<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K/A
(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, 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 0-19463
MICROPROSE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
State of Incorporation: DELAWARE I.R.S. Employer Identification No.: 52-1728656
<S> <C>
2490 MARINER SQUARE LOOP, SUITE 100, ALAMEDA, CA 94501
(Address of principal executive offices)
Registrant's telephone number: (510) 864-4440
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
</TABLE>
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 a 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/
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of July 15, 1998, was approximately $18,602,764 (based on
the July 15, 1998, closing price for shares of the Registrant's Common Stock
as reported by the Nasdaq National Market). Shares of Common Stock held by
each officer, director and holder of 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
On July 15, 1998, approximately 5,753,598 shares of the Registrant's Common
Stock, par value $0.001, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
The following table lists the names, ages and position of all executive
officers and directors of the Registrant. Executive officers serve at the
discretion of the Board of Directors.
NAME AGE POSITION
- --------------------- ----- ---------------------------------------
Gilman G. Louie 37 Chairman of the Board
David C. Costine 57 Director
Vinod Khosla 43 Director
Keith E. Schaefer 49 Director
Stephen M. Race 48 Director, Chief Executive Officer
Alden H. Andersen 48 Senior Vice President, Operations
Charles E. Balthaser 58 Senior Vice President, Studios
John M. Belchers 54 Chief Financial Officer
Tim P. Christian 43 Managing Director, Europe/Asia Pacific
Jeffery J. Forestier 41 Senior Vice President, Sales
Robert D. Botch 46 Senior Vice President, Marketing
Derek W. McLeish 50 Senior Vice President, Business Development
MR. LOUIE has served as Chairman of the Board of Directors of the
Company since December 14, 1993, the effective date of the merger (the Merger
Date) between Spectrum HoloByte, Inc. and MicroProse, Inc. Mr. Louie also
served as Chief Executive Officer of the Company from May 1, 1995, to August
15, 1995. Prior to the merger, Mr. Louie served as Chairman of the Board of
Spectrum HoloByte since its inception in September 1992. Mr. Louie holds a
Bachelor's degree in Business Administration from San Francisco State
University where he graduated magna cum laude.
MR. COSTINE has served as a director of the Company since November 1990.
Since 1987, Mr. Costine has been President of Costine Management Company.
Since 1988, he has been a General Partner of Costine Associates, L.P., which
is the General Partner of Corporate Venture Partners, L.P., a venture capital
fund that is a stockholder of the Company. He currently serves on the Board
of Directors of Yes! Entertainment. Mr. Costine has a Bachelor's degree in
Mechanical Engineering from Cornell University and an MBA from Harvard
University.
MR. KHOSLA has been a director of the Company since the Merger Date and
of Spectrum HoloByte since its inception in September 1992. He has been a
General Partner at Kleiner Perkins Caufield & Byers, a venture capital firm,
since November 1987. He currently serves on the Board of Directors of
Excite, Inc., Concentric Network Corp. and Qwest Communication International
Inc. Mr. Khosla holds a Bachelor of Technology in Electrical Engineering
from the Indian Institute of Technology in New Delhi, a Master's Degree in
Biomedical Engineering from Carnegie Mellon University and an MBA from the
Stanford University Graduate School of Business.
MR. SCHAEFER has been a director of the Company since the Merger Date
and of Spectrum HoloByte
2
<PAGE>
since March 1993. He is currently a managing partner of USWeb Corporation.
From July 1994 until September 1997, he was President and Chief Executive
Officer of Cybernautics, Inc. From October 1992 until June 1994, Mr.
Schaefer served as President of Paramount Communications Technology Group,
Inc., a global entertainment and communications company. He has a B.A. from
the University of Pittsburgh and attended the University of California, Los
Angeles Graduate School of Business.
