<PAGE>
As filed with the Securities and Exchange Commission on February 26, 1999
Registration No. 333-35249
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
AMENDMENT NO. 4
TO
FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
PROSOFTTRAINING.COM
(Exact Name of Registrant as Specified in Its Charter)
3001 Bee Caves Road, Suite 100
Austin, Texas 78746
(512) 328-6140
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Executive Offices)
Nevada 8243 87-0448639
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
JERRELL M. BAIRD
Chief Executive Officer
ProsoftTraining.com
3001 Bee Caves Road, Suite 100
Austin, Texas 78746
(512) 328-6140
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
____________________
Copy to:
William L. Twomey
Hewitt & McGuire, LLP
19900 MacArthur Boulevard, Suite 1050
Irvine, California 92612
____________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
____________________
If only the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
Pursuant to Rule 429 of the Securities Act of 1933, the Prospectus contained
herein is a combined Prospectus relating to securities registered hereby and
under Registration Statement No. 333-11247 and Registration Statement No. 333-
28993.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
8,348,532 Shares
PROSOFTTRAINING.COM
Common Stock
Shares of common stock of ProsoftTraining.com are being offered for resale
by certain of our stockholders by this Prospectus. The Shares being offered
include 4,348,810 presently outstanding shares, 1,993,472 shares which are
issuable upon exercise of outstanding common stock purchase warrants and
2,006,250 shares which are issuable upon conversion of outstanding convertible
promissory notes. The Shares will be sold from time to time by the Selling
Stockholders named in this Prospectus through public or private transactions, on
or off the Nasdaq SmallCap Market, at prevailing market prices, or at privately
negotiated prices. We will not receive any of the proceeds from the sale of the
Shares, other than the exercise price of any common stock purchase warrants
which are exercised.
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"POSO." The closing bid price of the Common Stock was $4.25 on February 25,
1999.
______________________________
Investing in the Common Stock Involves a High Degree of Risk. You Should
Purchase Shares Only if You Can Afford a Complete Loss. See "Risk Factors"
beginning on Page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Prospectus dated March , 1999
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ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission (the "SEC"). The Prospectus relates to
8,348,532 shares (the "Shares") of our common stock ("Common Stock") which the
selling stockholders named in this Prospectus (the "Selling Stockholders") may
sell from time to time. We will not receive any of the proceeds from such
sales.
The Shares have not been registered under the securities laws of any state
or other jurisdiction as of the date of this Prospectus. Brokers or dealers
should confirm the existence and exemption from registration or effectuate such
registration in connection with any offer and sale of the Shares.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................................. 3
Where You Can Find More Information....................................... 6
Forward-Looking Statements................................................ 8
About ProsoftTraining.com................................................. 8
The Offering.............................................................. 9
Use of Proceeds........................................................... 9
Selling Stockholders...................................................... 10
Plan of Distribution...................................................... 13
Experts................................................................... 15
</TABLE>
2
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RISK FACTORS
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, TOGETHER WITH THE OTHER
INFORMATION IN THIS PROSPECTUS, BEFORE BUYING ANY SHARES. YOU SHOULD ALSO BE
AWARE OF CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS THAT DO NOT RELATE TO
HISTORICAL RESULTS OR FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS, SUCH AS STATEMENTS OF OUR STRATEGIES, PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS, INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS.
Expectation of Continuing Losses
However, we expect to continue incurring losses on a quarterly basis
through at least the second quarter of our fiscal year ending July 31, 1999. We
have incurred net losses of approximately $40 million from our inception in
December 5, 1995 through July 31, 1998. For the year ended July 31, 1998, we
incurred a net loss of $16,525,123. Our ability to generate significant revenues
in the future is subject to uncertainty. In order to achieve profitability, we
must increase our revenues. We can not assure you that we will be able to
increase revenues or achieve profitability.
Uncertainty of Future Capital Requirements
Since our inception, we have been dependent on outside financing to fund
our operations and growth. We began realizing increasing revenues in late fiscal
1998 due to our sales reorganization and refocusing efforts. This shift in our
business strategy should result in a reduction in overhead expenses and, if
revenues continue to grow as demonstrated in fiscal 1998, we hope to reach
quarterly profitability in the second half of fiscal 1999. We believe that our
existing resources will be sufficient to meet our needs for working capital
expenditures through at least fiscal 1999. However, if we do not achieve
profitability and generate positive cash flow as anticipated, our ability to
continue as a going concern will be jeopardized unless additional outside
financing can be obtained.
Uncertainty of Future Funding
If we do not achieve profitability and generate positive cash flow as
anticipated, we may need additional outside financing. Even if we do achieve
profitability and positive cash flow, we may need outside financing to fund
further growth of our business. We do not know at this time when we may need
additional funds, and we cannot be certain that if we do need additional funds
in the future that we will be able to obtain them on terms satisfactory to us,
if at all. If we are unable to raise additional funds when necessary, we may
have to reduce planned capital expenditures, scale back our operations or growth
or enter into financing arrangements on terms which we would not otherwise
accept.
Intense Competition in Training Market
We face substantial competition in the training market. Competition in the
Internet/intranet training market is intense, rapidly changing and affected by
the rapidly evolving nature of the Internet/intranet industry. A number of
other companies offer products and services similar to ours, and additional new
competitors may emerge in the near future. Many of our existing competitors
have substantially greater capital resources, technical expertise, marketing
experience, research and development status, established customers and
facilities than we do. As a result, there is a risk that we
3
<PAGE>
will not be able to successfully compete with existing and future competitors
which would adversely affect our financial performance.
Need to Respond to Rapid Technological Changes
In our industry, technology advances rapidly and industry standards change
frequently. To remain competitive and achieve profitability, we must
continually enhance our existing products and services and promptly introduce
new products, services and technologies to meet the changing demands of our
customers. Our failure to respond to technological changes quickly will
adversely affect our financial performance.
Effect of Market Overhang on Stock Price
Future sales of our Common Stock could depress the market price of our
Common Stock. In addition, the perception that such sales will occur could also
adversely effect the price. Under this Prospectus, the selling stockholders may
sell up to 8,348,532 shares (or approximately 47.8% of the shares of Common
Stock currently outstanding). Any such sales, or even the market perception
that such sales could be made, may depress the price of the Common Stock.
Volatility of Stock Price
Our Common Stock has experienced substantial price volatility and such
volatility may continue to occur in the future. Additionally, the stock market
from time to time experiences significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. These broad
market fluctuations may also adversely effect the market price of our Common
Stock. In addition to such broad market fluctuations, factors such as the
following may have a significant effect on the market price of our Common Stock:
. Fluctuations in our operating results.
. The perception by others of our ability to obtain any necessary new
financing.
. Limited trading market for our Common Stock.
. Announcements of new ventures or products and services by us or our
competitors.
No Foreseeable Dividends
We have never paid cash dividends and we do not anticipate paying any cash
dividends in the foreseeable future. We intend to retain future earnings for
reinvestment in our business. Any future determination to pay cash dividends
will be at the discretion of our Board of Directors and will be dependent upon
our financial condition, results of operations, capital requirements and such
other factors as the Board of Directors deems relevant.
