Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
(Mark
One)
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
fiscal year ended December 31, 2007
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
transition period from __________ to __________
Commission
file number: 000-51426
FORTRESS
INTERNATIONAL GROUP, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
20-2027651
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
9841
Broken Land Parkway
Columbia,
Maryland
|
21046
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
(410)
312-9988
Securities
registered pursuant to Section 12(b) of the Exchange Act:
Title
of each class
|
|
Name of each exchange on
which registered
|
|
|
|
|
|
Common
Stock, $.0001 par value per share
|
|
|
NASDAQ Capital Market
|
|
Warrants
to purchase common stock, $.0001 par value per share
|
|
|
NASDAQ Capital Market
|
|
Units,
each consisting of one share of Common Stock, $.0001 par value and
two
warrants to purchase shares of common stock, $.0001 par
value
|
|
|
NASDAQ Capital Market
|
|
Securities
registered pursuant to Section 12(g) of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes x
No
o
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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
[Do not check if a smaller
|
Smaller reporting company x
|
|
|
|
|
reporting company]
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No
x
The
aggregate market value of the registrant’s voting and non-voting common stock
held by non-affiliates of the registrant (without admitting that any person
whose shares are not included in such calculation is an affiliate) computed
by
reference to the price at which the common stock was last sold, or the average
bid and asked price of the common stock, as of the last business day of the
registrant’s most recently completed second fiscal quarter end was
$19,578,343.
As
of
March 31, 2008, 12,089,221 shares of the registrant’s common stock, $0.0001 par
value, were outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
EXPLANATORY
NOTE
The
purpose of this Amendment No. 1 (the “Amendment”) to the Annual Report on Form
10-K of Fortress International Group, Inc. for the year ended December 31,
2007
(the “Original Report”) is to include the disclosure required in Part III, Items
10, 11, 12, 13 and 14. Except for Items 10, 11, 12, 13 and 14 of Part III and
Item 15 of Part IV, no other information included in the Original Report is
amended or changed by this Amendment. As a result of this Amendment, we are
also
filing as exhibits to this Amendment the certifications pursuant to Section
302
of the Sarbanes-Oxley Act of 2002. Because no financial statements are contained
in this Amendment, we are not including certifications pursuant to Section
906
of the Sarbanes-Oxley Act of 2002.
Except
as
otherwise expressly stated herein for the items amended in this Amendment,
this
Amendment continues to speak as of the date of the Original Report and we have
not updated the disclosure contained herein to reflect events that have occurred
since the filing of the Original Report. Accordingly, this Amendment should
be
read in conjunction with our Original Report and our other filings made with
the
SEC subsequent to the filing of the Original Report.
FORTRESS
INTERNATIONAL GROUP, INC.
FORM
10-K/A
INDEX
|
|
Page
|
|
|
|
|
PART
III
|
|
|
|
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
3
|
|
|
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
8
|
|
|
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
18
|
|
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
19
|
|
|
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
23
|
|
|
|
|
PART
IV
|
|
|
|
|
ITEM
15.
|
EXHIBITS
|
25
|
|
|
|
SIGNATURES
|
|
PART
III
Item
10. |
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Executive
Officers and Directors
The
following table sets forth certain information regarding our executive officers
and directors as of April 25, 2008.
Name
|
|
Age
|
|
Position
|
Harvey
L. Weiss
|
|
65
|
|
Chairman
of the Board
|
C.
Thomas McMillen*
|
|
55
|
|
Vice
Chairman of the Board
|
Thomas
P. Rosato
|
|
56
|
|
Chief
Executive Officer and Director
|
Gerard
J. Gallagher
|
|
51
|
|
President,
Chief Operating Officer and Director
|
Timothy
C. Dec
|
|
49
|
|
Chief
Financial Officer and Chief Accounting Officer
|
David
J. Mitchell* (1)(3)
|
|
46
|
|
Director
|
Donald
L. Nickles* (2)
|
|
59
|
|
Director
|
John
Morton, III* (1)(2)(3)
|
|
64
|
|
Director
|
Asa
Hutchinson* (1)(2)(3)
|
|
57
|
|
Director
|
William
L. Jews* (1)(3)
|
|
56
|
|
Director
|
*
Nonemployee director.
(1)
Member of the Audit Committee
(2)
Member of the Compensation Committee
(3)
Member of the Special Committee
Harvey
L. Weiss,
age 65,
became our Chairman of the Board upon the closing of our acquisition of
TSS/Vortech on January 19, 2007. From our inception through the closing of
the
acquisition, Mr. Weiss had served as our Chief Executive Officer, President
and
a member of our Board. He has over 35 years of experience in the information
technology and security market place. From 2002 to August 1, 2004,
Mr. Weiss was the Chief Executive Officer and President of System
Detection, Inc., a software security company. From 2000 to 2002, he served
as
President of Engineering Systems Solutions, Inc., a security and biometrics
integration firm. During 1999, Mr. Weiss was the Chief Executive Officer
and President of Global Integrity Corporation, a SAIC subsidiary specializing
in
information security and served as a Director until the company was sold in
2002. From 1996 to 1998, until sold to Network Associates, Inc, Mr. Weiss
was President of the Commercial Division, Secretary and Director of Trusted
Information Systems, Inc., a NASDAQ-listed security network company. Prior
to
that time, from 1994 to 1996, Mr. Weiss served as President of Public
Sector Worldwide Division for Unisys Corporation. From 1991 to 1993,
Mr. Weiss was the Vice President of Sales and the President and Chief
Operating Officer of Thinking Machines Corporation, a massively parallel
processing company. Prior to that time, he served in various senior capacities
in Digital Equipment Corporation. Mr. Weiss serves on the Board of Forterra
Systems, Inc., a simulation company, is a member of the Brookings Institution
Council, and is a trustee of Capitol College. In addition, Mr.
Weiss
is the Co-Chairman of the Board and Co-chief Executive Officer of Secure America
Acquisition Corporation, a blank check company formed for the purpose of
acquiring one or more domestic and international operating businesses in the
homeland security industry, but not businesses that design, build or maintain
mission-critical facilities. Mr. Weiss received a Bachelor of Science in
Mathematics from the University of Pittsburgh.
C.
Thomas McMillen,
age 55,
became our Vice Chairman of the Board upon the closing of our acquisition of
TSS/Vortech on January 19, 2007. From our inception through the closing of
the
acquisition, Mr. McMillen had served as our Chairman of the Board. He has
over 20 years of experience in government, finance and mergers and
acquisitions. Mr. McMillen has also served, since August 2005, as the
President, Chief Executive Officer and Chairman of the Board of Homeland
Security Capital Corporation, a consolidator of homeland security companies
that
provides capital, management advice and investments for developing companies.
Mr. McMillen co-founded Global Secure Corp., a homeland security company
providing critical infrastructure services, in 2003, and served as its Chief
Executive Officer until February 2004. From February 2004 until
February 2005, Mr. McMillen served as a consultant to Global Secure
Corp. In addition, from October 2004 through July 2005, he served as a
Chairman of the Board of Global Defense Corporation, a development stage company
focused on acquiring companies in critical infrastructure security. From
December 2003 to February 2004, Mr. McMillen served as Vice
Chairman and Director of Sky Capital Enterprises, Inc., a venture firm, and
until February 2005 served as a consultant. From March 2003 to
February 2004, Mr. McMillen served as Chairman of Sky Capital
Holdings, Ltd, Sky Capital Enterprises’ London stock exchange-listed brokerage
affiliate. Mr. McMillen has also been Chief Executive Officer of Washington
Capital Advisors, LLC, a merchant bank and one of our stockholders, since 2003.
Mr. McMillen has also been an independent consultant throughout his career.
From 1994 through February 1999, Mr. McMillen served as the Founder,
Chief Executive Officer and Director of NASDAQ-listed Complete Wellness Centers,
Inc., a medical multi-disciplinary clinic management company. In addition,
Mr.
McMillen is the Co-Chairman of the Board and Co-Chief Executive Officer of
Secure America Acquisition Corporation, a blank check company formed for the
purpose of acquiring one or more domestic and international operating businesses
in the homeland security industry, but not businesses that design, build or
maintain mission-critical facilities. Mr. McMillen was appointed by
President Clinton to Co-Chair the President’s Council on Physical Fitness and
Sports from 1993 to 1997. From 1987 through 1993, he served three consecutive
terms in the United States House of Representatives from the 4th Congressional
District of Maryland. Prior to that, Mr. McMillen played 11 years in the
National Basketball Association. Mr. McMillen received a Bachelor of
Science in chemistry from the University of Maryland and a Bachelor of Arts
and
a Master of Arts from Oxford University as a Rhodes Scholar.
Thomas
P. Rosato,
age 56,
became a Director and our Chief Executive Officer upon our acquisition of
TSS/Vortech on January 19, 2007. Mr. Rosato has over 25 years of experience
in mission-critical service businesses. In 2002, he Co-Founded TSS and Vortech
and served as Chairman of each of the companies. From 1998 to 2001,
Mr. Rosato served as the President - Group Maintenance of America/Encompass
Services Corporation, National Accounts Division. From 1995 to 1998, he served
as the Founder and President of Commercial Air, Power & Cable, Inc. From
1980 to 1995, he served in various capacities at Com-Site Enterprises, most
recently as Chief Financial Officer and Chief Operating Officer. Mr. Rosato
started his career in 1973 as a certified public accountant at Coopers &
Lybrand. Mr. Rosato received a Bachelor of Science in Accounting from
Temple University.
Gerard
J. Gallagher,
age 51,
became a Director and our President and Chief Operating Officer upon our
acquisition of TSS/Vortech on January 19, 2007. Mr. Gallagher has more than
25 years of experience in mission-critical fields. In 2002, he Co-Founded TSS
and Vortech and served as President of each of the companies. From 1998 to
2001,
Mr. Gallagher served as the President of the Total Site Solutions division
of Encompass Services Corp. From 1997 to 1998, he served as the President of
the
Total Site Solutions division of Commercial Air, Power & Cable, Inc and from
1991 to 1997; he served as the Chief Facilities Operations and Security Officer
of the International Monetary Fund. From 1980 to 1991, Mr. Gallagher served
in various capacities at Com Site International, most recently as Senior Vice
President of Engineering and Sales. Mr. Gallagher received a Bachelor of
Science in Fire Science from the University of Maryland and a Bachelor of
Science in Organizational Management, Summa
Cum Laude,
from
Columbia Union College.
Timothy
C. Dec,
age 49,
was appointed as Chief Financial Officer of the Company, effective August 20,
2007. From June 2006 to August 2007, Mr. Dec was the Chief Financial Officer
of
Presidio Networked Solutions Inc., the nation’s largest independent value-added
solutions provider that offers a wide range of Cisco-centric network
infrastructure and collaborative solutions. From 1999 until May 2006, Mr. Dec
was Senior Vice President, Chief Accounting Officer and Treasurer of Broadwing
Corporation, a NASDAQ listed telecommunications company. Broadwing Corp was
acquired by Level 3 Inc in 2007. From 1997 to 1999, Mr. Dec was Director of
Accounting and Administration for Thermo Trilogy Corporations, a subsidiary
of
Thermo Electron Company, an American Stock Exchange company. Earlier in his
career, Mr. Dec held finance and accounting related positions at North American
Vaccine, Inc. an AMEX listed company engaged in the research, development and
manufacturing of vaccines, general contractor of Clark Construction and Intertek
Services International, LTD, a division of Inchcape Group, and a multinational
public company based in London, England. Mr. Dec holds a Bachelor of Science
in
Accounting from Mount Saint Mary’s University in Emmitsburg, Maryland, and a
Masters of Business Administration from American University in Washington DC.
Mr. Dec is a Certified Public Accountant.
David
J. Mitchell,
age 46,
has served as a member of our Board since its inception and has over 20 years
of
investment, finance and mergers and acquisition experience. Mr. Mitchell is
President of Mitchell Holdings LLC, a New York-based merchant banking company
he
founded in January of 1991, and since June 2004, Managing Partner of Las
Vegas Land Partners LLC, a real estate development firm. From 1996 until the
business was sold to American Express in August 1998, Mr. Mitchell was
the Founder and Co-Chief Executive Officer of Americash LLC. Mr. Mitchell
served as a Director of Kellstrom Industries from its inception until
January 2002. Mr. Mitchell served as a director of Centerpoint
Corporation (including its predecessor companies) from October 1996 until
January 2003. Prior to 1991, Mr. Mitchell held various senior
positions at New York Stock Exchange member firms. From 1988 to 1990, he was
a
Managing Director and Principal of Rodman & Renshaw, Inc., and from 1985 to
1988, he was a Managing Director of Laidlaw Adams & Peck, Inc. Previous to
1985, Mr. Mitchell was with Bear Stearns and Oppenheimer & Co.