MR. RACE has been a director and the Chief Executive officer of the
Company since August 1995. From May 1994 until August 1995, Mr. Race served
as president of Sony Computer Entertainment America. Prior to joining Sony
Computer Entertainment America, Mr. Race directed his own consulting practice
and served as a consultant to a variety of companies from July 1991 until May
1994.
MR. ANDERSEN joined the Company in February 1996 as Senior Vice
President, Operations. From 1994 until 1995, he was Vice President of
Operations at Sony Computer Entertainment America. Mr. Andersen served as
Associate Director of Manufacturing Planning at Sega of America in 1993
through 1994. He has a B.S. in business administration from the University
of Santa Clara.
MR. BALTHASER joined the Company in September 1996 as Senior Vice
President, Studios. In July 1992, Mr. Balthaser established Alexandria
Digital Studios, a video game and interactive entertainment company. He
served as President and Chief Executive Officer until the company was sold in
1995.
MR. BELCHERS joined the Company in March 1998 as Chief Financial
Officer. From April 1996 until November 1997, Mr. Belchers served as Chief
Operating Officer at Discovery Toys, Inc., and various financial positions at
American President Lines from August 1989 until March 1996. Mr. Belchers is
a chartered accountant and holds a Bachelor of Business Science from the
University of Capetown.
MR. CHRISTIAN joined the Company in August 1994 as Managing Director,
U.K. From January 1991 until August 1994, Mr. Christian was managing director
at Accolade Europe Limited. Mr. Christian is a member of the Chartered
Institute of Management Accountants and holds a B.A. in business
administration from Loughborough University.
MR. FORESTIER joined the Company in December 1995 as Senior Vice
President, Sales. From January 1993 until November 1995, he was director of
sales and marketing at NAMCO HomeTek, Inc. Mr. Forestier holds a B.S. in
economics and agricultural science from the University of California at Davis.
MR. BOTCH joined the Company in March 1998 as Senior Vice President,
Marketing. From May 1996 until March 1998, he served as President of Apt
Productions. From October 1991 until April 1996, Mr. Botch served as
President of U.S. Gold.
MR. MCLEISH joined the Company in July 1996 as Senior Vice President,
Marketing. Since January 1998, he has been serving as Senior Vice President,
Business Development. From October 1994 until July 1996, he was President
and Chief Executive Officer of Xatrix Entertainment Inc. From February 1993
until October 1994, he served as President and Chief Executive Officer at
Velocity Development Corporation. Mr. McLeish has a B.A. from California
State University at Long Beach.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership on Forms 3,
4 and 5 with the Securities and Exchange Commission and to furnish copies of
such reports to the Company.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that, there was compliance for the fiscal year ended March
31, 1998, with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten-percent beneficial owners.
3
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned for each of the three fiscal years preceding March 31,
1998, by the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company earning at least $100,000 for
services rendered in all capacities to the Company and its subsidiaries (the
"Named Executive Officers"). No executive officer that would have otherwise
been includible in such table on the basis of salary and bonus earned for the
1998 fiscal year has resigned or terminated employment during the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ----------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL SALARY COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) (1) BONUS ($) ($) (2) OPTIONS (#) ($) (3)
- --------------------------- ------ ------ --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Race, 1998 339,689 -- -- -- 2,969
Director and Chief 1997 296,384 289,785 -- -- (5) 3,912
Executive Officer (4) 1996 172,404 75,000 -- 100,000 529
Gilman G. Louie, 1998 233,619 -- -- 20,000 2,445
Chairman of the Board 1997 213,462 223,061 -- -- (5) 2,702
1996 203,173 -- -- 40,000 2,282
Tim P. Christian 1998 201,097 -- -- 25,000 33,192
Managing Director, 1997 183,435 82,134 -- -- (5) 48,467
Europe/Asia Pacific 1996 131,750 77,520 -- 4,000 16,800
Derek W. McLeish (6) 1998 200,822 -- 35,133 (7) 5,000 --
Senior Vice President, 1997 123,750 35,000 -- 20,000 --
Business Development 1996 -- -- -- -- --
Charles E. Balthaser (8) 1998 200,683 -- -- 6,000 --
Senior Vice President, 1997 100,846 25,000 -- 14,000 --
Studios 1996 -- -- -- -- --
</TABLE>
(1) Salary includes salary deferred under the Company's 401(k) Plan.
