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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PROSOFTTRAINING.COM
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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ProsoftTraining.com
3001 Bee Caves Rd., Suite 300
Austin, Texas 78746
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Notice of Annual Meeting of Stockholders
----------------
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of ProsoftTraining.com (the "Company")
will be held at the Company's headquarters, located at 3001 Bee Caves Road,
Suite 300, Austin, Texas, on Tuesday, November 28, 2000, at 2:00 p.m. local
time, for the following purposes:
1. To elect two Class I directors to hold office for a three year term.
2. To consider and vote upon a proposal to approve the Company's
Employee Stock Purchase Plan;
3. To consider and vote upon a proposal to approve the Company's 2000
Stock Incentive Plan;
4. To consider and vote upon a proposal to approve an amendment to the
Company's Amended and Restated Articles of Incorporation to increase the
total authorized shares of Common Stock of the Company from 50,000,000 to
75,000,000;
5. To ratify the appointment of our independent auditors for fiscal year
2001; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record on the books of the Company at the close of
business on October 6, 2000 will be entitled to notice of, and to vote at, the
Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting. A
majority of the outstanding shares must be represented at the meeting in order
to transact business. Consequently, if you are unable to attend in person,
please execute the enclosed proxy and return it in the enclosed addressed
envelope. Your promptness in returning the proxy will assist in the
expeditious and orderly processing of the proxies. If you return your proxy,
you may nevertheless attend the meeting and vote your shares in person, if you
wish.
By Order of the Board of Directors,
ProsoftTraining.com
/s/ JERRELL M. BAIRD
Jerrell M. Baird
Chairman of the Board
Austin, Texas
October 16, 2000
<PAGE>
ProsoftTraining.com
3001 Bee Caves Rd., Suite 300
Austin, Texas 78746
----------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 28, 2000
----------------
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
ProsoftTraining.com (the "Company") for use at the Company's Annual Meeting of
Stockholders to be held at the Company's headquarters, located at 3001 Bee
Caves Road, Suite 300, Austin, Texas, on Tuesday, November 28, 2000, at 2:00
p.m. local time, and any and all adjournments or postponements thereof. All
shares represented by each properly executed, unrevoked proxy received in time
for the Annual Meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by the Company,
the proxy holders will vote FOR the election of the nominees for election to
the Board of Directors listed in the proxy, FOR approval of the Employee Stock
Purchase Plan, FOR approval of the 2000 Stock Incentive Plan, FOR approval of
an amendment to the Company's Amended and Restated Articles of Incorporation to
increase the total authorized shares of Common Stock of the Company from
50,000,000 to 75,000,000, FOR the ratification of the selection of Grant
Thornton LLP as independent auditors of the Company and, as to any other
business which may properly come before the meeting, in accordance with their
best judgment. Any stockholder has the power to revoke his or her proxy at any
time before it is voted. A proxy may be revoked by delivering a written notice
of revocation to the Secretary of the Company, by presenting at the meeting a
later-dated proxy executed by the person who executed the prior proxy, or by
attendance at the meeting and voting in person by the person who executed the
prior proxy. This Proxy Statement and form of Proxy are being mailed to the
Company's stockholders on or about October 16, 2000.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall constitute
a quorum and that, except as otherwise provided by statute, the Articles of
Incorporation of the Company or the Bylaws, all other matters coming before the
Annual Meeting shall be decided by the vote of the holders of a majority of the
stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat. Votes cast at the Annual Meeting will be tabulated by
the persons appointed by the Company to act as inspectors of election for the
Annual Meeting. The inspectors of election will treat shares of voting stock
represented by a properly signed and returned proxy as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Likewise, the inspectors of
election will treat shares of voting stock represented by "broker non-votes"
(i.e., shares of voting stock held in record name by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote; (ii) the broker or nominee does not have
discretionary voting power under applicable rules or the instrument under which
it serves in such capacity; or (iii) the recordholder has indicated on the
proxy card or has executed a proxy and otherwise notified the Company that it
does not have authority to vote such shares on that matter) as present for
purposes of determining a quorum. Directors will be elected by a favorable vote
of a plurality of the shares of voting stock present and entitled to vote, in
person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. Proposals 2, 3 and 5 require the
approval of a majority of the shares of Common Stock present and entitled to
vote at the Annual Meeting. Therefore, abstentions as to these proposals will
have the same effect as votes against such proposals. Broker non-votes as to
these proposals, however, will be deemed shares not
<PAGE>
entitled to vote on such proposals, and will not be counted as votes for or
against such proposals, and will not be included in calculating the number of
votes necessary for approval of such proposals. Proposal 4 requires the
approval of a majority of the outstanding shares and therefore abstentions and
broker non-votes will have the same effect as votes against such proposal.
The cost of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses will include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by
telephone or oral communication with some stockholders by the Company's regular
associates who will not receive additional compensation for the solicitation.
The Company has no plans to hire special associates or paid solicitors to
assist in obtaining proxies.
