<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. )
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
AMERICAN COMMUNICATIONS SERVICES, 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):
[ ] 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:
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<PAGE> 2
AMERICAN COMMUNICATIONS SERVICES, INC.
131 National Business Parkway, Suite 100
Annapolis Junction, Maryland 20701
(301) 617-4200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 25, 1997
To our Stockholders:
The annual meeting of stockholders (the "Annual Meeting") of American
Communications Services, Inc., a Delaware corporation ("ACSI" or the "Company")
will be held at the BWI Airport Marriott, 1743 West Nursery Road, Baltimore,
Maryland 21240 on Wednesday June 25, 1997 at 10:00 A.M. local time, for the
following purposes:
1. To elect seven (7) directors;
2. To approve and ratify an amendment to the Company's 1994 Stock
Option Plan, as amended (the "Stock Option Plan"), to increase the
number of shares of Common Stock reserved for issuance upon
exercise of options granted under the Stock Option Plan from
3,000,000 shares to 5,000,000 shares;
3. To approve and ratify an amendment to the Stock Option Plan to
permit the transfer by Outside Directors of options granted to them
under the Stock Option Plan.
4. To ratify the selection of KPMG Peat Marwick as the independent
auditors of the Company for the fiscal year ending December 31,
1997.
5. To transact such other matters as may properly come before the
meeting.
Accompanying this notice is a Proxy Card and Proxy Statement and a copy of
the Company's Annual Report for the fiscal period ended December 31, 1996.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT PURPOSE
PRIOR TO THE DATE OF THE ANNUAL MEETING. The Proxy may be revoked at any time
prior to the time that it is voted at the Annual Meeting. May 23, 1997, was
fixed by the Board of Directors as the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. Only stockholders of record at the close of business on
May 23, 1997 will be entitled to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting, and you may vote in
person even though you have returned your Proxy Card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ RILEY M. MURPHY
RILEY M. MURPHY
Secretary
Annapolis Junction, Maryland
May 27, 1997
<PAGE> 3
AMERICAN COMMUNICATIONS SERVICES, INC.
131 National Business Parkway, Suite 100
Annapolis Junction, Maryland 20701
(301) 617-4200
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the annual meeting of stockholders of American Communications
Services, Inc. ("ACSI" or the "Company") to be held at the BWI Airport Marriott,
1743 West Nursery Road, Baltimore, Maryland 21240 on Wednesday, June 25, 1997 at
10:00 a.m. local time and at any adjournments thereof (the "Annual Meeting").
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY AND
IS REVOCABLE BY THE STOCKHOLDER AT ANY TIME BEFORE IT IS VOTED. For more
information concerning the procedure for revoking the proxy see below. This
Proxy Statement was first mailed to stockholders of the Company on or about May
27, 1997, accompanied by the Company's Annual Report for the fiscal period
ending December 31, 1996. The principal executive offices of the Company are
located at 131 National Business Parkway, Suite 100, Annapolis Junction,
Maryland 20701, telephone (301) 617-4200.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Company's Common Stock, $.01 par value (the
"Common Stock" or "Common Shares") outstanding at the close of business on May
23, 1997 (the "Record Date") are entitled to receive notice of and vote at the
Annual Meeting. No other class of securities were issued and outstanding on the
Record Date.
As of the Record Date, the number and classes of stock that were
outstanding and entitled to vote at the meeting were 35,858,497 shares of Common
Stock. The shares of Common Stock vote together as a single class.
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock issued and outstanding and entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting. In the
election of directors, each share of Common Stock may be voted for as many
individuals as there are directors to be elected. Cumulative voting is not
permitted. Those individuals receiving the seven highest number of votes "for"
election to the Board of Directors shall be considered duly elected. For all
matters except the election of directors, each share is entitled to one vote.
The affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote there
at is required for approval of all matters (other than the election of
directors) being submitted to the stockholders for their consideration. An
automated system administered by the Company's transfer agent will be used to
tabulate the votes. Abstentions, votes against or withholding approval and
broker non-votes will be counted to determine whether a quorum is present.
Abstentions and votes against or withholding approval will be counted as votes
against any given proposal, whereas broker non-votes will not be counted in
determining whether a particular proposal has been approved by the stockholders.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of mailings, proxies may be solicited by personal interview, telephone
and telegraph, and by directors, officers and regular employees of the Company,
without special compensation therefor. The Company expects to reimburse banks,
brokers and other persons for their reasonable out-of-pocket expenses in
handling proxy materials for beneficial owners of the Common Stock.
The Board of Directors has selected Anthony J. Pompliano and Riley M.
Murphy, and each of them, to act as proxies with full power of substitution.
With respect to the proposal regarding election of directors, stockholders may
(a) vote in favor of all nominees, (b) withhold their votes as to all nominees,
or (c) withhold their votes as to specific nominees by so indicating in the
appropriate space on the enclosed proxy
1
<PAGE> 4
card. With respect to the proposals to approve and ratify amendments of the
Stock Option Plan and the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1997, stockholders may (i) vote "for", (ii)
vote "against" or (iii) abstain from voting as to each such matter. All properly
executed proxy cards delivered by stockholders and not revoked will be voted at
the Annual Meeting in accordance with the directions given. IF NO SPECIFIC
INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTERS TO BE VOTED UPON, THE SHARES
REPRESENTED BY A PROPERLY EXECUTED PROXY CARD WILL BE VOTED "FOR" THE ELECTION
OF ALL DIRECTOR NOMINEES, TO APPROVE AND RATIFY THE AMENDMENTS OF THE STOCK
OPTION PLAN AND THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS. Management knows of no other matters that may come before the Annual
Meeting for consideration by the stockholders. However, if any other matter
properly comes before the Annual Meeting, the persons named in the enclosed
proxy card as proxies will vote upon such matters in accordance with their
judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by filing with
the Secretary of the Company prior to the date of the Annual Meeting written
notice of revocation bearing a later date than the proxy, by duly executing and
delivering to the Secretary of the Company prior to the date of the Annual
Meeting a subsequent proxy relating to the same shares of Common Stock or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy unless the
stockholder votes his shares of Common Stock in person at the Annual Meeting.
Any notice revoking a proxy should be sent to the Secretary of the Company,
Riley M. Murphy, American Communications Services, Inc., 131 National Business
Parkway, Suite 100, Annapolis Junction, Maryland 20701 in a manner designed to
ensure that it is received by the Secretary prior to the date of the Annual
Meeting.
I. DIRECTORS AND NOMINEES
The Board is currently comprised of seven members. Until the Preferred
Stock of the Company was automatically converted into Common Stock on April 15,
1997, upon consummation of the Company's public offering of its Common Stock
(the "Public Offering"), the Company's amended and restated Certificate of
Incorporation (the "Charter") required that holders of the Preferred Stock elect
three of the seven directors and that holders of the Common Stock elect four of
the directors. The Charter now provides that all of the directors be elected by
the holders of the Common Stock, voting together as a single class.
Other than as described in this proxy statement, no arrangement or
understanding exists between an officer or director and any other person under
which any officer or director was or may be elected. All directors of the
Company hold office until the next annual meeting of stockholders and until
their successors are duly elected and qualified. No director or officer is
related to any other director or officer by blood, marriage, or adoption. All
current directors of the Company were elected by the stockholders. Each of the
director nominees is currently a director of the Company.
