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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 (Fee Required) for the fiscal year ended June 30, 1997.
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 (No Fee Required) for the transition period
from ______________ to _______________
Commission file number: 0-14315
ATC COMMUNICATIONS GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 75-2050538
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
5950 BERKSHIRE LANE, SUITE 1650, DALLAS, TEXAS
--------------------------------------------------------
75225 (Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (214) 361-9870
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(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, 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. X
---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of October 24, 1997 was approximately $75.1 million.
As of October 24, 1997, 21,806,554 shares of Common Stock were outstanding.
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ATC COMMUNICATIONS GROUP, INC.
AMENDMENT TO FORM 10-K
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of all directors and
executive officers of the Company as of October 24, 1997, as well as all
positions and offices held by each such person and his term in each such
position or office.
<TABLE>
<CAPTION>
Name Age Position with the Company or Subsidiary Held Position Since
- ---------------------------- ------- ------------------------------------------------ -----------------------
<S> <C> <C> <C>
Michael G. Santry 49 President and Chief Executive Officer October 1997
Chairman of the Board February 1986
Robert B. Allen 44 Chief Operating Officer January 1997
Matthew S. Waller 35 Chief Financial Officer March 1997
Jerry L. Sims, Jr. 36 Secretary February 1994
Director November 1993
Senior Vice President - Controller September 1991
William F. Bergeron, Jr. 36 Chief Technology Officer December 1996
Patrick V. Stark 43 Director December 1991
J. Michael Allred 52 Director February 1993
J. Frank Mermoud 41 Director March 1994
Darryl D. Pounds 47 Director March 1996
</TABLE>
MICHAEL G. SANTRY has been a director of the Company since February 1986,
Chairman of the Company since September 1996 and President and Chief Executive
Officer since October 1997. Mr. Santry previously held the positions of
President, Chief Executive Officer and Chief Financial Officer of the Company
from February 1986 through September 1996. Mr. Santry founded Chartwell Group,
Inc., a Dallas based investment firm, in 1996 and has served as its Chairman of
the Board since that time. Since 1980, Mr. Santry has been President and a
director of Lakewood Financial Consultants, Inc., a privately held corporation
providing financial consulting services. Mr. Santry is also a director of
Computer Integration Corp. and is a Certified Public Accountant.
ROBERT B. ALLEN has been Chief Operating Officer since January 1997. From
1980 through 1996, Mr. Allen held various management positions with PepsiCo,
Inc., most recently serving as Vice President of Sales and Marketing for the
$1.3 billion annual revenue single-serve business unit of PepsiCo's Frito-Lay
subsidiary. Mr. Allen's tenure with Frito-Lay also included two International
Managing Director positions.
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MATTHEW S. WALLER joined the Company in March 1997 as Chief Financial
Officer. From 1993 to March 1997, Mr. Waller served in various positions with
Principal Financial Securities, Inc., most recently as Senior Vice President and
Head of Technology Investment Banking. Prior to joining Principal, he was Chief
Financial Officer of Cox Sterile Products from 1992 to 1993. Mr. Waller is a
director of Computer Integration Corp.
JERRY L. SIMS, JR. has been a director of the Company since November 1993,
Secretary of the Company since February 1994, and Senior Vice President -
Controller of the Company since September 1991.
WILLIAM F. BERGERON, JR. joined Advanced in February 1993 and has been
Chief Technology Officer since December 1996. From 1992 to 1993, Mr. Bergeron
served in a variety of management positions with Tandem Telecommunications
Systems Inc., most recently as Senior Member of the Technical Staff.
PATRICK V. STARK has been a director of the Company since December 1991 and
has been a shareholder and director of the law firm Kane, Russell, Coleman and
Logan since 1993. Prior to joining the law firm, Mr. Stark was Executive Vice
President and General Counsel for Lifetime Automotive Products since May 1991.
J. MICHAEL ALLRED has been a director of the Company since February 1993
and has been a director of Spencer Stuart since April 1994. Prior to joining
Spencer Stuart, Mr. Allred was a Vice President of E-Systems from May 1992 to
March 1994.