Outstanding Shares and Voting Rights
Holders of record of the 22,707,587 shares of the Company's Common Stock
outstanding at the close of business on October 6, 2000 will be entitled to
notice of and to vote at the meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on October 6,
2000.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table and the notes thereto set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of
September 1, 2000, by (i) each current director and nominee for director of the
Company; (ii) each of the executive officers named in the Summary Compensation
Table herein; (iii) all present executive officers and directors of the Company
as a group; and (iv) each person known to the Company to own beneficially more
than five percent of the presently outstanding Common Stock.
<TABLE>
<CAPTION>
Percent of
Shares of Outstanding
Common Stock Common Stock
Beneficially Beneficially
Name of Individual Or Identity of Group(1) Owned Owned
------------------------------------------ ------------ ------------
<S> <C> <C>
Fidelity Management & Research................... 2,388,600 10.5%
One Federal St.
Boston, MA 02109
Hunt Capital Growth Fund II, L.P................. 1,279,220 5.6%
1601 Elm, Suite 4000
Dallas, Texas 75201
T. Rowe Price Associates......................... 1,175,000 5.2%
100 East Pratt St.
Baltimore, MD 21202
Drake Personnel (New Zealand) Limited............ 1,142,422 5.0%
50 Shirley St.
Nassau, Bahamas
Jerrell M. Baird (2)............................. 326,287 1.4%
J. William Fuller (3)............................ 31,791 *
Richard J. Groeneweg (4)......................... 10,000 *
Robert G. Gwin................................... -- --
J.R. Holland, Jr. (5)............................ 1,279,220 5.6%
Jeffrey Korn (6)................................. 50,000 *
Charles McCusker (7)............................. 250 *
David I. Perl (8)................................ 142,830 *
Dr. Edward Walsh (9)............................. 39,632 *
William J. Weronick (10)......................... 41,500 *
All executive officers and directors, as a group
(11)............................................ 1,921,510 8.4%
</TABLE>
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* Less than 1% of the outstanding shares of Common Stock
(1) Unless otherwise indicated, the named persons possess sole voting and
investment power with respect to the shares listed (except to the extent
such authority is shared with spouses under applicable law). The
percentages are based upon 22,696,762 shares outstanding as of September
1, 2000, except for certain parties who hold options and warrants that are
presently exercisable or exercisable within 60 days of September 1, 2000
are based upon the sum of shares outstanding as of September 1, 2000 plus
the number of shares subject to options and warrants that are presently
exercisable or exercisable within 60 days of September 1, 2000 held by
them, as indicated in the following notes.
(2) Includes 233,333 shares subject to stock options exercisable within 60
days of September 1, 2000, and 20,000 shares subject to a stock warrant
agreement.
(3) Includes 20,641 shares subject to stock warrant agreements exercisable
within 60 days of September 1, 2000.
(4) Includes 10,000 shares subject to stock options exercisable within 60 days
of September 1, 2000.
(5) Includes 1,279,220 shares owned by Hunt Capital Growth Fund II, L.P. Mr.
Holland is President and CEO of Hunt Capital Management, LLC, an affiliate
of Hunt Capital Growth Fund II, L.P. Mr. Holland disclaims beneficial
ownership of the shares held by Hunt Capital Growth Fund II, L.P., except
to the extent of his pecuniary interest therein.
(6) Includes 40,000 shares subject to stock options exercisable within 60 days
of September 1, 2000.
(7) Excludes 510,125 shares owned by ServiceMaster Venture Fund L.L.C. Of this
amount, 250,000 shares are subject to a stock warrant agreement. Mr.
McCusker is an employee of a ServiceMaster subsidiary called The
ServiceMaster Company Limited Partnership.
(8) Includes 130,830 shares subject to stock options exercisable within 60
days of September 1, 2000.
(9) Includes 38,332 shares subject to stock options exercisable within 60 days
of September 1, 2000.
(10) Includes 37,500 shares subject to stock options exercisable within 60 days
of September 1, 2000.
(11) Includes 489,995 shares subject to stock options exercisable within 60
days of September 1, 2000 and 40,641 shares subject to stock warrants.
3
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PROPOSAL 1
ELECTION OF TWO CLASS I DIRECTORS
The Company's Bylaws provide for a Board of Directors of not less than three
nor more than twenty-five Directors, the exact number to be fixed by the Board.
The Board has currently fixed that number at six, effective as of the Annual
Meeting. The Board of Directors is currently divided into three classes of
directors. Directors hold office for staggered terms of three years (or less if
they are filling a vacancy) and until their successors are elected and
qualified. One of the three classes is elected each year to succeed the
directors whose terms are expiring. Class I Directors will be elected at the
Annual Meeting to serve for a term expiring at the annual meeting in the year
2003. The terms for the directors in Class II expire in the year 2001. The
Class III directors' terms will expire in 2002.
Proxies solicited by the Board will be voted for the election of the
nominees, unless you withhold your vote on your proxy card. The Board has no
reason to believe that these nominees will be unable to serve. However, if any
one of them should become unavailable, the Board may reduce the size of the
Board or designate a substitute nominee. If the board designates a substitute,
shares represented by the proxies will be voted for the substitute nominee.
The Board of Directors recommends that you vote FOR each of the following
nominees for election as a director:
Class I Nominees for the Terms Expiring in 2003:
The Company's Board of Directors has proposed the following nominees for
election as Class I Directors at the Annual Meeting. Each of the nominees has
consented to serve a three-year term.
