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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to _____________
Commission file number: 0-27801
DATA RETURN CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Texas 75-2725998
(State of incorporation) (I.R.S. employer identification number)
222 West Las Colinas Boulevard, Suite 450, Irving, Texas 75039
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (972) 869-0770
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.001 Per Share
Preferred Stock Purchase Rights
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 [ ]
Indicated 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. [ ]
Aggregate market value of Common Stock held by nonaffiliates as of June 15,
2000: $434,809,858
Number of shares of Common Stock outstanding as of June 15, 2000:
35,495,608
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by
reference and the part of this report into which the document is incorporated:
None.
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The following items of our Annual Report on Form 10-K for the fiscal year ended
March 31, 2000 are hereby amended. Each such item is set forth herein in its
entirety, as amended.
<TABLE>
<S> <C> <C>
PART ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................. 3
III ITEM 11 EXECUTIVE COMPENSATION........................................................... 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................
7
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................. 8
===============================================================================================================
</TABLE>
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information with respect to the executive officers of Data Return
is set forth under the caption "Executive Officers of the Registrant" in Part I
of this report.
Our directors are:
Sunny C. Vanderbeck, a co-founder of the Company, has served as Chairman of
the Board and Chief Executive Officer since the Company's incorporation in
August 1997. Before founding Data Return, from July 1996 to January 1997, Mr.
Vanderbeck was a technical product manager and Lead Internet/Intranet Consultant
for Software Spectrum, a reseller of Microsoft products. From May 1995 to June
1996, while employed by Software Spectrum, Mr. Vanderbeck served as an
independent consultant to Microsoft where he served as a team leader for
Microsoft Messaging products and as a product support engineer. From July 1994
to May 1995, Mr. Vanderbeck was an independent consultant. From 1990 to 1994,
Mr. Vanderbeck served as a Section Leader in the 2nd Ranger Battalion, a U.S.
Army Special Operations unit. Mr. Vanderbeck was a regional finalist for the
Ernst & Young Entrepreneur of the Year award and is a Microsoft Certified
Systems Engineer.
Michelle R. Chambers, a co-founder of the Company, has served as President
and a director since the Company's inception and was appointed Chief Operating
Officer in April 1998. Before founding Data Return, from October 1996 to March
1997, Ms. Chambers was a Consultant at Microsoft, where she was a member of the
Microsoft Consulting team responsible for the design and development of the
migration plan for Audionet's (now Yahoo! Broadcast) platform conversion from
Unix to Windows NT. Prior thereto, Ms. Chambers served as a product support
engineer at Microsoft from February 1995 to October 1996, and was the Corporate
E-mail Coordinator for Arco Exploration and Production Technology from August
1993 to February 1995. Ms. Chambers is a Microsoft Certified Systems Engineer.
Ms. Chambers graduated magna cum laude from the University of North Texas with a
Bachelor in Business Administration in Business Computer Information Systems.
Jason A. Lochhead, a co-founder of the Company, has served as Vice
President -Chief Technology Officer since November 1999 and previously served as
Vice President - Research and Product Development. Mr. Lochhead has served as a
director since the Company's inception. From September 1996 until August 1997,
Mr. Lochhead was an independent consultant. Previously, from September 1995 to
September 1996, while employed by Software Spectrum, Mr. Lochhead served as an
independent consultant to Microsoft where he served as a product support
engineer for Microsoft Mail and Microsoft Exchange. While at Software Spectrum,
Mr. Lochhead also served as the Microsoft Mail Gateway team lead for the period
from March 1996 to September 1996. From July 1993 to September 1995, Mr.
Lochhead was a System Administrator at Hughes Training, a division of Hughes
Aircraft. Mr. Lochhead is a Microsoft Certified Systems Engineer.
Joseph M. Grant has served as a director since April 2000. Mr. Grant has
been Chairman of the Board and Chief Executive Officer of Texas Capital
Bancshares, Inc. since April 1998. Mr. Grant served as Chief Financial Officer
of Electronic Data Systems, Inc. ("EDS") from December 1990 to March 31, 1998
and an Executive Vice President since the consummation of the split-off of EDS
from General Motors Corporation on June 7, 1996. Prior to that time he had been
a Senior Vice President of EDS since February 1992. Prior to joining EDS in
December 1990, he served as executive vice president and chief systems officer
for American General Corporation from 1989 to 1990 and as chairman of the board
and chief executive officer of Texas American Bancshares Inc. from 1986 to 1989.