(2) In accordance with Commission rules, perquisites constituting less than
the lesser of $50,000 or 10% of total salary and bonus are not reported.
(3) "All Other Compensation" reflects matching contributions to the
Company's 401(k) Plan or U.K. pension contributions in the case of Mr.
Christian.
(4) Mr. Race has served as the Chief Executive Officer of the Company since
August 16, 1995. His salary in the 1996 fiscal year was for a partial
year.
(5) On June 26, 1996, as part of an Option Exchange Program, the Company
agreed to enter into Option Exchange Agreements with each of its
employee option holders, including Messrs. Race, Louie and
4
<PAGE>
Christian, pursuant to which the Company issued, in exchange for
tendered option agreements with an exercise price in excess of $26.875
from current option holders, new options, each with an exercise price of
$26.875 which represents the fair market value of one share of the
Company's Common Stock on June 26, 1996, as reported by the NASDAQ
national market ("NASDAQ"). Mr. Race exchanged options to purchase
100,000 shares, Mr. Louie exchanged options to purchase 30,000 shares,
and Mr. Christian exchanged options to purchase 10,000 shares. The
Company's Board of Directors approved the Option Exchange Program.
(6) Mr. McLeish was hired on July 29, 1996. His salary in the 1997 fiscal
year was for a partial year.
(7) Included in Mr. McLeish's Other Compensation in the 1998 fiscal year
were $14,805 for a housing allowance, $14,328 for storage of household
goods and the remainder for travel expenses.
(8) Mr. Balthaser was hired on September 4, 1996. His salary in the 1997
fiscal year was for a partial year.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made under the Company's 1994 Stock Option Plan for the 1998 fiscal
year to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------- POTENTIAL REALIZABLE VALUE OF
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME GRANTED (#) (1) FISCAL YEAR ($/SHARE) (2) DATE 5% 10%
-------------- --------------- ------------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Race --
Gilman G. Louie (4) 20,000 6.1% $ 9.845 2/26/08 $ 123,872 $ 313,808
Tim P. Christian (5) 20,000 6.1% $21.875 7/8/07 $ 275,237 $ 697,262
5,000 1.5% $10.000 1/15/08 $ 31,456 $ 79,687
Derek W. McLeish (6) 5,000 1.5% $10.000 1/15/08 $ 31,456 $ 79,687
Charles E. Balthaser (6) 6,000 1.8% $10.000 1/15/08 $ 37,747 $ 95,625
</TABLE>
(1) All options were granted under the Company's 1994 Stock Option Plan. The
options granted to Messrs. Louie, Christian and McLeish are incentive
and nonqualified options. The options granted to Mr. Balthaser are
incentive options. Each option will immediately vest in the event the
Company is acquired by a merger, reverse merger or asset sale, unless
the options are either assumed by the successor corporation or replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation. Each option has a maximum term of 10 years,
subject to earlier termination in the event of the optionee's cessation
of service with the Company.
(2) The exercise price of these options may be paid in cash, in shares of
Common Stock valued at fair market value on the exercise date or through
a cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares and the federal and state tax liability incurred in connection
with such exercise. The optionee may be permitted, subject to the
approval of the plan administrator, to apply a portion of the shares
purchased under the option (or to deliver existing shares of Common
Stock) in satisfaction of such tax liability.
5
<PAGE>
(3) In accordance with Securities and Exchange Commission rules, these
columns reflect hypothetical gains or "option spreads" that would exist
for the respective options. These rules require that the gains be based
on assumed rates of annual compounded stock price appreciation of 5
percent and 10 percent from the date the options were granted over the
full ten-year option term. There can be no assurance that these assumed
rates of appreciation or any appreciation will occur.
