common Stock in connection with and upon
completion of the merger of CDSI and a subsidiary of ACS.
<TABLE>
<CAPTION>
Served as
Director
Name Principal Occupation Since
- ---- -------------------- -----
<S> <C> <C>
Darwin Deason Chairman of the Board and Chief Executive Officer 1988
Jeffrey A. Rich President and Chief Operating Officer 1991
Henry G. Hortenstine Executive Vice President 1996
Joseph P. O'Neill President and Chief Executive Officer, Public Strategies,
Washington, Inc. 1994
Frank A. Rossi Chairman of the Board, FAR Holdings Company, L.L.C. 1994
Clifford M. Kendall Chairman of the Board, CDSI --
Mark A. King Executive Vice President and Chief Financial Officer 1996
David W. Black Executive Vice President, Secretary and General Counsel 1995
Peter A. Bracken Chief Executive Officer and President, CDSI --
</TABLE>
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Business Experience of Nominees
Set forth below is certain information with respect to each of the
nominees for the office of director.
Darwin Deason, age 57, has served as Chairman of the Board and Chief
Executive Officer of ACS since its formation in 1988. Prior to the formation of
ACS, Mr. Deason spent 20 years with MTech Corp. ("MTech"), a data processing
subsidiary of MCorp, a bank holding corporation based in Dallas, Texas
("MCorp"), serving as MTech's Chief Executive Officer and Chairman of the Board
from 1978 until April 1988, and served on the board of various subsidiaries of
MTech and MCorp. Prior to that, Mr. Deason was employed in the data processing
department of Gulf Oil in Tulsa, Oklahoma. Mr. Deason has over 30 years of
experience in the data processing industry.
Jeffrey A. Rich, age 37, has served as President and Chief Operating
Officer of the Company since April 1995 and as a director of ACS since August
1991. Mr. Rich joined ACS in July 1989 as Senior Vice President and Chief
Financial Officer and was named Executive Vice President in 1991. Prior to
joining ACS, Mr. Rich served as a Vice President of Citibank N.A. from March
1986 through June 1989, and also served as an Assistant Vice President of
Interfirst Bank Dallas, N.A. from 1982 until March 1986.
Henry G. Hortenstine, age 53, has served as Executive Vice President of
ACS since March 1995 and as a director of ACS since September 1996. Prior to
that time, he served as Senior Vice President - Business Development from July
1993 to March 1995. Mr. Hortenstine was engaged by ACS as a consultant providing
various business and corporate development services from 1990 to July 1993.
Prior to that, he was Senior Vice President of Lomas Mortgage USA, a subsidiary
of Lomas Financial Corporation, from 1987 to 1989.
Joseph P. O'Neill, age 50, has served as a director of ACS since
November 1994 and also serves as a consultant to ACS. Mr. O'Neill has served as
President and Chief Executive Officer of Public Strategies, Washington, Inc., a
public affairs and consulting firm, since March 1991, and from 1985 through
February 1991, served as President of the National Retail Federation, a national
association representing United States retailers. Mr. O'Neill also is a director
of Careerstaff, Inc.
Frank A. Rossi, age 59, has served as a director of ACS since November
1994 and also serves as a consultant to ACS. Mr. Rossi has served as Chairman of
FAR Holdings Company, L.L.C., a private investment firm, since February 1994,
and before that was employed by Arthur Andersen & Co. for over 35 years. Mr.
Rossi served in a variety of capacities for Arthur Andersen since 1959,
including Managing Partner/Chief Operating Officer and as a member of the firm's
Board of Partners and Executive Committee.
Clifford M. Kendall, age 66, has been with CDSI since its founding in
1968 and is currently Chairman of the Board of Directors of CDSI. From 1970 to
1991, Mr. Kendall served as Chief Executive Officer of CDSI. Mr. Kendall also
currently serves as the Chairman of the Board of Objective Communications, Inc.
Mark A. King, age 40, has served as Executive Vice President and Chief
Financial Officer of ACS since May 1995 and as a director since May 1996. Mr.
King joined ACS in November 1988 as Chief Financial Officer of various ACS
subsidiaries. Prior to joining ACS, Mr. King was Vice President and Assistant
Controller of MTech. Mr. King has over 18 years of finance and accounting
experience, including over 11 years of experience with the data processing
industry.
David W. Black, age 35, has served as Executive Vice President,
Secretary and General Counsel and a director of ACS since May 1995. Mr. Black
joined ACS in February 1995 as Associate General Counsel. Prior to that time,
Mr. Black was an attorney engaged in private practice in Dallas from 1986
through January 1995.