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Year 2000 Issue Risks
Many existing computer systems and applications, and other control devices,
use only two digits to identify a year in the date field, without considering
the impact of the upcoming change in the century. As a result, such systems and
applications could fail or create erroneous results unless corrected so that
they can process data related to the year 2000. We rely on our systems,
applications and devices, including financial systems, registration systems,
embedded computer chips, networks and telecommunications equipment.
We have completed our Year 2000 assessment and determined our financial
system needed to be updated at an expected cost of less than $3,000. We expect
the update to be completed in fiscal 1999. We have received assurances from our
other software vendors that their systems are Year 2000 compliant. In addition,
we have conducted an inventory, review and assessment of our personal computers,
networks and servers and desktop software applications to determine whether they
support Year 2000 date codes and we believe that all are Year 2000 compliant. In
the event of an unexpected failure in one of our systems, our employees would be
able to continue operations on a manual basis until such systems have been
restored to full operating capacity. We estimate that the total cost of our Year
2000 compliance will not be significant.
We have contacted our key vendors and service suppliers to determine the
extent to which we are vulnerable to their failure to address the Year 2000
problem. We have received verbal assurances from these key suppliers that their
systems are Year 2000 compliant. Although we do not believe our operations will
be significantly disrupted even if third parties with whom we have relationships
are not Year 2000 compliant, we cannot guarantee that any Year 2000 compliance
problems of our suppliers will not negatively affect our financial performance.
If our key suppliers are unable to provide us sufficient quantities of materials
or goods as a result of their failure to be Year 2000 compliant, we believe that
we can obtain adequate supplies of materials and goods at comparable prices from
other sources. Because uncertainty exists concerning the potential costs and
effects associated with any Year 2000 compliance, we intend to continue to make
efforts to ensure that third parties with whom we have relationships are Year
2000 compliant.
The Year 2000 problem could also have an effect on our customers. If
customers delay or forego purchasing our products based upon Year 2000 related
issues, it could affect our operating results. Based upon our evaluation of our
current information, we do not believe such an occurrence is likely. However, we
cannot control the Year 2000 readiness of third parties and such a risk is
possible.
Impact of Certain Anti-Takeover Provisions On Market Value of Stock
Our Bylaws contain certain provisions that may discourage other persons
from attempting to acquire control of us. These provisions include, but are not
limited to:
. A staggered Board of Directors.
. The elimination of the right of stockholders to act by written consent
without a meeting, except unanimously.
. The establishment of advance notice requirements for director
nominations and actions to be taken at annual meetings.
Such provisions, as well as the provisions of Section 203 of the
Delaware General Corporation Law (to which we are subject), could impede a
merger, consolidation, takeover or other business combination involving us or
discourage a potential acquiror from making a tender offer or otherwise
attempting to take control of us. In certain circumstances, the fact that
corporate devices are in place that will inhibit or discourage takeover attempts
could reduce the market value of our Common Stock.
5
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WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the SEC
concerning our business and operations. We file annual, quarterly and special
reports, proxy statements and other information with the SEC. You can read and
copy these documents at the public reference facility maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You
can also copy and inspect such reports, proxy statements and other information
at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
7 World Trade Center Citicorp Center
Suite 1300 500 West Madison Street
New York, NY 10048 Suite 1400
Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public on the SEC's
web site at http://www.sec.gov. You can also inspect our reports, proxy
-------------------
statements and other information at the offices of the Nasdaq Stock Market.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this Prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below (File No.
000-21535) and any future filings made with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934:
. Annual Report on Form 10-K/A for the fiscal year ended July 31, 1998
(including information specifically incorporated by reference into our
Form 10-K from our Proxy Statement for our 1998 Annual Meeting of
Stockholders);
. Quarterly Report on Form 10-Q for the quarter ended October 31, 1998
. The description of our Common Stock contained in the Registration
Statement on Form 8-A dated October 11, 1996.
This Prospectus is part of three Registration Statements we filed with the
SEC (Nos. 333-11247, 333-28993 and 333-35249). You may request a free copy of
any of the above filings by writing or calling:
Investor Relations
ProsoftTraining.com
2333 North Broadway, Suite 300
Santa Ana, California 92706
(714) 953-1200, ext. 375
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You should rely only on the information incorporated by reference or
provided in this Prospectus or any supplement to this Prospectus. We have not
authorized anyone else to provide you with different information. The Selling
Stockholders should not make an offer of these Shares in any state where the
offer is not permitted. You should not assume that the information in this
Prospectus or any supplement to this Prospectus is accurate as of any date other
than the date on the cover page of this Prospectus or any supplement.
7
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FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference in this
Prospectus, contain forward-looking statements which reflected our views at the
time the documents were filed regarding future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from historical results or
the results we expected at the time of filing. The words "believe," "expect,"
"anticipate" and similar expressions identify forward-looking statements, which
speak only as of the dates on which they were made. We undertake no obligation
to publicly update or revise any forward-looking statements, whether it is as
a result of new information, future events or otherwise. You should not unduly
rely on these forward-looking statements.
ABOUT PROSOFTTRAINING.COM
We provide comprehensive Internet skills training courses, Internet skills
certification programs and instructors to teach the training courses and
certification. We offer more than 50 instructor-led Internet skills courses
ranging from 1-day end-user workshops to 10-day certification programs. Our
Certified Internet Webmaster Program creates the professional skills required to
develop and implement e-business solutions in the Internet age. Our
certification testing program is administered worldwide by testing leader Sylvan
Prometric. We also sell our courseware to Authorized Training Center Resellers.
We originally incorporated in Nevada in March 1985 as Tel-Fed, Inc. Our
business was initially operated as a sole proprietorship (the "Proprietorship")
beginning in February 1995. In December 1995, ProSoft Development Corp., a
California corporation ("Old ProSoft") was incorporated and acquired the
business from the Proprietorship effective January 1, 1996. In March 1996, we
entered into a reorganization (the "Reorganization") with Old ProSoft and the
Old ProSoft shareholders. In the Reorganization, we issued shares of our Common
Stock to the Old ProSoft shareholders in exchange for their shares of Old
ProSoft and changed our name to ProSoft Development, Inc. As a result, Old
ProSoft became our wholly-owned subsidiary. From our incorporation until the
Reorganization, we had no significant operations. We changed our name to Prosoft
I-Net Solutions, Inc. in October 1996 and to prosofttraining.com in January
1999.
Under applicable accounting rules, for financial statement purposes, we are
required to account for the Reorganization as an acquisition of us by Old
ProSoft, with the additional shares held by our prior shareholders reflected as
a recapitalization of Old ProSoft. As a result, the consolidated financial
statements incorporated by reference in this Prospectus for ProsoftTraining.com
reflect, for the period prior to the Reorganization, the operations of Old
ProSoft. Financial statements of the Proprietorship are also incorporated by
reference herein. Our executive offices are located at 3001 Bee Caves Road,
Suite 100, Austin, Texas 78746, and our telephone number is (512) 328-6140.