(4) The options granted to Mr. Louie become exercisable as to 16.7 percent
of the option shares six (6) months after the vesting commencement date
and the balance of the shares vest in a series of thirty (30) equal
monthly installments.
(5) The 20,000 options granted to Mr. Christian become exercisable as to
12.5 percent of the option shares six (6) months after the vesting
commencement date and the balance of the shares vest in a series of
forty-two (42) equal monthly installments. The 5,000 options granted to
Mr. Christian become exercisable as to 10 percent of the option shares
six (6) months after the vesting commencement date and the balance of
the shares vest in a series of fifty-four (54) equal monthly
installments.
(6) The options granted to Messrs. McLeish and Balthaser become exercisable
as to 10 percent of the option shares six (6) months after the vesting
commencement date and the balance of the shares vest in a series of
fifty-four (54) equal monthly installments.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options during the 1998 fiscal
year and unexercised options held as of the end of the 1998 fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES VALUE YEAR-END (1998) (#) (1) FISCAL YEAR-END ($) (1) (2)
ACQUIRED ON REALIZED --------------------------- ----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Race -- -- 64,380 35,620 -- --
Gilman G. Louie -- -- 19,666 40,334 -- $40,600
Tim P. Christian -- -- 11,222 25,778 -- $ 9,375
Derek W. McLeish 2,000 $17,500 6,335 16,665 -- $ 9,375
Charles E. Balthaser -- -- 4,200 15,800 -- $11,250
</TABLE>
(1) Options granted pursuant to the Company's 1994 Stock Option Plan.
(2) Based on the fair market value of the shares on the last day of the 1998
fiscal year ($11.875 per share) less the exercise price payable for such
shares.
DIRECTOR REMUNERATION
Current cash compensation for non-employee members of the Board of
Directors consists of an annual retainer fee of $10,000. Members of the
Board are reimbursed for all out-of-pocket costs incurred in connection with
their attendance at Board and committee meetings. Under a self-administering
automatic option grant program in effect under the Company's 1994 Stock
Option Plan, an individual who first becomes
6
<PAGE>
a non-employee member of the Board will receive an automatic one-time option
grant for 5,000 shares of the Company's Common Stock upon commencement of
Board service, and each individual with six or more months of Board service
will receive an automatic option grant for an additional 500 shares at each
Annual Stockholders Meeting at which he or she continues to serve as a
non-employee Board member.
The exercise price of such options may not be less than the fair market
value per share of the Company's Common Stock (as determined by the closing
price reported by NASDAQ on the date of grant) and the term of such options
may not exceed ten years.
Automatic option grants become exercisable for 12 percent of the option
shares upon completion of six months of Board service from the date of grant,
and for the balance of the option shares in a series of 44 equal successive
monthly installments thereafter, provided the director remains a member of
the Board through such date. However, full and immediate vesting will occur
upon certain mergers involving the Company or a sale, transfer or other
disposition of all or substantially all of the Company's assets (a "Corporate
Transaction") and upon certain types of "hostile take-overs." Also, each
automatic option grant will be automatically canceled upon the occurrence of
certain Corporate Transactions not approved by the Board of Directors (a
"Hostile Take-Over") whether or not the option is otherwise at the time
exercisable for such shares. In return, the optionee will be entitled to a
cash distribution from the Company in an amount equal to the excess of (i)
the greater of (a) the fair market value per share on the date of
cancellation, as determined in accordance with the valuation provisions of
the Option Plan, or (b) the highest reported price per share paid by the
acquiring entity in effecting the Hostile Take-Over over (ii) the aggregate
exercise price payable for such shares.
Upon cessation of Board service, the options held by the director will
remain exercisable for six months. Should the optionee die while holding one
or more options, then those options may subsequently be exercised by the
personal representative of the optionee's estate or by the persons to whom
such options are transferred by the optionee's will or by the laws of
inheritance within twelve months of the director's death.