Peter A. Bracken, age 56, joined CDSI in May 1996 as Chief Executive
Officer and President. From 1986 to 1996, Mr. Bracken was employed by Martin
Marietta Corporation (now Lockheed Martin Corporation), most recently as
President of the Information Sciences Group. Before joining Martin Marietta in
1986, Mr. Bracken served as Director of Mission Operation and Data Systems for
NASA's Goddard Space Flight Center.
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Except as set forth above, none of the nominees holds a directorship in
any company with a class of securities registered pursuant to Section 12 of the
Exchange Act, or subject to the requirements of Section 15(d) of the Exchange
Act, or any company registered as an investment company under the Investment
Company Act of 1940, as amended.
Business Experience of Other Executive Officers
Set forth below is certain information with respect to other executive
officers of ACS:
Thomas G. Connor, age 57, has served as Executive Vice President of ACS
since July 1988 and is also Chairman of the Board and Chief Executive Officer of
Dataplex Corporation, ACS's image management subsidiary. Prior to joining ACS,
Mr. Connor served as Executive Vice President and General Manager of MTech's
Northern Region. Mr. Connor has over 30 years experience in the data processing
industry.
Pamela A. Simmons, age 40, has served as Executive Vice President of
ACS since July 1997. Ms. Simmons joined ACS in July 1989 as Human Resources
Manager. Prior to joining ACS, Ms. Simmons was Human Resources Manager at
Southern Union Company.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Other Compensation
The following table sets forth certain information regarding
compensation paid for all services rendered to ACS in all capacities during
fiscal years 1997, 1996, and 1995 by the ACS chief executive officer and the
four other most highly compensated executive officers of ACS whose total annual
salary and bonus exceeded $100,000, based on salary and bonuses earned during
fiscal year 1997 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- --------------------------------------------
PAYOUTS
-------------------------------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
COMPENSA- AWARDS SARS PAYOUTS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) TION ($)(1) ($) (2) (3) ($) (2) TION ($)
- --------------------------- ---- ---------- --------- ------------ -------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Darwin Deason 1997 450,000 1,125,000 -- -- -- -- --
Chairman of the Board and 1996 403,918 807,836 -- -- -- -- --
Chief Executive Officer 1995 403,918 776,473 -- -- -- -- --
Jeffrey A. Rich 1997 274,995 550,000 -- -- 60,000 -- --
President and Chief 1996 222,385 437,500 -- -- 200,000 -- --
Operating Officer 1995 155,322 149,291 -- -- 222,050 -- --
Henry G. Hortenstine 1997 200,000 250,000 40,000
Executive Vice President 1996 166,000 166,000 -- -- 120,000 -- --
1995 144,600 60,856 92,914(4) -- 103,970 -- --
Mark A. King 1997 175,000 218,750 -- -- 40,000 -- --
Executive Vice President 1996 125,000 125,000 -- -- 80,000 -- --
and Chief Financial Officer 1995 104,735 120,147 -- -- 40,014 -- --
David W. Black 1997 150,000 159,375 -- -- 30,000
Executive Vice President 1996 133,000 133,000 -- -- -- -- --
and General Counsel 1995 54,118 46,905 -- -- 44,000 -- --
</TABLE>
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(1) None of the Named Executive Officers received personal benefits, securities,
or property in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus during fiscal years 1997, 1996, and 1995.
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(2) ACS did not grant any restricted stock awards or long-term incentive plan
payouts to the Named Executive Officers during fiscal years 1997, 1996, and
1995.
(3) ACS did not grant any stock appreciation rights ("SARS") during fiscal
years 1997, 1996, and 1995.
(4) Represents commissions received during the year.
The following table sets forth the number of options granted during the
fiscal year ended June 30, 1997 to the Named Executive Officers to purchase
shares of Class A Common Stock and the potential realizable value of these
options.
OPTIONS GRANTED DURING FISCAL YEAR 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN FOR OPTION TERM (1)
OPTIONS/SARS FISCAL EXERCISE OR EXPIRATION -------------------------
NAME GRANTED (#) YEAR BASE PRICE($) DATE 5%($) 10%($)
- ---- ----------- ---- ------------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason -- 0.0% -- -- -- --
Jeffrey A. Rich 60,000 10.5% 21.13 4/7/07 797,124 2,020,069
Henry G. Hortenstine 40,000 7.0% 21.13 4/7/07 531,416 1,346,712
Mark A. King 40,000 7.0% 21.13 4/7/07 531,416 1,346,712
David W. Black 30,000 5.2% 21.13 4/7/07 398,562 1,010,034
</TABLE>
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(1) The amounts in these columns are the result of calculations at the 5% and
10% rates set by the Commission and are not intended to forecast possible
future appreciation, if any, of ACS's stock price.