8
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THE OFFERING
Common Stock Offered by the Selling
Stockholders........................ 8,348,532 shares(1)
Common Stock to be outstanding after
this Offering....................... 17,471,037 shares(1)(2)
Use of Proceeds..................... Other than the exercise price of the
common stock purchase warrants
("Warrants") which are exercisable, we
will receive none of the proceeds from the
sale of shares by the Selling
Stockholders. We would receive gross
proceeds of approximately $3,000,000 if
all of the Warrants are exercised. Any
proceeds we receive will be utilized for
working capital and general corporate
purposes.
NASDAQ SmallCap Symbol.............. POSO
____________________
(1) Includes 1,993,472 shares issuable upon exercise of the Warrants and
2,006,250 shares issuable upon conversion of outstanding convertible
promissory notes.
(2) Does not include 2,333,027 shares reserved for issuance upon the exercise
of outstanding stock options.
USE OF PROCEEDS
Other than the exercise price of such of the Warrants as may be exercised,
we will not receive any proceeds from the sale of Shares by the Selling
Stockholders. Holders of the Warrants are not obligated to exercise their
Warrants, and there can be no assurance that they will choose to exercise all or
any of their Warrants. The gross proceeds to us in the event that all of the
Warrants are exercised would be approximately $3,000,000. Proceeds we receive,
if any, will be utilized for working capital and general corporate purposes.
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SELLING STOCKHOLDERS
All of the Shares offered by this Prospectus are being offered by the
Selling Stockholders for their own respective accounts. Substantially all of the
Selling Stockholders purchased their Shares in private placement investments in
us or Old Prosoft which we believe were exempt from the registration
requirements of federal securities law under the Regulation D private placement
exemption. The following table sets forth certain information as of February 1,
1999 with respect to the Selling Stockholders:
<TABLE>
<CAPTION>
Shares Shares Shares
Name of Selling Stockholder Beneficially Owned Covered Beneficially Owned
- -------------------------------------------------------- Prior to By after the
Offering Prospectus Offering(1)
-------- ---------- -----------
<S> <C> <C> <C>
AGAPE International Center of Truth 4,000 4,000 0
Anderson, Erik T. 6,188 6,188 0
Baco, Raymundo C. 8,840 8,840 0
Baird, Jerrell M. (2) 245,500 112,500 133,000(3)
Betlem Service Corporation 9,524 9,524 0
Brown, David H. 70,000 70,000 0
Bussell, Mark 55,000 55,000 0
Bustin & Co. 12,750 12,750 0
Cahill, John 150,000 50,000 100,000(3)
Calamitous L.C. 15,000 15,000 0
Charles Schwab and Company
FBO Matthew Linsey 56,250 56,250 0
Clark Fork Medical Associates, P.C. 401(K)
Profit Sharing Plan 2,000 2,000 0
Clark Fork Medical Assn. Trust 22,500 22,500 0
Common Sense Partners 14,286 14,286 0
Corbin, Brooks A.(4) 168,708(5) 2,333 166,375(3)
Cranshire Capital, L.P. 328,869 328,869 0
D'Ambrosio, Louis J. 56,250 56,250 0
Davis, Anne T. 5,378 5,378 0
Davis, Gart D. 161,888 161,888 0
DiSanto, Frank J. 57,142 57,142 0
DLJSC FBO Franklin Coffey 40,000 40,000 0
Dorton, David 15,000 15,000 0
Dowling, Benjamin 300 300 0
Eagle Growth Limited Partnership 225,000 225,000 0
Ebbets Field International, Ltd. 281,250 281,250 0
EGS Securities 6,666 6,666 0
F&S Partnership 25,000 25,000 0
Fidelity Management Trust Co. FBO
Donald Holcomb IRA 50,000 50,000 0
Fidelity Management Trust Co. FBO
John Ryan IRA 25,000 25,000 0
Fidelity Management Trust Co. FBO
David I. Perl IRA(6) 41,249 10,000 31,249(3)
</TABLE>
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<TABLE>
<CAPTION>
Shares Shares Shares
Name of Selling Stockholder Beneficially Owned Covered Beneficially Owned
- -------------------------------------------------------- Prior to By after the
Offering Prospectus Offering(1)
-------- ---------- -----------
<S> <C> <C> <C>
Fliege, James Ritchie 28,125 28,125 0
Franklin, William I. 109,250 109,250 0
Fuller, J. William (7) 25,641 25,641 0
Fuller, Joyce 25,000 25,000 0
General Electric Pension Trust, Trustees 408,164 408,164 0
Geren, Preston M. III, Trustee 106,250 106,250 0
Gladstein, Gary 56,250 56,250 0
Glenn E. White Trust 19,048 19,048 0
Gramm, Colton 28,125 28,125 0
Investor Contacts Ltd. 80,666 80,666 0
JMB/FEB Partners 10,417 10,417 0
J.M. Bryan Family Trust 10,416 10,416 0
Judkins, Bary 5,000 5,000
Ketcher, Frederick 56,250 56,250 0
Keyway Investments Limited 76,200 76,200 0
Khaled, Michael E. 234,800(5) 25,000 209,800(8)
King, Bradley J. 6,188 6,188 0
Kopor, Betsy 500 500 0
Korn, Jeffrey G. (9) 78,000 20,000 58,000(3)
Luntz, Jerry 2,770 2,051 713(3)
MacNamara, John 150,000 50,000 100,000(3)
McDivitt, Kathleen 6,188 6,188 0
Mock, David 130,700(5) 130,700 0
Montesi, Terry 84,375 84,375 0
Morgan Guaranty Trust Company of New York, as 214,744 214,744 0
Investment Manager for the Alfred F. Sloan
Foundation (Multi-Market Account) (10)
Morgan Guaranty Trust Company of New York, as 214,744 214,744 0
Trustee of the Multi-Market Special Investment Trust
Fund of Morgan Guaranty Trust Company of
New York (10)
Morgan Guaranty Trust Company of New York, as 1,040,959 1,040,959 0
Trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment Fund II) of Morgan
Guaranty Trust Company of New York (10)
Morgan Guaranty Trust Company of New York, as 605,297 605,297 0
Trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment Fund 1) of Morgan
Guaranty Trust Company of New York (10)
Morning Star Partners 8,333 8,333 0
Olafson, Gregory 100,000(5) 55,000 45,000(3)
Pabrai, Tina Malkai 279,896 279,896 0
</TABLE>
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<TABLE>
<CAPTION>
Shares Shares Shares
Name of Selling Stockholder Beneficially Owned Covered Beneficially Owned
- -------------------------------------------------------- Prior to By after the
Offering Prospectus Offering(1)
-------- ---------- -----------
<S> <C> <C> <C>
Pabrai, Uday Om(11) 459,860 459,860 0
PAL Employer Services, Inc. 8,000 8,000 0
Peninsula Fund L.P. 202,083 202,083 0
Peterson, Melvin D. 5,000 5,000 0
Quota Rabbico N.V.-Shapiro 168,750 168,750 0
Redmond, Richard & Diana 20,000 20,000 0
Richardson, Eric W. (12) 140,166(5) 2,666 137,500(3)
Richardson, William E. (13) 123,750(5) 25,000 98,750(3)
Ropar LLC 30,000 30,000 0
Rosen, Harvey 160,000 160,000 0
Rousseau, Darren A. 2,620 2,620 0
Ruenitz & Associates 28,125 28,125 0
Schmidt Family Trust 20,000 20,000 0
Service Master Company Limited Partnership 142,857 142,857 0
Service Master Venture Fund, LLC 562,500 562,500 0
Shapiro, Steven 22,500 22,500 0
Siegfried & Jenson 401K Plan
FBO Michael R. Richman 5,000 5,000 0
Siegfried & Jenson 401K Plan
FBO Ned Siegfried 10,000 10,000 0
Siegel, Richard 28,125 28,125 0
Stallman, Andrew (14) 131,834 15,000 116,834(3)
Suleiman, Anver 10,978 8,126 2,852(3)
Suleiman, John 5,892 4,364 1,528(3)
Travelers Indemnity Co. 285,714 285,714 0
Trimble, Kelly 148,450(5) 56,250 92,200(3)
Turnbow Investment Co. L.C. 5,625 5,625 0
Turnbow, Lynn 191,250 191,250 0
Vanderhoof, Clark D. 10,000 10,000 0
Vanderhoof, Michael D. 324,490(5) 127,500 196,990(15)
VanZandt, Gloria 22,500 22,500 0
Whittal Company Limited 19,100 19,100 0
Williams, David R. 10,000 10,000 0
Wilson, D. Ross 10,000 10,000 0
WWW Internet Fund 162,500 162,500 0
---------- ---------- ----------
9,839,323(16) 8,348,532(17) 1,490,791
========== ========== ==========
</TABLE>
____________________
(1) Assumes that each Selling Stockholder sells all of the Shares to which
this Prospectus relates.