J. FRANK MERMOUD has been a director of the Company since March 1994 and
has acted as a consultant to the Company since May 1993. Mr. Mermoud was a
Legislative Director of Congressional Affairs with the U.S.
Department of State from 1992 to 1993.
DARRYL D. POUNDS has been a director of the Company since March 1996 and
has been a Partner of Chartwell Group, Inc., a Dallas based investment firm,
since 1996. From 1993 until 1995, Mr. Pounds served as Chairman and CEO of the
Trust Company of Texas and, from 1972 through 1993, Mr. Pounds held a variety of
positions within First City Bancorporation, including Chairman and CEO of First
City Bank of Dallas.
Each director serves until the next annual meeting of the Company's
shareholders and until the director's successor is duly elected. Officers serve
at the discretion of the Board of Directors. There is no family relationship
among any of the above named officers and directors of the Company.
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ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
Furnished below is a table containing individual compensation information
on persons serving as Chief Executive Officer of the Company during the fiscal
year ended June 30, 1997 and the four other most highly paid executive officers
of the Company and its operating subsidiary whose total annual salary and bonus
amounts totaled $100,000 or more for services rendered in all capacities during
the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------- ------------------------------
Awards
Other ------------------------------
Annual Restricted Options/
Name and Fiscal Salary Bonus Compen- Stock SARs
Principal Position Year $ $ sation Awards (1)
- ---------------------------- ------ ----------- ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
MICHAEL G. SANTRY 1997 - (2) - - - -
Chairman, Chief 1996 293,750 - - - 1,000,000
Executive Officer 1995 275,000 - - - -
and President
ARTHUR CHAVOYA 1997 292,564 (3) - - - 600,000
Former Chief Executive 1996 - - - - -
Officer and President 1995 - - - - -
ROBERT B. ALLEN 1997 100,833 (4) - - - 300,000
Chief Operating 1996 - - - - -
Officer 1995 - - - - -
MATTHEW S. WALLER 1997 52,067 (5) - - - 300,000
Chief Financial 1996 - - - - -
Officer 1995 - - - - -
JERRY L. SIMS, JR. 1997 114,792 - - - -
Senior Vice 1996 90,000 - - - -
President - Controller 1995 90,000 - - - -
WILLIAM F. BERGERON, JR. 1997 112,007 25,000 - - 100,000
Chief Technology 1996 85,926 20,000 - - -
Officer of Advanced 1995 87,889 - - - -
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In February 1993, the Company's shareholders approved the Company's 1992
Stock Option Plan (the "1992 Plan") to grant options to purchase up to
3,000,000 shares of Common Stock to key employees, officers and directors
of the Company and its subsidiaries. Options may be granted at any time
prior to December 11, 2002. In fiscal 1996, Mr. Santry was granted options
to purchase 1,000,000 shares at the market price on the date of grant
pursuant to the 1992 Plan. In
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September 1996, the Company's Board of Directors approved the Company's
1996 Stock Option and Restricted Stock Plan (the "1996 Plan") to grant
restricted stock or options to purchase up to 2,000,000 shares of Common
Stock to key employees, officers and directors of the Company and its
subsidiaries. In fiscal 1997, Mr. Chavoya, Mr. Allen, Mr. Waller and Mr.
Bergeron were granted options to purchase 600,000, 300,000, 300,000 and
100,000 shares, respectively, at the market price on the respective dates
of grant pursuant to the 1996 Plan.
(2) Mr. Santry elected not to receive any salary or bonus compensation during
the fiscal year ended June 30, 1997. Effective April 1, 1996, the
Compensation Committee of the Board of Directors set Mr. Santry's annual
base salary at $350,000. Mr. Santry is also entitled to receive bonus
compensation up to $125,000 annually.
(3) The amount indicated is the salary paid to Mr. Chavoya from the
commencement of his employment with the Company, on September 5, 1996,
through June 30, 1997. Mr. Chavoya's employment agreement with the Company
specified an annual base salary of $400,000. Mr. Chavoya relinquished the
offices of Chief Executive Officer and President effective October 1,
1997. See "Employment Agreements and Termination of Employment
Agreements."