The following table provides information related to options exercised by
the Named Executive Officers during fiscal year 1997 and the number and value of
options held at fiscal year end. ACS does not have any SARS outstanding.
AGGREGATE OPTIONS/SAR EXERCISES IN FISCAL 1997
AND FISCAL YEAR END 1997 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT SARS AT FISCAL
SHARES FISCAL YEAR END (#) YEAR END ($)(2)
ACQUIRED ON VALUE -------------------------- ------------------------
EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------------- ----------- ------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason -- -- -- -- -- --
Jeffrey A. Rich 25,000 686,625 28,186 482,050 777,652 6,606,644
Henry G. Hortenstine 43,036 1,222,653 -- 263,970 -- 3,468,464
Mark A. King -- -- -- 160,014 -- 1,880,250
David W. Black -- -- -- 74,000 -- 988,250
</TABLE>
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(1) Represents the value realized upon exercise calculated as the number of
options exercised times the difference between the average of the high and
low stock trading price from the trading day immediately prior to the
exercise date and the exercise price.
(2) Represents the value of unexercised options calculated as the number of
unexercised option times the difference between the closing price at June
30, 1997 and the exercise price.
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DIRECTOR COMPENSATION
Effective November 1994, each member of the Board of Directors ("ACS Board") who
is not employed by ACS receives compensation in the amount of $3,000 for
attendance at each ACS Board meeting. Directors are reimbursed for their travel
expenses incurred in connection with the meetings. On November 30, 1994, ACS and
each of Messrs. O'Neill and Rossi entered into consulting agreements in which
Messrs. O'Neill and Rossi agreed to provide, among other things, certain
corporate development services to ACS. Such agreements are terminable by either
party with 30 days notice. Pursuant to such agreements, in exchange for such
services, ACS has agreed to compensate Messrs. O'Neill and Rossi a de minimis
amount, respectively, and has agreed to reimburse both Messrs. O'Neill and Rossi
for their out-of-pocket expenses. After their election to the ACS Board in
1994, ACS granted Messrs. Rossi and O'Neill options to purchase 50,000 and
20,000 shares of ACS Class A Common Stock, respectively. Such options vest
ratably over five years.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee and Special Compensation Committee have been
responsible for administering the ACS 1988 Stock Option Plan (the "1988 Plan")
and approving compensation for the senior executives of ACS, including
recommending to the ACS Board policies and plans concerning the salaries,
bonuses, and other compensation for all executive officers. The Compensation
Committee will administer the ACS 1997 Incentive Plan (the "1997 Plan") if such
plan is adopted by the ACS stockholders at the ACS Annual Meeting. The objective
of the ACS executive compensation program is to attract and retain qualified,
motivated executives and to closely align their financial interests with both
the short and long-term interests of the ACS stockholders. The executive
compensation program is intended to provide the executive officers of ACS with
overall levels of compensation that are competitive within the information
industry, as well as within a broader spectrum of companies of similar size and
complexity.
The three principal components of the ACS executive compensation program
are base salary, annual incentive bonus opportunities, and stock options.
Base Salaries
Each executive officer's base salary is reviewed annually and is subject to
adjustment on the basis of individual, corporate, and business unit performance,
as well as competitive and inflationary considerations.
Incentive Bonus
Incentive bonus payments for executive officers other than the Chief
Executive Officer and Chief Operating Officer are made at the end of each fiscal
year based upon the achievement of consolidated financial criteria, business
unit financial criteria, and the attainment of individual goals, all of which
are established by the Chief Executive Officer and the Chief Operating Officer
of ACS subject to approval by the Compensation Committee of the ACS Board at the
beginning of each fiscal year. Compensation for the Chief Executive Officer and
Chief Operating Officer of ACS consisted of a base salary and bonus
compensation. Bonus compensation was substantially dependent on the achievement
of four targeted financial measures: consolidated revenues, consolidated
earnings before interest, taxes and depreciation, consolidated pre-tax earnings,
and consolidated earnings per share. During fiscal year 1997, ACS achieved 100%
of such measures. The Chief Executive Officer and Chief Operating Officer did
not participate in the Committee's decisions regarding their own compensation.
For fiscal year 1997, executive officers were eligible to receive maximum
bonuses of between 125% and 250% of salary provided certain financial goals were
met.