12
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(2) Mr. Baird is Chairman of the Board and Chief Executive Officer of the
Company.
(3) Represents less than 1% of our shares after this offering.
(4) Mr. Corbin is a former officer of the Company.
(5) These Selling Stockholders have agreed generally not to sell, under this
Prospectus, more than 1% of their respective Shares held as of November
27, 1996 for each month that elapses after that date unless our consent is
obtained.
(6) Mr. Perl is Chief Operating Officer of the Company.
(7) Mr. Fuller is a Director of the Company.
(8) Represents 1.2% of our shares after this offering.
(9) Mr. Korn is a Director of the Company.
(10) J.P. Morgan & Co., Incorporated is the ultimate parent of the trustee of
each of these stockholders.
(11) Mr. Pabrai is Vice Chairman and Chief Technology Officer of the Company.
(12) Mr. Eric Richardson is a former officer of the Company.
(13) Mr. William Richardson is a former member of the Board of Directors of the
Company.
(14) Mr. Stallman is a Director of the Company.
(15) Represents 1.1% of our shares after this offering.
(16) Includes 571,458 shares subject to currently exercisable options,
1,993,472 shares subject to currently exercisable warrants and 2,006,250
shares issuable upon conversion of promissory notes of the Company.
(17) Includes 1,993,472 shares subject to currently exercisable warrants and
2,006,250 shares issuable upon conversion of promissory notes of the
Company.
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling Stockholders. As
used in this Prospectus, the term "Selling Stockholder" includes donees and
pledgees selling Shares received from a named Selling Stockholder after the date
of this Prospectus. All costs, expenses and fees in connection with the
registration of the Shares offered hereby will be borne by us. The Selling
Stockholders will pay any brokerage commissions or similar selling expenses
attributable to the sale of the Shares. The Selling Stockholders may effect
sales of Shares from time to time in one or more types of transactions (which
may include block transactions) on the Nasdaq SmallCap Market, in negotiated
transactions, through put or call options transactions relating to the Shares,
through short sales of Shares, or a combination of such methods of sale, at
market prices prevailing at the time of sale, or at negotiated prices. These
transactions may involve brokers or dealers.
The Selling Stockholders may effect such transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection
with the sale of Shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933 (the "Securities Act"), and any
commissions received by such broker-dealers and any profit on
13
<PAGE>
the resale of the Shares sold by them while acting as principals might be deemed
to be underwriting discounts or commissions under the Securities Act. We have
agreed to indemnify each Selling Stockholder against certain liabilities,
including liabilities arising under the Securities Act. The Selling Stockholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act.
The Selling Stockholders will be subject to the prospectus delivery
requirements of the Securities Act because they may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act. We
have informed the Selling Stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Securities Exchange Act of 1934 may apply to
their sales in the market.
Selling Stockholders also may resell all or a portion of the Shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon notification to us by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealers, (ii) the number of Shares involved, (iii) the
price at which such Shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, (v) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus and (vi) other facts
material to the transaction. In addition, upon notification to us by a Selling
Stockholder that a donee or pledgee intends to sell more than 500 Shares, a
supplement to this Prospectus will be filed.
14
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of July 31, 1998,
and for the year ended July 31, 1998, appearing in our Annual Report on Form
10-K for the year ended July 31, 1998, have been audited by Grant Thornton, LLP,
Independent Auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements as of July 31, 1997, and for the year ended July 31, 1997
and the period from December 8, 1995 (date of incorporation) to July 31, 1996,
included in our Annual Report on Form 10-K for the year ended July 31, 1998, as
set forth in their report, which is incorporated in this prospectus by
reference. Our consolidated financial statements are incorporated by reference
in reliance on their report, given on their authority as experts in accounting
and auditing.
The financial statements of Professional Development Institute as of
December 31, 1995, and for the period from February 1, 1995 (date of inception)
to December 31, 1995, appearing in our Annual Report on Form 10-K for the year
ended July 31, 1998, have been audited by Kelly & Company, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered. All of the amounts
shown are estimates, except the Securities and Exchange Commission registration
and NASDAQ filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 9,500
Accounting fees and expenses.................................... $ 14,500
Blue sky fees and expenses (including counsel fees)............. $ 2,000
Other legal fees and legal expenses............................. $ 20,000
Miscellaneous expenses.......................................... $ 1,000
----------
Total........................................................ $ 47,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Nevada Private Corporation Law ("NPCL") provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to (x) any action or suit by or in the right
of the corporation against expenses, including amounts paid in settlement and
attorneys' fees, actually and reasonably incurred, in connection with the
defense or settlement believed to be in, or not opposed to, the best interests
of the corporation, except that indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction to be liable to the corporation or for amounts paid in
settlement to the corporation and (y) any other action or suit or proceeding
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, reasonable cause to believe his or her conduct was unlawful. To the
extent that a director, officer, employee or agent has been "successful on the
merits or otherwise" the corporation must indemnify such person. The articles
of incorporation or bylaws may provide that the expenses of officers and
directors incurred in defending any such action must be paid as incurred and in
advance of the final disposition of such action. The NPCL also permits the
corporation to purchase and maintain insurance on behalf of the corporation's
directors and officers against any liability arising out of their status as
such, whether or not the corporation would have the power to indemnify him
against such liability. These provisions may be sufficiently broad to indemnify
such persons for liabilities arising under the Securities Act.
