10-K/A 1 a2054604z10-ka.txt 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 MARCH 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-27988 ---------------------------------- MICROWARE SYSTEMS CORPORATION (Exact name of Registrant as specified in its charter) --------------------------------- IOWA 42-1073916 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1500 N.W. 118TH ST. 50325 DES MOINES, IOWA (Zip Code) (Address of principal executive offices) (515) 223-8000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value 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 ninety 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 in any amendment to this Form 10-K. [ ] 1 PURPOSE OF AMENDMENT The registrant has determined to furnish the information required in Part III of its Annual Report on Form 10-K for the fiscal year ended March 31, 2001 rather than to incorporate it by reference to information to be contained in the registrant's definitive proxy statement. The registrant hereby amends Part III of the Annual Report on Form 10-K as follows to include the information required by Part III. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The directors and executive officers of the Company are as follows:

Mr. Kaplan has served as President and Chief Executive Officer of the Company since he co-founded it in 1977. Mr. Kaplan was one of the principal designers of the OS-9 real-time operating system. Mr. Kaplan is a Trustee of Drake University and Buena Vista University. Mr. Kaplan attended Drake University. 2 Mr. Leonard joined the Company in August 1998 as Executive Vice President, Chief Financial Officer, Treasurer and Secretary. Mr. Leonard was appointed Chief Operating Officer and a director on May 16, 2000. Prior to joining the Company, from July 1996 to July 1998, Mr. Leonard was the Vice President and Chief Financial Officer and a director of Western Pacific Airlines, based in Colorado Springs, Colorado. Western Pacific Airlines filed for bankruptcy protection under Chapter 11 in October 1997 and converted its filing to Chapter 7 in July 1998. Mr. Leonard also served as Chairman and Chief Executive Officer of Consumer Guaranty Corporation of Phoenix, Arizona, President and CEO of GEL Management Corporation, Chairman and Chief Executive Officer of AmBank Holding Company, and Executive Vice President, Chief Financial Officer, Chief Lending Officer and Chief Banking Officer, and a Director of MeraBank from 1975 to 1996. Mr. Leonard holds a B.S. degree from the United States Naval Academy and an M.B.A from the University of Chicago. Mr. Don has been a member of the law firm of D'Ancona & Pflaum LLC, Chicago, Illinois, and has been counsel to the Company, since 1985. Mr. Don has been a director of the Company since 1994. Mr. Howell is Senior Managing Director of Mesirow Private Equity Investments, Inc., an affiliate of the corporate general partner of Mesirow Capital Partners VI, a venture capital partnership. Mr. Howell has been a director of the Company since 1994. Mr. Young is Executive Vice President, Chief Financial Officer and a director of Wells Fargo Financial, Inc., formerly Norwest Financial, Inc., a financial services firm headquartered in Des Moines, Iowa, which he joined in 1965. Mr. Peiser has been Chairman and Chief Executive Officer of Vitality Beverages, Inc. since July 1999. Prior to that date, Mr. Peiser served as Chairman of CVSI, Inc. from 1998 to 1999; President and Chief Executive Officer of Western Pacific Airlines from 1996 to 1998; and Vice Chairman and Chief Executive Officer of FoxMeyer Drug Company from August 1996 through November 1996. Western Pacific Airlines filed for bankruptcy protection under Chapter 11 in October 1997 and converted its filing to Chapter 7 in July 1998. In addition, Mr. Peiser was Executive Vice President - Finance and Chief Financial Officer of Trans World Airlines, Inc. from August 1994 through August 1996. Mr. Peiser is a member of the Board of Directors of Ascent Assurance, Inc., a health insurance holding company, and The Tampa Bay Partnership. Mr. Kendall joined Microware in January 2001 as director of business development. Mr. Kendall was promoted to Vice President of North American Sales in April 2001. Mr. Kendall was employed for the past 15 years by Avnet, a hardware and software distributor in St. Louis, Missouri, where he held positions including vice president of sales. Mr. Kendall received a B.S. degree in engineering from the University of Guam. Mr. Kostlan joined Microware in April 2001 as Vice President of Marketing. Mr. Kostlan was employed most recently by UGS of Ames, Iowa, formerly Engineering Animation, Inc. Prior to that, Mr. Kostlan worked at Texas Instruments in Dallas, Texas for 16 years. Mr. Kostlan holds a B.S. degree in engineering from the University of Iowa. 3 Ms. Law has served as Chief Accounting Officer, Controller and Assistant Treasurer of the Company since February 2000. In July 2000, Ms. Law was appointed Treasurer. Prior to joining the Company, Ms. Law worked for Network Six, Inc., a systems integrator based in Warwick, Rhode Island. Ms. Law is a Certified Public Accountant, and holds a B.S. degree from the University of Rhode Island. Mr. Nakai joined Microware in June of 2000, as President and Representative Director of Microware Systems, KK. From January 1999 to May 2000, Mr. Nakai served as Vice President at HCL Technology, and from October 1987 to December 1998, Mr. Nakai served as Director of Sales at Aspen Technology Japan. Mr. Nakai has also held executive positions at Cray Research, Japan and IBM, Japan. Mr. Nakai holds a B.S. degree in Instrumentation Engineering from Keio University in Tokyo, Japan. Mr. Roesch assumed the position of Vice President of European and International Operations in June of 2000. Prior to joining Microware as Managing Director for Central Europe in 1996, Mr. Roesch held the position of Managing Director for Cadre Technologies, a CASE-tool company. Mr. Roesch also has more than 15 years of previous management experience at companies such as Motorola (semiconductor), Ferranti (semiconductor), Daisy Systems (CAE) and TRW (semiconductor). On April 2, 2001, Mr. James Boswell resigned as Vice President of North American Sales, and was replaced by Mr. Kendall. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and officers, and persons who beneficially own more than 10% of the Company's Common Stock, to file with the Securities and Exchange Commission ("SEC") reports of beneficial ownership and changes in beneficial ownership of the Common Stock and other equity securities of the Company. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. The Company believes that during the previous fiscal year all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with, except that a Form 4 reporting a single transaction was inadvertently filed late on James A. Gordon's behalf. 4 ITEM 11. EXECUTIVE COMPENSATION The following summary compensation table sets forth information concerning all compensation awarded, earned, or paid by the Company during its fiscal years ended March 31, 2001, 2000 and 1999 to (a) the Company's Chief Executive Officer, (b) the four most highly compensated executive officers other than the CEO who were serving as executive officers as of March 31, 2001 and (c) individuals for whom disclosure would have been required but for the fact that they were not serving as executive officers at March 31, 2001 (the "Named Executives").