Mr. Grant has a bachelor's degree from Southern Methodist University. Mr. Grant
also earned a M.B.A. in finance and a Ph.D. in finance and economics from the
University of Texas at Austin.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation of the Company's
Chief Executive Officer and the other four most highly compensated executive
officers whose total salary and bonus for fiscal 2000 exceeded $100,000 (each a
"named executive officer," and collectively, the "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- -------------
Other Shares
Fiscal Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options
--------------------------- ------ -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Sunny C. Vanderbeck.................................... 2000 $130,000 $55,950 -- --
Chairman and Chief Executive Officer 1999 95,000 5,000 -- --
Michelle R. Chambers................................... 2000 130,000 50,950 -- --
President and Chief Operating Officer 1999 95,000 5,000 -- --
Michael S. Shiff....................................... 2000 175,000 66,610 -- --
Senior Vice President - Marketing, Sales and 1999 150,000 8,610 $40,000(1) 3,308,700
Business Development
Stuart A. Walker....................................... 2000 125,000 39,250 -- 121,050
Senior Vice President - Chief Financial Officer and 1999 5,661 -- -- 538,000
Treasurer
J. Todd Steitle........................................ 2000 141,500 17,080 -- 275,725
Vice President - Marketing 1999 108,740 -- -- 134,500
</TABLE>
-----------
(1) Other annual compensation for Mr. Shiff consists of deferred salary.
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Option/SAR Grants in Fiscal 2000
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Grants Price Appreciation for
Option Term ($) (1)
-------------------
Name Number of Percent of
---- Securities Total
Underlying Options
Options Granted to
Granted Employees in Exercise Price Expiration
(number of shares) fiscal 2000 Per Share ($) Date 5% 10%
---------------- ----------- ------------- ---------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sunny C. Vanderbeck - - - - - -
Michelle R. Chambers - - - - - -
Michael S. Shiff - - - - - -
Stuart A. Walker (2) 121,050 4.15 1.66 July 23, 2009 126,570 320,753
J. Todd Steitle (3) 47,075 1.62 0.23 April 15, 2009 24,806 45,913
121,050 4.15 1.66 July 23, 2009 126,570 320,753
107,600 3.69 13.00 October 27, 2009 879,698 2,229,327
</TABLE>
(1) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. Actual gains realized, if any, on stock
option exercises and common stock holdings are dependent on the future
performance of the common stock and overall stock market conditions. There
can be no assurance that the values shown in this table will be achieved.
(2) Amounts represent a single grant of options on July 23, 1999. One-fourth
of the grant becomes exercisable on each of the four one-year anniversaries
immediately succeeding the grant date.
(3) Amount represents a single grant of options on each of the following dates:
April 16, 1999, July 23, 1999 and October 27, 1999. One-fourth of the
July 23, 1999 grant becomes exercisable on each of the four one-year
anniversaries immediately succeeding the grant date. The April 16, 1999 and
October 27, 1999 grants became immediately exercisable in October 1999 upon
consummation of our initial public offering.
Fiscal 2000 Exercises and Year-End Option Values
The following table sets forth information concerning the value realized
upon exercise of options during fiscal 2000 and the number and value of
unexercised options held by each of the named executive officers at March 31,
2000. The values set forth in the table have been calculated using the last
reported sales price on March 31, 2000, less the per share exercise price,
multiplied by the number of shares underlying the option.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of In-the-Money
Acquired Unexercised Options Options at
on Value at March 31, 2000 (#) March 31, 2000 ($) (1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sunny C. Vanderbeck............. -- -- -- -- -- --
Michelle R. Chambers............ -- -- -- -- -- --
Michael S. Shiff................ -- -- 3,308,700 -- 121,735,345 --
Stuart A. Walker................ -- -- 538,000 121,050 19,713,665 4,254,895
J. Todd Steitle................. -- -- 289,175 121,050 9,224,867 4,254,895
</TABLE>
(1) Based on a closing price of $36.81 at March 31, 2000.
Employment Agreements
Sunny C. Vanderbeck, Michelle R. Chambers, Robert A. Prosen, Stuart A.
Walker, Mark A. Bowles, Mark C. Gunnin, Scott W. Brewer, Jason A. Lochhead and
Mark A. Warren have employment agreements expiring on June 30, 2002. These
agreements provide for:
. set base salaries; and
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. incentive bonuses determined by the compensation committee or Board of
Directors.