Each of the nominees has consented to serve on the Board of Directors
through the next Annual Meeting of Stockholders or until his successor is duly
elected and qualified. If any of the nominees should be unable to serve for any
reason (which Management has no reason to anticipate at this time), the Board of
Directors may designate a substitute nominee or nominees (in which case the
persons named as proxies in the enclosed proxy card will vote all valid proxy
cards for the election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate or candidates are
located, or by resolution amending the By-laws of the Company, provide for a
lesser number of directors.
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<PAGE> 5
INFORMATION CONCERNING DIRECTOR NOMINEES
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- --------------------------------------------- --- ------------------------------------ --------
<S> <C> <C> <C>
Anthony J. Pompliano......................... 58 Chairman of the Board of Directors 1993
Benjamin P. Giess............................ 34 Director 1995
Peter C. Bentz............................... 32 Director 1995
George M. Middlemas(1)....................... 50 Director 1993
Christopher L. Rafferty(1)................... 49 Director 1994
Olivier L. Trouveroy(1)(2)................... 42 Director 1995
Edwin M. Banks(2)............................ 34 Director 1994
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ITS
NOMINEES FOR DIRECTORS.
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES
Anthony J. Pompliano, Executive Chairman of the Board of Directors, has
more than 30 years of experience in the telecommunications industry. Mr.
Pompliano was elected a director of the Company in November 1993. He was
co-founder and President of Metropolitan Fiber Systems, the predecessor
organization to MFS Communications, a publicly-traded CLEC that was acquired by
WorldCom, Inc. in December 1996. Mr. Pompliano served as President, CEO and Vice
Chairman of MFS Communications from April 1988 until March 1991. He joined ACSI
in August 1993 after the expiration of his non-competition agreement with MFS
Communications. Before his association with MFS Communications and its
predecessor, he was Vice President -- Operations and Sales for MCI
Telecommunications International from 1981 to 1987, and prior thereto, was Vice
President -- National Operations for Western Union International, Inc. from 1960
to 1981.
Benjamin P. Giess, Director, was elected a director of the Company in June
1995. Since 1992, Mr. Giess has been employed by ING Equity Partners, L.P. I
("ING"), a principal stockholder of the Company, and its predecessors and
affiliates and currently serves as a Vice President responsible for originating,
structuring and managing equity and debt investments. See "Stock Ownership of
Certain Beneficial Owners, Directors and Management." From 1991 to 1992, Mr.
Giess worked in the Corporate Finance Group of ING Capital. From 1990 to 1991,
Mr. Giess was employed by the Corporate Finance Group of General Electric
Capital Corporation where he worked in the media and entertainment group. Prior
to attending business school, from 1986 to 1988, Mr. Giess was the Credit
Department Manager of the Boston Branch of ABN Amro North America, Inc. From
1984 to 1986, Mr. Giess was employed at the Shawmut Bank of Boston. Mr. Giess
also serves as a director of Matthews Studio Equipment Group and CMI Holding
Corp. Mr. Giess received his undergraduate degree from Dartmouth College and his
MBA from the Wharton School of the University of Pennsylvania.
Peter C. Bentz, Director, was elected a director of the Company in June
1995. Since 1992, Mr. Bentz has been employed by W. R. Huff Asset Management
Co., L.L.C., an affiliate of The Huff Alternative Income Fund, L.P. ("Huff"), a
principal stockholder of the Company, as a research analyst specializing in
telecommunications, media and healthcare. Mr. Bentz received his Bachelor of
Science degree from Boston College in 1987 and his MBA from the Wharton School
of the University of Pennsylvania in 1992. See "Stock Ownership of Certain
Beneficial Owners, Directors and Management."
George M. Middlemas, Director, was elected a director of the Company in
December 1993. Mr. Middlemas is a general partner of Apex Management
Partnership, which is the general partner of Apex Investment Fund I, L.P. and
Apex Investment Fund II, L.P., both of which are venture capital funds, and
affiliates of First Analysis Corporation, a principal stockholder of the
Company. See "Stock Ownership of Certain Beneficial Owners, Directors and
Management." From March 1991 to December 1991,
3
<PAGE> 6
Mr. Middlemas acted as an independent consultant providing fund raising and
other advisory services. From 1985 until March 1991, Mr. Middlemas was a Senior
Vice President and Principal of Inco Venture Capital Management, a venture
capital firm. He also serves on the Board of Directors of PureCycle Corporation,
Security Dynamics Technologies, Inc. and several privately held companies.
Christopher L. Rafferty, Director, was elected a director of the Company in
October 1994. Mr. Rafferty has been employed by WRH Partners, L.L.C., the
general partner of Huff since June 1994. From January 1993 to February 1994, Mr.
Rafferty was Vice President -- Acquisitions for Windsor Pet Care, Inc., a
venture capital-backed firm focusing on consolidating the pet care services
industry. From October 1990 to January 1993, Mr. Rafferty was a consultant
specializing in merchant banking, leveraged acquisitions and venture capital
transactions. From June 1987 to the time he started his consulting business, Mr.
Rafferty was a Managing Director of Chase Manhattan Capital Corporation, the
merchant banking and private equity investment affiliate of Chase Manhattan
Corporation. Mr. Rafferty also serves as a director of Del Monte Foods Company.
Mr. Rafferty received his undergraduate degree from Stanford University and his
law degree from Georgetown University.
Olivier L. Trouveroy, Director, was elected a director of the Company in
June 1995. Since 1992, Mr. Trouveroy has been employed by ING and its
predecessors and affiliates and currently serves as a Managing Director
responsible for originating, structuring and managing equity and debt
investments. From 1990 to 1992, Mr. Trouveroy was a Managing Director in the
Corporate Finance Group ("CFG") of General Electric Capital Corporation in
charge of CFG's office in Paris, France. From 1984 to 1990, Mr. Trouveroy held
various positions in the Mergers and Acquisitions department of Drexel Burnham
Lambert in New York, most recently as a First Vice President. Mr. Trouveroy also
serves as a director of AccessLine Technologies, Inc. and Cost Plus, Inc. Mr.
Trouveroy holds B.S. and Masters degrees in Economics from the University of
Louvain in Belgium, as well as an MBA from the University of Chicago.
Edwin M. Banks, Director, was elected a director of the Company in October
1994. Since 1988, Mr. Banks has been employed by W. R. Huff Asset Management
Co., L.L.C. and currently serves as a portfolio manager concentrating in the
healthcare, communications, food and food services industries. From 1985 until
he joined W. R. Huff Asset Management Co., L.L.C., Mr. Banks was employed by
Merrill Lynch & Company. Mr. Banks received his B.A. degree from Rutgers College
and his MBA degree from Rutgers University. Mr. Banks also serves as a director
of Charter Medical Corporation, Del Monte Foods Company and ABCO Food Service.
INFORMATION CONCERNING BOARD MEETINGS
Three meetings of the Company's Board of Directors were held during the
fiscal period ended December 31, 1996. Each incumbent director attended at least
75% of the total number of meetings of the Board and any Committees of the Board
of which he was a member.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The only Committees of the Company's Board are the Audit Committee and the
Compensation Committee.
The Audit Committee is comprised of three directors, one of whom shall be a
senior executive officer of the Company (but not the chief financial or chief
accounting officer) and two of whom shall not be employees of the Company or any
of its subsidiaries and were required, until the conversion of the Preferred
Stock, to be Preferred Directors elected by a majority of the Preferred
Directors. Currently only Olivier L. Trouveroy and Edwin M. Banks are members of
the Audit Committee. The Audit Committee is responsible for selecting the
Company's independent auditors and reviewing their audit, as well as reviewing
and approving the Company's internal controls and accounting systems. The Audit
Committee may be granted additional powers and duties as the Board may from time
to time determine. The Audit Committee did not hold any meetings during the
fiscal period ended December 31, 1996.