In accordance with the provisions of the Option Plan, Messrs. Costine,
Khosla and Schaefer were each granted options for 2,000 shares of the
Company's Common Stock at an exercise price of $48.75 per share on December
16, 1993, and options for 500 shares of the Company's Common Stock at an
exercise price of $66.25 on September 21, 1994, options for 500 shares of the
Company's Common Stock at an exercise price of $56.25 on October 5, 1995,
options for 500 shares of the Company's Common Stock at an exercise price of
$30.625 on September 18, 1996, and options for 500 shares of the Company's
Common Stock at an exercise price of $25.625 on September 18, 1997.
EMPLOYMENT AGREEMENTS
In August 1995, the company entered into an employment agreement with
Stephen M. Race, Chief Executive Officer of the Company, which terminates
upon Mr. Race's termination of employment with the Company. The agreement
provides for an initial annual base salary of $275,000 which will be reviewed
at least annually, but which may not be reduced below such level. His
current salary is $341,000. The agreement provides that the Company grant
Mr. Race options to purchase 100,000 shares of Common Stock, which options
vest ratably over a 50-month period. See "Stock Options." The agreement
also provides for an annual performance bonus of up to 100 percent of his
base salary if the Company exceeds certain performance targets established by
its Board of Directors. Under the terms of his employment agreement and
subject to certain conditions, Mr. Race will receive a special bonus of
$3,000,000 (less any realizable value from options Mr. Race holds that are
exercisable or gains as a result of a sale of the stock purchased pursuant to
such options) if Mr. Race remains employed with the Company through March 31,
1999. Mr. Race is also entitled to reimbursement of certain expenses in
connection with his employment with the Company, including automobile
expenses and reimbursement for taxes. He is also entitled to participate in
most Company benefit plans.
In the event that (i) the Company terminates Mr. Race's employment
(other than for cause), or (ii) Mr. Race's title is no longer Chief Executive
Officer and Mr. Race terminates his employment, or (iii) the Company is
acquired and Mr. Race is no longer the Company's Chief Executive Officer, he
(or his beneficiaries in the case of death) will receive a continuation of
his base salary, and Mr. Race will receive
7
<PAGE>
certain other benefits for twelve months and the exercisability of his
options will be accelerated as though he had remained employed for one
additional year. In addition, in the event of one of the three events
described above, and subject to certain conditions, including the time at
which Mr. Race's employment with the Company is terminated, the profitability
of the Company and whether there had occurred a change in control of the
Company, Mr. Race is entitled to receive a cash payment from the Company of
up to $3,000,000 (less any realizable value from options Mr. Race holds that
are exercisable or gains as a result of a sale of the stock purchased
pursuant to such options). In the event Mr. Race's employment with the
Company terminates for good cause, the Company is obligated to pay Mr. Race's
base salary for a period of six months following such termination.
Under the employment agreement, the Company has agreed to indemnify Mr.
Race to the fullest extent permitted by law so long as Mr. Race acts in good
faith. Failure by the Company to provide such indemnification is deemed to
be a breach of the employment agreement and may be deemed a termination of
Mr. Race's employment for other than cause.
In fiscal 1998, the Company entered into an employment agreement with
Tim Christian, Managing Director of Europe/Asia Pacific, which terminates
upon Mr. Christian's termination of employment with the Company. The
agreement provides for annual salary increases of no less than 7.5 percent.
His current salary is approximately $195,000. The agreement provides that
the Company grant Mr. Christian an additional option to purchase 20,000
shares of Common Stock, which options vest ratably over a four-year period
("Additional Option"). See "Stock Options." The agreement also provides for
an annual performance bonus of up to 50 percent of his base salary if Mr.