(4) Mr. Allen joined the Company as Chief Operating Officer on January 6,
1997. The amount indicated is the salary paid to Mr. Allen from the
commencement of his employment with the Company through June 30, 1997. Mr.
Allen's employment agreement with the Company specifies an annual base
salary of $220,000. See "Employment Agreements and Termination of
Employment Agreements."
(5) Mr. Waller joined the Company as Chief Financial Officer on March 24,
1997. The amount indicated is the salary paid to Mr. Waller from the
commencement of his employment with the Company through June 30, 1997. Mr.
Waller's employment agreement with the Company specifies an annual base
salary of $225,000. See "Employment Agreements and Termination of
Employment Agreements."
OPTION GRANTS
The following table sets forth certain information relating to stock option
grants made by the Company to the Named Executive Officers during the last
fiscal year. The Company has no plans that provide for the granting of stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to for Option Term
Options Employees in Exercise Expiration ---------------------------------
Name Granted Fiscal Year Price Date 5% 10%
- ------------------------ -------------- ---------------- ----------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Arthur Chavoya 600,000 36.3% $16.19 9/5/06 $6,109,082 $15,481,614
Robert B. Allen 300,000 18.1% $11.81 1/6/07 $2,228,174 $ 5,646,630
Matthew S. Waller 300,000 18.1% $ 6.94 3/24/07 $1,309,359 $ 3,318,172
Wm. F. Bergeron, Jr. 100,000 6.0% $ 6.25 2/28/07 $393,059 $ 996,089
</TABLE>
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OPTION REPRICING TABLE
The following table sets forth information relating to options held by any
executive officer that were repriced during October 1997.
OPTION REPRICING TABLE
<TABLE>
<CAPTION>
Length of
Number of Market Exercise Original
Securities Price Price of Option Term
Date Underlying of Stock Options New Remaining
of Repriced at Time of at Time of Exercise at Date of
Name Repricing Options Repricing Repricing Price Repricing
- ------------------------ ------------- ------------- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Santry 10/17/97 1,000,000 $3.63 $9.00 $3.80 8 years
Arthur Chavoya 10/1/97 200,000(1) $4.00 $16.19 $4.00 9 years
Robert B. Allen 10/17/97 300,000 $3.63 $11.81 $3.80 9 years
Matthew S. Waller 10/17/97 300,000 $3.63 $6.94 $3.80 9 years
Wm. F. Bergeron, Jr. 10/17/97 100,000 $3.63 $6.25 $3.80 9 years
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Concurrent with his relinquishing the positions of Chief Executive Officer
and President of the Company effective October 1, 1997, Mr. Chavoya's
option grant was reduced from options to purchase 600,000 shares to
options to purchase the 200,000 shares which had vested as of October 1,
1997. See "Employment Agreements and Termination of Employment
Agreements."
During October 1997, the Compensation Committee determined that certain
stock options issued to all employees of the Company and its operating
subsidiary had an exercise price in most cases substantially higher than the
market price of the Company's Common Stock. The Committee noted the decline in
the value of the Common Stock attributable to certain business setbacks,
including reduced volumes and delays in certain programs of the Company's
largest client and such client's negotiated price reductions with ATC in certain
of its programs. Therefore, the Committee concluded that the aforementioned
stock options were not providing the desired incentives. Accordingly, after
discussing the various alternatives available, the Committee approved the
repricing of all outstanding options under then existing option plans in order
to preserve the important motivating effect that stock options have had on the
Company's employees. Mr. Chavoya's replacement options were priced at the market
closing price of the Common Stock on October 1, 1997. All other replacement
options were priced at the average closing price of the Common Stock for the
five-day trading period from October 13, 1997 through October 17, 1997.
