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, 1998
OR
[_] 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: 000-23349
DISPATCH MANAGEMENT SERVICES CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3967426
(State of incorporation) (IRS Employer Identification No.)
1981 Marcus Avenue, Suite C131
Lake Success, New York 11042
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 326-9810
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 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 the filing
requirements for at least the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. (See
the definition of affiliate in Rule 405.)
At March 31, 1999 $33,479,052
- --------------------------------------------------------------------------------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Common Stock, Par Value $.01 Per Share (11,921,404 shares outstanding as of
April 27, 1999)
- --------------------------------------------------------------------------------
Documents incorporated by reference: List the following documents if
incorporated by reference and the part of the Form 10-K into which the document
is incorporated: (1) any annual report to security holders, (2) any proxy or
information statement, and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. (The listed documents should be clearly
described for identification purposes.)
Certain documents incorporated from prior filings (See Part IV)
DISPATCH MANAGEMENT SERVICES CORP.
Dispatch Management Services Corp., the registrant, hereby amends the
following items of its Annual Report on Form 10-K for 1998 as set forth in the
pages attached hereto:
Items 10, 11, 12, 13.
Item 10. Directors and Executive Officers of the Registrant
Identification of Directors
Served as Term Expires
Director at Annual Meeting
Name and Principal Occupation Since of Stockholders in
- ----------------------------------------------------------------------- ---------- ---------------------
H. STEVE SWINK, age 57
H. Steve Swink was appointed acting Chairman of the Board on
December 14, 1998. Mr. Swink was named Chairman of the Board
and Chief Executive Officer on January 28, 1999. From February
11, 1998 to January 1999, Mr. Swink was a director of the
Company. From August 1995 to August 1998, Mr. Swink served 1998 2000
as President of the Coffee and Beverage Division of the U.S.
Office Products Company. From 1977 to August 1995, Mr. Swink
served in various executive officer capacities, most recently as
President of Coffee Butler Services, Inc., a coffee service
business.
EDWARD N. ALLEN, age 58
Edward Allen has been the chairman and chief executive officer of
InterCoastal Communities, a developer of housing communities,
since 1979 and chairman of Port Developers L.C., a developer of 1999 1999
Caribbean cruise ship ports, since 1994. Mr. Allen is also a
director of Chateau Communities and Vacation Break USA, Inc.
D. KEITH COBB, age 58
Keith Cobb was the Chief Executive Officer of Alamo Rent A Car,
Inc., a travel-related group of companies with revenues of $2
billion, between 1995 and 1996, when Alamo was acquired by
Republic Industries, Inc. Prior to that, Mr. Cobb served as
National Managing Partner-- Financial Services of KPMG LLP 1999 1999
between 1993 and 1995. Mr. Cobb serves on the Boards of
Directors of the Federal Reserve Bank of Atlanta, Miami Branch,
Renaissance Cruise Lines, RHR International, First Fleet Corp.,
Laundromax and Capitol Guaranty Corp.
MICHAEL FIORITO, age 38
Michael Fiorito has been a director of the Company since
February 1998. Between 1980 and February 11, 1998, he was the
Chief Executive Officer, President and Chairman of Total
Management, LLC, and its predecessor, Earlybird Courier Servic 1998 1999
Inc., until that delivery company was acquired by the Company.
After the acquisition, Mr. Fiorito became the Company's center
manager for New York City.
THOMAS J. SAPORITO, age 47
Dr. Thomas J. Saporito has been the senior vice president of and 1999 1999
a member of the Executive Council of RHR International, an
executive management consulting firm based in Philadelphia since
1979.
Served as Term Expires
Director at Annual Meeting
Name and Principal Occupation Since of Stockholders in
- ----------------------------------------------------------------------- ---------- ---------------------
ANNE T. SMYTH, age 48
Anne T. Smyth has held senior information technology
positions for the U.S. Office Products Company, most recently
as executive vice president, E-Commerce, since January 1997.
From 1979 to 1997, Ms. Smyth was president and founder of The 1999 2000
Systems House, Inc., a privately-held systems integration
organization based in Des Plaines, Illinois that was
ultimately sold to the U.S. Office Products Company in 1996.
Identification of Executive Officers
Information with respect to the executive officers of Dispatch Management
Services Corp. (the "Company") is set forth under the caption "Executive
Management" contained in Part I, Item 1 of the Company's 1998 Form 10-K, which
information is incorporated herein by reference.