Donald
L. Nickles,
age 59,
has served as a Director since February 2005. Mr. Nickles currently serves
as a member of the board of directors of Chesapeake Energy Corporation, Valero
Energy Corporation and Washington Mutual Investors Fund. In 2005, after his
retirement from the United States Senate, Senator Nickles founded and is
currently Chairman and Chief Executive Officer of The Nickles Group, LLC, a
consulting and business venture firm headquartered in Washington, D.C. Senator
Nickles was elected to the United States Senate in 1980 where he represented
the
state of Oklahoma and held numerous leadership positions, including Assistant
Republican Leader from 1996 to 2002 and Chairman of the Senate Budget Committee
from 2003 to 2004. Senator Nickles also served on the Energy and Natural
Resources Committee and the Finance Committee. While serving in the Unites
States Senate, Senator Nickles was instrumental in several key areas of
legislation including securing Senate passage of the Homeland Security Act
of
2002, the legislation creating the Department of Homeland Security and the
2003
Tax Relief Act. Prior to his service in the United States Senate, Senator
Nickles served in the Oklahoma State Senate from 1979 to 1980 and worked at
Nickles Machine Corporation in Ponca City, Oklahoma, becoming Vice President
and
General Manager. Senator Nickles served in the National Guard from 1970 to
1976
and graduated from Oklahoma State University in 1971.
John
Morton III,
age 64,
has served as a Director since January 2007. Prior to his election as a
Director, Mr. Morton had served as a director of Broadwing Corp. from April
2006 until January 2007, when Broadwing Corp. was acquired by Level 3
Communications, Inc. Prior to that, Mr. Morton had served as President of
Premier Bank, Bank of America until his retirement in September 2005 and was
a
member of Bank of America’s Management Operating Committee. From 1997 to 2001,
Mr. Morton served as President of Mid-Atlantic Region, Bank of America.
Prior to assuming the Regional President position, Mr. Morton was President
of the Private Client Group from 1996 to 1997. From 1994 to 1996, he was
Chairman, Chief Executive Officer and President of The Boatmen’s National Bank
of St. Louis. From 1993 to 1994, he was Chief Executive Officer and President
of
Farm and House Financial Corporation. From 1990 to 1991, Mr. Morton served
as Perpetual Financial Corporation’s Chairman, Chief Executive Officer and
President. Mr. Morton was a member of the Executive Committee of the
Federal City Council in Washington D.C. and a former Chairman of the Greater
Baltimore Committee in Baltimore. Mr. Morton holds a Bachelor of Science
from the U.S. Naval Academy and a Master in Business Administration from Harvard
University. He served in the U.S. Navy as a lieutenant aboard the nuclear
submarine U.S.S. George Washington Carver.
Asa
Hutchinson,
age 57,
has served as a Director since January 2007. Prior to his election as a
Director, Mr. Hutchinson had acted as our special advisor. Mr. Hutchinson
was one of the original leaders of the Department of Homeland Security serving
as Undersecretary for Border and Transportation Security for the first two
years
of the Department’s history. Mr. Hutchinson served three terms in the United
States House of Representatives from the 3rd Congressional District of Arkansas
(1997-2001) and as Administrator of the Drug Enforcement Administration
(2001-2003). Since 2001, Mr. Hutchinson has been engaged in the homeland
security law practice in Little Rock, Arkansas, and he is also a law partner
in
the firm of Venable LLP in Washington, D.C. Mr. Hutchinson is also the
principal of Hutchinson Group, a consulting firm that provides homeland security
counsel for companies. Mr. Hutchinson serves on the board of directors of
Identiphi Inc., a company that offers software solutions to protect intellectual
property, secure assets and eliminate passwords. Also, Mr. Hutchinson is a
director of Secure America Acquisition Corporation, a blank check company formed
for the purpose of acquiring one or more domestic and international operating
businesses in the homeland security industry, but not businesses that design,
build or maintain mission-critical facilities. Mr. Hutchinson received a
Bachelor of Science from Bob Jones University and a Juris Doctor from the
University of Arkansas School of Law.
William
L. Jews,
age 56,
has served as a Director since April 24, 2007. Mr. Jews served as President
and
Chief Executive Officer of CareFirst, Inc., a health care insurer and the
seventh largest Blue Cross Blue Shield Plan, from1993 to December 2006. During
this period, Mr. Jews was also President and Chief Executive Officer of Blue
Cross Blue Shield of Maryland and the Blue Cross and Blue Shield Plan of the
National Capital area and Chief Executive Officer of the Delaware Blue Cross
and
Blue Shield Plan. From 1990 to 1993, Mr. Jews was President and Chief Executive
Officer of Dimensions Health Corporation, a multi-faceted healthcare corporation
based in Landover, Maryland. From 1979 to 1990, Mr. Jews was President and
Chief
Executive Officer of Liberty Medical Center, Inc., of Baltimore MD. Mr. Jews
currently serves on the boards of The Ryland Group Inc., Camden
Learning Corporation and Choice Hotels International. Mr. Jews
received a Bachelor of Arts Degree from The Johns Hopkins University and a
Master from Morgan State University.
Board
of Directors
Our
Second Amended and Restated Certificate of Incorporation and amended and
Restated By-laws provide that our business is to be managed by or under the
direction of our Board. Our Board is divided into three classes for purposes
of
election. One class is elected at each annual meeting of stockholders to serve
for a three-year term. Our Board currently consists of nine members, classified
into three classes as follows:
|
· |
The
Class I directors are Messrs. David J. Mitchell, Gerard J. Gallagher
and
Asa Hutchinson, and their term will end at the 2009 annual meeting
of
stockholders.
|
|
· |
The
Class II directors are Messrs. Harvey L. Weiss, Donald L. Nickles
and
William L. Jews, and their term will end at the 2010 annual meeting
of
stockholders;
|
|
· |
The
Class III directors are Messrs. C. Thomas McMillen, Thomas P. Rosato
and John Morton, III, and their term will end at the 2008 annual
meeting
of stockholders; and
|
Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each
class will consist of one-third of the directors.
Board
Committees
Our
board
of directors has established an Audit Committee, a Compensation Committee,
and,
during 2007, had a Special Committee. The Board has adopted a charter for the
Audit and Compensation Committees.
Audit
Committee
Our
Audit
Committee currently has four members, John Morton, III (Chairman), David J.
Mitchell, Asa Hutchinson and William L. Jews. Our Audit Committee’s role and
responsibilities are set forth in a written charter and include the authority
to
retain and terminate the services of our independent accountants, review annual
financial statements, consider matters relating to accounting policy and
internal controls and review the scope of annual audits.
All
members of the Audit Committee satisfy the current independence standards
promulgated by the Securities and Exchange Commission and the Nasdaq Stock
Market, as such standards apply specifically to members of audit committees.
The
Board has determined that Mr. Morton is an “audit committee financial expert,”
as the Securities and Exchange Commission has defined that term in Item 407
of
Regulation S-K.
A
copy of
the Audit Committee’s written charter is publicly available on our website at
www.thefigi.com.
Compensation
Committee
Our
Compensation Committee currently has three members, Donald L. Nickles
(Chairman), Asa Hutchinson and John Morton, III. Our Compensation Committee
reviews, approves and makes recommendations regarding our compensation policies,
practices and procedures to ensure that legal and fiduciary responsibilities
of
the Board are carried out and that such policies, practices and procedures
contribute to our success. The Compensation Committee is responsible for the
determination of the compensation of our Chief Executive Officer, and conducts
its decision-making process with respect to that issue without the Chief
Executive Officer present. All members of the Compensation Committee qualify
as
independent directors under the definition promulgated by the Securities and
Exchange Commission and the Nasdaq Stock Market.
A
copy of
the Compensation Committee’s written charter is publicly available on our
website at www.thefigi.com.
Special
Committee
Our
Special Committee currently has four members, John Morton, III (Chairman),
David
J. Mitchell, Asa Hutchinson and William L. Jews. Our Special Committee’s role
and responsibility have been to review a potential transaction with a related
party. All members of the Special Committee qualify as independent directors
under the definition promulgated by the Securities and Exchange Commission
and
the Nasdaq Stock Market.
Board
and Committee Meetings
During
the fiscal year ended December 31, 2007, our Board and the various committees
of
the Board held the following meetings:
|
Number
of
|
|
Meetings
|
|
|
Board
|
7
|
Audit
Committee
|
4
|
Compensation
Committee
|
4
|
Special
Committee
|
5
|
Although
we do not have any formal policy regarding director attendance at our annual
meetings, we will attempt to schedule our annual meetings so that all of our
directors can attend. All of our directors attended the 2007 annual meeting
either in person or telephonically. During the fiscal year ended December 31,
2007, all of our directors attended at least 75% of the meetings of the Board
and committees of the Board on which they served.
Nominations
for Directors
We
do not
currently have a standing Nominating Committee since our Board determined that
the independent members of the Board adequately fulfill the obligations of
a
nominating committee without the need of incurring additional costs of committee
meetings.
The
Board
considers recommendations of potential candidates from current directors,
management and stockholders. Stockholders’ nominations for directors must be
made in writing and include the nominee’s written consent to the nomination and
sufficient background information on the candidate to enable the Board to assess
his or her qualifications. Nominations must be addressed to the Chairman of
the
Board at our headquarters address listed below, and generally must be received
no later than 60 days nor earlier than 90 days prior to the first anniversary
of
the preceding year’s annual meeting, in order to be considered for the next
annual election of directors.
Chairman
of the Board of Directors
9841
Broken Land Parkway
Columbia,
Maryland 21046
Stockholder
Communications to the Board
Generally,
stockholders who have questions or concerns should contact our Investor
Relations department at 212-554-5485.
However, any stockholders who wish to address questions regarding our business
directly with the Board, or any individual director, should direct his or her
questions in writing to the Chairman of the Board at 9841 Broken Land Parkway,
Columbia, Maryland 21046. Communications will be distributed to the Board,
or to
any individual director or directors as appropriate, depending on the facts
and
circumstances outlined in the communications. Items that are unrelated to the
duties and responsibilities of the Board may be excluded, such as:
•
junk
mail and mass mailings
•
resumes
and other forms of job inquiries
•
surveys
•
solicitations or advertisements.
In
addition, any material that is unduly hostile, threatening, or illegal in nature
may be excluded, provided that any communication that is filtered out will
be
made available to any outside director upon request.
Section
16(a) Beneficial Ownership Reporting Compliance
Our
executive officers, directors and 10% stockholders are required under Section
16(a) of the Securities Exchange Act of 1934, as amended, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Copies of these reports must also be furnished to us.
Based
solely on our review of copies of reports furnished to us, or written
representations that no reports were required, we believe that during 2007
our
executive officers, directors and 10% stockholders complied with all filing
requirements of Section 16(a) in a timely manner, except for Timothy C. Dec,
Chief Financial Officer and Paul D. Sonkin and Hummingbird, as defined below.
Mr.
Dec
was hired on August 20, 2007 and on September 7, 2007 received restricted common
stock grants of (i) 40,000 shares, one half vesting 18 months from the grant
date and one half vesting 36 months from the grant date and (ii) 40,000 shares
vesting based on certain performance criteria. Accordingly, Form 3 and Form
4
were required to be filed by August 30, 2007 and September 11, 2007,
respectively, but were not filed until March 20, 2008.
Paul
D.
Sonkin, The Hummingbird Value Fund L.P., The Hummingbird Microcap Value Fund
L.P., The Hummingbird Concentrated Fund, L.P., Hummingbird Capital, LLC,
and
Hummingbird Management, LLC (collectively, “Hummingbird”) filed late Form 3 and
Form 4. The date of the reporting event associated with the Form 3 was September
25, 2006, requiring filing by no later than October 5, 2006. The date of
the
reporting event associated with the Form 4 was October 12, 2006, requiring
filing by no later than October 16, 2006. The Form 3 and Form 4 were filed
by
Hummingbird on January 8, 2007.
Code
of Conduct and Ethics
Our
Code
of Ethics, which is our code of ethics applicable to all our employees, officers
and directors, embodies our principles and practices relating to the ethical
conduct of our business and commitment to honesty, fair dealing and full
compliance with all laws affecting our business. The text of our Code of Ethics
is being filed as an exhibit 14 to this Amendment. The Code of Ethics is also
available without charge, to any stockholder upon written request to our Chief
Executive Officer at 9841 Broken Land Parkway Columbia, Maryland 21046.