Jerrell M. Baird, 44. Mr. Baird has been Chairman and Chief Executive
Officer of the Company since February 1998. Mr. Baird joined the Company as
Chief Operating Officer in June 1997 and became President of the Company in
August 1997, a Director in December 1997 and Chairman and Chief Executive
Officer in February 1998. Prior to joining the Company, Mr. Baird served as the
Chief Information Officer of IBM's Consumer Product Division from 1996 to 1997.
In 1992, Mr. Baird founded Baird Information Systems, an information technology
outsourcing company where he served as President until 1994. From 1978 to 1992
and from 1994 to 1996, Mr. Baird served in a variety of positions at Mrs.
Baird's Bakeries, a wholesale baking company, including Plant Manager, Director
of Information Technology and Vice President of Marketing. Mr. Baird graduated
from Washington and Lee University with a BS in Business Administration in
1978, and earned an MBA from Harvard University in 1982.
J. William Fuller, 48. Mr. Fuller has served as a Director of the Company
since December 1998. Mr. Fuller is registered as an investment advisor and
owner of Fuller Capital Management LLC, a money management firm founded in
1983. Mr. Fuller has been active in venture capital and private investments
banking ventures for the past 16 years. Additionally, he is a registered
representative of Cambridge Investment Research, a registered broker dealer.
Mr. Fuller graduated from Southern Methodist University with a BA in Philosophy
in 1974.
Directors Whose Term of Office Continue
The individuals listed below are presently serving as directors.
Class II Terms Expire in 2001:
Jeffrey G. Korn, 43. Mr. Korn has served as a Director of the Company since
June 1997. Mr. Korn joined the Company in August 2000 as its General Counsel.
Prior to joining the Company, Mr. Korn was a partner in
4
<PAGE>
the law firm of Kosto & Rotella, P.A. in Jacksonville, Florida, which he joined
in 1983. Mr. Korn specialized in corporate law, and dispute resolution. He
graduated from the State University of New York at New Paltz with a BA in
Political Science in 1979, and received his JD degree from Stetson University
in 1982.
Charles McCusker, 31. Mr. McCusker has served as a Director of the Company
since December 1998. Since 1997, Mr. McCusker has been responsible for
investment opportunities in for-profit education and electronic commerce at
ServiceMaster Venture Fund, the venture capital arm of ServiceMaster Company
(NYSE: SVM). Prior to that, Mr. McCusker spent three years as a Vice President
of Bengur Bryan & Co., Inc., a venture capital and private equity firm. Mr.
McCusker graduated from Virginia Tech with a BS in Mechanical Engineering in
1992, and earned an MBA from the University of Chicago in 1998.
Class III Terms Expire in 2002:
J.R. Holland, Jr., 56. Mr. Holland has been President and Chief Executive
Officer of Unity Hunt, Inc. since 1991 and is currently Chairman of the Unity
Hunt Investment Committee, in addition to being President and CEO of Hunt
Capital Management, LLC. He is a Director of Texas Capital Bancshares, Inc.,
and several private companies. Mr. Holland graduated from Oklahoma State
University with a BS in Chemical Engineering and received an MBA from Carnegie
Mellon University, of which he presently serves on its advisory board.
Dr. Edward Walsh, 61. Dr. Walsh has served as a Director since December
1999. Dr. Walsh is the chairman of the Irish Council for Science Technology and
Innovation and the chairman of T.A. Ryan Academy of Entrepreneurship, a
software incubation organization in Ireland. He was founding president of the
University of Limerick, the first new university established by the Republic of
Ireland, a post from which he stepped down in l998 after a 28 year term. Dr.
Walsh is a graduate of the National University of Ireland and holds Masters and
Doctorate qualifications in nuclear and electrical engineering from Iowa State
University, where he was an Associate of the US Atomic Energy Commission
Laboratory.
The Board of Directors
The Board of Directors oversees the overall performance of the Company on
your behalf. Members of the Board stay informed of the Company's business
through discussion with the Chairman and other members of management and staff,
by reviewing materials provided to them, and by participating in board and
committee meetings. The Board met twelve times during the fiscal year ended
July 31, 2000, and held three committee meetings. Each director attended at
least 75% of the total number of meetings of the Board of Directors and of
Board of Director committees on which that director served which were held
during the period for which he was a director.
Directors, other than associates or officers of the Company, receive $500
per Board meeting attended and $250 per committee meeting attended, other than
committee meetings held in conjunction with meetings of the Board of Directors.
Directors are reimbursed for expenses incurred in connection with attendance at
Board and committee meetings. Directors who are officers or associates of the
Company are not compensated separately for service on the Board of Directors.
The Board of Directors has standing Compensation, Audit, and Nominating
Committees.
The Compensation Committee is responsible for reviewing the structure,
performance and compensation of the Company's senior executives and determining
awards under the Company's stock option plans. The Compensation Committee is
comprised of Messrs. McCusker, Holland, and Walsh. The Compensation Committee
met one time during the fiscal year ended July 31, 2000.