II-1
<PAGE>
The Company's Restated Articles of Incorporation provide that the Company
shall indemnify any director or officer of the Company in connection with
certain actions, suits or proceedings, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred. The Company is also required to pay any expenses incurred by a
director or officer in defending the Company or its stockholders for damages for
breach of fiduciary duty as a director or officer, provided that such a
provision must not eliminate or limit the liability of a director or officer
for: (a) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or (b) the payment of illegal distributions. The
Company's Restated Articles of Incorporation include a provision eliminating the
personal liability of directors for breach of fiduciary duty except that such
provision will not eliminate or limit any liability which may not be so
eliminated or limited under applicable law.
The Company's Bylaws generally require the Company to indemnify, as well as
to advance expenses, to its directors and its officers to the fullest extent
permitted by Nevada Law upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it should be ultimately determined
that they are not entitled to indemnification by the Company. The Company has
also entered into indemnification agreements with its directors and officers
which similarly provide for the indemnification and advancement of expenses by
the Company.
The Company maintains liability insurance for its directors and officers
covering, subject to certain exceptions, any actual or alleged negligent act,
error, omission, misstatement, misleading statement, neglect or breach of duty
by such directors or officers, individually or collectively, in the discharge of
their duties in their capacity as directors or officers of the Company.
Item 16. Exhibits and Financial Statement Schedules.
(a) Index of Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
- ------- ---------------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Reorganization dated March 26, 1996 between the
Company, Pro-Soft Development Corp. and the shareholders of Pro-Soft
Development Corp. Filed as Exhibit 2 to the Company's Registration
Statement on Form S-1 (No. 333-11247) ("Registration Statement No.
333-11247") and incorporated herein by reference.*
3.1 Restated Articles of Incorporation of the Company, as amended.*
3.2 Amended and Restated Bylaws of the Company. Filed as Exhibit 3.2 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
4 Specimen Stock Certificate. Filed as Exhibit 4 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
5.1 Opinion of Eric W. Richardson.*
5.2 Opinion of Hewitt & McGuire, LLP.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
- -------- ----------------------------------------------------------------------
<C> <S>
10.1 Pro-Soft Development Corp. 1996 Stock Option Plan. Filed as Exhibit
10.1 to Registration Statement No. 333-11247 and incorporated herein
by reference.*
10.2 ProsoftTraining.com Amended 1996 Stock Option Plan.
10.3 Stock and Warrant Purchase Agreement dated April 15, 1996 by and
among the Company, Donald L. Danks, Keith D. Freadhoff, Douglas
Hartman and various investors. Filed as Exhibit 10.3 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
10.4 Form of Registration and Lock-Up Agreement dated September __, 1996
between the Company and certain of the Selling Stockholders. Filed as
Exhibit 10.5 to Registration Statement No. 333-11247 and incorporated
herein by reference.*
10.5 Form of Indemnification Agreement between the Company and its
Directors and Officers. Filed as Exhibit 10.13 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
10.6 Office Building Lease dated as of December 16, 1996 between COSCAN
California Limited Partnership and the Company. Filed as Exhibit 10
to the Company's Report on Form 10-Q for the quarter ended January
31, 1997 and incorporated herein by reference.*
10.7 Form of Subscription Agreement, entered into in February through
April 1997, between the Company and various investors. Filed as
Exhibit 10.16 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.8 Registration Rights Agreement dated as of March 13, 1997 among the
Company and various investors. Filed as Exhibit 10.17 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
10.9 Subscription Agreement between the Company and General Electric
Pension Trust dated April 4, 1997. Filed as Exhibit 10.18 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.10 Escrow Agreement among the Company, General Electric Pension Trust
and State Street Bank and Trust dated April 4, 1997. Filed as Exhibit
10.19 to Registration Statement No. 333-11247 and incorporated herein
by reference.*
10.11 Secured Promissory Note dated April 9, 1997 in favor of the Company.
Filed as Exhibit 10.20 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.12 Form of Subscription Agreement, entered into in November 1997 between
the Company and various investors.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
- ------- ----------------------------------------------------------------------
<C> <S>
10.13 Registration Rights Agreement dated as of November 12, 1997 among the
Company and various investors.*
10.14 Stock Purchase Agreement dated as of January 1, 1998 by and between
the Company and Uday O. Pabrai with respect to all outstanding
capital stock of Net Guru Technologies, Inc. Filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K dated January 1, 1998 and
incorporated herein by reference.*
10.15 Employment Agreement dated January 1, 1998 between the Company and
Uday O. Pabrai. Filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K dated January 1, 1998 and incorporated herein by
reference.*
10.16 Promissory Note dated June 18, 1998, made by Uday Pabrai in favor of
the Company. Filed as Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the year ending July 31, 1998 and incorporated herein
by reference.*
10.17 Consulting Agreement dated April 30, 1998, between Investment
Transaction, LLC and the Company. Filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ending July 31,
1998 and incorporated herein by reference.*
10.18 Form of Stock Purchase Agreement dated as of November 18, 1998 by and
among the Company and various investors.*
10.19 Note and Warrant Purchase Agreement dated as of December 2, 1998 by
and among the Company and various investors.*
10.20 Registration Rights Agreement dated as of December 2, 1998 among the
Company and various investors.*
21 Subsidiaries of the Company. Filed as Exhibit 21 to the Company's
Annual Report on Form 10-K for the year ending July 31, 1998 and
incorporated herein by reference.*
23.1 Consent of Grant Thornton LLP, Independent Auditors*
23.2 Consent of Ernst & Young LLP, Independent Auditors*
23.3 Consent of Kelly & Co., Independent Auditors*
23.4 Consent of Eric W. Richardson (included in the opinion filed as
Exhibit 5.1).*
23.5 Consent of Hewitt & McGuire, LLP (included in the opinion filed as
Exhibit 5.2)
24 Power of Attorney*
</TABLE>
_______________
* Previously filed
II-4
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually, or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum Offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) (230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate Offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the Offering of such securities at
that time shall be deemed to be the initial bona fide Offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
Insofar as indemnification for liabilities arising from the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to
II-5
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Austin, State of Texas on
the 25th day of February, 1999.