Disclosure regarding any amendments to, or waivers from, provisions of the
code
of conduct and ethics that apply to our directors, principal executive and
financial officers will be included in a Current Report on Form 8-K within
four
business days following the date of the amendment or waiver.
Item
11. |
EXECUTIVE
COMPENSATION
|
Compensation
Discussion and Analysis
Overview
On
January 19, 2007, we consummated the acquisition of TSS/Vortech. Our
Compensation Committee has developed a comprehensive executive compensation
program and philosophy with respect to our executive officers. The Compensation
Committee has not selected or hired a compensation consulting firm to assist
in
the development of a comprehensive executive compensation program and
philosophy, but may consider doing so in the future.
The
Compensation Committee of our Board makes all decisions regarding the
compensation of our executive officers, which decisions are subject to
ratification by our Board. On March 7, 2007, we established a Compensation
Committee consisting of Donald Nickles and Asa Hutchinson, and on April 24,
2007, John Morton, III was appointed to the Committee. Our Board has determined
that each of these directors is an “independent director” within the meaning of
the rules of the Nasdaq Stock Market and Rule 10A-3 promulgated under the
Securities and Exchange Act of 1934, as amended. The Compensation Committee
has
the responsibility to:
|
·
|
review,
modify and approve our overall compensation strategy;
|
|
·
|
recommend
to the Board the compensation and terms of employment of our executive
officers, including Thomas P. Rosato, our Chief Executive Officer,
Gerard
J. Gallagher, our President and Chief Operating Officer, and Timothy
C.
Dec, our Chief Financial Officer, and to evaluate their respective
performance in light of relevant goals and objectives;
|
|
·
|
review
and recommend to our board the type and amount of compensation to
be paid
or awarded to the members of our Board;
|
|
·
|
recommend
to our Board the adoption, amendment and termination of any bonus,
equity
and other deferred compensation plans, including the 2006 Omnibus
Incentive Compensation Plan (“2006 Stock Plan”);
|
|
·
|
determine
appropriate insurance coverage for our executive officers and directors;
and
|
|
·
|
review,
discuss and assess its own performance at least
annually.
|
General
Compensation Philosophy
We
recognize the importance of maintaining sound principles for the development
and
administration of our compensation and benefits programs. The overall
compensation philosophy of our company is primarily driven by our business
environment and our desire to align the interest of the employees with the
interests of our company. It is also based on the principles of competitive
and
fair compensation, as well as our goal to attract, retain and motivate qualified
employees.
The
compensation and benefit plans are designed to enable us to meet our corporate
goals and performance. The objectives of our compensation structure are to:
|
·
|
enable
the company to attract, engage and retain key executives and employees
critical to future success;
|
|
·
|
motivate
and inspire employee behavior which fosters a high performance culture;
and
|
|
·
|
support
the overall business objectives and ensure that a significant component
of
the compensation opportunity will be related to factors that both
directly
and indirectly influence shareholder
value.
|
We
measure the success of our compensation plans on overall business performance
and our ability to attract and retain key talent which, in turn, will minimize
risk and optimize return for our shareholders.
To
this
end, the Compensation Committee affirms that the total compensation plan should
consist of:
|
·
|
Annual
salary. Designed
to reward the core competence in the executive role relative to the
skills, experience and contribution to our company.
|
|
·
|
Annual
cash incentive/bonus awards. Designed
to reward the executive for specific contributions to our company
aligned
to both corporate and individual objectives.
|
|
·
|
Long-term
equity compensation. Designed
to align the executives’ interests with those of the
shareholders.
|
|
·
|
Certain
other benefits, including retirement and welfare
plans.
|
The
use
of the above components of our overall compensation plan enables us to reinforce
our pay for performance philosophy and strengthen our ability to attract and
retain high caliber and experienced executives. We believe that our combination
of programs provides an appropriate mix of fixed and variable pay, balances
short-term operational performance with longer-term shareholder value and
facilitates effective executive recruitment and retention.
We
will
seek to target both short and long-term compensation levels competitively among
a peer group of similar companies based on available survey data. The companies
that will comprise our peer group to benchmark executive compensation levels
against companies that have executive positions with responsibilities similar
in
breadth and scope to ours and have businesses which compete with us for
executive talent.
Compensation
Components
Base
Salary
The
salaries of our executive officers are the only non-variable element of our
compensation and are reviewed on an annual basis. The salaries reflect each
executive’s responsibilities, the importance and impact of the executive’s role,
and the contribution each executive delivers to us. Salary revisions are based
on an evaluation of the individual’s performance, as part of our Annual
Performance Review process and related salary revision matrix, in addition
to
level of pay compared to homeland security industry peer group company levels.
Within this comparison group, we seek to make comparisons to executives who
are
comparable in terms of (a) level of responsibility and (b) expected level of
contribution to our performance. Performance-related increases generally take
effect as of January 1 of each year.
Bonuses
Our
Compensation Committee will be responsible for establishing and implementing
pre-established quantitative and qualitative performance standards for executive
bonuses as well as guidelines and requirements for the distribution of such
bonuses. To the extent that our employment agreements contain qualitative
standards for discretionary bonuses, our Board intends to take the following
steps to ensure direct correlation between executive compensation and
performance:
|
·
|
initiate
a practice of periodically reviewing the performance of all senior
executives at Board meetings; and
|
|
·
|
establish
annual reviews of compensation reports for the named executive officers.
|
Long-Term
Equity Compensation
We
believe that long-term incentive compensation, primarily in the form of
restricted stock awards, ensures that our executive officers have an ongoing
stake in the long-term success of the company, as well as giving our employees
the opportunity to share in any appreciation in the value of our common stock.
Under the 2006 Stock Plan, stock options and stock appreciation rights may
be
granted; however, we currently have no plans or intentions of using these as
a
form of compensation.
The
Compensation Committee supports the belief that equity participation aligns
employees’ interests with those of the shareholders. However, we have not yet
instituted stock ownership or retention guidelines for our executive
officers.
Other
Benefits
We
provide a number of benefits as part of our overall remuneration package to
all
eligible employees including the named executive officers.
We
operate a defined contribution retirement plan — a qualified 401(k) Plan which
allows each of our employees to contribute up to the limits imposed by the
Internal Revenue Code (US), on a pre-tax basis. We provide for matching payments
up to 50% of the first six percent of employee contributions.
We
also
provide other benefits such as medical, dental, life insurance and short and
long-term disability coverage to each named executive officer, as well as to
all
of our full-time employees. In addition, we provide paid time off and other
paid
holidays to all employees, including our named executive officers, which we
believe are in line with our peers in the industry.
Tax
Considerations
The
Compensation Committee’s compensation strategy is to be cost and tax effective.
Therefore, the Compensation Committee’s policy is to preserve corporate tax
deductions, while maintaining the flexibility to approve compensation
arrangements that it deems to be in the best interests of our company and our
stockholders, even if such arrangements do not always qualify for full tax
deductibility.
Employment
Agreements
Descriptions
of the employment agreements with Messrs. Rosato, Gallagher, Dec and Weiss
are
set forth below. The terms and conditions of Messrs. Rosato’s and Gallagher’s
employment agreements were negotiated with the sellers of TSS/Vortech as well
as
with such executives as part of the negotiation of the overall terms and
conditions of the acquisition. We expect that the Compensation Committee will,
in connection with the development of a comprehensive executive compensation
program and philosophy, recommend to our Board the compensation and terms of
employment for our other executive officers whereupon we may enter into
appropriate employment agreements with them.
Change
in Control and Severance
As
described below, the employment agreements of Messrs. Rosato, Gallagher, Dec
and
Weiss provide for severance benefits. We have not yet developed any
comprehensive severance policies for our executive officers but expect to do
so
in connection with the development of our comprehensive executive compensation
program and philosophy.
Role
of Executive Officers in Executive Compensation
We
expect
that our Compensation Committee will approve and make recommendations to our
Board with respect to the compensation for our executive officers, other than
Mr. Rosato, with the advice of Mr. Rosato and/or one or more other executive
officers designated by Mr. Rosato. We expect Mr. Rosato and any such other
executive officers to play no role in the Compensation Committee’s determination
of their respective compensation. However, to the extent we enter into
employment agreements with our executive officers, such agreements would be
subject to negotiation between us and the applicable executive
officer.
Compensation
Committee Report
The
Compensation Committee of our Board has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears
elsewhere in this annual report, with our management. Based on this review
and
discussion, the Compensation Committee has recommended to the Board that the
Compensation Discussion and Analysis be included in this annual
report.
|
Members of the Fortress International Group, Inc. Compensation Committee
|
|
Donald
L. Nickles
|
|
Asa
Hutchinson
|
|
John
Morton, III
|
Summary
Compensation Table
The
following table shows the total compensation paid or accrued by us during the
fiscal year ended December 31, 2007 to our (1) Chief Executive Officer, (2)
President and Chief Operating Officer, (3) Chief Financial Officer and (4)
Chairman, during the fiscal year ended December 31, 2007. Collectively, these
are the “named executive officers”. The 2006 reported amounts for Mr. Rosato and
Mr. Gallagher below were received from the predecessor, Vortech, LLC and VTC,
L.L.C. (TSS/Vortech), which was acquired by us on January 19, 2007.
|
|
|
|
Annual Compensation
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Other
|
|
|
|
Name and Principal Position(s)
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards (1)
|
|
Compensation (2)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
2007
|
|
$
|
401,665
|
|
$
|
-
|
|
$
|
-
|
|
$
|
282,881
|
|
$
|
684,546
|
|
|
|
|
2006
|
|
|
166,788
|
|
|
- |
|
|
-
|
|
|
33,563
|
|
|
200,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
J. Gallagher (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief Operating Officer
|
|
|
2007
|
|
|
405,865
|
|
|
-
|
|
|
-
|
|
|
277,505
|
|
|
683,370
|
|
|
|
|
2006
|
|
|
350,000
|
|
|
42,580
|
|
|
-
|
|
|
48,710
|
|
|
441,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harvey
L. Weiss (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman and former Chief Executive Officer
|
|
|
2007
|
|
|
180,769
|
|
|
-
|
|
|
-
|
|
|
34,091
|
|
|
214,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
This
column represents the dollar amount recognized as compensation expense for
financial statement reporting purposes with respect to the referenced fiscal
year for the fair value of restricted stock granted in that fiscal year.
These
values have been calculated in accordance with SFAS 123R using the closing
price
of our common stock on the grant date. Pursuant to SEC rules, the amounts
shown
exclude the effect of estimated forfeitures related to service-based vesting
conditions. The amounts in this column reflect our accounting expense for
these
awards, and may not correspond to the actual value that will be recognized
by
the named executive officer. In connection with his new hiring, Mr. Timothy
C.
Dec was the only executive officer to receive a stock grant during the fiscal
year ended December 31, 2007, see “Grant of Plan Based Awards”
below.
(2)
See
“All Other Compensation Table” below for additional information regarding the
components of the amounts set forth in this column.
(3)
Mr.
Rosato’s and Mr. Gallagher’s employment commenced January 19, 2007 in connection
with the acquisition of TSS/Vortech. Accordingly, compensation reflects the
partial period January 19, 2007 through December 31, 2007. Mr. Rosato and
Mr.
Gallagher received $11,538 and $14,423, respectively, from TSS/Vortech during
the period from January 1, 2007 to January 18, 2007. In addition to the amounts
included above, distributions of $1,386,473 and $1,337,972 were made during
2006
by TSS/Vortech to Mr. Rosato and Mr. Gallagher, respectively. Such distributions
represented payments for income taxes and profit distributions of the
companies.
(4)
Mr.
Dec’s employment commenced on August 20, 2007. Accordingly, compensation
reflects the partial period from August 20, 2007 through December 31,
2007.
(5)
Mr.
Weiss entered into an employment agreement on January 19, 2007. Accordingly,
his
compensation reflects the partial period from January 19, 2007 through December
31, 2007.