The Audit Committee is responsible for making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
public accountants the plans and results of the audit engagement, considering
the range of audit and non-audit fees and reviewing the adequacy of the
Company's internal accounting controls. The Audit Committee is comprised of
Messrs. Fuller, McCusker and Richard Groeneweg. The Audit Committee met one
time during the fiscal year ended July 31, 2000.
5
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The Nominating Committee is responsible for recommending to the Board
qualified nominees for election to the Board. The Committee considers
suggestions from many sources, including stockholders, regarding possible
candidates for director. Such suggestions, together with appropriate
biographical information, should be submitted to the Secretary of the Company.
The Nominating Committee is comprised of Messrs. Baird, Holland, and Walsh. The
Nominating Committee met one time during the fiscal year ended July 31, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Directors, Executive Officers and greater-than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended July 31, 2000 all Section
16(a) filing requirements applicable to its Directors, Executive Officers and
greater-than ten percent beneficial owners were satisfied.
PROPOSAL 2
APPROVAL OF PROSOFTTRAINING.COM
EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are being asked to approve the
ProsoftTraining.com Employee Stock Purchase Plan (the "Purchase Plan"). The
purpose of the Purchase Plan is to provide eligible employees of the Company
and its participating affiliates with the opportunity to acquire a proprietary
interest in the Company through participation in a payroll-deduction based
employee stock purchase program designed to operate in compliance with Section
423 of the Internal Revenue Code.
The following is a summary of the principal features of the Purchase Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the Purchase Plan. Any stockholder of the Company who wishes to
obtain a copy of the actual plan document may do so without charge upon written
request to the Secretary at the Company's principal executive offices in
Austin, Texas.
Share Reserve
A total of 100,000 shares of Common Stock have been authorized for issuance
over the term of the Purchase Plan. In addition, the number of shares of Common
Stock reserved for issuance under the Purchase Plan will automatically be
increased on the first trading day of each calendar year, beginning in calendar
year 2001, by an amount equal to one half percent (.5%) of the total number of
shares of Common Stock outstanding on the last trading day of the preceding
calendar year, but in no event will any such annual increase exceed 150,000
shares.
Administration
The Purchase Plan will be administered by the Compensation Committee of the
Board of Directors. Such committee, as Plan Administrator, has full authority
to adopt such rules and procedures as it may deem necessary for proper plan
administration and to interpret the provisions of the Purchase Plan. The Board
of Directors may exercise the Committee's powers and duties under the Purchase
Plan.
6
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Offering Periods
Shares will be issued through a series of successive offering periods, each
of approximately six (6) months duration. The initial offering period will
begin on January 2, 2001. Each participant will be granted a separate option to
purchase shares of Common Stock for each offering period in which he or she
participates. Options under the Purchase Plan will be granted on the first
business day in January and July of each year and will be automatically
exercised on the last business day in the immediately succeeding June and
December, respectively, of each year. Each option entitles the participant to
purchase the whole number of shares of Common Stock obtained by dividing the
participant's payroll deductions for the offering period by the purchase price
in effect for such period.
Eligibility
Any individual who customarily works for more than twenty (20) hours per
week for more than five (5) months per calendar year in the employ of the
Company or any participating affiliate will be eligible to participate in one
or more offering periods. An eligible employee may only join an offering period
on the start date of that period.
Participating affiliates include any parent or subsidiary corporations of
the Company, whether now existing or hereafter organized, which elect, with the
approval of the Plan Administrator, to extend the benefits of the Purchase Plan
to their eligible employees.
As of September 1, 2000, approximately 124 employees, including four
executive officers, were eligible to participate in the Purchase Plan.
Purchase Provisions
Each participant may authorize periodic payroll deductions in any multiple
of one percent (1%) of his or her cash earnings, up to a maximum of fifteen
percent (15%). A participant may not increase his or her rate of payroll
deduction for an offering period after the start of that period, but he or she
may decrease the rate once per offering period.
On the last business day of each offering period, the accumulated payroll
deductions of each participant will automatically be applied to the purchase of
whole shares of Common Stock at the purchase price in effect for that period.
Purchase Price
The purchase price per share at which Common Stock will be purchased on the
participant's behalf for each offering period will be equal to eighty-five
percent (85%) of the lower of (i) the fair market value per share of Common
Stock on the start date of that offering period or (ii) the fair market value
per share of Common Stock on the last day of that offering period.
Valuation
The fair market value per share of Common Stock on any relevant date will be
the closing selling price per share on such date on the Nasdaq National Market.
On September 1, 2000, the fair market value per share determined on such basis
was $14.00.
Special Limitations
The Purchase Plan imposes certain limitations upon a participant's rights to
acquire Common Stock, including the following limitations:
. No purchase right may be granted to any individual who owns stock
(including stock purchasable under any outstanding options or purchase
rights) possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or any of its
affiliates.
7
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. No purchase right granted to a participant may permit such individual to
purchase Common Stock at a rate greater than $25,000 worth of such Common
Stock (valued at the time such purchase right is granted) for each
calendar year the purchase right remains outstanding at any time.
. No participant may purchase more than 1,000 shares of Common Stock on any
one purchase date.