(1) Includes bonus and/or sales commission earned in respective fiscal years. (2) The aggregate amount of perquisites and other personal benefits, securities or property, given to each Named Executive Officer valued on the basis of aggregate incremental cost to the Company, was less than either $50,000 or 10% of the total annual salary and bonus for that executive officer during each of these years. (3) Other compensation includes 401(k) plan-matching contributions and life insurance premiums. (4) Includes personal tax preparation services paid by the Company. (5) Represents relocation expenses and related taxes paid by the Company (6) Mr. Leonard joined the Company on August 31, 1998. (7) Mr. Boswell joined the Company on February 17, 1999 and resigned on April 2, 2001. (8) Mr. Nakai joined the Company on June 6, 2000. (9) Mr. Roesch became an Executive Officer on July 27, 2000. 5 BOARD OF DIRECTORS TERMS The Board of Directors of the Company is divided into three classes of directors serving staggered three-year terms. Class I Directors. The following persons serve as Class I directors with their term expiring at the annual meeting to be held after March 31, 2002: Kenneth B. Kaplan and Daniel P. Howell. Class II Directors. The following persons serve as Class II directors with their term expiring at the annual meeting to be held after March 31, 2003: Robert A. Peiser and George E. Leonard. Class III Directors. The following persons serve as a Class III director with their term expiring at the annual meeting to be held after March 31, 2001: Arthur Don and Dennis E. Young. DIRECTOR COMMITTEES The Board of Directors has established an Audit Committee and a Compensation Committee. The Audit Committee's functions are to recommend annually to the Board of Directors the appointment of the independent public accountants of the Company, to discuss and review the scope and the fees of the prospective annual audit and to review the results thereof with the Company's independent public accountants, to review and approve non-audit services of the independent public accountants, to review compliance with existing major accounting and financial policies of the Company, to review the adequacy of the financial organization of the Company, and to review management's procedures and policies relative to the adequacy of the Company's internal accounting controls. Messrs. Young (Chair), Howell, and Peiser currently serve on the Audit Committee. The Compensation Committee's functions are to review and approve annual salaries and bonuses for all executive officers, to review, approve and recommend to the Board the terms and conditions of all employee benefit plans or changes thereto and to administer the Corporation's various stock option plans. Messrs. Howell (Chair) and Peiser currently serve on the Compensation Committee. DIRECTORS' COMPENSATION All independent Directors of the Company are entitled to be paid a $15,000 Annual Retainer fee, $2,000 for in person attendance at Board meetings, $1,000 for in person attendance at Committee meetings held separately from Board meetings, and $1,000 and $500 respectively, for Board and Committee meetings attended telephonically. All Directors are reimbursed for travel expenses incurred in attending meetings of the Board of Directors. Non-employee Directors are also eligible to receive grants of 25,000 stock options. EMPLOYMENT AGREEMENTS GEORGE E. LEONARD In September of 1999, the Company entered into an employment agreement with Mr. Leonard whereby he agreed to serve as Chief Financial Officer of the Company for an initial term through March 31, 2001. This agreement is 6 currently effective until March 31, 2002, and is automatically extended for additional one-year periods unless terminated by either party in accordance with the agreement. Mr. Leonard currently earns a base salary of $180,000 per year. Mr. Leonard's employment agreement provides that, in the event Mr. Leonard's employment is involuntarily terminated as a result of a change of control of the Company, he will be entitled to a severance payment equal to one year of his base salary. 7 OPTIONS The following tables provide certain information concerning options granted to, exercised by and held by each Named Executive Officer of the Company at March 31, 2001 under the Company's 1991, 1992 and 1995 stock option plans. OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