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The Compensation Committee is comprised of three directors, none of whom
may be an employee of the Company or any of its subsidiaries, and two of whom
were required, until the conversion of the Preferred Stock, to be Preferred
Directors elected by a majority of the Preferred Directors. The Compensation
Committee's current members are Olivier L. Trouveroy, Christopher L. Rafferty
and George M. Middlemas. The Compensation Committee is responsible for
recommending to the full Board all stock option grants, bonuses and other
compensation arrangements for executives and key employees and loans and other
nonsalary payments and other benefits and arrangements with employees,
affiliates and associates of the Company. The Compensation Committee may be
granted additional powers and duties as the Board may from time to time
determine. The Compensation Committee did not hold any meetings during the
fiscal period ended December 31, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and any persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission (SEC) reports of ownership and changes in ownership of the
Company's Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that there was compliance for the period from June 30, 1996 to December 31, 1996
with all Section 16 filing requirements applicable to its officers, directors
and greater than ten-percent beneficial owners.
DIRECTORS' COMPENSATION
Members of the Board do not receive cash compensation for acting as members
of the Board or Committees of the Board, other than reimbursement for reasonable
out-of-pocket expenses incurred in connection with their attendance at meetings
of the Board and its committees. While the Preferred Stock was outstanding, the
Company was obligated to pay the reasonable fees and expenses of two counsel
selected by the directors elected by the Preferred Directors from time to time
to represent them in their capacity as directors. During the fiscal year ended
June 30, 1996 and the fiscal period ended December 31, 1996, the Company paid an
aggregate of approximately $31,000 in such counsel fees. Directors who also
serve as executive officers receive cash compensation for acting in their
capacity as executive officers. See "-- Summary Compensation Table." From time
to time the Board has granted options to purchase shares of Common Stock to
members of the Board who are not also officers of the Company in consideration
for their service as directors. However, other than "formula grants" under the
Company's 1994 Stock Option Plan, no formal arrangement exists. For fiscal
period ended December 31, 1996, no directors were granted options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
None of the directors serving on the Compensation Committee are employees
of the Company, and neither the Chief Executive Officer -- Communications
Services nor any of the Named Officers have served on the Compensation
Committee. No director or executive officer of the Company is a director or
executive officer of any other corporation that has a director or executive
officer who is also a director or board committee member of the Company.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table provides a summary of compensation for the fiscal
period ended December 31, 1996 and for each of the three fiscal years ended June
30, 1996, 1995 and 1994, with respect to the Company's Chief Executive Officer,
and the other five most highly compensated officers of the Company during the
fiscal year ended June 30, 1996 whose annual salary and bonus during such fiscal
year exceeded $100,000 (collectively, the "Named Officers"):
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<PAGE> 8
Summary Compensation Table
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------- NUMBER OF
OTHER SECURITIES
NAME AND PRINCIPAL POSITION ANNUAL UNDERLYING ALL OTHER
ON DECEMBER 31, 1996 YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION
- ------------------------------ ----- -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Pompliano.......... 1996* $124,167 $ 75,000(3) $ -- -- $ 2,574(4)
Executive Chairman of the 1996 239,583 175,000(3) -- -- 6,187(4)
Board of Directors 1995 219,500 175,000(3) -- 500,000 6,977(4)
1994 110,000 -- 25,000(5) 1,349,899 61,507(6)
Jack E. Reich(7).............. 1996* 20,883 -- -- 1,200,000
President and Chief
Executive Officer --
Communications Services
George M. Tronsrue............ 1996* 100,000 -- -- -- 2,400(4)
President and Chief
Operating 1996 191,128 54,116(8) -- 50,000 4,800(4)
Officer -- Strategy and 1995 150,000 135,417(8) 68,800(9) 350,001(10) --
Technology Development.... 1994 53,827 50,000 -- --
Riley M. Murphy............... 1996* 91,250 -- -- -- --
Executive Vice
President -- 1996 162,499 81,500(11) 37,004(9) 50,000 3,536(4)
Legal and Regulatory 1995 150,000 81,500(12) -- 250,001(10) 9,783(4)
Affairs, General Counsel
and 1994 37,500 -- 48,620(13) --
Secretary
Robert H. Ottman(14).......... 1996* 90,667 -- -- -- --
Executive Vice President/ 1996 170,000 50,000(3) 100,000(9) -- --
Network Services and 1995 28,333 -- -- 250,000 --
Technical Support
Richard A. Kozak(15).......... 1996* 129,167 137,500(3) -- 83,334(16) 2,700(4)
President and Chief
Executive 1996 232,885 200,000(3) -- -- 5,400(4)
Officer -- Corporate
Services 1995 184,378 175,000(3) -- 399,999(16) 3,750(4)
and Acting Chief Financial 1994 87,500 -- 39,728(5) 899,932 --
Officer
</TABLE>
- ---------------
* Subsequent to June 30, 1996, the Company changed its fiscal year-end to
December 31. Information is for the six months ended December 31, 1996.
(1) Excludes perquisites and other personal benefits that in the aggregate do
not exceed 10% of the Named Officers' total annual salary and bonus.
(2) See information provided in "Option Grants in Fiscal Year Ended June 30,
1996 and Fiscal Period Ended December 31, 1996" and "December 31, 1996
Option Values."
(3) Represents cash bonuses received for attainment of certain performance
goals.
(4) Represents payments received for medical or disability insurance in excess
of that provided to other employees and/or car allowances and, for Ms.
Murphy, includes payments of $6,423 of premiums in connection with
professional liability insurance for the period prior to her employment
with the Company.
(5) Consists of amounts paid to Messrs. Pompliano and Kozak as consultants for
services rendered prior to their employment by the Company in August 1993
and November 1993, respectively.
(6) Consists of $20,000 received as compensation in connection with the
Company's November 1993 sale of 400,000 shares of Common Stock and $41,507
received as compensation in connection with the Company's June 1994
issuance of $4,300,720 principal amount of 15% convertible notes.
(7) Mr. Reich commenced employment with the Company in December 1996.
(8) Represents an installment of a $244,500 bonus, $54,116 of which is due on
February 24, 1997.
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(9) Includes $65,000, $100,000 and $37,004 paid to Messrs. Tronsrue and Ottman
and Ms. Murphy, respectively, in connection with relocation and moving
expenses relating to the relocation of the Company's headquarters to
Annapolis Junction, Maryland.
(10) 150,000 of these options were originally granted in the fiscal year ended
June 30, 1994 at an exercise price of $2.50 per share and such exercise
price was subsequently reduced to $2.25 per share in connection with the
Company's October 1994 private placement.
(11) Represents an installment of a $244,500 cash bonus, $81,500 of which was
paid in January 1997.
(12) This payment represents the first installment of a $244,500 cash bonus.
(13) Consists of $43,620 received for performing legal services for the Company
as outside counsel and a $5,000 for location expenses.
(14) Mr. Ottman commenced employment with the Company in May 1995 and his
employment was terminated in February 1997.