All
Other Compensation Table
The
following table shows the components of all other compensation with respect
to
our named executive officers.
|
|
401(k)
|
|
Club
|
|
Rent
|
|
Automobile
|
|
Interest
|
|
Long-term
|
|
|
|
|
|
Match
($)(1)
|
|
Membership
($)(2)
|
|
Expense($)(3)
|
|
Allowance
($)(4)
|
|
Payments
($)(5)
|
|
Disability
($)(6)
|
|
Total
($)
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato
|
|
|
7,654
|
|
|
4,645
|
|
|
33,000
|
|
|
19,248
|
|
|
218,334
|
|
|
-
|
|
|
282,881
|
|
Gerald
J. Gallagher
|
|
|
7,750
|
|
|
16,407
|
|
|
-
|
|
|
16,636
|
|
|
234,247
|
|
|
2,466
|
|
|
277,505
|
|
Timothy
C. Dec
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,200
|
|
|
-
|
|
|
-
|
|
|
3,200
|
|
Harvey
L. Weiss
|
|
|
1,091
|
|
|
-
|
|
|
33,000
|
|
|
-
|
|
|
|
|
|
-
|
|
|
34,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
(paid by Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato
|
|
|
6,657
|
|
|
12,105
|
|
|
-
|
|
|
14,801
|
|
|
-
|
|
|
-
|
|
|
33,563
|
|
Gerald
J. Gallagher
|
|
|
6,115
|
|
|
25,941
|
|
|
-
|
|
|
16,654
|
|
|
-
|
|
|
-
|
|
|
48,710
|
|
(1)
|
|
We
offer employees a 401(k) matching contribution up to 50% of the
first 6%
of an employee’s compensation contributed to our 401(k) Plan. These
amounts reflect Company contributions to the employee account under
the
matching program.
|
|
|
|
(2)
|
|
We
reimbursed golf club memberships not exclusively used for business
entertainment.
|
|
|
|
(3)
|
|
Per
their respective employment agreements, Mr. Rosato and Mr. Weiss
each
received $3,000 per month for the reimbursement of the cost associated
with separately maintaining their own office.
|
|
|
|
(4)
|
|
Reflects
reimbursement for automobile and associated costs not exclusively
used for
business.
|
|
|
|
(5)
|
|
Represents
interest paid on our convertible, promissory notes issued to Mr.
Rosato
and Mr. Gallagher in conjunction with our purchase of TSS/Vortech.
The
notes bear interest at 6% per annum.
|
|
|
|
(6)
|
|
We paid
premiums for a supplemental long-term disability policy on behalf
of Mr.
Gallagher.
|
Grants
of Plan-Based Awards
The
2006
Stock Plan was approved on January 17, 2007. Timothy C. Dec was the only
named executive officer that received an equity award under the Stock Plan
during the fiscal year ended December 31, 2007.
|
|
|
|
Stock Awards
|
|
|
|
|
|
Restricted Stock
|
|
Grant Date
|
|
|
|
|
|
Granted
|
|
Fair Value of Stock
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec
|
|
|
9/7/2007
|
|
|
40,000
|
|
|
239,600
|
|
|
|
|
9/7/2007
|
|
|
40,000
|
|
|
239,600
|
|
Outstanding
Equity Awards at 2007 Fiscal Year End
The
following table provides information on the current holdings of restricted
stock
by Mr. Dec, who is the only named executive officer with outstanding equity
awards. This table includes unvested restricted stock and the vesting schedule
is footnoted accordingly.
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
|
|
|
|
|
|
of Shares of
|
|
Name
|
|
Grant Date
|
|
Shares that Have not
Vested (#)
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec
|
|
|
9/7/2007 (1)
|
|
|
40,000
|
|
$ |
194,000
|
|
|
|
|
9/7/2007 (2)
|
|
|
40,000
|
|
|
194,000
|
|
|
(1) |
Shares
vest 50% at 18 months from the grant date and the remaining 50% vest
at 36
months from the grant date.
|
|
(2) |
Shares
vest based on specific performance targets established by the Board.
The
market value of the stock awards is determined by multiplying the
number
of shares times $4.85, the closing price of our common stock on the
Nasdaq
Capital Market on December 31, 2007, the last day of our fiscal
year.
|
Stock
Vested in 2007
As
no
restricted shares of common stock vested during 2007, the named executive
officers acquired no shares during fiscal year 2007.
Pension
Benefits
Our
named
executive officers did not participate in, or otherwise receive any benefits
under, any pension or retirement plan sponsored by us during the fiscal year
ended December 31, 2007.
Nonqualified
Deferred Compensation
Our
named
executive officers did not earn any nonqualified deferred compensation benefits
from us during the fiscal year ended December 31, 2007.
Employment
Agreements
Employment
Agreement with Thomas P. Rosato
On
January 19 2007, we entered into an employment agreement with Thomas P. Rosato
whereby Mr. Rosato agreed to serve as our Chief Executive Officer for a
period of three years. Under the terms of the employment agreement,
Mr. Rosato’s base compensation is $425,000 per year (subject to a minimum
annual increase of 5% per year), Mr. Rosato is eligible to receive an
annual bonus of up to 50% of his then applicable base compensation (the amount
of the bonus and the criteria for the bonus to be determined by the Board),
and
Mr. Rosato is eligible for the share performance bonus described below. In
addition to base compensation and bonus eligibility, (i) we will pay the
premiums on the life insurance policies, (ii) Mr. Rosato is entitled to an
office allowance of $3,000 monthly, and (iii) Mr. Rosato is otherwise
entitled to receive vacation, health insurance and other benefits as generally
made available to our other executives.
Pursuant
to the terms of the employment agreement, if we terminate Mr. Rosato’s
employment for reasons other than “Cause” or Mr. Rosato terminates his
employment for “Good Reason” (as those terms are defined in the employment
agreement), Mr. Rosato is entitled to receive his base compensation as and
when it would otherwise be payable if his employment had not been terminated
(provided, however that if termination occurs during the last twelve months
of
Mr. Rosato’s employment, then Mr. Rosato shall be entitled to receive
amounts equal to base compensation (as and on the terms otherwise payable)
for
twelve months from the date of termination).
Share
performance bonus.
Up to
$5.0 million in additional shares of our common stock will be issuable to
Mr. Rosato if during the period from the closing of the acquisition
(January 19, 2007) through July 13, 2008, certain share performance
thresholds (alternative and not cumulative) set forth below are
satisfied:
|
· |
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $9.00 per share but is no more than $10.00
per share, he will be entitled to $0.5 million worth of additional
shares;
or
|
|
· |
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $10.00 per share but is no more than $12.00
per share, he will be entitled to $1.5 million worth of additional
shares;
or
|
|
· |
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $12.00 per share but is no more than $14.00
per share, he will be entitled to $3.0 million worth of additional
shares;
or
|
|
· |
if
the highest average share price of shares of common stock during
any 60
consecutive trading day period between the closing of the acquisition
and
July 13, 2008 exceeds $14.00 per share, he will be entitled to $5.0
million worth of additional
shares.
|
Employment
Agreement with Gerard J. Gallagher
On
January 19, 2007, we entered into an employment agreement with Gerard J.
Gallagher whereby Mr. Gallagher agreed to serve as our President and Chief
Operating Officer for a period of three years. Under the terms of the employment
agreement, Mr. Gallagher’s base compensation is $425,000 per year (subject
to a minimum annual increase of 5% per year), Mr. Gallagher will be
eligible to receive an annual bonus of up to 50% of his then applicable base
compensation (the amount of the bonus and the criteria for the bonus to be
determined by the Board), and Mr. Gallagher is eligible to receive a share
performance bonus on terms identical to those described above under “Employment
Agreement with Thomas P. Rosato” set forth above. In addition to base
compensation and eligibility for a bonus, (i) we pay the premiums on the life
insurance policies, and (ii) Mr. Gallagher is otherwise entitled to receive
vacation, health insurance and other benefits as generally made available to
our
other executives. Pursuant to the terms of the employment agreement, if we
terminate Mr. Gallagher’s employment for reasons other than “Cause” or
Mr. Gallagher terminates his employment for “Good Reason” (as those terms
are defined in the employment agreement), Mr. Gallagher is entitled to
receive his base compensation as and when it would otherwise be payable if
his
employment had not been terminated (provided, however that if termination occurs
during the last twelve months of Mr. Gallagher’s employment, then
Mr. Gallagher shall be entitled to receive amounts equal to base
compensation (as and on the terms otherwise payable) for twelve months from
the
date of termination).
Employment
Agreement with Timothy C. Dec
On
August
20, 2007, we entered into an employment agreement with Timothy C. Dec whereby
Mr. Dec agreed to serve as our Chief Financial Officer and will be
responsible for our finance, accounting and treasury functions for a period
of
three years. Under the terms of the employment agreement, Mr. Dec’s base
compensation is $225,000 per year (subject to a minimum annual increase of
5%
per year), and he is eligible to receive an annual bonus of up to 50% of his
then applicable base compensation (the amount of the bonus and the criteria
for
the bonus to be determined by the Board of Directors). Mr. Dec received
40,000 shares of restricted common stock of which 50% of the shares vest 18
months from his commencement of employment date and the remainder vest 36 months
from his commencement of employment date. An additional 40,000 common shares
were granted to Mr. Dec and vest on achieving certain milestones set by the
Board. In addition to base compensation, eligibility for a bonus, and equity
compensation (i) we will pay the premiums on a life insurance policy, and (ii)
Mr. Dec is otherwise entitled to receive vacation, health insurance and other
benefits as generally made available to our other executives. Pursuant to the
terms of the employment agreement, if we terminate Mr. Dec’s employment for
reasons other than “Cause” or Mr. Dec terminates his employment for “Good
Reason” (as those terms are defined in the employment agreement), Mr. Dec
is entitled to receive his base compensation as and when it would otherwise
be
payable if his employment had not been terminated (provided, however that if
termination occurs during the last twelve months of Mr. Dec’s employment,
then Mr. Dec shall be entitled to receive amounts equal to base
compensation (as and on the terms otherwise payable) for twelve months from
the
date of termination).
Employment
Agreement with Harvey L. Weiss
On
January 19, 2007, we entered into an employment agreement with Harvey L. Weiss
whereby Mr. Weiss agreed to serve as our chairman for a period of three
years. Under the terms of the employment agreement, Mr. Weiss’ base
compensation is $200,000 per year (subject to a minimum annual increase of
5%
per year) and Mr. Weiss is eligible to receive an annual bonus of up to 50%
of his then applicable base compensation (the amount of the bonus and the
criteria for the bonus to be determined by the Board of Directors). In addition
to base compensation and eligibility for a bonus, (i) Mr. Weiss is entitled
to a referral fee equal to 5% of the “Gross Profits” (as defined in the
Employment Agreement) attributable to any client or customer (other than the
federal government, or any agency or subdivision thereof) identified by
Mr. Weiss to us or our subsidiaries, (ii) Mr. Weiss is entitled to an
“office allowance” of $3,000 per month and (iii) Mr. Weiss is otherwise
entitled to receive vacation, health insurance and other benefits as generally
made available to our other executives. Pursuant to the terms of the employment
agreement, if we terminates Mr. Weiss’ employment for reasons other than
“Cause” or Mr. Weiss terminates his employment for “Good Reason” (as those
terms are defined in the Employment Agreement), Mr. Weiss is entitled to
receive his base compensation as and when it would otherwise be payable if
his
employment had not been terminated (provided, however that if termination occurs
during the last twelve months of Mr. Weiss’ employment, then Mr. Weiss
shall be entitled to receive amounts equal to base compensation (as and on
the
terms otherwise payable) for twelve months from the date of termination).
Executive
2007 Performance and Compensation Review
During
2008, our Compensation Committee completed its 2007 annual performance reviews
for our executive officers, Chairman of the Board and Vice Chairman of the
Board consistent with terms of their respective employment or consulting
agreements, as applicable. Per their respective agreements, the aforementioned
individuals were entitled to a minimum 5% raise of their base salary and were
eligible for annual bonuses up to 50% of their base salary. The Compensation
Committee elected to leave their base pay unchanged during the first half of
2008, and agreed to reevaluate it in the second half of the 2008 and determined
that no bonuses would be paid to the individuals for fiscal year
2007.
Potential
Payments Upon Termination or Change-in-Control
Termination
by the Company for reasons other than “Cause” or by the Executive for“Good
Reason”.
Pursuant
to terms of their respective employment agreements, if we terminate each
of Mr.
