SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-24435
MICROSTRATEGY INCORPORATED
(Exact name of registrant as specified in its charter)
1861 International Drive, McLean, VA 22102
(Address of Principal Executive Offices) (Zip Code)
Delaware 51-0323571
(State of incorporation) (I.R.S. Employer Identification Number)
Registrant's telephone number, including area code: (703) 848-8600
Securities registered pursuant to Section 12(b) of the Act: Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Class A common stock, par value $0.001 per share
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 [ ]
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant (based on the last reported sale price of the Registrant's Class A
common stock on May 1, 2001 on the Nasdaq National Market) was approximately
$174.2 million.
The number of shares of the registrant's Class A common stock and Class B common
stock outstanding on May 1, 2001 was 31,100,485 and 50,975,624, respectively.
PART III
ITEM 11. EXECUTIVE COMPENSATION
The compensation information set forth in this Item 11 relates to compensation
paid by the Company to its Chief Executive Officer, the Company's four other
most highly compensated executive officers who were serving as executive
officers of the Company as of December 31, 2000, and the two most highly
compensated executive officers who served as executive officers during the
fiscal year ended December 31, 2000 ("Fiscal Year 2000"), but who were not
serving as executive officers at the end of Fiscal Year 2000 (collectively, the
"Named Executive Officers").
Option awards relating to the Class A Common Stock of Strategy.com Incorporated,
a majority-owned subsidiary of the Company, are designated in the tables set
forth below in this Item 11 by the term "SDC." Unless so designated, all option
information set forth in this Item 11 refers to option awards relating to the
Class A Common Stock of the Company.
The following table sets forth certain information concerning the compensation
of the Named Executive Officers for each of the last three fiscal years:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
---------------------------------- ----------------------
Fiscal Other Annual Number of Shares
Name and Principal Position Year Salary Bonus Compensation Underlying Options
-------------------------------------------------------------- -------- -------- ------- --------------- ----------------------
Michael J. Saylor............................................. 2000 $150,000 $ -- $ -- --
Chairman of the Board and Chief Executive Officer 1999 150,000 50,000 -- --
1998 127,500 -- -- --
Sanju K. Bansal............................................... 2000 115,000 -- -- --
Vice Chairman of the Board, Executive Vice 1999 115,000 40,000 -- --
President, Chief Operating Officer and Director 1998 115,000 -- -- --
Eric F. Brown (1)............................................. 2000 131,250 10,000 96,962 (2) 500,000
President and Chief Financial Officer 100,000 (SDC)
1999 -- -- -- --
1998 -- -- -- --
Jonathan F. Klein............................................. 2000 135,417 60,000 -- 75,000
Vice President, Law and General Counsel 75,000 (SDC)
1999 115,000 30,000 -- 30,000
1998 91,500 15,000 -- 80,500
Stephen S. Trundle............................................ 2000 125,000 -- -- 125,000
Vice President, Technology and Chief Technology 150,000 (SDC)
Officer 1999 125,000 -- -- 100,000
1998 115,000 20,000 -- --
Eric D. Driscoll (3).......................................... 2000 153,750 72,365 -- 125,661
Vice President, Corporate Development 50,000 (SDC)
1999 -- -- -- 10,000
1998 -- -- -- --
Joseph P. Payne (4)........................................... 2000 175,000 75,000 -- 75,000
Vice President, Marketing and Chief Marketing Officer 50,000 (SDC)
1999 121,307 15,000 -- 250,000
1998 -- -- -- --
(1) Mr. Brown joined the Company in February 2000 as Chief Financial Officer of
Strategy.com, a business unit of the Company at the time, and became Chief
Financial Officer and President of the Company on August 1, 2000 and
November 14, 2000, respectively. Accordingly, the 2000 information for Mr.
Brown is for the period from February 2000 to December 31, 2000, and there
is no information for 1999 and 1998.
(2) This amount represents relocation expenses paid by the Company.
(3) Mr. Driscoll became the Company's Vice President, Corporate Development in
June 2000. From March 1999 until June 2000, Mr. Driscoll was Vice President,
Americas Consulting and from October 1998 until March 1999 was Director,
North American Consulting. The information in the table for Mr. Driscoll
reflects the aggregate compensation received during 2000 as an employee of
MicroStrategy Services Corporation and as an employee of the Company. Mr.
Driscoll did not serve as an executive officer of the Company during 1999 or
1998. Mr. Driscoll ceased serving in the capacity of an executive officer on
November 29, 2000.
(4) Mr. Payne joined the Company in April 1999 as Vice President, Marketing and
Chief Marketing Officer. Accordingly, the 1999 information for Mr. Payne is
for the period from April 22, 1999 to December 31, 1999, and there is no
information for 1998. Mr. Payne ceased serving in the capacity of an
executive officer of the Company on November 29, 2000 and resigned from the
Company on February 28, 2001.