(15) Mr. Kozak served as the Company's President and Chief Executive Officer
during fiscal year 1996. He became Acting Chief Financial Officer in
December 1996 upon the resignation of the Company's previous Chief
Financial Officer. In connection with the Company's December 1996
management reorganization, Mr. Kozak became President and Chief Executive
Officer -- Corporate Services. Effective February 2, 1997, Mr. Kozak's
employment with the Company was terminated.
(16) In connection with the settlement of the dispute relating to the
termination of Mr. Kozak's employment, all of the options granted in fiscal
period ended December 31, 1996 and options to purchase 83,333 shares
granted in fiscal year ended June 30, 1995 were canceled. See
"-- Employment Agreements."
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<PAGE> 10
Option Grants in Fiscal Year Ended June 30, 1996 and Fiscal Period Ended
December 31, 1996
The following table contains information concerning the grant of stock
options to the Named Officers during the fiscal year ended June 30, 1996 and the
fiscal period ended December 31, 1996.
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS MARKET PRICE
UNDERLYING GRANTED TO EXERCISE OR OF UNDERLYING
OPTIONS EMPLOYEES BASE PRICE SECURITIES ON EXPIRATION
NAME GRANTED IN PERIOD (PER/SHARE) DATE OF GRANT DATE
- ----------------------------------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Anthony J. Pompliano............... -- -- -- -- --
Jack E. Reich...................... 200,000 13.95% $ 9.375 $11.625 12/1/02
200,000 13.95 9.375 11.625 12/1/03
200,000 13.95 9.375 11.625 12/1/04
200,000 13.95 9.375 11.625 12/1/05
400,000 27.90 9.375 11.625 12/31/07
George M. Tronsrue, III............ 25,000(2) 2.20 3.40 3.875 2/22/03
25,000(3) 2.20 3.40 3.875 2/22/04
Riley M. Murphy.................... 25,000(2) 2.20 3.40 3.875 3/30/03
25,000(3) 2.20 3.40 3.875 3/30/04
Robert H. Ottman................... -- -- -- -- --
Richard A. Kozak................... 83,334 5.80 15.00 11.75 11/15/04(4)
</TABLE>
- ---------------
(1) Mr. Tronsrue and Ms. Murphy were granted options in fiscal year ended June
30, 1996, and Messrs. Reich and Kozak were granted options in the fiscal
period ended December 31, 1996.
(2) These options were granted on July 6, 1995, with an exercise price of $3.40.
Mr. Tronsrue's options will vest on February 23, 1998 and Ms. Murphy's
options will vest on March 31, 1998 provided, in each case, that he or she
does not voluntarily terminate his or her employment with the Company or is
not terminated for cause prior to the applicable vesting date.
(3) These options were granted on July 6, 1995, with an exercise price of $3.40.
Mr. Tronsrue's options will vest on February 23, 1999 and Ms. Murphy's
options will vest on March 31, 1999 provided, in each case, that he or she
does not voluntarily terminate his or her employment with the Company or is
not terminated for cause prior to the vesting date.
(4) These options were canceled in connection with the settlement of the dispute
relating to the termination of Mr. Kozak's employment. See "-- Employment
Agreements."
8
<PAGE> 11
December 31, 1996 Option Values
The following table sets forth the value of unexercised options held by the
Named Officers as of December 31, 1996. None of the Named Officers exercised
options during the fiscal year ended June 30, 1996 or the fiscal period ended
December 31, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT DECEMBER 31,
OPTIONS AT DECEMBER 31, 1996 1996(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Anthony J. Pompliano.................. 1,599,899 250,000 $15,455,253 $ 1,987,500
Jack E. Reich......................... -- 1,200,000 -- 1,650,000
George M. Tronsrue, III............... 250,000 150,000 2,125,000 1,217,500
Riley M. Murphy....................... 137,501 162,501 1,168,759 1,323,759
Robert H. Ottman...................... 100,000 150,000(2) 775,000 1,162,500
Richard A. Kozak...................... 1,133,265 250,000(3) 10,824,326 970,825
</TABLE>
- ---------------
(1) Represents the difference between the per share exercise price of the
unexercised options and $10.75, the last sale price on December 31, 1996, as
reported by the Nasdaq Stock Market.
(2) The vesting of options to purchase 75,000 of these shares was accelerated in
connection with the termination of Mr. Ottman's employment in February 1997.
(3) Of these, options to purchase 166,667 shares were canceled and the vesting
of options to purchase an additional 83,333 shares was accelerated in
connection with the settlement of the dispute relating to the termination of
Mr. Kozak's employment. See "-- Employment Agreements."
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
- --------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Anthony J. Pompliano....... 58 Executive Chairman of the Board Directors
Jack E. Reich.............. 46 President and Chief Executive Officer -- Communications
Services
George M. Tronsrue, III.... 40 President and Chief Operating Officer -- Strategy and
Technology Development
Riley M. Murphy............ 41 Executive Vice President -- Legal and Regulatory Affairs,
General Counsel and Secretary
David L. Piazza(1)......... 42 Chief Financial Officer
George M. Middlemas(2)..... 50 Director
Edwin M. Banks(3).......... 34 Director
Christopher L. 49 Director
Rafferty(2)..............
Benjamin P. Giess.......... 34 Director
Olivier L. 42 Director
Trouveroy(2)(3)..........
Peter C. Bentz............. 32 Director
</TABLE>
- ---------------
(1) Mr. Piazza's employment began on March 24, 1997.
(2) Member of Compensation Committee
(3) Member of Audit Committee
Anthony J. Pompliano, Executive Chairman of the Board of Directors, has
more than 30 years of experience in the telecommunications industry. Mr.
Pompliano was elected a director of the Company in November 1993. He was
co-founder and President of Metropolitan Fiber Systems, the predecessor
organization to MFS Communications, a publicly-traded CLEC that was acquired by
WorldCom, Inc. in Decem-
9
<PAGE> 12
ber 1996. Mr. Pompliano served as President, CEO and Vice Chairman of MFS
Communications from April 1988 until March 1991. He joined ACSI in August 1993
after the expiration of his non-competition agreement with MFS Communications.
Before his association with MFS Communications and its predecessor, he was Vice
President -- Operations and Sales for MCI Telecommunications International from
1981 to 1987, and prior thereto, was Vice President -- National Operations for
Western Union International, Inc. from 1960 to 1981.
Jack E. Reich, President and Chief Executive Officer -- Communications
Services, had 22 years of telecommunications industry and management experience
before joining ACSI in December 1996. For two and one-half years prior to
joining ACSI, Mr. Reich was employed by Ameritech, Inc. as President of its
Custom Business Service Organization, where Mr. Reich was responsible for full
business marketing to Ameritech's largest customers for telecommunications
services, advanced data services, electronic commerce and managed
services/outsource initiatives. Prior to that, he served as President of MCI's
Multinational Accounts organization and also served as MCI's Vice President of
Products Marketing. Mr. Reich has also held sales and marketing positions at
AT&T and ROLM Corp. Mr. Reich has a B.S. degree from St. Louis University and an
MBA from the University of Chicago.
George M. Tronsrue, III, President and Chief Operating Officer -- Strategy
and Technology Development, had 17 years of telecommunications industry and
management experience before joining ACSI in February 1994. Mr. Tronsrue served
the Company as Executive Vice President -- Strategic Planning and Business
Development from February 1994 until January 31, 1996. From 1993 until he joined
ACSI in February 1994, Mr. Tronsrue was the Regional Vice President for the
Central Region for Teleport Communications Group and the Vice President of
Emerging Markets, responsible for start-up and profit and loss management of
joint ventures with major cable television providers in eight major markets.