Rosato’s, Mr. Gallagher’s, Mr. Dec’s or Mr. Weiss’s employment for reasons other
than “Cause” or the executive terminates his employment for “Good Reason” (as
those terms are defined in their respective employment agreement), each of
the
named executive officers is entitled to severance and health care payments,
as
described in the following table. Additionally, per the terms of his restricted
stock agreement, Mr. Dec is entitled to accelerated vesting of any unvested
restricted stock outstanding at the date of termination.
|
|
|
|
Health
|
|
Restricted
|
|
|
|
|
|
Severance
($)
|
|
Care
($)(4)
|
|
Stock
($)
|
|
Total($)
|
|
Thomas
P. Rosato
(1)
|
|
|
873,288
|
|
|
4,476
|
|
|
-
|
|
|
877,764
|
|
Gerald
J. Gallagher (1)
|
|
|
873,288
|
|
|
6,074
|
|
|
-
|
|
|
879,362
|
|
Timothy
C. Dec (2)
|
|
|
225,000
|
|
|
6,074
|
|
|
388,000
|
|
|
619,074
|
|
Harvey
L. Weiss (3)
|
|
|
410,959
|
|
|
4,476
|
|
|
-
|
|
|
415,435
|
|
|
(1)
|
Per
their respective employment agreement, each of Mr. Rosato and Mr.
Gallagher is entitled to receive base compensation as and when
it would
otherwise payable if his employment had not been terminated from
the date
of termination through January 19, 2010, the expiration date of
the
employment period. If the termination occurs during the last twelve
months
of their employment, then the executive shall be entitled to receive
amounts equal to his base compensation (as and on terms otherwise
payable)
for twelve months from the date of termination.
|
|
(2)
|
Per
his employment agreement, Mr. Dec is entitled to amounts equal
to his base
compensation (as and on terms otherwise payable) for 12 months
from the
date of termination. Mr. Dec’s restricted stock award is valued at $4.85
per share based on our closing stock price at December 31,
2007.
|
|
(3)
|
Per
his employment agreement, Mr. Weiss is entitled to receive base
compensation as and when it would otherwise payable if his employment
had
not been terminated from the date of termination through January
19, 2010,
the expiration date of the employment period. If the termination
occurs
during the last 24 months of his employment, then the executive
shall be
entitled to receive amounts equal to base compensation (as and
on terms
otherwise payable) for 24 months from the date of termination.
|
|
(4)
|
Per
their respective employment agreements, each of Mr. Rosato, Mr.
Gallagher,
Mr. Dec and Mr. Weiss is entitled to the reimbursement of a portion
of any
elected COBRA coverage for twelve months from the date of termination.
We
will pay a percentage of the premium for such COBRA health coverage
equal
to the percentage of the premium for health insurance coverage
paid by the
Company on the date of termination.
|
As
defined in the 2006 Stock Plan, any remaining restrictions on the restricted
common stock will lapse immediately, upon the occurrence of a change of control
of Fortress International Group, Inc.
Compensation
Committee Interlocks and Insider Participation
During
the 2007 fiscal year, none of the members of our Compensation Committee were
an
officer of our company. During the 2007 fiscal year, no interlocking
relationship existed between our board and the Board or the Compensation
Committee of any other company, nor has any such interlocking relationship
existed in the past.
Non-Employee
Director Compensation
During
the 2007 fiscal year, each of our non-employee directors, other than Mr.
McMillen, received an annual retainer fee of $20,000 and $3,000 for each
in-person Board meeting attended and $1,000 for each telephonic Board meeting
attended. In addition, each member of the Audit Committee (except the chairman)
shall receive $10,000 per year and the chairman of the Audit Committee shall
receive $30,000 per year. Each member of the Compensation Committee (except
the
chairman) shall receive $5,000 per year and the chairman of the Compensation
Committee shall receive $15,000 per year. Each member of the Special Committee
receives $1,000 for each committee meeting attended.
We
also
compensate our non-employee directors, other than Mr. McMillen, with restricted
stock. The compensation policy provides such non-employee directors with an
annual grant of 10,000 shares of restricted stock under our 2006 Stock Plan
to
be granted on or about May 1 of each calendar year (unless the Board determines
otherwise), and which vest over a two-year period with one-third of the shares
vesting on the grant date, and each one-half of the balance of such shares
vesting on the first and second anniversaries of the grant date, respectively.
In
addition, for the new members who joined the Board in 2007,
they received a one-time grant of $100,000 worth of restricted stock under
the 2006 Stock Plan, based on the closing price on the grant date of our common
stock on the Nasdaq Stock Market. Such shares will vest over a three-year
period, with one-third of such shares vesting on each of the first, second
and
third anniversaries of the grant date.
We
reimburse our directors for travel, lodging and other reasonable
out-of-pocket expenses in connection with the attendance at Board, committee,
and stockholder meetings, as well as for other reasonable expenses related
to
service on the Board. We also provide liability insurance for our directors
and
officers. American International Group and XL Insurance Company are the primary
carriers. The annual cost of this coverage is approximately $0.2
million.
We
do not
maintain any pension, nonqualified defined contribution or other deferred
compensation plans for our non-employee directors. The following table
summarizes compensation earned by our non-employee directors during fiscal
year
2007.
|
|
|
|
|
|
All
|
|
|
|
|
|
Fees Earned
|
|
Stock
|
|
Other
|
|
Total
|
|
Name
|
|
or Paid in Cash ($)
|
|
Awards ($)(1)
|
|
Compensation ($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Asa
Hutchinson
|
|
$
|
57,000
|
|
$
|
28,658
|
|
$
|
-
|
|
$
|
85,658
|
|
William
L. Jews
|
|
|
29,000
|
|
|
50,881
|
|
|
-
|
|
|
79,881
|
|
C.
Thomas McMillen (2)
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
200,000
|
|
David
J. Mitchell
|
|
|
57,000
|
|
|
28,658
|
|
|
-
|
|
|
85,658
|
|
John
Morton, III
|
|
|
75,000
|
|
|
50,881
|
|
|
-
|
|
|
125,881
|
|
Donald
L. Nickles
|
|
|
52,000
|
|
|
28,658
|
|
|
-
|
|
|
80,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
270,000
|
|
$
|
187,736
|
|
$
|
200,000
|
|
$
|
657,736
|
|
(1)
|
This
column represents the dollar amount recognized as compensation expenses
for financial statement reporting purposes with respect to the referenced
fiscal year for the fair value of restricted stock granted in that
fiscal
year. These values have been calculated in accordance with SFAS 123R
using
the closing price of our common stock on the grant date. Pursuant
to SEC
rules, the amounts shown exclude the effect of estimated forfeitures
related to service-based vesting conditions. The amounts in this
column
reflect our accounting expense for these awards, and may not correspond
to
the actual value that will be recognized by the director.
|
(2)
|
Represents
fees earned under the consulting agreement between us and the Washington
Capital Advisors, LLC, which is principally owned and managed by
Mr.
McMillen. See description of the consulting agreement below under
the
caption “Related
Party Transactions.”
|
The
non-employee directors without a consulting agreement received the following
equity awards under the 2006 Stock Plan during fiscal year 2007.
|
|
|
|
Stock Awards
|
|
|
|
|
|
Restricted Stock
|
|
Grant Date
|
|
|
|
|
|
Granted
|
|
Fair Value of Stock
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
Asa
Hutchinson
|
|
5/1/2007
|
|
|
10,000
|
|
$
|
54,300
|
|
William
L. Jews
|
|
5/1/2007
|
|
|
18,416
|
|
|
100,000
|
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
David
J. Mitchell
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
John
Morton, III
|
|
5/1/2007
|
|
|
18,416
|
|
|
100,000
|
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
Donald
L. Nickles
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
Potential
Payments upon Death, Disability or Termination
Termination
due to either Death, Disability, or by the Company for reasons other than
“Cause” or upon a “Change of Control”
Pursuant
to terms of their stock agreements, if the individual terminates due to death
or
disability, or we terminate each of Mr. Hutchinson’s, Mr. Jew’s, Mr. Mitchell’s,
Mr. Morton’s, or Mr. Nickle’s employment on the board for reasons other than
“Cause” or upon a “Change of Control” (as those terms are defined in their
respective stock agreements), each of the named executive officers is entitled
to accelerated vesting of any unvested restricted stock outstanding at the
date
of termination. Pursuant to Mr. McMillen’s consulting agreement, if we terminate
Mr. McMillen for reasons other than “Cause” or the executive terminates his
contract for “Good Reason” (as those terms are defined in his consulting
agreement), Mr. McMillen is entitled to severance payments.
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
|
|
Severance($)(1)
|
|
Stock($)
(2)
|
|
Total($)
|
|
Asa
Hutchinson
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
William
L. Jews
|
|
|
-
|
|
|
121,652
|
|
|
121,652
|
|
C.
Thomas McMillen
|
|
|
410,959
|
|
|
-
|
|
|
410,959
|
|
David
J. Mitchell
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
John
Morton, III
|
|
|
-
|
|
|
121,652
|
|
|
121,652
|
|
Donald
L. Nickles
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
|
(1)
|
Per
his consulting agreement, Mr. McMillen is entitled to receive base
compensation as and when it would otherwise payable if his employment
had
not been terminated from the date of termination through January
19, 2010,
the expiration date of the employment period. If the termination
occurs
during the last twelve months of his employment, then the executive
shall
be entitled to receive amounts equal to base compensation (as and
on terms
otherwise payable) for twelve months from the date of
termination.
|
|
(2)
|
The
restricted stock value is valued at $4.85 per share based on our
closing
stock price at December 31, 2007.
|
Item
12. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
The
following table sets forth certain information with respect to the beneficial
ownership of our common stock, as of March 31, 2008, by our directors, the
named
executive officers, the directors and executive officers as a group, and
each
person known by the company to beneficially own more than five percent of
our
outstanding shares of common stock. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and includes
voting or investment power with respect to securities. We deem shares of
common
stock that may be acquired by an individual or group within the 60-day period
following April 28, 2008 pursuant to the exercise of options or warrants
to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of
computing the percentage ownership of any other person shown in the table.
Percentage ownership is based on 12,089,221 share of common stock outstanding
on
March 31, 2008. Except as indicated in footnotes to this table, we believe
that
the stockholders named in this table have sole voting and investment power
with
respect to all share of common stock shown to be beneficially owned by them
based on information provided to us by these stockholders. Unless otherwise
indicated, the address for each director and current executive officer is
c/o
Fortress International Group, Inc., 9841 Broken Land Parkway, Columbia, Maryland
21046.
Directors
and Executive Officers
|
|
Beneficially
Owned
|
|
Ownership
|
|
|
|
|
|
|
|
C.
Thomas McMillen (1)
|
|
|
575,000
|
|
|
4.8
|
%
|
Harvey
L. Weiss (2)
|
|
|
1,070,000
|
|
|
8.5
|
%
|
Thomas
P. Rosato (3)
|
|
|
2,203,823
|
|
|
17.8
|
%
|
Timothy
C. Dec (4)
|
|
|
80,000
|
|
|
*
|
|
Gerard
J. Gallagher
|
|
|
1,221,433
|
|
|
10.1
|
%
|
David
J. Mitchell(5)
|
|
|
160,000
|
|
|
1.3
|
%
|
Donald
L. Nickles(6)
|
|
|
210,000
|
|
|
1.7
|
%
|
John
Morton, III(7)
|
|
|
28,416
|
|
|
*
|
|
Asa
Hutchinson(8)
|
|
|
210,000
|
|
|
1.7
|
%
|
William
L. Jews(9)
|
|
|
28,416
|
|
|
*
|
|
All
directors and offices combined as a group (10 persons)
(10)
|
|
|
5,787,088
|
|
|
45.1
|
%
|
|
|
|
|
|
|
|
|
5%
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hummingbird
Management, LLC, Hummingbird Capital, LLC, and
Hummingbird
Concentrated Fund, LP (11)
|
|
|
1,482,241 |
|
|
12.2 |
% |
Paul
D. Sonkin (12)
|
|
|
1,902,641
|
|
|
15.1
|
% |
Wellington
Management Company, LLP (13)
|
|
|
1,725,600
|
|
|
14.3
|
%
|
The
Pinnacle Fund, L.P. (14) |
|
|
1,847,500 |
|
|
14.6 |
% |
Robert
I. Green (15) |
|
|
1,735,000 |
|
|
12.6 |
% |
Southwell
Partners, L.P. (16) |
|
|
795,000 |
|
|
6.6 |
% |
|
Represents
beneficial ownership of less than 1% of the outstanding shares
of our
common stock.
|
(1)
|
Includes
575,000 shares held by Washington Capital Advisors, LLC, of
which Mr.