Option Grants Table
The following table contains information concerning grants of stock options made
to each of the Named Executive Officers during Fiscal Year 2000:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Potential Realizable
Number of Value At Assumed
Shares of % of Annual Rates of Stock
Class A Total Options Price Appreciation for
Common Stock Granted to Exercise Option Term (3)
Underlying Options Employees in Price Per Expiration -------------------------
Name Granted (1) 2000 Share (2) Date 5% 10%
---- --------------------------------------------------------------------------------------------------
Michael J. Saylor............. -- -- % $ -- -- $ -- $ --
Sanju K. Bansal............... -- -- -- -- -- --
Eric F. Brown................. 500,000 6.504 21.000 8/21/2010 6,603,394 16,734,296
100,000 (SDC) 2.124 2.750 12/20/2010 172,946 438,279
Jonathan F. Klein............. 50,000 0.650 23.625 9/27/2010 742,882 1,882,608
25,000 0.325 21.500 10/17/2010 338,031 856,637
75,000 (SDC) 1.593 2.750 12/20/2010 129,710 328,709
Stephen S. Trundle............ 50,000 0.650 44.125 6/09/2010 1,387,499 3,516,194
75,000 0.976 21.500 10/17/2010 1,014,093 2,569,910
150,000 (SDC) 3.186 2.750 12/20/2010 259,419 657,419
Eric D. Driscoll.............. 661 0.009 17.938 5/30/2010 7,457 18,897
75,000 0.976 39.313 6/16/2010 1,854,280 4,699,110
50,000 0.650 21.500 10/17/2010 676,062 1,713,273
50,000 (SDC) 1.062 2.750 12/20/2010 86,473 219,140
Joseph P. Payne............... 50,000 0.650 23.625 9/27/2010 742,882 1,882,608
25,000 0.325 21.500 10/17/2010 338,031 856,637
50,000 (SDC) 1.062 2.750 12/20/2010 86,473 219,140
(1) These options generally vest over a five-year period and expire on the tenth
anniversary of the date of grant. SDC options, irrespective of vesting, are
not exercisable until the earlier of an underwritten initial public offering
of SDC, the closing of an acquisition transaction resulting in a change of
control of SDC or sixty months from the date of grant.
(2) The exercise price of options of the Company or SDC may be paid in cash or
in shares of Class A Common Stock of the Company or SDC, as the case may be,
valued at fair market value on the exercise date. All stock options were
granted with an exercise price equal to the fair market value of such stock
as determined by the Board of Directors of the Company or SDC, as
applicable, on the grant date.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Class A Common Stock of the Company or of SDC, as the
case may be, on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price.
Option Exercises and Holdings
The following table sets forth information concerning each exercise of a stock
option during Fiscal Year 2000 by each of the Named Executive Officers and the
number and value of unexercised options held by each of the Named Executive
Officers on December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Shares of
Class A Common stock Value of Unexercised
Number of Underlying Unexercised In-the-Money Options at
Shares of Options at Fiscal Year-End Fiscal Year-End (2)
Acquired Value ------------------------------ -------------------------
Name on Exercise Realized (1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------------------------------------------------------------------------------------------
Michael J. Saylor -- $ -- --/ -- $ --/ $ --
Sanju K. Bansal -- -- --/ -- --/ --
Eric F. Brown.................... -- -- 0/ 500,000 --/ --
0/ 100,000 (SDC) --/ --
Jonathan F. Klein................ 20,000 2,049,000 10,200/ 155,300 35,270/ 429,905
0/ 75,000 (SDC) --/ --
Stephen S. Trundle............... 100,000 16,025,000 81,600/ 245,400 569,800/ 373,700
0/ 150,000 (SDC) --/ --
Eric D. Driscoll................. 10,000 318,750 2,000/ 153,661 0/ 170,000
0/ 50,000 (SDC) --/ --
Joseph P. Payne.................. 20,000 380,000 30,000/ 275,000 18,750/ 125,000
0/ 50,000 (SDC) --/ --
(1) Represents the difference between the exercise price and the fair market
value of the Class A Common Stock of the Company on the date of exercise.
(2) Value of unexercised options is determined by subtracting the exercise price
per share from the fair market value per share for the underlying shares as
of December 31, 2000, multiplied by the number of shares underlying the
options. The fair market value of the Company's Class A Common Stock is
based upon the last reported sale price as reported on the Nasdaq National
Market on December 31, 2000 ($9.50 per share). No public market for the
shares underlying the SDC options existed as of December 31, 2000, and
accordingly no value in excess of the exercise price has been attributed to
these options.