Item 11. Executive Compensation
Directors' Compensation
Directors who are also employees of the Company or one of its subsidiaries
do not receive additional compensation for serving as a director. Each director
who is not an employee of the Company or one of its subsidiaries receives a fee
of $2,000 for attendance at each meeting of the Board and $1,000 for each
committee meeting attended (unless held on the same day as a meeting of the
Board). Directors are also reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board or committees thereof incurred in their capacity
as directors.
Executive Compensation
Summary of Compensation. The following table shows information concerning
the annual and long-term compensation earned during the last two fiscal years by
the Company's chief executive officer on December 31, 1998, each of the
Company's other executive officers as of December 31, 1998, and each former
executive officer during 1998 whose total annual salary and bonus exceeded
$100,000 (the "Named Executive Officers"):
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Compensa- Award(s) Options/ Compensa-
Position During 1998 Year Salary Bonus tion(1) ($) SARs (#) tion
-------------------- ---- ------ ----- --------- ---------- -------- ---------
Linda Jenkinson,
Chief Executive Officer
(2) 1998 $127,513 -- $36,000(3) -- 98,377(4) --
1997 45,000 $40,000 -- -- -- --
Marko Bogoievski,
Chief Financial Officer 1998 135,246 50,000 -- -- 78,750(5) --
Howard J. Ross,
General Counsel 1998 123,958 50,000 -- -- 25,000(6) --
Kevin Holder,
Chief Operating Officer
(7) 1998 153,750 -- -- -- -- --
Lever Stewart,
Director of Business
Development (8) 1998 124,661 -- -- -- 33,750(9) --
(1) Except as otherwise indicated, any perquisites received by a Named
Executive Officer for the relevant fiscal year were in aggregate amounts
that did not exceed the lesser of $50,000 or 10% of the Named Executive
Officer's salary and bonus.
(2) Effective January 29, 1999, Ms. Jenkinson resigned as chief executive
officer and director.
(3) Figure represents a housing allowance for the Named Executive Officer.
(4) Includes (i) 45,000 shares of Common Stock subject to stock options that
vest over a five-year period at the rate of 20% per year and (ii) 53,377
shares of Common Stock subject to stock options that vest over a two-year
period at the rate of 50% per year, subject to forfeiture if not exercised
by May 29, 1999.
(5) Includes (i) 33,750 shares of Common stock subject to immediately vesting
stock options and (ii) 45,000 shares of Common Stock subject to stock
options that vest over a five-year period at the rate of 20% per year.
(6) Includes 25,000 shares of Common Stock subject to stock options that vest
over a five-year period at the rate of 20% per year.
(7) Mr. Holder left the Company on September 21, 1998.
(8) Mr. Stewart left the Company on September 21, 1998.
(9) Includes 33,750 shares of Common Stock subject to immediately vesting stock
options, subject to forfeiture if not exercised by February 6, 2000.
Stock Options. The Company's 1997 Stock Incentive Plan, as amended (the
"Plan"), provides for grants of stock options, stock appreciation rights,
dividend equivalent rights, restricted stock and performance awards. The purpose
of the Plan is to provide long-term incentives to select employees, officers,
directors and consultants of the Company and its subsidiaries for high levels of
performance and unusual efforts which represent significant contributions to the
successful performance of the Company. The Plan is also intended to qualify
certain compensation awarded under the Plan for tax deductibility under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan
is not qualified under Section 401(a) of the Code and is not subject to the
requirements of the Employee Retirement Income Security Act of 1974, as amended.