From 1987 until 1992, he was a member of the initial management team at MFS,
where he held senior positions in planning and market development, served as
Vice President of Sales and the Vice President/General Manager for the initial
start-up of MFS' New York operations, and served as the Executive Vice President
for MFS-Intelenet. Prior to joining MFS, he was a Director of Operations for MCI
Telecommunications International. Mr. Tronsrue has a B.S. degree in Applied
Sciences and Engineering from the United States Military Academy at West Point.
Riley M. Murphy, Executive Vice President -- Legal and Regulatory Affairs
and Secretary, had twelve years of experience in the private practice of
telecommunications regulatory law for inter-exchange, cellular, paging and other
competitive telecommunication services prior to joining the Company. Since
February 1995, she has served as an officer and director of The Association for
Local Telecommunications Services. Ms. Murphy joined ACSI on a full-time basis
in April 1994 and was senior counsel to Locke Purnell Rain Harrell, a
Dallas-based law firm through December 1994. From 1987 to 1992, Ms. Murphy was a
partner of Wirpel and Murphy, a telecommunications law firm she co-founded, and
from 1992 to 1993 she was a sole practitioner. She holds a B.A. degree from the
University of Colorado and a J.D. from the Catholic University of America and is
admitted to practice law in the District of Columbia and Louisiana.
David L. Piazza, Chief Financial Officer, will join the Company as of March
24, 1997. For ten years prior to joining the Company, Mr. Piazza was employed by
MFS Communications in a variety of finance and senior management positions, most
recently as the Senior Vice President and Chief Financial Officer of MFS
Telecom, Inc., a subsidiary of MFS Communications. Prior to his employment with
MFS Communications, Mr. Piazza was employed by AT&T for four years in its
finance and support divisions. Mr. Piazza received his B.S. degree in
Accountancy from the University of Illinois and holds a CPA.
As part of the December 1996 management reorganization, Richard A. Kozak,
who had previously served as the Company's President and Chief Executive
Officer, was named President and Chief Executive Officer -- Corporate Services.
Mr. Kozak was also appointed as ACSI's Acting Chief Financial Officer, replacing
Harry D'Andrea who had resigned as ACSI's Chief Financial Officer in November
1996. Effective February 2, 1997, Mr. Kozak's employment was terminated, with
each of Mr. Kozak and the Company claiming the termination was the result of the
other party's breach of his employment agreement. The parties
10
<PAGE> 13
have settled their dispute relating to the cause of Mr. Kozak's termination. See
"-- Employment Agreements."
The Board is comprised of seven members, four of whom were elected by the
holders of the Common Stock and three of whom were elected by the holders of the
Preferred Stock, which shares were automatically converted into Common Stock on
April 15, 1997, upon consummation of the Public Offering. Beginning at the
Annual Meeting, the Board will be elected by the holders of the Common Stock.
All directors of the Company hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified. See
"Business Experience of Directors."
EMPLOYMENT AGREEMENTS
Anthony J. Pompliano. The Company is party to an employment agreement with
Anthony J. Pompliano, its Executive Chairman, which terminates on August 23,
1998. Under the terms of the agreement, as amended, Mr. Pompliano is entitled to
an annual base salary of $250,000 and a cash bonus of up to $200,000 for each of
the 1997 and 1998 fiscal years based upon the Company's achievement of certain
performance goals for the relevant fiscal year. Under this employment agreement,
Mr. Pompliano has been granted options to purchase an aggregate of 1,849,899
shares of the Company's Common Stock at exercise prices ranging from $.875 per
share to $2.80 per share. Mr. Pompliano has the right to obtain a 30-day loan
from the Company for the purpose of paying the aggregate exercise price of the
options granted to him.
Mr. Pompliano has the right, for 90 days after termination of his
employment (unless he is terminated by the Company "for cause" or he voluntarily
resigns), to sell to the Company up to $1.0 million in then market value of
shares of Common Stock issued or issuable pursuant to the options granted to Mr.
Pompliano under his employment agreement, at a price equal to the
publicly-traded price of the Common Stock, less the exercise price of the
options with respect to unexercised options; provided, however, this right
cannot be exercised unless at least 5,000,000 shares of Common Stock are owned
by non-affiliates of the Company at the time of his request and the market value
of the outstanding Common Stock is at least $300 million. Mr. Pompliano's
employment agreement also contains non-compete, non-solicitation and
confidentiality provisions.
Jack E. Reich. The Company is party to an employment agreement with Jack
E. Reich, its President and Chief Executive Officer -- Communications Services,
which terminates on December 31, 2000, extendable for one year by mutual
agreement. Under the terms of this agreement, Mr. Reich is entitled to a minimum
annual base salary of $250,000, a cash bonus of $100,000 in 1997 and annual
bonuses of between $150,000 and $350,000 based on the Company's achievement of
certain performance goals. Under this employment agreement, Mr. Reich was
granted an option to purchase 1,200,000 shares of Common Stock at an exercise
price $9.375 per share. These options vest in installments between December 1997
and December 2001, subject to Mr. Reich's continued employment. Mr. Reich's
employment agreement also contains a two year non-compete/non-solicit provision.
George M. Tronsrue, III. The Company is party to an employment agreement
with George M. Tronsrue, III, its President and Chief Operating
Officer -- Strategy and Technology Development, which terminates on February 23,
1999. The agreement, as amended, calls for an annual salary $200,000, a $400 per
month car allowance and a guaranteed bonus of $244,500 payable in annual
installments through February 1997. Under the terms of this employment
agreement, Mr. Tronsrue has been granted stock options to purchase an aggregate
of 400,000 shares of Common Stock at prices ranging from $2.25 per share to
$3.40. Furthermore, the Company has, upon Mr. Tronsrue's request, extended a
loan to Mr. Tronsrue in the aggregate amount of $195,000, bearing simple
interest at the rate of 8% per year and payable on the second anniversary of the
loan. Mr. Tronsrue's employment agreement also contains a two year
non-compete/non-solicit provision. See "Certain Relationships and Related
Transactions."
Riley M. Murphy. The Company is party to an employment agreement with
Riley M. Murphy, its Executive Vice President for Legal and Regulatory Affairs,
which terminates on March 31, 1999. This agreement, as amended, calls for an
annual salary of $175,000 and a guaranteed bonus of $244,500, payable in annual
installments through January 1997. Under this employment agreement, Ms. Riley
was granted options
11
<PAGE> 14
to purchase an aggregate of 300,002 shares of Common Stock at prices ranging
from $2.25 per share to $3.40 per share. Ms. Murphy's employment agreement also
contains a two year non-compete/non-solicit provision.
Robert H. Ottman. The Company is party to an employment agreement with
Robert Ottman, pursuant to which Mr. Ottman's employment was terminated in
February 1997. In connection with Mr. Ottman's termination, the Company
accelerated the vesting of options to purchase 75,000 shares of Common Stock
having an exercise price of $3.00 per share and paid Mr. Ottman a lump sum of
approximately $44,000 as severance. Mr. Ottman's employment agreement contains a
two year non-compete/non-solicit provision.