PROSOFTTRAINING.COM
By: /s/ Jerrell M. Baird
---------------------------------------
Jerrell M. Baird,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons on
behalf of the Company in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Jerrell M. Baird Chief Executive Officer and February 25, 1999
- ----------------------------- Chairman of the Board
Jerrell M. Baird (Principal Executive Officer)
/s/ Uday O. Pabrai * Vice Chairman and Director February 25, 1999
- -----------------------------
Uday O. Pabrai
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Kimberly V. Johnston Chief Financial Officer February 25, 1999
- ----------------------------- (Principal Financial and
Kimberly V. Johnston Accounting Officer)
/s/ J William Fuller * Director February 25, 1999
- -----------------------------
J William Fuller
/s/ Richard J. Groeneweg * Director February 25, 1999
- -----------------------------
Richard J. Groeneweg
/s/ Jeffrey G. Korn * Director February 25, 1999
- -----------------------------
Jeffrey G. Korn
/s/ Charles McCusker * Director February 25, 1999
- -----------------------------
Charles McCusker
/s/ Andrew Stallman * Director February 25, 1999
- -----------------------------
Andrew Stallman
</TABLE>
*By /s/ Kimberly V. Johnston
--------------------------
Kimberly V. Johnston
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT 5.2
February 26, 1999
ProsoftTraining.com
3001 Bee Caves Rd., Suite 100
Austin, TX 78746
Re: Registration Statement on Form S-3
----------------------------------
Gentlemen:
We have acted as your legal counsel in the preparation of the Form S-3
Registration Statement ("Registration Statement") which has been filed with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 7,007,532 shares of
Common Stock, $.001 par value, of ProsoftTraining.com, a Nevada corporation (the
"Company"). A legal opinion as to 2,796,563 of those shares has previously been
delivered by the former general counsel of the Company. This opinion is
delivered as to the remaining 4,210,969 shares, of which 516,246 are currently
issued and outstanding (the "Existing Shares"), 1,688,473 shares (the "Warrant
Shares") are issuable upon exercise of outstanding common stock purchase
warrants (the "Warrants"), and 2,006,250 shares (the "Convertible Note Shares")
are issuable upon conversion of existing outstanding convertible promissory
notes (the "Convertible Notes").
As such legal counsel, we have made such legal and factual inquiries as
we deemed necessary under the circumstances for the purposes of rendering this
opinion. In reliance thereon, we are of the opinion that:
(i) The Existing Shares have been legally and validly issued and are
fully paid and nonassessable;
(ii) The Warrant Shares, when issued pursuant to the terms of the
Warrants, shall be legally and validly issued, fully paid and nonassessable; and
(iii) The Convertible Note Shares, when issued upon conversion of the
Convertible Notes pursuant to the terms of the Convertible Notes, shall be
legally and validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
/s/ HEWITT & McGUIRE, LLP
HEWITT & McGUIRE, LLP
<PAGE>
EXHIBIT 10.2
ProsoftTraining.com
1996 STOCK OPTION PLAN
1. Purpose. The purposes of this Plan are to attract and retain the best
-------
available personnel for positions of substantial responsibility, to provide
additional incentive to the Employees, Directors and Consultants of the Company
and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (b) of Section 3 of the Plan, if one is
appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
------------
(e) "Company" shall mean prosofttraining.com, a Nevada
-------
corporation.
(f) "Consultant" shall mean any person who is engaged by the Company
----------
or any Parent or Subsidiary to render consulting services and is compensated for
such consulting services, including compensation through Options granted under
this Plan; provided that the term Consultant shall not include Directors who are
not compensated for their services or are paid only a director's fee by the
Company.
(g) "Continuous Status as an Employee, Director or Consultant" shall
--------------------------------------------------------
mean the absence of any interruption or termination of service as an Employee,
Director or Consultant (as the case may be). Continuous Status as an Employee,
Director or Consultant shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Director" shall mean a member of the Board.
--------
(i) "Disability" shall mean a total and permanent disability as that
----------
term is defined in Section 22(e)(3) of the Code.
<PAGE>
(j) "Disinterested Person" shall have the meaning set forth in Rule
--------------------
16b-3 and shall mean a Director who has not, during the one-year period prior to
the date he or she is appointed to the Committee or during the period he or she
is on the Committee, received an option grant or stock issuance under this Plan
or any other stock plan of the Company or any Parent or Subsidiary of the
Company, other than as permitted by Rule 16b-3; provided, however, if Rule 16b-3
is amended after the effective date of this Plan, "Disinterested Person" shall
have the meaning set forth in such amended Rule 16b-3.
(k) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" shall mean: (i) if Shares are exchange-traded
-----------------
or traded on the NASDAQ National Market System ("NMS"), the closing sale or last
sale price per share of the Shares; (ii) if Shares are regularly traded in any
over-the-counter market other than NMS, the average of the bid and asked prices
per share of the Shares; and (iii) if Shares are not traded as described in (i)
and (ii) of this Section 2(m), the per share fair market value of the Shares as
determined in good faith by the Board on such basis as the Board in its sole
discretion shall choose. Fair Market Value as of a given date with respect to
subparagraphs (i), (ii) and (iii) shall be determined as of the close of
business on the day prior to the date of determination, or if no trading in the
Shares takes place on such date, on the next preceding trading day on which
there has been such trading.
(n) "Incentive Stock Option" shall mean an Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422(b) of the Code.
(o) "Nonstatutory Stock Option" shall mean an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Option" shall mean a stock option granted pursuant to the Plan.
------
(q) "Optionee" shall mean an Employee, Director or Consultant who
--------
receives an Option.
(r) "Option Termination Date" shall mean the date of expiration of the
-----------------------
term of such Option as set forth in the written option agreement.
(s) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" shall mean this ProsoftTraining.com 1996 Stock
----
Option Plan.
2
<PAGE>
(u) "Restricted Shareholder" shall mean an Optionee who, at the time
----------------------
the Option is granted, owns stock representing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary of the Company.
(v) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
----------
and Exchange Commission under the Exchange Act, as such rule may be amended from
time to time.
(w) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(x) "Subsidiary" shall mean a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(y) "Terminating Transaction" shall mean any of the following events:
-----------------------
(a) the dissolution or liquidation of the Company; (b) a reorganization, merger
or consolidation of the Company with one or more other corporations (except with
respect to a transaction, the purpose of which is to change the domicile or name
of the Company), as a result of which the Company goes out of existence or
becomes a subsidiary of another corporation (which shall be deemed to have
occurred if another corporation shall own, directly or indirectly, fifty percent
(50%) or more of the aggregate voting power of all outstanding equity securities
of the Company); or (c) a sale of all or substantially all of the Company's
assets.
3. Administration.
--------------
(a) The Plan shall be administered by the Board, which shall have sole
authority in its absolute discretion, subject to the terms of Section 3(b)
herein, (i) to determine which Employees, Directors and Consultants shall
receive Options, (ii) subject to the express provisions of the Plan, to
determine the time when Options shall be granted, the number of Shares subject
to the Options, the exercise prices, and the terms and conditions of Options
other than those terms and conditions fixed under the Plan, and (iii) to
interpret the provisions of the Plan and any Option granted under the Plan. The
Board shall adopt by resolution such rules and regulations as may be required to
carry out the purposes of the Plan and shall have authority to do everything
necessary or appropriate to administer the Plan. All decisions, determinations
and interpretations of the Board shall be final and binding on all Optionees.
(b) The Board may delegate administration of the Plan to a Committee
of no less than two Directors, each of which shall be Disinterested Persons
unless the Board expressly declares that it does not require the Plan to comply
with the requirements of Rule 16b-3. The Board may from time to time remove
members from, or add members to, the Committee, and vacancies on the Committee
shall be filled by the Board. Furthermore, the Board at any time by resolution
may abolish the Committee and revest in the Board the administration of the
Plan. (For purposes of this Plan document, the term "Board" shall mean the
Committee to the extent that the Board's powers have been delegated to the
Committee.)
3
<PAGE>
4. Eligibility.
-----------
(a) Incentive Stock Options may be granted only to Employees who
render services which contribute to the Company. Nonstatutory Stock Options may
be granted only to Employees, Directors or Consultants who render services which
contribute to the Company.