Option Grants in Last Fiscal Year. The following table provides information
related to options granted or awarded to the Named Executive Officers during
1998:
Potential Realizable Value at
% of Assumed Annual Rates of Stock
Number Total Price Appreciation
of Secu- Options for Option Term (1)
rities Granted ---------------------------
Under- to Em-
lying ployees Exercise
Options in or Base
Granted Fiscal Price Grant Expiration
Name # Year ($/share) Date Date 0% 5% 10%
- --------------- ------ ----- --------- -------- --------- ----- ---- -----
Linda Jenkinson 98,377 10.8% $13.25 02/06/98 02/06/08 0 0 0
Marko Bogoievski 78,750 8.6 13.25 02/06/98 02/06/08 0 0 0
Howard J. Ross 25,000 2.7 13.25 02/06/98 02/06/08 0 0 0
Lever Stewart 33,750 3.7 13.25 02/06/98 02/06/08 0 0 0
Kevin Holder -- -- -- -- -- -- -- --
All Optionees 235,877 25.8% Various Various Various N/A N/A N/A
- ----------
(1) The dollar amounts under these columns are the results of calculations at
assumed annual rates of stock price appreciation of 0%, 5% and 10%. These
assumed rates of growth were selected by the SEC for illustration purposes
only. They are not intended to forecast possible future appreciation, if
any, of the Company's stock price. Since optionees received options with an
exercise price equal to the market value on the date of grant, no gain is
possible without an increase in stock prices, which will benefit all
stockholders. A 0% gain in stock price will result in a 0% benefit to such
optionees. The closing piece of the Company's Common Stock on December 31,
1998 was $4.0625.
Aggregated Option Exercises and Fiscal Year-end Option Values Table. The
following table provides information related to any stock options for shares of
Common Stock acquired upon exercise by the Named Executive Officers during 1998
and certain information about unexercised options held by the Named Executive
Officers at December 31, 1998:
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options at Option at
Fiscal Year End Fiscal Year-End
(#) ($)
Shares-Acquired Value Exercisable/ Exercisable/
Name On Exercise(#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ----------- ------------- -------------
Linda Jenkinson -- -- 0/98,377 $0
Marko Bogoievski -- -- 42,750/36,000 0
Howard J. Ross -- -- 5,000/20,000 0
Lever Stewart -- -- 33,750/0 0
Kevin Holder -- -- 0/0 0
- ----------
Employment Agreements
On February 1, 1999, H. Steve Swink entered into an employment agreement
with the Company to serve as chief executive officer of the Company. The term of
the agreement runs from February 1, 1999 to January 31, 2001 and is
automatically renewable for consecutive one-year terms unless either party sends
notice of non-renewal. The employment agreement provides for an annual base
salary of $300,000. Mr. Swink is eligible to participate in the Company's
executive bonus pool, profit sharing, stock purchase plan or other incentive
program available to the Company's senior executive officers. On February 1, Mr.
Swink was granted an option to acquire 100,000 shares of the Company's Common
Stock at an exercise price of $2.00 per share, which vested upon execution of
the employment agreement. Mr. Swink has been issued an option to purchase an
additional 150,000 shares of the Company's Common Stock at an exercise price of
$2.00 per share, vesting ratably over the six calendar quarters following the
date of the agreement. The Company will reimburse Mr. Swink for his cost of
disability income insurance in the policy benefit amount of $10,000 per month,
subject to customary terms and availability. Mr. Swink also received a $50,000
relocation allowance. The Company has agreed to maintain directors and officers
liability insurance for the benefit of Mr. Swink of at least $25 million and to
indemnify Mr. Swink for all third-party actions brought in connection with the
performance of his duties as chairman and chief executive officer. On March 30,
1999, Mr. Swink's employment agreement was amended to provide that the
definition of "change in control" in his employment agreement be in accordance
with the definition used in the Company's 1997 Stock Incentive Plan. Pursuant to
such amendment, Mr. Swink would have the option of terminating his employment
agreement with the Company and receiving $600,000, provided that he gives
fifteen days prior written notice of such termination within six months of such
change in control.
Kevin Holder, Marko Bogoievski and Lever F. Stewart each entered into an
employment agreement with the Company to serve in their respective capacities as
executive officers of the Company and providing for an annual base salary of
$180,000 each. Each employment agreement is for a term of two years commencing
on February 5, 1998. Unless terminated, the term of each employment agreement
continues thereafter on a year-to-year basis on the same terms and conditions
existing at the time of renewal. Each employment agreement contains a
non-solicitation covenant, which is effective during the term of such employment
agreement and for a period of one year immediately following termination of
employment. In the event of termination of employment by the Company without
"cause" (as defined in the employment agreement), the executive officer will be
entitled to receive from the Company pursuant to the terms of the agreement: (i)
any unpaid base salary, bonuses or benefits accrued through the date of
termination; (ii) reimbursement of expenses incurred through the date of
termination; (iii) the base salary for a period of the greater of the remainder
of the term or one year from the date of termination at the annual rate thereof
immediately preceding such termination; (iv) an annual bonus for a period of the
greater of the remainder of the term of one year following such termination at
an annual rate equal to the executive officer's annual bonus over the five
fiscal years of the Company (or the period of employment if less than five
years) immediately preceding the fiscal year in which the termination occurred,
payable in equal installments together with the base salary; and (v) the
continuation of group life, health and disability benefits for a period of the
greater of the remainder of the term or one year from the date of termination.