Richard A. Kozak. The Company was party to an employment agreement with
Richard A. Kozak, which was terminated effective February 2, 1997. Each of the
parties initially claimed the termination was the result of a breach of the
employment agreement by the other party. In settlement of their dispute and
related litigation concerning Mr. Kozak's termination, the parties agreed, among
other things, that Mr. Kozak was to (i) receive $300,000 in cash, payable by the
Company in three equal installments on April 1, July 1 and October 1, 1997, (ii)
forfeit 166,667 of his unvested options, and (iii) execute a 180-day Lock-Up
Agreement with the underwriters of the Public Offering for all but 150,000 of
the shares underlying his vested options and 80,000 other shares he holds. The
Company also accelerated the vesting of Mr. Kozak's remaining 83,333 options
which had not vested at the time of his termination. Mr. Kozak also agreed to
certain non-compete, non-solicitation and confidentiality provisions expiring on
December 31, 1997. Under his employment agreement, Mr. Kozak had been granted
stock options to purchase an aggregate of 1,383,265 shares of the Company's
Common Stock at exercise prices ranging from $0.875 per share to $15.00 per
share, of which options to purchase 1,133,265 shares had vested as of his
termination. In January 1997, Mr. Kozak exercised options to purchase 100,000 of
these shares.
The shares of Common Stock underlying the stock options held by Messrs.
Pompliano and Tronsrue and Ms. Murphy which are discussed above are subject to
the Registration Rights Agreement. Mr. Pompliano waived his right to demand an
underwritten registration of at least 300,000 shares of Common Stock beginning
120 days after the Public Offering. The Company has agreed to use its best
efforts to have Mr. Reich's shares included in the Registration Rights
Agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1995, the Company completed a private placement of its Series B
Preferred Stock, of which ING purchased an aggregate of 100,000 shares of
Preferred Stock, warrants to purchase 428,571 shares of Common Stock at an
exercise price of $0.01 per share and a warrant to purchase 100,000 shares of
Common Stock at an exercise price of $2.50 per share. Huff and certain of its
affiliates purchased an aggregate of 100,975 shares of the Preferred Stock,
warrants to purchase 432,749 shares of Common Stock at an exercise price of
$0.01 per share, a warrant to purchase 100,000 shares of Common Stock at an
exercise price of $1.79 per share and a warrant to purchase 100,000 shares at an
exercise price of $2.50 per share. Apex and certain of its affiliates purchased
an aggregate of 21,000 shares of the Preferred Stock and warrants to purchase an
aggregate of 90,000 shares of Common Stock at an exercise price of $0.01 per
share. The price per unit in the June 1995 private placement was $100. Pursuant
to the Series B Purchase Agreement, in November 1995, ING purchased 50,000
additional shares of the Series B Preferred Stock and exercised a warrant
entitling ING to purchase 214,286 shares of Common Stock at an exercise price of
$0.01 per share. In connection with these private placements, the Company
entered into the Registration Rights Agreement dated June 26, 1995, among the
holders of the Preferred Stock, certain holders of Common Stock and certain
holders of options or warrants convertible into Common Stock (the "Registration
Rights Agreement") wherein the parties were granted piggy-back registration
rights with respect to any registration statements (other than Registration
Statements filed on Forms S-4 or S-8) filed by the Company with the Commission
at any time prior to the sixth anniversary of the Registration Rights Agreement,
and certain demand registration rights following the occurrence of, among other
things, a Qualifying Offering.
The Company also entered into the Stockholders' Agreement, dated as of June
26, 1995, with the holders of the Preferred Stock, Anthony J. Pompliano and
Richard A. Kozak, the provisions of which terminated upon
12
<PAGE> 15
consummation of the Public Offering. The Stockholders' Agreement, among other
things, generally restricted the transfer of the Company's stock owned by the
parties to the agreement, with the exception of stock sold: (i) in a public
offering pursuant to an effective registration statement under the Securities
Act or (ii) in the public market pursuant to Rule 144 under the Securities Act.
The agreement further provided the stockholders with rights of first refusal in
the case of sales initiated by stockholders that are parties to the agreement
and certain "tag-along" rights which allow the stockholders to sell a
proportionate amount of their stock in the event a stockholder proposed to sell
such stock to an unrelated purchaser.
In response to voting rights issues raised by the NASDAQ Stock Market staff
concerning the Company's governance structure as set forth in a Governance
Agreement between the Company and certain of the holders of the Preferred Stock
dated November 8, 1995, the Company amended its Charter, which amendments were
approved by the stockholders of the Company on January 26, 1996, such that,
until the conversion of the Preferred Stock to Common Stock and except in
certain events (which did not occur prior to the conversion of the Preferred
Stock), the Board was required to be comprised of seven members, four of whom
were to be elected by the holders of the Company's Common Stock and three of
whom were to be elected by the holders of the Company's Preferred Stock. On
February 26, 1996, the Company and the other parties to the Governance Agreement
amended its terms to be consistent with the provisions of the Charter. The
amended Governance Agreement terminated upon conversion of the Preferred Stock.
The Company was party to an employment agreement with Richard A. Kozak,
which was terminated effective February 2, 1997. Each of the parties initially
claimed the termination was the result of a breach of the employment agreement
by the other party. In settlement of their dispute and related litigation
concerning Mr. Kozak's termination, the parties agreed, among other things, that
Mr. Kozak (i) receives $300,000 in cash, payable by the Company in three equal
installments on April 1, July 1 and October 1, 1997, (ii) forfeited 166,667 of
his unvested options, and (iii) execute a 180-day Lock-Up Agreement with the
Underwriters of the Public Offering for all but 150,000 of the shares underlying
his vested options and 80,000 other shares he holds. The Company agreed to
accelerate the vesting of Mr. Kozak's remaining 83,333 options which had not
vested at the time of his termination. Mr. Kozak also waived all rights under
the Registration Rights Agreement. Mr. Kozak also agreed to certain non-compete,
non-solicitation and confidentiality provisions expiring on December 31, 1997.
Under his employment agreement, Mr. Kozak had been granted stock options to
purchase an aggregate of 1,383,265 shares of the Company's Common Stock at
exercise prices ranging from $0.875 per share to $15.00 per share, of which
options to purchase 1,133,265 shares had vested as of his termination. In
January 1997, Mr. Kozak exercised options to purchase 100,000 of these shares.
In connection with, and as a condition precedent to the consummation of the
Public Offering, the Company sold 2,099,125, 1,364,432 and 136,443 shares of
Common Stock to Huff, ING and affiliates of First Analysis Corporation,
respectively. The per share price for the shares sold to these principal
stockholders was $4.70 (the same price paid to the Company by the Underwriters
for the 4,400,000 shares sold in the Public Offering) for aggregate proceeds to
the Company equal to $16,920,000. Additionally, these stockholders elected to
receive an aggregate of 1,603,241 shares of Common Stock in lieu of
approximately $7.6 million of accrued dividends payable upon conversion of the
Preferred Stock they held. See "Stock Ownership of Certain Beneficial Owners,
Directors and Management."
On April 28, 1997, the Company extended a loan in the principal amount of
$195,000 to George M. Tronsrue, III, the Company's President and Chief Operating
Officer -- Strategy and Technology Development. The loan bears interest at 8%
per annum and is due and payable no later than April 28, 1999. Mr. Tronsrue must
prepay all amounts outstanding if his employment terminates earlier than April
28, 1999, and he must use net proceeds from the sale of any of his shares of
Common Stock prior to April 28, 1999 to prepay any principal and interest then
outstanding.