Christian achieves certain performance criteria. Under the terms of the
agreement and subject to certain conditions, Mr. Christian will receive a
special bonus of approximately $822,000 (less any realizable value from the
Additional Option described above) if he remains employed with the Company
through July 9, 2001. Mr. Christian is also entitled to certain pension
contributions, reimbursement of expenses and other employee benefits.
Under the terms of the agreement with Mr. Christian, upon the
consummation of a transaction resulting in a change-of-control, the
Additional Option shall become exercisable on an accelerated basis as if Mr.
Christian had completed an additional 12 months of service beyond the date of
such transaction. If Mr. Christian elects to remain Managing Director (or
similar position) after the change-of-control, he shall receive a bonus equal
to the bonus paid to him pursuant to his agreement during the past fiscal
year. If Mr. Christian's employment is terminated following a
change-of-control, he will be entitled to nine-months severance and vesting
of options. If Mr. Christian, within three months of the change-of-control,
elects to terminate his employment and gives six months written notice of
this election, he shall be entitled to salary and certain other benefits for
a six-month period.
Under the terms of employment agreements with Mr. Balthaser, Senior Vice
President of Studios, and Mr. McLeish, Senior Vice President of Business
Development, each is entitled to receive six months severance and vesting of
options in the event that their employment is terminated as a result of a
change-of-control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following outside Directors served on the Compensation Committee of
the Board of Directors of the Company during fiscal 1998: Mr. Keith Schaefer
and Mr. David Costine. There were no Compensation Committee interlocks or
insider participation during fiscal year 1998.
8
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
COMMON STOCK - MANAGEMENT AND DIRECTORS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
July 15, 1998, by each director, the "Named Executive Officers" as shown in the
Summary Compensation Table in Item 11, and all current directors and executive
officers as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws, where applicable. The address for each
Director and Officer is that of the Company.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED (1)
- ----------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
David C. Costine (2) 59,785 1.0%
Vinod Khosla (3) 49,839 *
Keith Schaefer (4) 5,160 *
Stephen M. Race (5) 86,313 1.5%
Gilman G. Louie (6) 141,963 2.5%
Tim P. Christian (7) 16,401 *
Derek W. McLeish (8) 9,162 *
Charles E. Balthaser (9) 7,248 *
All current directors and executive officers as a group (12 persons)(10) 403,320 6.8%
</TABLE>
* Less than one percent of the outstanding Common Stock.
(1) Percentage of beneficial ownership is calculated assuming 5,753,598
shares of Common Stock were outstanding on July 15, 1998. This
percentage also includes Common Stock of which such individual or entity
has the right to acquire beneficial ownership within sixty (60) days of
July 15, 1998, including but not limited to the exercise of an option;
however, such Common Stock shall not be deemed outstanding for the
purpose of computing the percentage owned by any other individual or
entity. General Rule 13-3(d)(1)(i) under the Securities Exchange Act of
1934 requires such calculation.
(2) Includes 3,160 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within
sixty (60) days of July 15, 1998. Also includes 38,570 shares of Common
Stock held by Corporate Venture Partners, L.P. Mr. Costine is a
principal of Corporate Venture Partners, L.P. Mr. Costine disclaims
beneficial ownership of the listed securities not held by him
personally, except to the extent of his pecuniary interest therein.
(3) Includes 3,160 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within
sixty (60) days of July 15, 1998. Also includes 40,000 shares of Common
Stock held by Mr. Khosla's wife and 3,443 shares of Common Stock held by
an irrevocable trust for Mr. Khosla and his wife. Mr. Khosla disclaims
beneficial ownership of the securities held directly by his spouse,
Neeru Khosla, and the Vinod and Neeru Khosla 1992 irrevocable trust,
except to the extent of any indirect pecuniary interest therein.
(4) Includes 5,160 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within
sixty (60) days of July 15, 1998.
(5) Includes 74,857 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within sixty
(60) days of July 15, 1998.
9
<PAGE>
(6) Includes 26,500 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within sixty
(60) days of July 15, 1998.
(7) Includes 15,638 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within sixty
(60) days of July 15, 1998.