The Compensation Committee of the Board of Directors:
J. Michael Allred
Darryl D. Pounds
COMPENSATION OF DIRECTORS
Directors of the Company receive no fees for serving on the Board of
Directors. Upon election to the Board of Directors, non-employee directors are
automatically granted non-qualified stock options
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to purchase 135,000 shares of Common Stock at the market price of the Common
Stock on the date of grant. All directors are entitled to reimbursement for
expenses incurred for attendance at each meeting.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
ARTHUR CHAVOYA entered into an employment agreement effective September 5,
1996, pursuant to which he served as Chief Executive Officer and President of
the Company. Under the employment agreement, Mr. Chavoya was is entitled to
receive an annual base salary and an incentive bonus based upon certain
financial performance targets of the Company. The employment agreement also
provided for the payment to Mr. Chavoya of up to two times his annual salary
plus an amount equal to bonus compensation paid for the previous fiscal year
should the Company terminate Mr. Chavoya's employment without cause (as defined
in the employment agreement) or in the event of his termination after a change
in control (as defined in the employment agreement) of the Company. The
employment agreement also stipulated that Mr. Chavoya's stock options were to
vest immediately in the event of a change in control (as defined in the
employment agreement) of the Company.
Subsequent to the fiscal year ended June 30, 1997, Mr. Chavoya relinquished
the offices of Chief Executive Officer and President of the Company effective
October 1, 1997. In connection with this change, Mr. Chavoya entered into
negotiations with the Company for a release and separation from his employment
agreement. As of the date of this Amendment, such agreement has not been
finalized although general terms of the separation agreement call for Mr.
Chavoya to receive one times his annual salary and for Mr. Chavoya's option
grant to be reduced from options to purchase 600,000 shares to options to
purchase the 200,000 shares which had vested as of October 1, 1997.
ROBERT B. ALLEN entered into an employment agreement effective January 6,
1997, pursuant to which he serves as Chief Operating Officer of the Company.
Under the employment agreement, Mr. Allen is entitled to receive an annual base
salary and an incentive bonus based upon certain financial performance targets
of the Company. The employment agreement provides for the payment to Mr. Allen
of nine (9) months of compensation if the Company terminates Mr. Allen's
employment without cause (as defined in the employment agreement) or in the
event that he is terminated after a change in control (as defined in the
employment agreement) of the Company. Mr. Allen's options vest immediately in
the event of a change in control (as defined in the employment agreement) of the
Company.
MATTHEW S. WALLER entered into an employment agreement effective January 6,
1997, pursuant to which he serves as Chief Operating Officer of the Company.
Under the employment agreement, Mr. Waller is entitled to receive an annual base
salary and an incentive bonus based upon certain financial performance targets
of the Company. The employment agreement provides for the payment to Mr. Waller
of one times his annual compensation if the Company terminates Mr. Waller's
employment without cause (as defined in the employment agreement) or in the
event that he is terminated after a change in control (as defined in the
employment agreement) of the Company. Mr. Waller's options vest immediately in
the event of a change in control (as defined in the employment agreement) of the
Company.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 24, 1997, certain information
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to be a beneficial owner of five percent (5%) or more of
the Company's Common Stock, (ii) each director and each of the five executive
officers listed in the Summary Compensation Table above who beneficially own
Common Stock of the Company, and (iii) all officers and directors who
beneficially own Common Stock as a group:
<TABLE>
<CAPTION>
Amount
Name and and Nature
Address of of Beneficial Percent of
Beneficial Owner Ownership Class (1)(2)
- -------------------------------------- --------------- -----------------
<S> <C> <C>
Codinvest Limited 4,200,000 19.58%
Road Town
Tortola, British Virgin Islands
Michael G. Santry 583,890(3) 2.65%(3)
5950 Berkshire Lane, #1650
Dallas, TX 75225
Jerry L. Sims, Jr. 300,000(4) 1.38%(4)
5950 Berkshire Lane, #1650
Dallas, TX 75225
Arthur Chavoya 200,000(5) 0.92%(5)
7 Southern Hills Court
Frisco, TX 75034
Patrick V. Stark 123,000(6) 0.57%(6)
1601 Elm St., Suite 3700
Dallas, TX 75201
J. Michael Allred 101,000(7) 0.47%(7)
1201 W. Peachtree St., Suite 3230
Atlanta, GA 30309
Matthew S. Waller 100,000(8) 0.46%(8)
5950 Berkshire Lane, #1650
Dallas, TX 75225
Robert B. Allen 74,600(9) 0.35%(9)
5950 Berkshire Lane, #1650
Dallas, TX 75225
</TABLE>
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<TABLE>
<CAPTION>
Amount
Name and and Nature
Address of of Beneficial Percent of
Beneficial Owner Ownership Class (1)(2)
- --------------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Darryl D. Pounds 39,000 (10) 0.18% (10)