McMillen is the chief executive officer and the sole owner.
|
(2)
|
Includes
452,000 shares of common stock issuable upon the exercise of
warrants held
by Mr. Weiss.
|
(3)
|
Includes
294,870 shares of common stock issuable upon the exercise of
warrants held
by Mr. Rosato.
|
(4)
|
Includes
80,000 shares of restricted common stock which are subject
to
forfeiture.
|
(5)
|
Includes
3,333 shares of restricted common stock, the restrictions on
which will
lapse within 60 days of March 31, 2008, and 3,333 shares of
unvested
restricted common stock which are subject to
forfeiture.
|
(6)
|
Includes
3,333 shares of restricted common stock, the restrictions on
which will
lapse within 60 days of March 31, 2008, and 3,333 shares of
unvested
restricted common stock which are subject to
forfeiture.
|
(7)
|
Includes
9,472 shares of restricted common stock, the restrictions on
which will
lapse within 60 days of March 31, 2008, and 15,611 shares of
unvested
restricted common stock which are subject to
forfeiture.
|
(8)
|
Includes
3,333 shares of restricted common stock, the restrictions on
which will
lapse within 60 days of March 13, 2008, and 3,333 shares of
unvested
restricted common stock which are subject to
forfeiture.
|
(9)
|
Includes
9,472 shares of restricted common stock, the restrictions on
which will
lapse within 60 days of March 31, 2008, and 15,611 shares of
unvested
restricted common stock which are subject to
forfeiture.
|
(10)
|
Includes
746,870 shares of common stock issuable upon the exercise of
warrants,
28,943 shares of restricted common stock, the restrictions
on which will
lapse within 60 days of March 31, 2008, and 121,221 shares
of unvested
restricted common stock subject to forfeiture.
|
(11)
|
Derived
from a Schedule 13D/A and Form 4 filed on January 26, 2007
and March 20,
2008, respectively, by Paul D. Sonkin, The Hummingbird Value
Fund, LP
(“HVF”), The Hummingbird Microcap Value Fund, LP (“Microcap Fund”), The
Hummingbird Concentrated Fund, LP (“Concentrated Fund”), Hummingbird
Management, LLC (“Hummingbird”) and Hummingbird Capital, LLC (“Hummingbird
Capital”). HVF, Microcap Fund and Concentrated Fund are the beneficial
owner of 305,864, 378,733 and 702,644 shares of our common
stock,
respectively. Concentrated Fund is also the beneficial owner
of an
additional 95,000 shares of common stock issuable upon the
exercise of
warrants. Concentrated Fund Holdings were determined from a
Form 4 filed
on March 20, 2008, by Paul Sonkin. Hummingbird is the investment
manager
of HVF, Microcap Fund and Concentrated Fund and may be deemed
to have the
sole voting and investment authority over the shares owned
by such
entities. Hummingbird Capital, as the general partner of each
of HVF,
Microcap Fund and Concentrated Fund, may also be deemed to
have the sole
voting and investment authority over the shares owned by HVF,
Microcap
Fund and Concentrated Fund. Hummingbird and Hummingbird Capital
disclaim
any beneficial ownership of such shares. The business address
of Mr.
Sonkin and the foregoing Hummingbird entities is 460 Park Avenue,
12th
Floor, New York, New York 10022.
|
(12)
|
Includes
392,000 shares of common stock issuable upon the exercise of
warrants held
in Mr. Sonkin’s and Mrs. Sonkin's IRA accounts and an additional 28,400
shares of common stock issuable upon the exercise of warrants
held in IRA
accounts of various other parties for which Mr. Sonkin has
dispositive
power and for which Mr. Sonkin disclaims beneficial ownership.
As the
managing member and control person of Hummingbird, Mr. Sonkin
may also be
deemed to have the sole voting and investment authority over
the shares
beneficially owned by Hummingbird. Mr. Sonkin disclaims any
beneficial
ownership of such shares, except by pecuniary interest in the
392,000
warrants owned by him and his wife personally.
|
(13)
|
Derived
from a Schedule 13G/A filed by Wellington Management Company,
LLP
(“Wellington”) on February 14, 2008. Wellington, in its capacity as an
investment advisor, may be deemed to beneficially own 1,725,600
shares of
common stock which are held of record by clients of Wellington.
Those
clients have the right to receive, or the power to direct the
receipt of,
dividends from, or the proceeds from the sale of, such securities.
No such
client is known to have such right or power with respect to
more than five
percent of our common stock. Wellington has shared voting control
over
1,092,400 shares of common stock and shared investment control
over
1,725,600 shares of common stock. Wellington’s business address is 75
State Street, Boston, MA 02109.
|
(14)
|
Derived
from a Schedule 13G/A filed jointly by The Pinnacle Fund, L.P.
(Pinnacle)
and Barry Kitt (collectively “Reporting Persons”) on February 13, 2008.
The ownership includes 539,700 shares of common stock issuable
upon the
exercise of warrants. Pinnacle Advisers, L.P. (“Advisers”) is the general
partner of Pinnacle. Pinnacle Fund Management, LLC (“Management”) is the
general partner of Advisers. Mr. Kitt is the sole member of
Management.
Mr. Kitt may be deemed to be the beneficial owner of the shares
of Common
Stock beneficially owned by Pinnacle. Mr. Kitt expressly disclaims
beneficial ownership of all shares of Common Stock beneficially
owned by
Pinnacle. The principal business office of the reporting persons
is 4965
Preston Park Blvd., Suite 240, Plano, TX 75093.
|
(15)
|
Derived
from a Schedule 13D filed by Robert I. Green on January 26,
2007. Includes
1,735,000 shares of common stock issuable upon exercise of
warrants
beneficially owned by Mr. Green. Of such shares, 1,485,000
shares of
common stock issuable upon the exercise of warrants are held
by Starwood
Group L.P. and 250,000 shares of common stock issuable upon
the exercise
of warrants are held by an individual retirement account for
the benefit
of Mr. Green. Mr. Green is the general partner of Starwood
Group L.P. The
business address of Mr. Green is 150 Bears Club Drive, Jupiter,
Florida
33477.
|
(16)
|
Derived
from a Schedule 13G/A filed jointly by Southwell Partners,
L.P., Southwell
Management, L.P., Southwell Holdings, LLC, and Wilson S. Jaeggli
on
February 12, 2008. Southwell is the general partner of Southwell
Partners
and may be deemed to befiecially own securities owedn and or
held by
and/or for the account and/or benefit of Southwell Partners.
Southwell
Holdings is the general partner of Southwell Management and
may be deemed
to beneficially own securities owned and/or held by and/or
for the account
and/or benefit of Soutwehll Management. Mr. Jaeggli is the
managing
director of Southwell Holdigns and may be deemed to beneficially
own
securities owned and/or held by and/or for the account and/or
benefit of
Southwell Holdings. The principal business office of each f
the reporting
persons is 1901 North Akard, 2nd Floor, Dallas, TX
75201.
|
Equity
Compensation Plan Information
The
following table provides certain aggregate information with respect to all
of
the Company’s equity compensation plans in effect as of December
31, 2007:
|
|
|
|
Weighted-
|
|
Number of securities
|
|
|
|
Number of
|
|
average
|
|
remaining available
|
|
|
|
securities to be
|
|
fair market
|
|
for future issuance
|
|
|
|
issued upon vesting of
|
|
value on
|
|
under equity
|
|
Plan Category
|
|
restricted stock
|
|
date of grant
|
|
compensation plans
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by stockholders (1)
|
|
|
970,832
|
(3)
|
$
|
5.47
|
|
|
1,129,168
|
|
Equity
compensation plans not approved by stockholders (2)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
970,832
|
|
$
|
5.47
|
|
|
1,129,168
|
|
(1) This
plan is
the 2006
Omnibus Incentive Compensation Plan.
(2) There
are no
other equity plans currently unapproved by the stockholders.
(3) Includes
unvested restricted stock of 954,166 shares issued under the 2006 Stock
Plan.
Summary
Description of the Company’s Non-Stockholder Approved Equity Compensation
Plans
We
have
no equity compensation plans that are not approved by the stockholders.
Item
13. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Related
Party Transactions
Convertible
Note Repayment
On
August
29, 2007, we, acting upon approval of our disinterested directors and approved
by our Audit Committee, entered into a prepayment agreement (the “Agreement”)
with Thomas P. Rosato, our Chief Executive Officer and a member of our Board,
to
revise the repayment terms of the $5,000,000 Convertible Promissory Note, dated
January 19, 2007, issued to Mr. Rosato us (the “Rosato Note”), as consideration
in connection with our acquisition of TSS/Vortech. Pursuant to the Agreement,
we
paid down a portion of the Rosato Note in the amount of $2,000,000 as a
prepayment of the Rosato Note and Mr. Rosato agreed that such
prepayment retired $2,500,000 of the Rosato Note. In addition, pursuant to
a
10b5-1 Plan with a designated broker in accordance with the conditions of Rule
10b-18 of the Securities Exchange Act of 1934, as amended, Mr. Rosato used
the
$2,000,000 of funds received from us to purchase 273,398 shares of our publicly
traded common stock at a weighted average price of $5.96 per share and warrants
to purchase an additional 294,870 shares of common stock at weighted average
cost of $1.31 per warrant.
Prior
Share Issuances
On
March
9, 2005, we issued 1,750,000 shares of our common stock to the individuals
set
forth below for $25,000 in cash, at an average purchase price of approximately
$0.014 per share, as follows:
Name
|
|
Number of
Shares
|
|
Washington
Capital Advisors, LLC
|
|
|
575,000
|
|
Harvey
L. Weiss
|
|
|
575,000
|
|
David
J. Mitchell
|
|
|
150,000
|
|
Donald
L. Nickles
|
|
|
200,000
|
|
Asa
Hutchinson
|
|
|
200,000
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
24,765
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
15,926
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
5,553
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
3,756
|
|
All
of
the shares of our common stock outstanding prior to our initial public offering
(“initial shares”) and held by the above stockholders (“initial stockholders”)
were placed in escrow with Continental Transfer & Trust Company, as
escrow agent, until the earliest of: July 13, 2008; our dissolution and
liquidation; or the consummation of a liquidation, merger, stock exchange or
other similar transaction which results in all of our stockholders having the
right to exchange their shares of common stock for cash, securities or other
property subsequent to our consummating a business combination with a target
business.
During
the escrow period, the initial stockholders will not be able to sell or transfer
their securities except to their spouses and children or trusts established
for
their benefit or otherwise as provided in the stock escrow agreement, but will
retain all other rights as our stockholders, including, without limitation,
the
right to vote their shares of common stock and the right to receive cash
dividends, if declared. If dividends are declared and payable in shares of
common stock, such dividends will also be placed in escrow.
Registration
Rights.
The
holders of the majority of the initial shares are entitled to make up to two
demands that we register the initial shares. The holders of the majority of
the
initial shares may elect to exercise these registration rights at any time
after
the date on which the initial shares are released from escrow, which, except
in
limited circumstances, is not before July 13, 2008. In addition, the
initial stockholders have certain “piggyback” registration rights on
registration statements filed subsequent to the date on which these shares
of
common stock are released from escrow. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Washington
Capital Advisors, LLC.
We paid
Washington Capital Advisors, LLC (“Washington Capital Advisors”), of which Mr.
C. Thomas McMillen , our vice chairman and a director, is the principal equity
owner and officer, $7,500 per month for office space and general administrative
services. This arrangement was agreed to by Washington Capital Advisors, the
successor-in-interest to Global Defense Corporation, also an affiliate of
Mr. McMillen, for our benefit and was not intended to provide
Mr. McMillen compensation in lieu of salary. Upon completion of the
acquisition of TSS/Vortech, we were no longer required to pay this monthly
fee.
We paid an aggregate of $97,500 pursuant to this agreement, of which $7,500
was
paid during the fiscal year ended December 31, 2007.
Consulting
Agreement with C. Thomas McMillen
On
January 19, 2007, we entered into a consulting agreement with Washington Capital
Advisors, of which Mr. C. Thomas McMillen , our vice chairman and a director,
is
the principal equity owner and officer, pursuant to which Washington Capital
Advisors is engaged to serve as a consultant for a period of three years. Under
the terms of the Consulting Agreement, Washington Capital Advisors provides
advisory services relating to strategic, financial, marketing and business
development matters and will also provide mergers and acquisitions assistance.