13
<PAGE> 16
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth as of the Record Date, certain information
regarding the beneficial ownership of the Company's Common Stock outstanding
(assuming the exercise of options and warrants exercisable on or within 60 days
of such date by (i) each person who is known to the Company to own 5% or more of
the Common Stock, (ii) each director of the Company, (iii) the Chief Executive
Officer and each of the Named Officers and (iv) all executive officers and
directors of the Company as a group.
Unless otherwise indicated, the named persons exercise sole voting and
investment power over the shares that are shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF
NAME OF BENEFICIAL OWNER(1) OF SHARES(2) TOTAL(3)
------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Anthony J. Pompliano(3)...................................... 1,662,499 4.4%
Jack E. Reich................................................ -- --
George M. Tronsrue, III(4)................................... 300,000 *
Riley M. Murphy(5)........................................... 137,500 *
George M. Middlemas(6)....................................... 1,748,147 4.9
Christopher Rafferty(7)...................................... 8,000 *
Edwin M. Banks(7)............................................ -- --
Peter C. Bentz(7)............................................ -- --
Olivier L. Trouveroy(8)...................................... -- --
Benjamin P. Giess(8)......................................... -- --
Richard A. Kozak(9).......................................... 1,113,465 2.7
Robert H. Ottman(10)......................................... 175,000 *
The Huff Alternative Income Fund, L.P.(11)................... 14,286,960 39.6
ING Equity Partners, L.P. I(12).............................. 7,946,828 22.1
First Analysis Corporation(13)............................... 3,156,420 8.8
All executive officers and directors as a group (10
persons)................................................... 3,856,146 9.7
</TABLE>
- ---------------
* Less than one percent.
(1) The address of all officers and directors listed above is in the care of
the Company.
(2) The percentage of total outstanding for each stockholder is calculated by
dividing (i) the number of shares of Common Stock deemed to be beneficially
owned by such stockholder as of the Record Date by (ii) the sum of (A) the
number of shares of Common Stock outstanding as of the Record Date plus (B)
the number of shares of Common Stock issuable upon the exercise of options
or warrants held by such stockholder which were exercisable as of the
Record Date or will become exercisable within 60 days after the Record Date
("currently exercisable").
(3) Includes currently exercisable options to purchase 1,662,399 shares.
(4) Includes currently exercisable options to purchase 300,000 shares.
(5) Includes currently exercisable options to purchase 137,500 shares.
(6) Includes currently exercisable options to purchase 20,000 shares. Also
includes 788,905 shares of Common Stock owned by Apex II and 278,973 shares
of Common Stock owned by Apex I. Mr. Middlemas is a general partner of Apex
Management Partnership which is the general partner of Apex I and Apex II.
Mr. Middlemas disclaims beneficial ownership of the shares owned by Apex I
and Apex II, except to the extent of his ownership in the general partner
of Apex I and in the general partner of Apex II.
(7) Messrs. Banks and Bentz are employees of W.R. Huff Asset Management Co.,
L.L.C., an affiliate of Huff. Mr. Rafferty is an employee of WRH Partners,
L.L.C., the general partner of Huff. Messrs. Rafferty, Bentz and Banks
disclaim beneficial ownership of all shares held by Huff.
(8) Mr. Trouveroy is a Managing Partner of ING and Mr. Giess is a Partner of
ING. Messrs. Trouveroy and Giess disclaim beneficial ownership of all
shares held by ING.
14
<PAGE> 17
(9) Includes currently exercisable options to purchase 1,033,265 shares. Mr.
Kozak's employment was terminated effective February 2, 1997. See "Certain
Transactions."
(10) Includes currently exercisable options to purchase 175,000 shares. Mr.
Ottman's employment with the Company was terminated in February 1997.
(11) Includes currently exercisable warrants to purchase 200,000 shares. The
address for Huff is 1776 On the Green, 67 Park Place, Morristown, NJ 07960.
(12) Includes currently exercisable warrants to purchase 100,000 shares. The
address for ING is 135 East 57th Street, 16th Floor, New York, NY 10022.
(13) Includes 1,034,465 shares of Common Stock owned by Apex II. Includes
103,800 and 175,173 shares of Common Stock owned by Apex I. Includes
359,214 and 732,213 shares of Common Stock owned by The Productivity Fund
II, L.P. ("Productivity"). Includes 714,293 shares of Common Stock owned by
Environmental Private Equity Fund II, L.P. ("EPEF"). First Analysis
Corporation ("FAC") is an ultimate general partner of Apex I, Apex II,
Productivity and EPEF and may be deemed to be the beneficial owner of the
shares owned by them. FAC disclaims beneficial ownership of these shares.
This information was obtained from a Schedule 13D filed with the Securities
and Exchange Commission on August 4, 1995, as amended from time to time.
The address for First Analysis Corporation is 233 South Wacker Drive, Suite
9600, Chicago, IL 60093.
15
<PAGE> 18
II. AND III. APPROVAL AND RATIFICATION OF AMENDMENTS TO THE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE UPON THE EXERCISE OF OPTIONS GRANTED THEREUNDER FROM
3,000,000 TO 5,000,000 AND TO PERMIT THE TRANSFER BY OUTSIDE
DIRECTORS OF OPTIONS GRANTED TO THEM UNDER THE STOCK OPTION PLAN.
The Board of Directors, pursuant to recommendation of its Compensation
Committee, amended the Stock Option Plan on April 25, 1997 to increase the
number of shares of Common Stock available for issuance upon exercise of options
granted to Outside Directors for award thereunder by 2,000,000 shares. Before
this amendment, the total number of shares for award thereunder authorized under
the Stock Option Plan was 3,000,000 and now is 5,000,000 shares. The
Compensation Committee recommended the increases for the primary purpose of
rewarding key employees for past performances and giving key employees,
including those joining the Company as new hires, incentive to perform at a high
standard in the future. The amendment allowing Outside Directors to transfer
options granted to them under the Plan was adopted for the purpose of retaining
the highest caliber Outside Directors and rewarding such directors for their
contributions to the Company.
1994 STOCK OPTION PLAN
On November 15, 1994, the Board adopted and on December 16, 1994,
stockholders approved the Stock Option Plan. On January 26, 1996 and November
15, 1996, the Company's stockholders approved amendments to the Stock Option
Plan. The Stock Option Plan will terminate no later than November 15, 2004, ten
years after adoption by the Board of Directors and after such termination no
additional options may be granted. The Stock Option Plan is administered by the
Compensation Committee which makes discretionary grants ("discretionary grants")
of options to employees (including employees who are officers and directors of
the Company), directors who are not employees of the Company ("Outside
Directors") and consultants. The Stock Option Plan also provides for formula
grants of options to Outside Directors ("formula grants"). Under the Stock
Option Plan, 2,790,000 shares of Common Stock have been reserved for
discretionary grants and 210,000 shares of Common Stock have been reserved for
formula grants. As of December 31, 1996, 845,350 discretionary and 20,000
formula options had been granted under the Stock Option Plan.
Options granted pursuant to discretionary grants may be nonqualified
options or incentive options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. The selection of participants, allotment of
shares, determination of price and other conditions of purchase of such options
will be determined by the Compensation Committee, in its sole discretion.