Stock Option Plan
The 1988 Plan has been administered by the Compensation Committee and the
Special Compensation Committee of the ACS Board. Under its terms, the 1988 Plan
may be administered by the ACS Board or another body, if permitted by Rule
16b-3. The Compensation Committee and the Special Compensation Committee have
determined the individuals eligible to receive grants of options under the 1988
Plan, the type of option granted, the number of shares of ACS Class A Common
Stock subject to a grant and the terms of the grant, including exercise price,
exercise date, and any restrictions on exercise. The Compensation Committee and
the Special Compensation Committee also have been
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responsible for determining the advisability and terms of any buyout of options
previously granted and the reductions, if any, in the exercise prices of
previously granted options.
The 1988 Plan also provides for the issuance of stock purchase rights. When
the Compensation Committee determines to grant a stock purchase right, it
advises the recipient of the grant of the terms and conditions of the grant,
including any restrictions on the grant, the number of shares subject to the
grant, the exercise price of the grant, and the time within which the grant must
be accepted by the recipient. The maximum amount of time that a recipient may
have to accept the grant is 30 days. The purchase price of stock acquired
pursuant to a stock purchase right shall not be less than 50% of the fair market
value of ACS Class A Common Stock at the time of grant. There have been no stock
purchase rights granted through June 30, 1997.
Submitted by the
Compensation Committee of
the Board of Directors:
DARWIN DEASON
FRANK A. ROSSI
JOSEPH P. O'NEILL
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
------------------------------------------
NASDAQ S & P Comp.
Month Computer & Software &
End NASDAQ Data Processing ACS Services S & P 500
- --- ------ --------------- --- ----------- ---------
<S> <C> <C> <C> <C> <C>
09/26/94 (IPO Date) 100.0 100.0 100.0 100.0 100.0
06/30/95 123.1 147.5 190.6 144.8 119.8
06/30/96 161.0 194.6 293.8 192.2 150.2
06/30/97 195.7 245.5 350.0 295.5 200.0
</TABLE>
The above graph compares cumulative total stockholder return on ACS Class A
Common Stock from September 26, 1994 ("IPO Date") through June 30, 1997 with
the Standard & Poor's 500 Stock Index and the Standard & Poor's Computer
Software & Services Index. The stock comparison is also included for the NASDAQ
Computer & Data Processing Index and NASDAQ Market Index, which were presented
in proxies for fiscal years 1995 and 1996. Future stock performance comparisons
will utilize only the Standard & Poor's 500 Stock Index and the Standard &
Poor's Computer Software & Services Index.
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The graph assumes the investment of $100 on the IPO Date and the
reinvestment of all dividends. The stock price performance shown on the graph is
not necessarily indicative of future stock price performance.
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE
GRAPH WILL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH OR
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES SUCH REPORT OR
GRAPH BY REFERENCE.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 1997, certain
information with respect to the shares of ACS Class A Common Stock and the ACS
Class B Common Stock beneficially owned by stockholders known to ACS to own more
than 5% of the outstanding shares of such classes and the shares of ACS Class A
Common Stock and ACS Class B Common Stock beneficially owned by each of ACS's
directors and executive officers and by all of ACS's executive officers and
directors as a group:
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF AMOUNT AND PERCENT OF
NATURE OF TOTAL SHARES NATURE OF PERCENT OF TOTAL SHARES
BENEFICIAL OF CLASS A BENEFICIAL TOTAL SHARES OF CLASS A
OWNERSHIP COMMON OWNERSHIP OF CLASS B AND CLASS B
OF CLASS A STOCK OF CLASS B COMMON COMMON PERCENT OF
COMMON OWNED COMMON STOCK OWNED STOCK OWNED TOTAL VOTING
DIRECTORS AND EXECUTIVE OFFICERS STOCK BENEFICIALLY STOCK BENEFICIALLY BENEFICIALLY POWER (1)
- -------------------------------- --------- ------------ --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason (2) 17,410 * 6,405,686 100% 17.72% 68.24%
Jeffrey A. Rich (3) 33,186 * -- -- * *
Joseph P. O'Neill 23,810 * -- -- * *
Frank A. Rossi 5,000 * -- -- * *
Henry G. Hortenstine -- * -- -- * *
David W. Black (4) 5,254 * -- -- * *
Mark A. King (5) 46,058 * -- -- * *
All Executive Officers and
Directors as a Group
(nine persons) (6) 153,711 * 6,405,686 100% 18.10% 68.39%
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY'S STOCK
Putnam Investments (7) 3,951,000 13.24% -- -- 10.90% 4.21%
1 Post Office Square
Boston, Massachusetts 02109
Massachusetts Financial Services 3,223,000 10.80% -- -- 8.89% 3.43%
Company (7)
500 Boylston Street
Boston, Massachusetts 02116
First Nationwide Bank (8) 2,083,616 6.98% -- -- 5.75% 2.22%
14651 Dallas Parkway
Suite 200
Dallas, Texas 75240
AIM Management (7) 1,821,000 6.10% -- -- 5.02% 1.94%
82 Devonshire Street
Boston, Massachusetts 02109
Fidelity Financial Services (7) 1,671,000 5.60% -- -- 4.61% 1.78%
14651 Dallas Parkway
Suite 200
Dallas, Texas 75240
</TABLE>
- ------------------
Less than 1%
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(1) In calculating the percent of total voting power, the voting power of
shares of ACS Class A Common Stock (one vote per share) and ACS Class B
Common Stock (ten votes per share) is aggregated.