The base compensation to Washington Capital Advisors is $200,000 per year
(subject to a minimum annual increase of 5% per year) and Washington Capital
Advisors is eligible to receive an annual bonus of up to 50% of its then
applicable base compensation (the amount of the bonus and the criteria for
the
bonus to be determined by the Board). In addition to base compensation and
eligibility for a bonus, Washington Capital Advisors is entitled to a referral
fee equal to 5% of the “Gross Profits” (as defined in the Consulting Agreement)
attributable to any client or customer (other than the federal government,
or
any agency or subdivision thereof) identified by Washington Capital Advisors
to
us or any of our subsidiaries. Pursuant to the terms of the Consulting
Agreement, if we terminate the Consulting Agreement for reasons other than
“Cause” or Washington Capital Advisors terminates the Consulting Agreement for
“Good Reason” (as those terms are defined in the Consulting Agreement),
Washington Capital Advisors is entitled to receive its base compensation as
and
when it would otherwise be payable if the Consulting Agreement had not been
terminated (provided, however that if termination occurs during the last twelve
months of the Consulting Agreement, then Washington Capital Advisors shall
be
entitled to receive amounts equal to base compensation (as and on the terms
otherwise payable) for twelve months from the date of termination). During
the
fiscal year ended December 31, 2007, $200,000 was paid pursuant to this
agreement.
Our
Audit
Committee in accordance with its written charter reviews and approves in advance
all related party transactions greater than $25,000 and follows a pre-approved
process for contracts with related party for less than $25,000.
We
participate in transactions with the following entities affiliated through
common ownership and management. The Audit Committee of the Board reviewed
and approved in advance all of these related party transactions in accordance
with its written charter.
S3
Integration L.L.C.
S3
Integration L.L.C. (S3 Integration) is owned 15% each by our Chief Executive
Officer and President. S3 Integration provides commercial security systems
design and installation services as a subcontractor to us.
Chesapeake
Systems, L.L.C.
(Chesapeake Systems) is 9% owned and significantly indebted to our Chief
Executive Officer. Chesapeake Systems is a manufacturers’ representative and
distributor of mechanical and electrical equipment and purchased certain assets
of Chesapeake Tower Systems, Inc. in February 2007.
Chesapeake
Mission Critical, L.L.C.
(Chesapeake MC) is 9% owned each by our Chief Executive Officer and President.
Additionally, it is significantly indebted to our Chief Executive Officer.
Chesapeake MC is a manufacturers’ representative and distributor of electrical
equipment and purchased certain assets of Chesapeake Tower Systems, Inc. in
February 2007.
Chesapeake
Tower Systems, Inc.
Chesapeake Tower Systems, Inc. (Chesapeake) is 100% owned by our Chief Executive
Officer. On February 28, 2007, Chesapeake sold substantially all of its assets
to Chesapeake Systems and Chesapeake MC and, except for an office space sublease
agreement, does not engage in any business with us. Chesapeake was a
manufacturer’s representative and distributor of mechanical and electrical
equipment, which Chesapeake sold to us. In addition, we acted as a subcontractor
to Chesapeake for certain equipment installation on project-by-project
basis.
CTS
Services, L.L.C.
(CTS) is
55% owned by our Chief Executive Officer and 5% owned by our Treasurer. CTS
is a
mechanical contractor that acts as a subcontractor to us for certain projects.
In addition, CTS utilizes us as a subcontractor on projects as
needed.
L.H.
Cranston Acquisition Group, Inc.
L.H.
Cranston Acquisition Group, Inc. (Cranston) is 25% owned by our Chief Executive
Officer. Cranston is a mechanical, electrical and plumbing contractor that
acts,
directly or through its Subsidiary L.H. Cranston and Sons, Inc., as
subcontractor to us on a project-by-project basis.
Telco
P&C, L.L.C.
Telco
P&C, L.L.C. is 55% owned by our Chief Executive Officer. Telco P&C is a
specialty electrical installation company that acts as a subcontractor to us.
We
have also acted as a subcontractor to Telco as needed.
Automotive
Technologies, Inc.
Automotive Technologies, Inc. is 60% owned by our Chief Executive Officer and
provides vehicle maintenance and repair services to us.
TPR
Group Re Three, L.L.C.
As of
November 1, 2006, TPR Group Re Three, L.L.C. (TPR Group Re Three) is owned
50%
each by our Chief Executive Officer and our President. TPR Group Re Three leases
office space to us under the terms of a real property lease to TSS/Vortech.
We
had an independent valuation, which determined the lease to be at fair
value.
The
following table sets forth transactions we entered into with the above related
parties during the fiscal year ended December 31, 2007. It should be noted
that
revenue represents amounts earned on contracts with related parties under which
we provide services; and cost of revenue represents costs incurred in connection
with related parties which provide services to us on contracts for our
customers. Accordingly, a direct relationship to the revenue and cost of revenue
information below should not be expected.
|
|
2007
|
|
Revenue
|
|
|
|
|
CTS
Services, L.L.C.
|
|
$
|
183,532
|
|
Chesapeake
Systems, L.L.C.
|
|
|
105,965
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
106,627
|
|
Total
|
|
$
|
396,124
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
|
|
CTS
Services, L.L.C.
|
|
$
|
3,439,631
|
|
Chesapeake
Systems, L.L.C.
|
|
|
161,178
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
144,924
|
|
Chesapeake
Tower Systems, Inc.
|
|
|
1,052
|
|
S3
Integration, L.L.C.
|
|
|
267,848
|
|
LH
Cranston & Sons, Inc.
|
|
|
234,252
|
|
Telco
P&C, L.L.C.
|
|
|
29,174
|
|
Total
|
|
$
|
4,278,059
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
|
|
Office
rent paid on Chesapeake sublease agreement
|
|
|
207,671
|
|
Office
rent paid to TPR Group Re Three, L.L.C.
|
|
|
384,271
|
|
Vehicle
repairs to Automotive Technologies, Inc.
|
|
|
4,442
|
|
Total
|
|
$
|
596,384
|
|
|
|
2007
|
|
Accounts
receivable/(payable):
|
|
|
|
|
CTS
Services, L.L.C.
|
|
$
|
44,821
|
|
CTS
Services, L.L.C.
|
|
|
(2,969,671
|
)
|
Chesapeake
Systems, L.L.C.
|
|
|
611
|
|
Chesapeake
Systems, L.L.C.
|
|
|
(873
|
)
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
104,397
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
(18,950
|
)
|
Telco
P&C, L.L.C.
|
|
|
(8,000
|
)
|
LH
Cranston & Sons, Inc.
|
|
|
(11,575
|
)
|
S3
Integration, L.L.C.
|
|
|
(60,556
|
)
|
Total
Accounts receivable
|
|
$
|
149,829
|
|
|
|
|
|
|
Total
Accounts (payable)
|
|
$
|
(3,069,625
|
)
|
Director
Independence
The
Board
has adopted standards concerning director independence which meet the
independence standards of the Nasdaq Stock Market and, with respect to the
Audit
Committee, the rules of the Securities and Exchange Commission.
We
and
our Board are involved in the process for determining the independence of acting
directors and director nominees. We solicit relevant information from directors
and director nominees via a questionnaire, which covers material relationships,
compensatory arrangements, employment and any affiliation with us. In addition
to reviewing information provided in the questionnaire, we ask our executive
officers on an annual basis regarding their awareness of any existing or
currently proposed transactions, arrangements or understandings involving our
company in which any director or director nominee has or will have a direct
or
indirect material interest, including charitable contributions made by our
company to nonprofit organizations with which any director is affiliated. We
share our findings with the Board regarding the Nasdaq Stock Market and SEC
independence requirements and any information regarding the director or director
nominee that suggest that such individual is not independent. The Board
discusses all relevant issues, including consideration of any transactions,
relationships or arrangements which are not required to be disclosed under
Item 404(a) of Regulation S-K, prior to making a determination with respect
to the independence of each director.
Based
on
the review described above, the Board affirmatively determined that a majority
of the directors are independent, and all members of the Audit and Compensation
Committees are independent, under the Nasdaq standard and, in the case of the
Audit Committee, the SEC standard. Our independent directors are: Donald L.
Nickles, Asa Hutchinson, John Morton, III, David J. Mitchell and William L.
Jews.
Other
than as described above, in 2007, there were no transactions, relationships
or
arrangements not disclosed as related person transactions that were considered
by the Board in determining that the applicable independence standards were
met
by each of the directors.
Item
14. |
PRINCIPAL
ACCOUNTING FEES AND
SERVICES
|
The
Audit
Committee has appointed Grant Thornton, LLP (“Grant Thornton”), independent
public accountants, to audit our financial statements for the fiscal year ending
December 31, 2007. Goldstein Golub Kessler, LLP (“GGK”) were our independent
public accountants for the fiscal year ended December 31, 2006. Grant Thornton
audited our financial statements for the fiscal year ended December 31, 2007.
The
following table presents fees for professional audit services rendered by Grant
Thornton and GGK for the audit of our annual financial statements for the years
ended December 31, 2007 and 2006, respectively, and fees billed for other
services rendered by Grant Thornton and GGK during those periods.
Audit
and Non-Audit Fees
|
|
2006
|
|
2007
|
|
Audit
fees
|
|
$
|
38,000
|
|
$
|
240,130
|
|
Audit-related
fees
|
|
|
17,786
|
|
|
52,775
|
|
Tax
fees
|
|
|
2,612
|
|
|
6,000
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
58,398
|
|
$
|
298,905
|
|
Audit
Fees
Audit
fees consisted of professional services rendered by Grant Thornton and GGK
for
the audit of the annual consolidated financial statements included in our Annual
Report on Form 10-K, for the reviews of the consolidated quarterly financial
statements included in our Forms 10-Q and assistance and review of such
documents filed with the SEC.
Audit-Related
Fees
Audit-related
fees consisted principally of fees for professional services associated with
the
audits in connection with acquisitions. We paid Grant Thornton $49,275 in
connection with opening balance sheet audits and other related work for our
acquisitions of TSS/Vortech, Innovative, and Rubicon.
We
paid
GGK $17,786 in 2006 for services related to the preparation and filing of the
proxy statement in connection with our acquisition of TSS/Vortech. We paid
GCK
$3,500 in 2007 in connection with the review of certain 2007 filings for
purposes of referencing previously audited financial statements by
GCK.
Tax
Fees
Tax
fees
consisted of professional services provided associated with tax compliance,
tax
planning and tax advice. We have paid no fees to our principal auditor for
tax
compliance or consultation in 2007; however, we did pay RSM McGladry, an
affliate of GCK, $6,000 in 2007 for tax services. Fees paid to GGK associated
with tax compliance and tax consultation were and $2,612 in 2006.
All
Other Fees
We
paid
no other fees to either Grant or GGK 2007 and 2006, respectively.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services
of
Independent Auditors
Consistent
with policies of the Securities and Exchange Commission regarding auditor
independence, the Audit Committee has responsibility, pursuant to its written
charter, for appointing, setting compensation and overseeing the work of the
independent auditor. In recognition of this responsibility, the audit committee
has established a policy to pre-approve all audit and permissible non-audit
services provided by the independent auditor. The Audit Committee’s policy is to
approve all audit and non-audit services provided by our independent registered
public accounting firm prior to the commencement of the services using a
combination of pre-approvals for certain engagements up to predetermined dollar
thresholds in accordance with the pre-approval policy and specific approvals
for
certain engagements on a case-by-case basis. The Audit Committee has delegated
authority to the committee chairman to pre-approve between committee meetings
those services that have not already been pre-approved by the committee. The
chair is required to report any such pre-approval decisions to the full
committee at its next scheduled meeting.
PART
IV
(b) Exhibits.