. No more than 100,000 shares of Common Stock may be purchased in the
aggregate by all participants on any one purchase date.
The Plan Administrator will have the discretionary authority, exercisable
prior to the start of any offering period, to increase or decrease the 1,000
share and 100,000 share limitations to be in effect for the number of shares
purchasable per participant or in the aggregate by all participants on each
purchase date during that offering period.
Termination of Purchase Rights
A participant's purchase right will immediately terminate upon such
participant's loss of eligible employee status, and his or her accumulated
payroll deductions for the offering period in which the purchase right
terminates will be promptly refunded. A participant may withdraw from an
offering period at any time prior to the end of that period and elect to have
his or her accumulated payroll deductions for the offering period in which such
withdrawal occurs either refunded or applied to the purchase of shares of
Common Stock on the next purchase date.
Stockholder Rights
No participant will have any stockholder rights with respect to the shares
of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
Assignability
No purchase right will be assignable or transferable and will be exercisable
only by the participant.
Acquisition
Should the Company be acquired by merger or asset sale during an offering
period, all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of such acquisition. The purchase price
will be equal to eighty-five (85%) of the lower of (i) the fair market value
per share of Common Stock on the start date of that offering period or (ii) the
fair market value per share of Common Stock immediately prior to such
acquisition. The limitation on the maximum number of shares purchasable in the
aggregate on any one purchase date will not apply to the share purchases
effected in connection with such acquisition.
Changes in Capitalization
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the class and maximum number of securities issuable under the
Purchase Plan, including the class and maximum number of securities issuable
per participant or in the aggregate on any one purchase date, (ii) the class
and maximum number of securities subject to each outstanding purchase right and
the purchase price payable per share thereunder and (iii) the class and maximum
number of securities by which the share reserve is to increase each calendar
year by reason of the automatic share increase provisions of the Purchase Plan.
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Amendment and Termination
The Purchase Plan will terminate upon the earliest to occur of (i) December
31, 2010, (ii) the date on which all available shares are issued or (iii) the
date on which all outstanding purchase rights are exercised in connection with
an acquisition of the Company.
The Board of Directors may at any time alter, suspend or discontinue the
Purchase Plan. However, the Board of Directors may not, without stockholder
approval, (i) increase the number of shares issuable under the Purchase Plan,
except in connection with certain changes in the Company's capital structure,
(ii) alter the purchase price formula so as to reduce the purchase price or
(iii) modify the requirements for eligibility to participate in the Purchase
Plan.
Federal Tax Consequences
The Purchase Plan is intended to be an "employee stock purchase plan" within
the meaning of Section 423 of the Internal Revenue Code. Under a plan which so
qualifies, no taxable income will be recognized by a participant, and no
deductions will be allowable to the Company, in connection with the grant or
the exercise of an outstanding purchase right.
Taxable income will not be recognized until there is a sale or other
disposition of the shares acquired under the Purchase Plan or in the event the
participant should die while still owning the purchased shares.
If the participant sells or otherwise disposes of the purchased shares
within two (2) years after the start date of the offering period in which such
shares were acquired or within one (1) one year after the actual purchase date
of those shares, then the participant will recognize ordinary income in the
year of sale or disposition equal to the amount by which the fair market value
of the shares on the purchase date exceeded the purchase price paid for those
shares, and the Company will be entitled to an income tax deduction, for the
taxable year in which such sale or disposition occurs, equal in amount to such
excess.
If the participant sells or disposes of the purchased shares more than two
(2) years after the start date of the offering period in which such shares were
acquired and more than one (1) one year after the actual purchase date of those
shares, then the participant will recognize ordinary income in the year of sale
or disposition equal to the lesser of (i) the amount by which the fair market
value of the shares on the sale or disposition date exceeded the purchase price
paid for those shares or (ii) fifteen percent (15%) of the fair market value of
the shares on the start date of the offering period, and any additional gain
upon the disposition will be taxed as a long-term capital gain. The Company
will not be entitled to any income tax deduction with respect to such sale or
disposition.
If the participant still owns the purchased shares at the time of death, the
lesser of (i) the amount by which the fair market value of the shares on the
date of death exceeds the purchase price or (ii) fifteen percent (15%) of the
fair market value of the shares on his or her entry date into the offering
period in which those shares were acquired will constitute ordinary income in
the year of death.
Accounting Treatment
Under current accounting rules, the issuance of Common Stock under the
Purchase Plan will not result in a direct charge to the Company's reported
earnings. However, the Company must disclose, in footnotes and pro-forma
statements to the Company's financial statements, the impact the purchase
rights granted under the Purchase Plan would have upon the Company's reported
earnings were the fair value of those purchase rights treated as compensation
expense.
Proposal
At the Annual Meeting, stockholders will be asked to approve the Purchase
Plan. Such approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock present or
represented and entitled to vote at the Annual Meeting.
The Board of Directors recommends that you vote FOR this proposal.