(b) The Plan shall not confer upon any Optionee any right to continue
as an Employee, Director or Consultant of the Company, nor shall it interfere in
any way with an Optionee's right or the Company's right to terminate Optionee's
employment or relationship as a Director or Consultant at any time, with or
without cause.
(c) The determination as to whether an Employee, Director or
Consultant is eligible to receive Options hereunder shall be made by the Board
in its sole discretion, and the decision of the Board shall be binding and
final.
5. Number of Shares. The maximum aggregate number of Shares which may be
----------------
optioned and sold under this Plan is 2,500,000 Shares of authorized but unissued
Common Stock of the Company. No Employee, Director or Consultant shall receive
Options for more than 250,000 shares over any one-year period. In the event
that Options granted under the Plan shall terminate or expire without being
exercised, in whole or in part, the Shares subject to such unexercised Options
may again be optioned and sold under this Plan.
6. Term of the Plan. The Plan shall be effective as of March 26, 1996,
----------------
and shall continue in effect until March 25, 2006, unless terminated earlier.
7. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board in
its sole discretion, but shall be subject to the following:
(i) for an Option granted to a Restricted Shareholder, the per
Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant;
(ii) for a Nonstatutory Stock Option granted to any Employee,
Director or Consultant (other than a Restricted Shareholder), the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share
on the date of grant; and
(iii) for an Incentive Stock Option granted to any Employee
(other than a Restricted Shareholder), the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of
grant.
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<PAGE>
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option shall consist of full payment in cash or cash equivalents
or, with the consent of the Board, one of the alternative forms specified below:
(i) full payment in shares of Common Stock (duly endorsed for
transfer to the Company) held by the Optionee for the requisite period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes and valued at Fair Market Value on the date of delivery;
or
(ii) full payment through a combination of cash or cash
equivalents and shares of Common Stock (duly endorsed for transfer to the
Company) held by the Optionee for the requisite period necessary to avoid a
charge to the Company's earnings for financial reporting purposes and
valued at Fair Market Value on the date of delivery; or
(iii) full payment effected through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (A) shall provide
irrevocable written instructions to a designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased Shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Company by reason of such purchase and (B) shall provide
written directives to the Company to deliver the certificates for the
purchased Shares directly to such brokerage firm in order to complete the
sale transaction; or
(iv) any other legal consideration that may be acceptable to
the Board.
8. Exercise of Options.
-------------------
(a) Vesting of Options. Any Option granted hereunder shall be
------------------
exercisable at such times and under such conditions as determined by the Board,
including performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan, except that any Option
granted hereunder to an employee who is not an officer or director shall be
exercisable at a rate of at least 20% per year over five (5) years from the date
of grant.
(b) Procedure for Exercise. An Option may be exercised at any time as
----------------------
to all or any portions of the Shares as to which it is then exercisable, except
that an Option may not be exercised for a fraction of a Share and shall be
subject to any provision in the written option agreement governing the minimum
number of Shares as to which the Option may be exercised. An Option shall be
deemed to be exercised when written notice of such exercise has been given to
the Company in accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 7(b) of the Plan.
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<PAGE>
(c) Termination of Options. All installments of an Option shall
----------------------
expire and terminate on such date(s) as the Board shall determine, but in no
event later than ten (10) years from the date such Option was granted (except
that an Incentive Stock Option granted to a Restricted Shareholder shall by its
terms not be exercisable after the expiration of five (5) years from the date
such Option was granted).
(d) Death or Termination of Service of Optionee. The following
-------------------------------------------
provisions shall govern the exercise period applicable to any Options held by an
Optionee at the time of his or her death or termination of service with the
Company or any Parent or Subsidiary of the Company:
(i) Termination of Continuous Status as an Employee, Director or
------------------------------------------------------------
Consultant. In the event of termination of an Optionee's Continuous Status
----------
as an Employee, Director or Consultant (as the case may be) for any reason
other than Optionee's death or Disability, such Optionee may only exercise
the Option within three (3) months (or such shorter period as specified in
the written option agreement, but in no event less than thirty (30) days)
after the date of such termination.
(ii) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee, Director or Consultant as a
result of the Optionee's Disability, the Optionee may only exercise the
Option within twelve (12) months (or such shorter period as is specified in
the written option agreement, but in no event less than six (6) months)
from the date of such termination.
(iii) Death of Optionee. In the event of termination of an
-----------------
Optionee's Continuous Status as an Employee, Director or Consultant as a
result of the Optionee's death, the Option may only be exercised any time
within twelve (12) months (or such shorter period as is specified in the
written option agreement, but in no event less than six (6) months)
following the date of death by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance.
(iv) Limitations. Each Option shall, during the limited exercise
-----------
period under this Section 8(d), be exercisable only as to the Shares for
which the Option is exercisable on the date of the Optionee's death or
termination of service with the Company. Under no circumstances shall any
Option become exercisable under this Section 8(d) after the Option
Termination Date. Upon the earlier of the expiration of such limited
exercise period or the Option Termination Date, the Option shall terminate
and cease to be exercisable.
(v) Immediate Termination. Should (A) the Optionee's Continuous
---------------------
Status as an Employee, Director or Consultant be terminated for misconduct
(including, but not limited to, any act of dishonesty, willful misconduct,
fraud or embezzlement) or (B) the Optionee make any unauthorized use or
disclosure of confidential information or trade secrets of the Company or
any Parent or Subsidiary, then in any such event all
6
<PAGE>
outstanding Options granted to the Optionee under this Plan shall terminate
immediately and cease to be exercisable.
(e) Extensions. Notwithstanding the provisions covering the
----------
exercisability of Options following death or termination of service, as
described in Section 8(d), the Board may, in its sole discretion, with the
consent of the Optionee or the Optionee's estate (in the case of the death of
Optionee), extend the period of time during which the Option shall remain
exercisable, provided that in no event shall such extension go beyond the Option
Termination Date. In the case of Incentive Stock Options, extensions under this
Section 8(e) may result in loss of the favorable treatment accorded to incentive
stock options under the Code.
9. Restrictions on Grants of Options and Issuance of Shares.
--------------------------------------------------------
(a) Regulatory Approvals. No Shares shall be issued or delivered upon
--------------------
exercise of an Option unless and until there shall have been compliance with all
applicable requirements of the Securities Act of 1933, as amended, (the "1933
Act"), and any other requirement of law or of any regulatory body having
jurisdiction over such issuance and delivery. The inability of the Company to
obtain any required permits, authorizations or approvals necessary for the
lawful issuance and sale of any Shares hereunder on terms deemed reasonable by
the Board shall relieve the Company, the Board, and any Committee of any
liability in respect of the non-issuance or sale of such Shares as to which such
requisite permits, authorizations, or approvals shall not have been obtained.
(b) Representations and Warranties. As a condition to the granting or
------------------------------
exercise of any Option, the Board may require the person receiving or exercising
such Option to make any representation and/or warranty to the Company as may be
required (or deemed appropriate by the Board, in its discretion) under any
applicable law or regulation, including but not limited to a representation that
the Option and/or Shares are being acquired only for investment and without any
present intention to sell or distribute such Option and/or Shares, if such a
representation is required under the 1933 Act or any other applicable law, rule,
or regulation.