Options granted pursuant to discretionary grants are exercisable for a period of
up to ten years, except that incentive options granted to optionees who, at the
time the option is granted, own stock representing greater than 10% of the
voting power of all classes of stock of the Company or any parent or subsidiary,
are exercisable for a period of up to five years. The per-share exercise price
of incentive options granted pursuant to discretionary grants must be no less
than 100% of the fair market value of the Common Stock on the date of grant,
except that the per share exercise price of incentive options granted to
optionees who, at the time the option is granted, own stock representing greater
than 10% of the voting power of all classes of stock of the Company or any
parent or subsidiary, must be no less than 110% of the fair market value of the
Common Stock. The per share exercise price of nonqualified stock options granted
pursuant to discretionary grants must be no less than 85% of the fair market
value of the Common Stock on the date of grant. To the extent options are
granted at less than fair market value, the Company incurs a non-cash cost for
financial reporting purposes.
Under the formula grants, each Outside Director will be granted
automatically a nonqualified option to purchase 50,000 shares (subject to
adjustment as provided in the 1994 Plan). Each such director may decline such
grant. Each option granted pursuant to a formula grant will vest and become
exercisable as to 10,000 shares on the date such option is granted (the "Grant
Date"), as to 10,000 shares on the date of the first annual meeting of
stockholders held at least eight months after the Grant Date (the "First Annual
Meeting") and as to 10,000 shares on the date of each of the next three annual
meetings of stockholders held
16
<PAGE> 19
after the First Annual Meeting, provided that the option will only vest on the
relevant annual meeting of stockholders date if the Outside Director is
re-elected to the Board at such meeting. Each such option shall have a term of
five years from the relevant vesting date. The exercise price per share of
Common Stock for options granted pursuant to a formula grant shall be 100% of
the fair market value as determined under the terms of the 1994 Plan.
Currently, all options granted under the 1994 Plan are nontransferable,
other than by will or by the laws of descent and distribution, and may be
exercised during the optionee's lifetime, only by the optionee, or in the event
of the optionee's legal incapacity to do so, by the optionee's guardian or legal
representative. On April 25, 1997, the Board adopted an amendment to the Stock
Option Plan authorizing the inclusion of a provision in stock option agreements
relating to options granted to Outside Directors which permits the transfer by
such Outside Director of the options granted pursuant to such stock option
agreement.
As of December 31, 1996, there were 322 employees eligible to participate
and approximately 107 actual participants in the 1994 Plan. During the fiscal
year ended June 30 and the fiscal period ended December 31, 1996 there were no
grants of options pursuant to the 1994 Plan to any director or executive officer
of the Company, including the Named Officers. There were grants of options
pursuant to the 1994 Plan to all other employees as a group to acquire an
aggregate of 595,309 shares of Common Stock, at an average exercise price of
$5.41 per share, during the fiscal year ended June 30, 1996 and the fiscal
period ended December 31, 1996.
For a description of certain of the federal income tax consequences
associated with the grant and exercise of options and the Stock Option Plan, see
"Federal Income Tax Consequences: Stock Option Plan."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL AND RATIFICATION OF THE AMENDMENTS TO THE STOCK OPTION PLAN TO (A)
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE STOCK OPTION PLAN
FROM 3,000,000 SHARES TO 5,000,000 SHARES AND (B) PERMIT THE TRANSFER BY OUTSIDE
DIRECTORS OF OPTIONS GRANTED TO THEM UNDER THE STOCK OPTION PLAN.
IV. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, pursuant to the recommendation of its Audit
Committee, has selected KPMG Peat Marwick LLP ("KPMG Peat Marwick"), independent
auditors, to examine and audit the financial statements of the Company for the
fiscal year ended December 31, 1997. KPMG Peat Marwick has served as independent
auditors of the Company since 1995. A partner of the firm will be present at the
Annual Meeting and available to respond to appropriate questions, and will have
an opportunity to make a statement if he desires to do so.
In 1996, KPMG Peat Marwick performed various professional services for the
Company. They included completion of the examination of financial statements for
the Company for fiscal year ended June 30, 1996, other review work of required
filings with the SEC, preliminary work on the examination of fiscal period ended
December 31, 1996 financial statements, preparation of corporate tax returns and
other consultation with Company personnel on accounting and related matters.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
V. OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If matters other than the foregoing should properly come before
the Annual Meeting, it is intended that the shares represented by proxies will
be voted in accordance with the judgment of the persons named in the proxy as to
the best interests of the Company.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal period ended
December 31, 1996 accompanies this Proxy Statement.
17
<PAGE> 20
STOCKHOLDERS' PROPOSALS
The Company's next Annual Meeting of Stockholders will be held in or around
May 1998. Such Annual Meeting of Stockholders will present information relating
to the Company's fiscal year ending December 31, 1997. Any proposal by
stockholders intended to be presented at the next Annual Meeting of Stockholders
must be received by the Company at the above address for inclusion in its Proxy
Statement and form of proxy relating to that meeting by December 7, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ RILEY M. MURPHY
RILEY M. MURPHY
Secretary
Dated: May 27, 1997
18
<PAGE> 21
AMERICAN COMMUNICATIONS SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 14, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Anthony J. Pompliano and Jack
E. Reich, and each of them, as Proxies of the undersigned, with full power to
appoint their substitutes, and authorizes each of them to represent and to vote
all shares of Common Stock and Preferred Stock of American Communications
Systems, Inc. (the "Company") held by the undersigned as of the close of
business on March 21, 1997, at the Annual Meeting of Stockholders to be held at
BWI Marriott, 1743 West Nursery Road, Baltimore, Maryland 21240, on Wednesday,
May 14, 1997, at 10:00 a.m., local time, and at any adjournments or
postponements thereof.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, the signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
<PAGE> 22
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's Annual Report for the Fiscal Period Ended December
31, 1996, and hereby revoke(s) any proxy or proxies heretofore given. This
proxy may be revoked at any time before it is exercised.
RECORD DATE SHARES:
- ---------------------------------------
REGISTRATION
- ---------------------------------------
------------
Please be sure to sign and date this Proxy. Date
- ------------------------------------------------------------
- ---Shareholder sign here-----------Co-owner sign here-------
<TABLE>
<CAPTION>
With- For All
For Held Except
<S> <C> <C> <C>
1A. Proposal to elect the following persons as [ ] [ ] [ ]
COMMON DIRECTORS, and until their successors
are duly elected and qualified:
Anthony J. Pompliano
Benjamin P. Giess
Peter C. Bentz
George M. Middlemas
</TABLE>
If you wish to withhold your shares for any individual nominee, mark
the "For All Except" box and make a line through the nominee's
name(s).
<TABLE>
<CAPTION>
With- For All
For Held Except
<S> <C> <C> <C>
1B. Proposal to elect the following persons as [ ] [ ] [ ]
PREFERRED DIRECTORS, and until their
successors are duly elected and qualified:
Christopher L. Rafferty
Olivier L. Trouveroy
Edwin M. Banks
</TABLE>
If you wish to withhold your shares for any individual nominee, mark the "For
All Except" box and make a line through the nominee's name(s).
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
2. Proposal to approve and ratify amendments [ ] [ ] [ ]
to the 1994 Employee Stock Option Plan to
increase the number of shares authorized
for award thereunder from 3,000,000 shares
to 5,000,000 shares.
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
3. Proposal to ratify the selection of KPMG [ ] [ ] [ ]
Peat Marwick LLP as the independent auditors
of the Company for the fiscal year ending
December 31, 1997.
Mark box at right if comments or address change have been [ ]
noted on the reverse side of this card.
</TABLE>
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
AMERICAN COMMUNICATIONS SYSTEMS, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and mail your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders,
June 25, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Riley M. Murphy
Secretary