9
<PAGE>
PROPOSAL 3
APPROVAL OF PROSOFTTRAINING.COM
2000 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve the
ProsoftTraining.com 2000 Stock Incentive Plan (the "2000 Plan"), to serve as
the successor to the Company's existing 1996 Stock Option Plan and 2000 Stock
Option Plan (together, the "Predecessor Plans"). The 2000 Plan will become
effective immediately upon stockholder approval at the Annual Meeting, and all
outstanding options under the Predecessor Plans will be incorporated into the
2000 Plan at that time. The Predecessor Plans will terminate, and no further
option grants will be made under the Predecessor Plans. However, all
outstanding options under the Predecessor Plans will continue to be governed by
the terms and conditions of the existing option agreements for those grants
except to the extent the Board or Compensation Committee elects to extend one
or more features of the 2000 Plan to those options.
The 2000 Plan was adopted by the Board on September 20, 2000 and is designed
to serve as an equity incentive program to attract and retain the services of
individuals essential to the Company's long-term growth and financial success.
Accordingly, officers and other key employees, non-employee board members,
consultants and other advisors in the service of the Company or any parent or
subsidiary corporation will have the opportunity to acquire a meaningful equity
interest in the Company through their participation in the 2000 Plan.
The following is a summary of the principal features of the 2000 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 2000 Plan. Any stockholder of the Company who wishes to
obtain a copy of the actual plan document may do so without charge upon written
request to the Corporate Secretary at the Company's principal executive offices
in Austin, Texas.
Administration
The 2000 Plan will be administered by the Compensation Committee of the
Board. This committee (the "Plan Administrator") will have complete discretion
(subject to the provisions of the 2000 Plan) to authorize option grants under
the 2000 Plan, except that the exercise price of outstanding options may not be
reset and new grants may not be made in exchange for the cancellation of
outstanding options without stockholder approval. The Board may also appoint a
secondary committee of one or more Board members, including employee directors,
to authorize option grants to eligible persons other than executive officers
and Board members subject to the short-swing liability provisions of the
federal securities laws.
Share Reserve
A total of 4,731,695 shares of Common Stock have been authorized for
issuance over the term of the 2000 Plan. Such share reserve consists of (i) the
number of shares that remain available for issuance under the Predecessor Plans
(including shares subject to outstanding options) and (ii) an additional
increase of 2,000,000 shares.
As of September 1, 2000, options for 2,671,179 shares of Common Stock were
outstanding under the Predecessor Plans and 60,516 shares of Common Stock
remained available for future option grants.
No participant in the 2000 Plan may receive option grants for more than
200,000 shares of Common Stock in the aggregate per calendar year, subject to
adjustment for subsequent stock splits, stock dividends and similar
transactions. Stockholder approval of this proposal will also constitute
approval of the 200,000 share limitation for purposes of Internal Revenue Code
Section 162(m).
The shares of Common Stock issuable under the 2000 Plan may be drawn from
shares of the Company's authorized but unissued Common Stock or from shares of
Common Stock reacquired by the Company, including shares repurchased on the
open market.
10
<PAGE>
Shares subject to any outstanding options under the 2000 Plan (including
options incorporated from the Predecessor Plans) which expire or otherwise
terminate prior to exercise will be available for subsequent issuance. Unvested
shares issued under the 2000 Plan and subsequently repurchased by the Company
pursuant to its repurchase rights under the 2000 Plan will also be available
for subsequent issuance.
Eligibility
Employees, non-employee Board members and independent advisors and
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) will be eligible to
participate in the 2000 Plan.
As of September 1, 2000, four executive officers, five non-employee Board
members and approximately 124 other employees and consultants were eligible to
participate in the 2000 Plan.
Valuation
The fair market value per share of Common Stock on any relevant date under
the 2000 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On September 1, 2000, the closing selling price per
share was $14.00.
Discretionary Option Grants
The options granted under the 2000 Plan may be either incentive stock
options under the federal tax laws or non-statutory options. Each granted
option will have an exercise price per share not less than the fair market
value per share of Common Stock on the option grant date, and no granted option
will have a term in excess of ten years. The shares subject to each option will
generally vest in one or more installments over a specified period of service
measured from the grant date. Historically, the Company has granted options
vesting over three and four year periods from the date of grant.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for
vested shares. The Plan Administrator will have complete discretion to extend
the period following the optionee's cessation of service during which his or
her outstanding options may be exercised and/or to accelerate the
exercisability or vesting of such options in whole or in part. Such discretion
may be exercised at any time while the options remain outstanding, whether
before or after the optionee's actual cessation of service.
General Provisions
In the event of an acquisition of the Company, whether by merger or asset
sale or a sale of stock by the stockholders, each outstanding option under the
2000 Plan which is not to be assumed by the successor corporation or otherwise
continued in effect will automatically accelerate in full, and all unvested
shares will immediately vest, except to the extent the Company's repurchase
rights with respect to those shares are to be assigned to the successor
corporation or otherwise continued in effect. The Plan Administrator will have
the authority to provide that the shares subject to options granted under the
2000 Plan will automatically vest upon an acquisition of the Company, whether
or not those options are assumed or continued.
The acceleration of vesting in the event of a change in the ownership of the
Company may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
Financial Assistance
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options under the 2000 Plan by delivering a
promissory note payable in installments. The Plan Administrator will determine
the terms of any such promissory note. However, the maximum amount of financing
provided
11
<PAGE>
any participant may not exceed the cash consideration payable for the issued
shares plus all applicable taxes incurred in connection with the acquisition of
the shares.
Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the
withholding tax liability incurred by such individuals in connection with the
exercise of those options or the vesting of those shares. Alternatively, the
Plan Administrator may allow such individuals to deliver previously acquired
shares of Common Stock in payment of such tax liability.
Changes in Capitalization
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
2000 Plan, (ii) the number and/or class of securities for which any one person
may be granted stock options under the 2000 Plan per calendar year and (iii)
the number and/or class of securities and the exercise price per share in
effect under each outstanding option (including the options incorporated from
the Predecessor Plans) in order to prevent the dilution or enlargement of
benefits thereunder.
Amendment and Termination
The Board may amend or modify the 2000 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may
terminate the 2000 Plan at any time, and the 2000 Plan will in all events
terminate on November 28, 2010.
Option Grants
No options have been granted under the 2000 Plan. The table below shows, as
to each of the Company's executive officers named in the Summary Compensation
Table and the various indicated individuals and groups, the number of shares of
Common Stock subject to options granted between August 1, 1999 and July 31,
2000 under the Predecessor Plans, together with the weighted average exercise
price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
Weighted
Number of Average
Name Option Shares Exercise Price
---- ------------- --------------
<S> <C> <C>
Jerrell M. Baird.................................. 36,000 $11.00
Chairman of the Board and Chief Executive Officer
David I. Perl..................................... 36,000 $11.00
Chief Operating Officer, President
William J. Weronick............................... 9,500 $11.00
Vice President, Finance
All executive officers and directors as a group
(9 persons)...................................... 148,875 $ 5.92
All nonemployee directors as a group (5 persons).. 67,375 $ 5.66
All employees, including current officers who are
not executive officers as a group (approximately
124 persons)..................................... 1,041,601 $ 7.62
</TABLE>
12
<PAGE>
Federal Income Tax Consequences
Option Grants
Options granted under the 2000 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of those shares on the exercise date over
(ii) the exercise price paid for the shares will be taxable as ordinary income
to the optionee. Any additional gain or loss recognized upon the disposition
will be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but will
have to report as ordinary income, as and when the Company's repurchase right
lapses, an amount equal to the excess of (i) the fair market value of the
shares on the date the repurchase right lapses over (ii) the exercise price
paid for the shares. The optionee may, however, elect under Section 83(b) of
the Internal Revenue Code to include as ordinary income in the year of exercise
of the option an amount equal to the excess of (i) the fair market value of the
purchased shares on the exercise date over (ii) the exercise price paid for
such shares. If the Section 83(b) election is made, the optionee will not
recognize any additional income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
optionee.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per
13
<PAGE>
covered officer in any fiscal year. The limitation applies only to compensation
which is not considered to be performance-based. Compensation deemed paid by
the Company in connection with disqualifying dispositions of incentive stock
option shares or exercises of non-statutory stock options granted under the
2000 Plan qualifies as performance-based compensation for purposes of Section
162(m) if such plan is administered by a committee of "outside directors" as
defined under Section 162(m). The Company anticipates that any compensation
deemed paid by it in connection with disqualifying dispositions of incentive
stock option shares or exercises of non-statutory options will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Code Section 162(m).
Accounting Treatment
Option grants made to employees under the 2000 Plan will generally not
result in any charge to the Company's earnings. However, the Company must
disclose in footnotes and pro-forma statements to the Company's financial
statements, the impact those options would have upon the Company's reported
earnings were the value of those options at the time of grant treated as a
compensation expense. The number of outstanding options may be a factor in
determining the Company's earnings per share on a fully-diluted basis.
New Plan Benefits
No options may be granted under the 2000 Plan until it has been approved by
the stockholders.
Proposal
At the Annual Meeting, stockholders will be asked to approve the 2000 Plan.
Such approval will require the affirmative vote of a majority of the voting
power of all outstanding shares of the Company's Common stock present or
represented and entitled to vote at the Annual Meeting. Should such stockholder
approval not be obtained, then the 2000 Plan will not be implemented. The
Company's 1996 Stock Option Plan and 2000 Stock Option Plan will, however,
continue to remain in effect, and option grants may be made pursuant to the
provisions of those plans until the available reserve of Common Stock under
each such plan is issued.
The Board of Directors recommends that you vote FOR this proposal.
14
<PAGE>
PROPOSAL 4
APPROVAL OF AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION TO INCREASE
THE TOTAL AUTHORIZED SHARES OF COMMON STOCK
General
On September 20, 2000, the Board of Directors of the Company adopted,
subject to stockholder approval, an amendment to the Company's Amended and
Restated Articles of Incorporation (the "Articles") to increase the total
authorized shares of Common Stock of the Company from 50,000,000 to 75,000,000.
Such increase in the number of authorized shares of Common Stock of the Company
would be effected by restating the current Article IV of the Articles to read
as follows:
"The Corporation shall have the authority to issue a total of
75,000,000 shares of capital stock having a par value of $.001
per share. All shares of capital stock of the Corporation shall
be of the same class and shall have the same rights and
preferences."