Directors' Compensation
Directors do not receive any fees or other cash compensation for serving on the
Company's Board of Directors or any committee thereof. Directors of the Company
who are not employees of the Company or any subsidiary ("Outside Directors") are
entitled to receive options to purchase shares of the Company's Class A Common
Stock.
In 2000, options for 120,000 shares of Class A Common Stock were granted to
Outside Directors under the 1997 Director Option Plan. Subsequent to 2000, the
Company grants options to Outside Directors under the 1999 Stock Option Plan.
Pursuant to this plan, Outside Directors are granted options on the following
terms: (i) each new Outside Director of the Company is granted an option to
purchase 100,000 shares of Class A Common Stock upon his or her initial election
or appointment to the Board of Directors ("First Options") and (ii) each Outside
Director is granted an option to purchase 30,000 shares of Class A Common Stock
on the day immediately following each annual meeting of stockholders
("Subsequent Options"). Each option granted to an Outside Director under the
1999 Stock Option Plan has an exercise price equal to the last reported sale
price of the Class A Common Stock as reported on the Nasdaq National Market for
the most recent trading day prior to the date of grant. First Options granted
under the 1999 Stock Option Plan become exercisable in equal annual installments
over a five-year period and Subsequent Options are exercisable in full upon
grant. In the event of a merger of the Company with or into another corporation
or another qualifying acquisition event, each option will be assumed or an
equivalent option will be substituted by the successor corporation. If the
successor corporation does not assume outstanding options or such options are
not otherwise exchanged, the exercisability of all outstanding options will
accelerate.
Employment Agreements
Employees of the Company, including the Company's executive officers, are
generally required to enter into confidentiality agreements prohibiting the
employees from disclosing any confidential or proprietary information of the
Company. In addition, the agreements generally provide that upon termination, an
employee will not provide competitive products or services and will not solicit
Company customers and employees for a period of one year. At the time of
commencement of employment, the Company's employees also generally sign offer
letters specifying certain basic terms and conditions of employment. Otherwise,
employees of the Company are generally not subject to written employment
agreements.
Compensation Committee Interlocks and Insider Participation
As discussed below under Item 13 "Certain Relationships and Related
Transactions," Frank A. Ingari, a director and member of the Compensation
Committee of the Company, is a founding stockholder and chairman of the board of
directors of Wheelhouse Corporation, which paid the Company approximately
$374,000 in 2000 and, in 2001, has paid approximately $21,000 through March 31,
2001, relating to license and support fees and education services under a
business alliance agreement between the Company and Wheelhouse. Also, the
Company paid Wheelhouse approximately $1,200 in 2000 and, in 2001, has paid
approximately $18,000 through March 31, 2001 for consulting services which were
unrelated to the business alliance agreement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As discussed under Item 3 "Legal Proceedings" above, Michael J. Saylor and Sanju
K. Bansal were named as defendants in a class action lawsuit and shareholder
derivative action and were subjects of an SEC investigation relating to the
restatement of our financial results for 1999, 1998 and 1997. Mr. Saylor and Mr.
Bansal each retained separate legal counsel to defend their individual interests
in these legal proceedings. Using a portion of the proceeds that we received
from insurance in connection with those proceedings, we paid the legal fees of
such separate counsel in the amounts of $1,009,360 and $334,553 on behalf of Mr.
Saylor and Mr. Bansal, respectively, during 2000.
On December 30, 1999, the Company entered into a business alliance agreement
with Wheelhouse Corporation, a company for which Frank A. Ingari, a director and
member of the Compensation Committee of the Company, is a founding stockholder
and chairman of the board of directors. Pursuant to the agreement, Wheelhouse
acquired from the Company certain development software and training technology
and the right to offer Company products in the marketplace as a sales agent. In
addition, Wheelhouse is entitled to a finders fee of 1.5% of the license fees
paid to the Company by any company referred to the Company by Wheelhouse.
Wheelhouse paid the Company approximately $374,000 in 2000 and, in 2001, has
paid approximately $21,000 through March 31, 2001, relating to license and
support fees and education services in connection with the development software
acquired from the Company under the agreement. Also, the Company paid Wheelhouse
approximately $1,200 in 2000 and, in 2001, has paid approximately $18,000
through March 31, 2001 for consulting services which were unrelated to the
business alliance agreement.
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, in the city of McLean,
Commonwealth of Virginia, on this 22nd day of June, 2001.
MICROSTRATEGY INCORPORATED
(Registrant)
By: /s/ Eric F. Brown
---------------------
Name: Eric F. Brown
Title: President and Chief Financial Officer