On August 16, 1998, Mr. Bogoievski's employment agreement was amended to
temporarily reduce his salary to $90,000 for a period of 90 days. On March 1,
1999, Mr. Bogoievski's salary was increased to $250,000. On March 30, 1999, Mr.
Bogoievski's employment agreement was amended to provide that, in the event of a
"change in control" (as defined in amendment two to the employment agreement),
Mr. Bogoievski would have the option of terminating his employment agreement
with the Company and receiving $500,000, provided that he gives fifteen days
prior written notice of such termination within six months of such change in
control. Mr. Holder and Mr. Stewart left the Company on September 21, 1998.
Pursuant to their respective employment agreements, the Company is making
monthly payments to them through February 6, 2000 at an annual rate of $180,000
each.
On February 6, 1998, Howard J. Ross, who currently serves as the Company's
General Counsel, entered into an employment agreement with the Company to serve
as Associate Director -- Acquisitions. The employment agreement provides for an
annual base salary of $175,000 and is for a term of two years commencing on
February 6, 1998. The term of the employment agreement will be extended for one
year unless terminated by either Mr. Ross or
the Company by prior written notice. Mr. Ross is eligible to receive an annual
bonus of at least $75,000 under the Company's bonus plan. Pursuant to his
employment agreement, on February 6, 1998, Mr. Ross received an option to
purchase 25,000 shares of Common Stock of the Company at an exercise price of
$13.25 per share, vesting at a rate of 20% per year over five years, and is
eligible to receive additional stock options pursuant to the Company's Stock
Incentive Plan. The employment agreement contains a non-solicitation covenant,
which is effective during the term of such employment agreement and for a period
of one year immediately following termination of employment. In the event of
termination of employment by the Company other than for "cause" (as defined in
the employment agreement), death or disability, Mr. Ross will be entitled to
receive: (i) any unpaid base salary, bonuses or benefits accrued through the
date of termination; (ii) reimbursement of expenses incurred through the date of
termination; (iii) the base salary for a period of the greater of the remainder
of the term of the employment agreement or one year from the date of termination
at the annual rate thereof immediately preceding such termination; (iv) an
annual bonus for a period of the greater of the remainder of the term of one
year following such termination at an annual rate equal to Mr. Ross's annual
bonus over the five fiscal years of the Company (or the period of employment if
less than five years) immediately preceding the fiscal year in which the
termination occurred, payable in equal installments together with the base
salary; and (v) the continuation of group life, health and disability benefits
for a period of the greater of the remainder of the term or one year from the
date of termination. On March 30, 1999, Mr. Ross's employment agreement was
amended to provide that, in the event of a "change in control" (as defined in
amendment one to the employment agreement), Mr. Ross would have the option of
terminating his employment agreement with the Company and receiving $500,000,
provided that he gives fifteen days prior written notice of such termination
within six months of such change in control.
Linda M. Jenkinson entered into an Employment Agreement identical to the
one entered into by Messrs. Holder, Bogoievski, and Stewart. Upon her
resignation in January 1999, the Company agreed to pay her $180,000 over the
succeeding 15 months.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Stockholders
The stockholders named in the following table are those who are known to
the Company to be the beneficial owners of 5% or more of Common Stock. Unless
otherwise indicated, the information is as of April 27, 1999. For purposes of
this table, and as used elsewhere in this amendment to the Company's Annual
Report on Form 10-K, the term "beneficial owner" means any person who, directly
or indirectly, has or shares the power to vote, or to direct the voting of, a
security or the power to dispose, or to direct the disposition of, a security or
has the right to acquire shares within sixty (60) days.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Common Stock
- ---------------------------------- -------------------- ------------
Gilder Gagnon Howe & Co. LLC, 3,297,490 (1) 27.7%
1775 Broadway
26th Floor
New York, New York 10019
(1) Gilder Gagnon Howe & Co. LLC possesses shared voting power with respect to
21,300 shares and shared dispositive power with respect to all 3,297,490
shares. The shares reported include 2,835,180 shares held in customer
accounts over which members and/or employees of Gilder Gagnon Howe & Co.