(c) Shareholder Approval. The exercise of Options under the Plan also
--------------------
is conditioned on approval of the Plan by the Company's Shareholders within
twelve (12) months of adoption of the Plan by the Board, and no Option shall be
exercisable hereunder unless and until the Plan has been so approved.
10. Option Adjustments.
------------------
(a) Change in Capitalization. If the outstanding shares of Common
------------------------
Stock of the Company are increased, decreased, changed into or exchanged for a
different number or kind of shares of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock
split, upon authorization by the Board an appropriate and proportionate
adjustment shall be made in the number or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any individual
Optionees under the Plan upon exercise of Options granted under the Plan;
provided, however, that no such
7
<PAGE>
adjustment need be made if, upon the advice of counsel, the Board determines
that such adjustment may result in the receipt of federal taxable income to
holders of Options granted under the Plan or the holders of Common Stock or
other classes of the Company's securities.
(b) Corporate Reorganizations. Upon the occurrence of a Terminating
-------------------------
Transaction, as of the effective date of such Terminating Transaction, the Plan
and any then outstanding Options (whether or not vested) shall terminate unless
(i) provision is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of such Options, or for the
substitution for such Options of new options covering the securities of a
successor corporation or an affiliate thereof, with appropriate adjustments as
to the number and kind of securities and exercise prices, in which event the
Plan and such outstanding Options shall continue or be replaced, as the case may
be, in the manner and under the terms so provided; or (ii) the Board otherwise
shall provide in writing for such adjustments as it deems appropriate in the
terms and conditions of the then-outstanding Options (whether or not vested),
including without limitation providing for the cancellation of Options and their
automatic conversion into the right to receive the securities or other
properties which a holder of the Shares underlying such Options would have been
entitled to receive upon such Terminating Transaction had such Shares been
issued and outstanding (net of the appropriate option exercise prices). If,
pursuant to the foregoing provisions of this paragraph (b), the Plan and the
Options shall terminate by reason of the occurrence of a Terminating Transaction
without provision for any of the action(s) described in clause (i) or (ii)
hereof, then any Optionee holding outstanding Options shall have the right, at
such time immediately prior to the consummation of the Terminating Transaction
as the Board shall designate, to exercise his or her Options to the full extent
not theretofore exercised, including any portion which has not yet become
exercisable.
11. Option Agreement. The terms and conditions of Options granted under
----------------
the Plan shall be evidenced by a written option agreement executed by the
Company and the person to whom the Option is granted. Each option agreement
shall incorporate the Plan by reference and shall include such provisions as are
determined to be necessary or appropriate by the Board.
12. Limitations on Incentive Stock Options. In the event that the
--------------------------------------
aggregate Fair Market Value of Shares (determined as of the date of grant of the
Option covering such Shares) with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any calendar year under
this Plan and any other plan of the Company exceeds $100,000, Options with
respect to and to the extent of such excess shall be treated as Nonstatutory
Stock Options. This Section 12 shall be applied by taking Options which are
intended to be Incentive Stock Options into account in the order in which they
were granted.
13. Amendment or Termination of the Plans.
-------------------------------------
(a) Board Authority. The Board may amend, suspend, alter, or
---------------
terminate the Plan at any time. To the extent necessary or desirable to comply
with Rule 16b-3 of the Exchange Act, the Code or any other applicable law or
regulation, the Company may obtain
8
<PAGE>
shareholder approval of any amendment to the Plan only in such a manner and to
such a degree as required under applicable law.
(b) Limitation on Board Authority. Furthermore, the Plan may not,
-----------------------------
without the approval of the shareholders, be amended in any manner that would
cause Incentive Stock Options issued hereunder to fail to qualify as Incentive
Stock Options as defined in Section 422(b) of the Code. Notwithstanding the
foregoing, no amendment, suspension or termination of the Plan shall adversely
affect Options granted on or prior to the date thereof, as evidenced by the
execution of an option agreement by both the Company and the Optionee, without
the consent of such Optionee.
(c) Contingent Grants Based on Amendments. Options may be granted in
-------------------------------------
reliance on and consistent with any amendment adopted by the Board and which is
necessary to enable such Options to be granted under the Plan, even though such
amendment requires future shareholder approval; provided, however, that any such
contingent Option by its terms may not be exercised prior to shareholder
approval of such amendment, and provided further, that in the event shareholder
approval is not obtained within twelve (12) months of the date of grant of such
contingent Option, then such contingent Option shall be deemed cancelled and no
longer outstanding.
14. Options Not Transferable. Options granted under this Plan may not be
------------------------
sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, either voluntarily or involuntarily by
operation of law, other than by will or the laws of descent or distribution, and
may be exercised during the lifetime of an Optionee only by such Optionee.
15. No Rights in Shares Before Issuance and Delivery. Neither the
------------------------------------------------
Optionee, his or her estate nor his or her transferees by will or the laws of
descent and distribution shall be, or have any rights or privileges of, a
shareholder of the Company with respect to any Shares issuable upon exercise of
the Option unless and until certificates representing such Shares shall have
been issued and delivered notwithstanding exercise of the Option. No adjustment
will be made for a dividend or other rights where the record date is prior to
the date such stock certificates are issued, except as provided in Section 10.
16. Taxes. The Board shall make such provisions and take such steps as it
-----
deems necessary or appropriate for the withholding of any federal, state, local
and other tax required by law to be withheld with respect to the grant or
exercise of an Option under the Plan, including, without limitation, the
deduction of the amount of any such withholding tax from any compensation or
other amounts payable to an Optionee by the Company, or requiring an Optionee
(or the Optionee's beneficiary or legal representative) as a condition of
granting or exercising an Option to pay to the Company any amount required to be
withheld, or to execute such other documents as the Board deems necessary or
desirable in connection with the satisfaction of any applicable withholding
obligation. In the discretion of the Board, upon exercise of a Nonstatutory
Stock Option, the Optionee may request the Company to withhold from the Shares
to be issued upon such exercise that number of Shares (based on the Fair
9
<PAGE>
Market Value of the Shares as of the day notice of exercise is received by the
Company) that would satisfy any tax withholding requirement.
17. Legends on Options and Stock Certificates. Each option agreement and
-----------------------------------------
each certificate representing Shares acquired upon exercise of an Option shall
be endorsed with all legends, if any, required by applicable federal and state
securities laws to be placed on the option agreement and/or the certificate.
The determination of which legends, if any, shall be placed upon option
agreements and/or the certificates representing Shares shall be made by the
Board in its sole discretion and such decision shall be final and binding.
18. Availability of Plan and Financial Statements. A copy of this Plan
---------------------------------------------
shall be delivered to the Secretary of the Company and shall be shown by the
Secretary to any eligible person making reasonable inquiry concerning the Plan.
The Company shall also provide Optionees with financial statements of the
Company at least annually.
19. Applicable Law. This Plan shall be governed by and construed in
--------------
accordance with the laws of the State of California.
10