(*) Calculations based on the fair market value of the underlying securities as of March 31, 2001 of $0.7190 per share, minus the aggregate exercise price. No compensation intended to serve as an incentive for performance to occur over a period longer than one fiscal year was paid or accrued pursuant to a long-term incentive plan during the last fiscal year to any of the persons named in the Summary Compensation Table. The Company does not have 8 any defined benefit or actuarial plan under which benefits are determined primarily by final compensation or average final compensation and years of service. 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of June 28, 2001, the name, address and holdings of each person (including any "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) known by the Company to be the beneficial owner of more than five percent of the Company's Common Stock, and the amount of Common Stock beneficially owned by each of the Directors, Named Executive Officers (defined herein) and executive officers of the Company and by all Directors and executive officers of the Company as a group.

----------------------------------------- * Less than 1% of the outstanding Common Stock. (1) Unless otherwise indicated in the footnotes to this table, the Company believes the persons named in this table have sole voting and investment power with respect to all shares of Common Stock reflected in this table. (2) Includes 7,600 shares held by Mr. Kaplan as custodian and 7,350 held as trustee. (3) Comprises options which are currently exercisable or which are deemed currently exercisable, and in the case of Messrs. Leonard and Don, includes 4,917 and 100 shares, respectively, which are directly owned. (4) Mr. Howell is Senior Managing Director of Mesirow Private Equity Investments, Inc., an affiliate of the corporate general partner of Mesirow Capital Partners VI, which is the direct beneficial owner of 748,639 of these shares. (5) Does not include Mr. Boswell who resigned from the Company in April 2001. (6) Includes 1,248,736 warrants deemed currently exercisable at an exercise price of $10.81 per share. Such warrants expire July 31, 2001. ITEM 13. CERTAIN RELATED TRANSACTIONS During the fiscal year ended March 31, 2001, the Company received total revenues of $861,000 under various license and service agreements with Motorola, which holds 1,526,232 shares of Common Stock of the Company and 10 warrants to purchase an additional 1,248,736 shares. The Company also routinely purchases various hardware products from Motorola used in product development. The Company believes that all transactions discussed or disclosed above have been, and the Company's Board of Directors has adopted a policy stating that any future transactions with the Company's officers, Directors, affiliates, or controlling shareholders will be, on terms which are considered to be no less favorable to the Company than those obtainable in arm's length transactions with unaffiliated third parties. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to its Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. MICROWARE SYSTEMS CORPORATION, an Iowa Corporation By: /s/ George E. Leonard ------------------------------------ George E. Leonard A duly authorized representative Dated: July 19, 2001 12

MICROWARE SYSTEMS CORP 10-K/A