Each of these executives has agreed not to compete with us during the term
of the agreement and for two years after resignation or termination for cause or
for one year after a termination without cause or any resignation or termination
following a change of control. The employment agreements define "cause" as an
employee committing an immoral crime, materially breaching the employment
agreement or failing to obey written directions of a senior corporate executive.
A "change of control" will be deemed to occur if a substantial portion of our
ownership changes or the constitution of the board changes during any 15-month
period without the approval of our Board of Directors or shareholders. If there
has not been a change in control, the agreements provide for the payment of
salary for 12 months after any termination by the Company other than for cause.
Further, if the termination follows a change of control and is not voluntary, it
will be made in a lump sum equal to the following items, or in the case of Mr.
Vanderbeck, Ms. Chambers, Mr. Prosen and Mr. Walker three times the following
items:
. the highest annualized base salary earned during the employee's
employment with us;
. two times the employee's largest bonus during the last two years;
. any unpaid expense, reimbursement or accrued but unpaid salary or
benefit; and
. the estimated cost of insurance coverage for the next 12 months.
If the termination is following a change of control and is voluntary, the base
salary component of these severance payments will, in the case of Mr.
Vanderbeck, Ms. Chambers, Mr. Prosen, Mr. Walker and Mr. Gunnin, equal 75% and,
in the case of Mr. Bowles, Mr. Brewer, Mr. Lochhead and Mr. Warren equal 25%, of
the highest annualized base salary earned during the employee's employment with
the Company.
In addition, upon a change of control, all outstanding options of Mr.
Vanderbeck, Ms. Chambers, Mr. Prosen, Mr. Walker and Mr. Gunnin will vest. That
number of the outstanding options of Mr. Bowles, Mr. Brewer, Mr. Warren and Mr.
Lochhead that would have vested upon their next annual vesting date will
immediately vest upon a change of control, and, if they are terminated within 24
months of a change of control, all of their options will immediately vest.
The Company also has employment agreements with Mr. Shiff, Mr. Garber and
Mr. Steitle. Mr. Shiff's agreement expires on December 31, 2002. His agreement
provides for a set base salary plus deferred salary and a fixed performance
bonus. Mr. Shiff's agreement provides for the payment of all accrued salary and
bonus upon his termination by Data Return. Upon a change of control, all of Mr.
Shiff's outstanding unvested options will vest immediately. Mr. Shiff has agreed
not to compete with the Company during the term of his agreement and for one
year after his termination.
Mr. Garber's agreement expires on March 31, 2004. His agreement provides
for a set base salary plus commissions. Upon a termination of his employment by
Data Return without cause, Mr. Garber is entitled to the payment of salary for
12 months and the right to participate in benefit plans and exercise his
outstanding options for 12 months. Upon change of control, 50% of Mr. Garber's
outstanding unvested options vest immediately and the remaining 50% vest one
year later. As a result, 269,000options will vest in October 2000. If Mr. Garber
is terminated following a change of control, he is entitled to 12 months of
salary and all of his outstanding unvested options immediately vest. Mr Garber
has agreed not to compete with the Company during the term of the agreement and
for one year after resignation or termination for cause.
Mr. Steitle's agreement expired on May 3, 1999 and was automatically
renewed for a one-year period in May 1999 and 2000. His agreement will continue
to be renewed automatically for one year periods unless terminated by either
party upon notice at least 15 days prior to a renewal date. Mr. Steitle is
entitled to a set base salary. Upon termination other than for cause, Mr.
Steitle is entitled to his accrued salary. Upon a change of control, or if Mr.
Vanderbeck and Ms. Chambers cease to be executive officers, all of Mr. Steitle's
unvested options immediately
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vest. Mr. Steitle has agreed not to compete with us during the term of his
agreement and for one year after his agreement.
Compensation Committee Interlocks and Insider Participation
Except for Ms. Chambers, no officer or employee of the Company or its
subsidiaries is a member of the Company's compensation committee.
Compensation of Directors
The Company does not pay cash fees to any of its directors for serving on
the Board of Directors. However, the Company does reimburse directors for
travel, lodging and related expenses they may incur in attending Board and
committee meetings. In addition, under the 1999 Long-Term Incentive Plan, which
was approved and ratified by shareholders in fiscal 2000, non-employee directors
receive a one-time grant of an option to purchase 25,000 shares of Common Stock.