LLC have discretionary authority to dispose of or direct the disposition of
the shares, 556,660 shares held in accounts owned by the members of Gilder
Gagnon Howe & Co. LLC and their families, and 21,300 shares held in the
account of the profit-sharing plan of Gilder Gagnon Howe & Co. LLC.
Stock Ownership of Directors, Executive Officers and Former Executive Officers
The following table and notes thereto set forth information, as of April
27, 1999, with respect to the beneficial ownership of shares of Common Stock by
each director and each Named Executive Officers by the Company in the Summary
Compensation Table and, as a group, by the current directors and executive
officers of the Company, based upon information furnished to the Company by such
persons. Except as otherwise indicated, the Company believes that each
beneficial owner listed below exercises sole voting and dispositive power.
Amount of Beneficial Ownership
-------------------------------------------------
Name of Number of Percentage of
Beneficial Owner Shares Common Stock
- ------------------------------------------------- ---------------- -------------
Edward N. Allen.................................. 50,000 *
D. Keith Cobb.................................... 15,000 *
Michael Fiorito.................................. 136,026 (1) 1.1%
Thomas J. Saporito............................... 0 --
Anne T. Smyth.................................... 0 --
H. Steve Swink................................... 166,000 (2) 1.4%
Marko Bogoievski................................. 67,750 (3) *
Howard J. Ross................................... 17,500 (3) *
Linda Jenkinson.................................. 90,587 *
Lever Stewart.................................... 33,750 (3) *
Kevin Holder..................................... 19,829 *
All Current Directors and Executive Officers 514,476 (4) 4.6%
as a Group (9 persons)
- ----------
* Less than one percent (1%).
(1) This figure includes 12,250 shares which may be acquired upon the exercise
of options that are exercisable within 60 days.
(2) This figure includes 125,000 shares which may be acquired upon the exercise
of options that are exercisable within 60 days.
(3) This figure reflects only shares which may be acquired upon the exercise of
options that are exercisable within 60 days.
(4) This figure includes 222,500 shares which may be acquired upon the exercise
of options that are exercisable within 60 days.
Item 13. Certain Relationships and Related Transactions
Upon consummation of the Company's initial public offering, the Company
acquired Earlybird Courier for approximately $9.4 million in cash and 350,868
shares of Common Stock of the Company. Michael Fiorito, a director of the
Company and Regional Vice President for New York, was a 45% shareholder of
Earlybird Courier. In addition, the Company agreed to pay Mr. Fiorito a finder's
fee equal to the revenues for a two-week period of any courier company acquired
by the Company if Mr. Fiorito identified such courier company for acquisition by
the Company, negotiated the acquisition and otherwise aided in closing the
acquisition. As of December 31, 1998, the Company paid Mr. Fiorito approximately
$792,292 pursuant to such agreement in respect of four such acquisitions. The
Company believes that the price paid to acquire Earlybird Courier was at least
as favorable to the Company as would have been available from an independent
third party.
Approximately $1.1 million principal amount of indebtedness was incurred by
the Company in December 1997 and January 1998 (the "December Bridge Loan") to
partially fund expenses associated with the Company's initial public offering
and the acquisition of 38 courier firms and one software firm acquired by the
Company on February 11, 1998. The December Bridge Loan matured upon consummation
of the initial public offering and bore interest at 14% per annum. In addition,
commitment fees equal to the principal amount of the loan were paid at the
repayment of the loan. In January 1998, Lever Stewart, former Director of
Business Development, purchased for cash $172,000 principal amount of the
Company's notes as part of the December Bridge Loan. In January 1998, Bonnie
Brogdon, an executive officer of the Company, purchased for cash $100,000
principal amount of the Company's notes as part of the December Bridge Loan.
Also in January 1998, H. Steve Swink, Chief Executive Officer and Chairman of
the Board, purchased for cash $100,000 principal amount of the Company's notes
as part of the December Bridge Loan.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
DISPATCH MANAGEMENT SERVICES CORP.
(Registrant)
Date: April 30, 1999 By: /s/ Marko Bogoievski
------------------------------
Marko Bogoievski
Chief Financial Officer