(2) 6,332,958 of ACS Class B Common Stock listed are owned by The Deason
International Trust (the "Trust") and 72,728 of the shares of ACS Class B
Common Stock are owned by the Deason Foundation (the "Foundation"). Mr.
Deason holds the sole voting power with respect to such shares through an
irrevocable proxy granted by the Trust and the Foundation. The investment
power with respect to such shares is held by the Trust and the Foundation.
The shares of ACS Class A Common Stock include 7,310 shares owned by Mr.
Deason's spouse and spouse's daughter, to which Mr. Deason disclaims
beneficial ownership.
(3) Includes 28,186 shares of ACS Class A Common Stock issuable pursuant to
options that are currently exercisable.
(4) Includes 254 shares of ACS Class A Common Stock owned by Mr. Black through
the ACS 401(k) Plan.
(5) Includes 4,679 shares of ACS Class A Common Stock owned by Mr. King's
spouse, to which Mr. King disclaims beneficial ownership; 744 shares of ACS
Class A Common Stock contained in the ACS 401(k) Plan, and 1,823 shares of
ACS Class A Common Stock granted to Mr. King under the ACS Employee Stock
Purchase Plan.
(6) Includes 28,186 shares of ACS Class A Common Stock issuable pursuant to
options that are currently exercisable; 1,037 shares of ACS Class A Common
Stock owned through the ACS 401(k) Plan; and 3,335 shares of ACS Class A
Common Stock granted under the Employee Stock Purchase Plan.
(7) Based on filings by the stockholder with the Commission.
(8) All shares are owned of record by First Nationwide Bank, which is a wholly
owned subsidiary of First Nationwide Holdings Inc. ("FN Holdings"). Gerald
J. Ford, a director of ACS from August 1991 through July 7, 1997 (when he
resigned as a director), beneficially owns 20% of the outstanding capital
stock of FN Holdings, the remaining 80% of which is beneficially owned by
Ronald Perelman.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the reorganization of ACS on June 30, 1994, ACS and
Precept Business Products, Inc. ("Precept") entered into a reciprocal services
agreement pursuant to which Precept would sell business forms and supplies, and
provide courier and certain other administrative services to ACS, and ACS would
provide office space and certain administrative services to Precept. Mr. Deason
is a director and holds voting control of Precept. The prices for all services,
forms and supplies provided by Precept to ACS under such agreement must be no
less favorable than could be obtained from an independent third party and are
subject to review from time to time by the Independent Directors Committee of
ACS. The prices for all services provided by ACS to Precept will be at no less
than ACS's direct cost. The costs incurred by ACS for services provided by
Precept covered by such reciprocal services agreement, which are believed to
approximate fair market value, were approximately $5.4 million for fiscal year
1997. Precept's payments to ACS under the reciprocal services agreement were
approximately $0.4 million for fiscal year 1997.
Effective April 1996, ACS sold all of the outstanding capital stock of ACS
Merchant Services, Inc. ("Merchant Services"), a wholly owned subsidiary formed
as a start-up operation of the EFT business line, to Thomas M. Rouse, a former
executive officer and director of ACS, for a promissory note in the principal
amount of $500,000. The promissory note bears interest at the prime lending rate
of Wells Fargo Bank, N.A. Amortization of principal begins in 1999. There was no
gain or loss recognized on the sale. Simultaneously with the sale, ACS
contributed an additional $1,500,000 and the unpaid balance of an intercompany
note due from Merchant Services of approximately $712,000 in exchange for 1,000
shares of 5% cumulative redeemable convertible preferred stock of Merchant
Services. This preferred stock is convertible after five years into
approximately 55% of the common stock of Merchant Services on a fully diluted
basis. ACS provides guarantees to two banks on Merchant Services' debt up to
$7,500,000.
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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 in
its behalf by the undersigned thereunto duly authorized.
Affiliated Computer Services, Inc.
Date: October 28, 1997
By: /s/ Mark A. King
-------------------------------
Mark A. King
Executive Vice President and
Chief Financial Officer