Thereafter, on the next business day after each annual meeting of shareholders
of the Company, such directors receive an annual grant of an option to purchase
5,000 shares of Common Stock. The options are granted at fair market value on
the grant date and vest in three, equal annual installments beginning one year
after the grant date and expire on the earlier of one-year after ceasing to
serve on the Board and the expiration of 10 years from the grant date.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of our common stock as of March 31, 2000 by (i) each director, (ii) each person
known to us to own beneficially 5% or more of our common stock, (iii) each named
executive officer and (iv) all current directors and executive officers as a
group. Except as otherwise indicated, the address of each beneficial owner of 5%
or more of our common stock is 222 West Las Colinas Boulevard, Suite 450,
Irving, Texas 75039.
Includes shares of common stock directly and indirectly owned and shares of
common stock underlying currently exercisable options as well as those options
which will become exercisable within 60 days of March 31, 2000. Except as
otherwise indicated, the named persons herein have sole voting and dispositive
power with respect to beneficially owned shares.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
------------------
Beneficial Owner Number of Shares Percent of Class
---------------- ---------------- ----------------
<S> <C> <C>
Sunny C. Vanderbeck(1)..................................................... 8,106,315 22.9
Michelle R. Chambers(2).................................................... 6,562,255 18.5
Jason A. Lochhead.......................................................... 772,030 2.2
Nathan A. Landow(3)........................................................ 5,135,210 14.5
T. Geir Ramleth(4)......................................................... 96,571 *
Michael S. Shiff(5)........................................................ 3,308,700 9.3
Stuart A. Walker(6)........................................................ 538,000 1.5
J. Todd Steitle(7)......................................................... 289,175 *
DCR Technology Fund I, Ltd.(1)............................................. 8,106,315 22.9
OHG Technology, Ltd.(2).................................................... 6,562,255 18.5
Nathan Landow Family Limited Partnership (3)............................... 4,788,200 13.5
All directors and executive officers as a group (13
persons)(8)............................................................... 25,403,194 71.8
</TABLE>
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* Less than 1%.
(1) Consists of 8,106,315 shares of our common stock owned by DCR Technology
Fund I, Ltd., which is controlled by Mr. Vanderbeck.
(2) Consists of 6,562,255 shares of our common stock owned by OHG Technology,
Ltd., which is controlled by Ms. Chambers.
(3) Includes 4,788,200 shares of our common stock owned by Nathan Landow Family
Limited Partnership, which is controlled by Mr. Landow. The address for
Nathan Landow Family Limited Partnership is 4710 Bethesda Avenue, Bethesda,
Maryland 20814. Mr. Landow resigned from our board of directors to pursue
other business interests effective March 31, 2000.
(4) Mr. Ramleth resigned from our board of directors to pursue other business
interests in May 2000.
(5) Consists of 3,308,700 shares of our common stock issuable pursuant to
options that are exercisable within 60 days of March 31, 2000.
(6) Consists of 538,000 shares of our common stock issuable pursuant to options
that are exercisable within 60 days of March 31, 2000.
(7) Consists of 289,175 shares of our common stock issuable pursuant to options
that are exercisable within 60 days of March 31, 2000.
(8) Includes 4,724,313 shares of common stock issuable pursuant to options that
are exercisable within 60 days of March 31, 2000. Giving effect to the
resignations of Mr. Landow and Mr. Ramleth, the number of shares and
percent of class owned would be 20,171,413 and 57.0%, respectively.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Data Return Corporation
Date: July 31, 2000 By: /s/ Sunny C. Vanderbeck
---------------------------------
Sunny C. Vanderbeck
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following individuals on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity in Which Signed Date
--------- ------------------------ ----
<S> <C> <C>
/s/ Sunny C. Vanderbeck Chairman of the Board, Chief Executive Officer and Director July 31, 2000
------------------------- (Principal Executive Officer)
Sunny C. Vanderbeck
/s/ Michelle R. Chambers President, Chief Operating Officer and Director July 31, 2000
-------------------------
Michelle R. Chambers
/s/ Jason A. Lochhead Vice President - Chief Technology Officer and Director July 31, 2000
-------------------------
Jason A. Lochhead
/s/ Stuart A. Walker Senior Vice President - Chief Financial Officer and Treasurer July 31, 2000
------------------------- (Principal Financial and Accounting Officer)
Stuart A. Walker
/s/ Joseph M. Grant Director July 31, 2000
-------------------------
Joseph M. Grant
</TABLE>
9