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
Second
Amended and Restated Certificate of Incorporation dated January 19,
2007 (previously filed with the Commission as Exhibit 3.1 to the
Current
Report on Form 8-K filed on January 25, 2007 and incorporated herein
by reference)
|
3.1.1
|
|
Amendment
to the Second Amended and Restated Certificate of Incorporation
(previously filed with the Commission as Exhibit A-1 to the Company’s
Definitive Proxy Statement filed on May 22, 2007 and incorporated
herein
by reference)
|
3.2
|
|
Amended
and Restated By-laws (previously filed with the Commission as Exhibit
4.2
to the Company’s Registration Statement on Form S-8 No. 333-142906, filed
on May 14, 2007 and incorporated herein by reference)
|
4.1
|
|
Specimen
Unit Certificate (previously filed with the Commission as Exhibit
4.1 to
the Company’s Registration Statement on Form S-1 No. 333-123504, effective
July 13, 2005 and incorporated herein by
reference)
|
4.2
|
|
Specimen
Common Stock Certificate (previously filed with the Commission as
Exhibit
4.2 to the Company’s Registration Statement on Form S-1 No. 333-123504,
effective July 13, 2005 and incorporated herein by
reference)
|
4.3
|
|
Specimen
Warrant Certificate (previously filed with the Commission as Exhibit
4.3
to the Company’s Registration Statement on Form S-1 No. 333-123504,
effective July 13, 2005 and incorporated herein by
reference)
|
4.4
|
|
Warrant
Agreement between Continental Stock Transfer & Trust Company and the
Company (previously filed with the Commission as Exhibit 4.4 to the
Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
4.4.1
|
|
Warrant
Clarification Agreement between Continental Stock Transfer & Trust
Company and the Company (previously filed with the Commission as
Exhibit
4.5 to the Company’s Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 2006 and incorporated herein by
reference)
|
4.4.2
|
|
Warrant
Clarification Agreement No. 2 between Continental Stock Transfer
&
Trust Company and the Company (previously filed with the Commission
as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December
14, 2006 and incorporated herein by reference)
|
4.5
|
|
Unit
Purchase Option (previously filed with the Commission as Exhibit
4.5 to
the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
4.5.1
|
|
Amendment
to Unit Purchase Option (previously filed with the Commission as
Exhibit
4.6 to the Company’s Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 2006 and incorporated herein by
reference)
|
Exhibit
Number
|
|
Description
|
|
|
|
4.5.2
|
|
Amendment
No. 2 to Unit Purchase Option (previously filed with the Commission
as
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December
14, 2006 and incorporated herein by reference)
|
10.1
|
|
Second
Amended and Restated Membership Interest Purchase Agreement dated
July 31, 2006 among Fortress America Acquisition Corporation, VTC,
L.L.C., Vortech, L.L.C., Thomas P. Rosato and Gerard J. Gallagher,
and
Thomas P. Rosato as Members’ Representative (previously filed with the
Commission as Exhibit 10.1 to the Company’s Quarterly Report on Form
10-QSB for the quarterly period ended September 30, 2006 and incorporated
herein by reference)
|
10.2
|
|
Amendment
to the Second Amended and Restated Membership Interest Purchase Agreement
dated January 16, 2007 among Fortress America Acquisition
Corporation, VTC, L.L.C., Vortech, L.L.C., Thomas P. Rosato and Gerard
J.
Gallagher, and Thomas P. Rosato as Members’ Representative (previously
filed with the Commission as Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on January 19, 2007 and incorporated herein by
reference)
|
10.3
|
|
Escrow
Agreement (Balance Sheet Escrow) dated January 19, 2007 among
Fortress America Acquisition Corporation, VTC, L.L.C., Vortech, L.L.C.,
Thomas P. Rosato and Gerard J. Gallagher, Thomas P. Rosato as Members’
Representative, and SunTrust Bank (previously filed with the Commission
as
Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
January 25, 2007 and incorporated herein by
reference)
|
10.4
|
|
Escrow
Agreement (General Indemnity) among Fortress America Acquisition
Corporation, VTC, L.L.C., Vortech, L.L.C., Thomas P. Rosato and Gerard
J.
Gallagher, Thomas P. Rosato as Members’ Representative, and SunTrust Bank
(previously filed with the Commission as Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on January 25, 2007 and incorporated
herein by reference)
|
10.5
|
|
Registration
Rights Agreement among Fortress America Acquisition Corporation and
Thomas
P. Rosato and Gerard J. Gallagher (previously filed with the Commission
as
Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on
January 25, 2007 and incorporated herein by
reference)
|
10.6
|
|
Fortress
America Acquisition Corporation 2006 Omnibus Incentive Compensation
Plan
(previously filed with the Commission as Exhibit E to the Company’s
Definitive Proxy Statement filed on December 27, 2006 and incorporated
herein by reference)
|
10.7
|
|
Employment
Agreement between Harvey L. Weiss and the Company, dated January 19,
2007 (previously filed with the Commission as Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed on January 25, 2007 and
incorporated herein by reference)*
|
10.8
|
|
Executive
Consulting Agreement dated January 19, 2007 by Fortress America
Acquisition Corporation and Washington Capital Advisors, Inc. (previously
filed with the Commission as Exhibit 10.8 to the Company’s Current Report
on Form 8-K filed on January 25, 2007 and incorporated herein by
reference)
|
10.9
|
|
Executive
Employment Agreement dated January 19, 2007 by Fortress America
Acquisition Corporation and Thomas P. Rosato (previously filed with
the
Commission as Exhibit 10.9 to the Company’s Current Report on Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)*
|
10.10
|
|
Executive
Employment Agreement dated January 19, 2007 by Fortress America
Acquisition Corporation and Gerard J. Gallagher (previously filed
with the
Commission as Exhibit 10.10 to the Company’s Current Report on Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)*
|
10.11
|
|
Voting
Agreement dated January 19, 2007 by Fortress America Acquisition
Corporation, Thomas P. Rosato, Gerard J. Gallagher, C. Thomas McMillen
and
Harvey L. Weiss (previously filed with the Commission as Exhibit
10.11 to
the Company’s Current Report on Form 8-K filed on January 25, 2007
and incorporated herein by reference)
|
10.12
|
|
Letter
Agreement among the Company, Sunrise Securities Corp. and C. Thomas
McMillen (previously filed with the Commission as Exhibit 10.1 to
the
Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
Exhibit
Number
|
|
Description
|
|
|
|
10.13
|
|
Letter
Agreement among the Company, Sunrise Securities Corp. and Harvey
L. Weiss
(previously filed with the Commission as Exhibit 10.2 to the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2005 and
incorporated herein by reference)
|
10.14
|
|
Letter
Agreement among the Company, Sunrise Securities Corp. and David J.
Mitchell (previously filed with the Commission as Exhibit 10.3 to
the
Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
10.15
|
|
Letter
Agreement among the Company, Sunrise Securities Corp. and Donald
L.
Nickles (previously filed with the Commission as Exhibit 10.4 to
the
Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
10.16
|
|
Agreement
among the Company, Sunrise Securities Corp. and Paladin Homeland
Security
Fund, L.P., Paladin Homeland Security Fund (NY City), L.P., Paladin
Homeland Security Fund (CA), L.P. and Paladin Homeland Security Fund
(Cayman Islands), L.P. (previously filed with the Commission as Exhibit
10.5 to the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
10.17
|
|
Letter
Agreement among the Company, Sunrise Securities Corp. and Asa Hutchinson
(previously filed with the Commission as Exhibit 10.6 to the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2005 and
incorporated herein by reference)
|
10.18
|
|
Investment
Management Trust Agreement between Continental Stock Transfer & Trust
Company and the Company (previously filed with the Commission as
Exhibit
10.7 to the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
10.19
|
|
Stock
Escrow Agreement between the Company, Continental Stock Transfer
&
Trust Company and the Initial Stockholders (previously filed with
the
Commission as Exhibit 10.8 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 and incorporated herein by
reference)
|
10.20
|
|
Registration
Rights Agreement among the Company and the Initial Stockholders
(previously filed with the Commission as Exhibit 10.9 to the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2005 and
incorporated herein by reference)
|
10.21
|
|
Warrant
Purchase Agreement between C. Thomas McMillen, Harvey L. Weiss and
Sunrise
Securities Corp. (previously filed with the Commission as Exhibit
10.10 to
the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2005 and incorporated herein by
reference)
|
10.22
|
|
Letter
Agreement between the Company and Global Defense Corp. (previously
filed
with the Commission as Exhibit 10.11 to the Company’s Annual Report on
Form 10-KSB for the year ended December 31, 2005 and incorporated
herein by reference)
|
10.23
|
|
Agreement
and Plan of Merger among Fortress America Acquisition Corporation
and FAAC
Merger Corporation dated June 29, 2005 (previously filed with the
Commission as Exhibit 10.15 to the Company’s Registration Statement on
Form S-1 No. 333-123504, effective July 13, 2005 and incorporated
herein by reference)
|
10.24
|
|
Non-Employee
Director Compensation Policy (previously filed with the Commission
as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
May 21, 2007 and incorporated herein by
reference)*
|
10.25
|
|
Form
of Restricted Stock Agreement (Employees Only) (previously filed
with the
Commission as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on May 21, 2007 and incorporated herein by
reference)
|
10.26
|
|
Executive
Employment Agreement, dated as of August 6, 2007, between Fortress
International Group, Inc. and Timothy C. Dec (previously filed with
the
Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on August 8, 2007 and incorporated herein by
reference)*
|
Exhibit
Number
|
|
Description
|
|
|
|
10.27
|
|
Prepayment
Agreement, dated as of August 29, 2007, between Fortress International
Group, Inc. and Thomas P. Rosato (previously filed with the Commission
as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August
30, 2007 and incorporated herein by reference)*
|
10.28
|
|
Stock
Purchase Agreement dated September 24, 2007 between Innovative Power
Systems Inc., the Stockholders of Innovative Power Systems Inc.,
Quality
Power Systems, Inc., the Stockholders of Quality Power Systems, Inc.,
and
the Company (previously filed with the Commission as Exhibit 10.1
to the
Company’s Current Report on Form 8-K filed on September 27, 2007 and
incorporated herein by reference)
|
10.29†#
|
|
Membership
Interest Purchase Agreement dated November 30, 2007 between Rubicon
Integration, L.L.C., each of the members of Rubicon and the Company
|
10.30
|
|
Stock
Purchase Agreement by and among SMLB, Ltd, the Stockholders of SMLB,
Ltd,
and the Company dated January 2, 2008 (previously filed with the
Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on January 1, 2008 and incorporated herein by
reference)
|
14.1
|
|
Code
of Ethics
|
21#
|
|
Significant
Subsidiaries of the Registrant
|
23.1#
|
|
Consent
of Grant Thornton LLP regarding Fortress International Group, Inc.
financial statements for the year ended December 31,
2007.
|
23.2#
|
|
Consent
of Grant Thornton LLP regarding Vortech L.L.C. and VTC L.L.C. financial
statements for the period ending January 1, 2007 through January
19,
2007.
|
23.3#
|
|
Consent
of Goldstein Golub Kessler LLP
|
23.4#
|
|
Consent
of McGladrey & Pullen, LLP
|
31.1
|
|
Certificate
of Fortress International Group, Inc. Principal Executive Officer
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certificate
of Fortress International Group, Inc. Principal Financial Officer
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1#
|
|
Certificates
of Fortress International Group, Inc. Principal Executive Officer
and
Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
#
|
Previously
filed with the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2007 filed on March 31, 2008.
|
*
|
Management
contract or compensatory plan or arrangement.
|
†
|
Confidential
treatment has been requested as to certain portions, which have been
filed
separately with the Securities and Exchange
Commission.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
|
|
|
Fortress
International Group, Inc.
|
|
|
|
|
|
Date:
|
April
28, 2008
|
|
By:
|
/s/
Thomas P. Rosato
|
|
|
|
|
Thomas
P. Rosato
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
(Authorized
Officer and Principal Executive Officer)
|
|
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in the
capacities indicated below and on the dates indicated.
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
|
|
Chief
Executive Officer and Director
|
|
|
/s/
Thomas P. Rosato
|
|
(Principal
Executive Officer)
|
|
April
28, 2008
|
Thomas
P. Rosato
|
|
|
|
|
|
|
|
|
|
/s/
Harvey L. Weiss
|
|
Chairman
and Director
|
|
April
28, 2008
|
Harvey
L. Weiss
|
s/
Timothy C. Dec
|
|
Chief
Financial Officer
|
|
April
28, 2008
|
Timothy
C. Dec
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
/s/
Gerard J. Gallagher
|
|
President
and Director
|
|
April
28, 2008
|
Gerard
J. Gallagher
|
|
|
|
|
|
|
|
|
|
/s/
Asa Hutchinson
|
|
Director
|
|
April
28, 2008
|
Asa
Hutchinson
|
|
|
|
|
|
|
|
|
|
/s/
William L. Jews
|
|
Director
|
|
April
28, 2008
|
William L.
Jews |
|
|
|
|
|
|
|
|
|
/s/
C. Thomas McMillen
|
|
Director
|
|
April
28, 2008
|
C.
Thomas McMillen
|
|
|
|
|
|
|
|
|
|
/s/
David J. Mitchell
|
|
Director
|
|
April
28, 2008
|
David
J. Mitchell
|
|
|
|
|
|
|
|
|
|
/s/
John Morton, III
|
|
Director
|
|
April
28, 2008
|
John
Morton, III
|
|
|
|
|
|
|
|
|
|
/s/
Donald L. Nickles
|
|
Director
|
|
April
28, 2008
|
Donald
L. Nickles
|
|
|
|
|
|
|
|
|
|