(8) Includes 8,917 shares of Common Stock purchasable under stock options that
are currently exercisable or that will become exercisable within sixty (60)
days of July 15, 1998.
(9) Includes 6,300 shares of Common Stock purchasable under stock options that
are currently exercisable or that will become exercisable within sixty (60)
days of July 15, 1998.
(10) Includes 167,841 shares of Common Stock purchasable under stock options
that are currently exercisable or that will become exercisable within sixty
(60) days of July 15, 1998.
COMMON STOCK - PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the only
persons, other than those persons shown on the previous table, who beneficially
owned (to the Company's knowledge) more than 5 percent of the Company's Common
Stock as of July 15, 1998.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OWNED (1)
------------------------------- ------------ ------------
<S> <C> <C>
FMR Corp. 860,000 14.9%
82 Devonshire Street
Boston, MA 02109
Weiss Peck & Greer 384,100 6.7%
One New York Plaza
30th Floor
New York, NY 10004
SWICO Anstalt (2) 377,255 6.5%
c/o Rowbotham & Company, Inc.
400 Montgomery Street, Suite 600
San Francisco, CA 94104
</TABLE>
(1) Percentage of beneficial ownership is calculated assuming 5,753,598
shares of Common Stock were outstanding on July 15, 1998. This
percentage also includes Common Stock of which such individual or entity
has the right to acquire beneficial ownership within sixty (60) days of
July 15, 1998, including but not limited to the exercise of an option;
however, such Common Stock shall not be deemed outstanding for the
purpose of computing the percentage owned by any other individual or
entity. General Rule 13(d)(1)(i) under the Securities Exchange Act of
1934 requires such calculation.
(2) Includes 19,608 shares of Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock held by PH(US), Inc. SWICO Anstalt
is the sole shareholder of PH(US), Inc.
10
<PAGE>
PREFERRED STOCK
The following table sets forth beneficial ownership information for the
Company's Preferred Stock outstanding as of July 15, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------------------------------ ------------------ -------------------
<S> <C> <C>
PH(US), Inc.(1)
c/o Rowbotham Company, Inc. 2,000,000 100%
400 Montgomery Street, Suite 600
San Francisco, CA 94104
</TABLE>
(1) SWICO Anstalt is the sole shareholder of PH(US), Inc., the record owner
of all shares of Series A Preferred Stock of the Company. Accordingly,
SWICO Anstalt may be deemed to be the beneficial owners of all the
shares of Series A Preferred Stock of the Company. These Preferred
Shares are convertible into 19,608 shares of the Company's Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There are no material transactions reportable for fiscal year 1998 under
this item.
11
<PAGE>
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.
MICROPROSE, INC.
By: /s/ Stephen M. Race
-------------------
Stephen M. Race
CHIEF EXECUTIVE OFFICER AND DIRECTOR
/s/ John M. Belchers
--------------------
John M. Belchers
CHIEF FINANCIAL OFFICER
/s/ Andrew A. Nimitz
--------------------
Andrew A. Nimitz
VICE PRESIDENT, CORPORATE CONTROLLER
Date: July 27, 1998
12
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Stephen M. Race Chief Executive Officer, July 27, 1998
- ------------------- and Director
(Stephen M. Race)
/s/ John M. Belchers Chief Financial Officer July 27, 1998
- ---------------------
(John M. Belchers)
GILMAN G. LOUIE* Chairman of the Board of Directors July 27, 1998
- ----------------
(Gilman G. Louie)
DAVID C. COSTINE* Director July 27, 1998
- -----------------
(David C. Costine)
VINOD KHOSLA* Director July 27, 1998
- -------------
(Vinod Khosla)
KEITH E. SCHAEFER* Director July 27, 1998
- ------------------
(Keith Schaefer)
* By: /s/ Stephen M. Race
-------------------
(Stephen M. Race, Attorney-in-Fact)
</TABLE>
13