5950 Berkshire Lane, #1650
Dallas, TX 75225
J. Frank Mermoud 29,500 (11) 0.14% (11)
5004 Klingle St., N.W.
Washington, DC 20016
William F. Bergeron, Jr. 12,700 0.06%
8001 Bent Branch Drive
Irving, TX 75063
All directors and officers as 1,563,690 (12) 6.91% (12)
a group (10 persons)
</TABLE>
(1) Reported in accordance with the beneficial ownership rules of the
Securities and Exchange Commission. Unless otherwise noted, the
shareholders listed in the table have both sole voting power and sole
dispositive power with respect to such shares, subject to community
property laws where applicable and the information contained in the
other footnotes to the table.
(2) Based on 21,445,554 shares of Common Stock outstanding at October 24,
1997. This number excludes 361,000 unretired treasury shares held by
the Company. Each owner's percentage is calculated by dividing the
number of shares beneficially held by the sum of 21,445,554 and the
number of shares such owner has the right to acquire within 60 days.
(3) 183,050 of Mr. Santry's shares are owned of record by Lakewood
Financial Consultants, Inc. which is 99% owned by Mr. Santry. 150,840
of Mr. Santry's shares are held by a company in which Mr. Santry is a
1% general partner. Mr. Santry has investment control over such shares.
Includes beneficial ownership of 250,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1992
Plan.
(4) Includes beneficial ownership of 300,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1992
Plan.
(5) Includes beneficial ownership of 200,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1996
Plan.
(6) Includes beneficial ownership of 110,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1992
Plan.
(7) Includes beneficial ownership of 101,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1992
Plan.
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(8) Includes beneficial ownership of 100,000 shares of Common Stock
issuable upon exercise of stock options granted pursuant to the 1996
Plan.
(9) Includes beneficial ownership of 50,000 shares of Common Stock issuable
upon exercise of stock options granted pursuant to the 1996 Plan.
(10) Includes beneficial ownership of 39,000 shares of Common Stock issuable
upon exercise of stock options granted pursuant to the 1992 Plan.
(11) Includes beneficial ownership of 29,500 shares of Common Stock issuable
upon exercise of stock options granted pursuant to the 1996 Plan.
(12) Includes certain beneficial ownership as set forth in footnotes (3),
(4), (5), (6), (7), (8), (9), (10) and (11) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At September 30, 1997 and June 30, 1997, the Chairman of the Company had
outstanding borrowings and accrued interest of approximately $3,679,052 and
$3,539,779, respectively. The borrowing bears 6% annual interest, is due in full
on June 30, 1998 and is secured by collateral pledged by Codinvest Limited, the
Company's largest shareholder of record. Interest income from the receivable
amounted to approximately $54,658 for the quarter ended September 30, 1997 and
$78,935 for the fiscal year ended June 30, 1997.
At June 30, 1997, FEM Inc., a company controlled by a shareholder of the
Company, had outstanding borrowings and accrued interest of $198,212 pursuant to
a note receivable to the Company. The note bears 6% annual interest and is due
in full on March 31, 1998.
During the fiscal years ended June 30, 1997, 1996 and 1995, the Company
paid J. Frank Mermoud, a director of the Company, $80,000 per year in monthly
installments of approximately $6,700, in consideration for consulting services
performed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
ATC COMMUNICATIONS GROUP, INC.
(The Registrant)
Dated: October 27, 1997 By: /s/ Matthew S. Waller
-----------------------------
Matthew S. Waller
Chief Financial Officer
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