The additional shares of Common Stock for which authorization is sought herein
would be part of the existing class of Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. Holders of Common Stock have no preemptive or other
subscription rights.
As of September 30, 2000, 22,706,187 shares of Common Stock were issued and
outstanding; 2,666,179 shares were reserved for issuance pursuant to
outstanding grants under the Company's stock option plans; 60,516 were reserved
and available for issuance under the Company's stock option plans; and
1,670,126 shares were reserved for issuance pursuant to the exercise of
outstanding warrants. Therefore, of the 50,000,000 shares currently authorized
by the Articles, approximately 22,896,992 shares are presently available for
general corporate purposes. Assuming Proposals 2 and 3 are approved by the
stockholders, approximately 6,496,821 shares of Common Stock will be
outstanding or reserved for issuance on exercise of options existing or to be
granted under the Company's stock option and stock purchase plans and upon
exercise of outstanding warrants and approximately 20,796,992 shares will be
available for general corporate purposes.
Purposes and Effects of the Authorized Shares Amendment
The increase in authorized shares of Common Stock is recommended by the
Board of Directors in order to provide a sufficient reserve of such shares for
the present and future needs and growth of the Company. Such additional
authorized shares would be available for issuance at the discretion of the
Board of Directors without further stockholder approval (subject to certain
provisions of state law) to take advantage of future opportunities for equity
financing, to improve the Company's capital structure, in connection with
possible acquisitions, in connection with stock dividends or stock splits, and
for other corporate purposes.
The Board of Directors does not intend to issue any Common Stock or
securities convertible into Common Stock except on terms that the Board deems
to be in the best interests of the Company and its stockholders. The Company's
management has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
to be authorized by the proposed amendment to the Articles.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an antitakeover effect (for example, by diluting
the stock of a person seeking to effect a change in the composition of the
Board of Directors or contemplating a tender offer or other transaction for a
combination of the Company with another company), this proposal to amend the
Articles is not in response to any effort of which the Company is aware to
accumulate the Company's stock or obtain control of the Company, nor is it part
of a plan by management to recommend a series of similar amendments to the
Board of Directors and stockholders.
15
<PAGE>
Proposal
At the Annual Meeting, stockholders will be asked to approve the amendment
to the Articles of Incorporation to increase the total authorized shares of
Common Stock of the Company from 50,000,000 shares to 75,000,000 shares. Such
approval will require the affirmative vote of a majority of the voting power of
all outstanding shares of the Company's Common Stock.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 5
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Grant Thornton LLP as independent public accountants for the Company
to audit its consolidated financial statements for the fiscal year ending July
31, 2001 and is asking the stockholders to ratify this appointment. In the
event the stockholders do not ratify the selection of Grant Thornton LLP, the
appointment of the independent auditors will be reconsidered by the Board of
Directors. Grant Thornton LLP were independent auditors for the Company for
fiscal year ended July 31, 2000. Representatives of Grant Thornton LLP are
expected to be present at the Annual Meeting and will be available to respond
to appropriate questions and to make such statements as they may desire.
The Board of Directors recommends that you vote FOR this proposal.
16
<PAGE>
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jerrell M. Baird................... 44 Chairman and Chief Executive Officer
David I. Perl...................... 38 Chief Operating Officer and President
Robert G. Gwin..................... 37 Chief Financial Officer
Jeffrey Korn....................... 43 General Counsel
</TABLE>
For additional information with respect to Messrs. Baird and Korn who are
also directors of the Company, see "Proposal 1--Election of Directors".
David I. Perl. Mr. Perl joined the Company in June 1998 as its Chief
Operating Officer, and became President in February 1999. Prior to joining the
Company, Mr. Perl served as the first president and general manager of Otis
Transit Systems, Inc., a wholly owned subsidiary of Otis Elevator Company,
which is a division of United Technologies Corporation. He joined Otis Elevator
in 1988, and held positions of increasing responsibility in strategic planning,
sales, project management and general management. From 1984 to 1986, Mr. Perl
worked for Trammell Crow Company, a Dallas-based, global real estate developer,
where his responsibilities ranged from information systems to human resources.
Mr. Perl earned a BS in economics from the Wharton School at the University of
Pennsylvania in 1984 and obtained his MBA from Harvard University in 1988.
Robert G. Gwin. Mr. Gwin joined the Company in August 2000 as its Chief
Financial Officer. Prior to joining the Company, Mr. Gwin served as Managing
Director of Prudential Capital Group, an asset management unit of The
Prudential Insurance Company of America. He joined Prudential Capital in 1990,
ultimately assuming management of its Dallas-based private investment
activities, including both day-to-day operating responsibility and investment
portfolio oversight. Mr. Gwin graduated from the University of Southern
California with a BS in Business Administration in 1985 and earned an MBA from
the Fuqua School at Duke University in 1990. Mr. Gwin is a Chartered Financial
Analyst (CFA).
SUMMARY COMPENSATION TABLE
Information is set forth below concerning the compensation for services in
all capacities to the Company for the fiscal years ended July 31, 1998, 1999
and 2000 for the Company's Chief Executive Officer and any other executive
officers as of July 31, 2000 whose compensation exceeded $100,000 for the
fiscal year ending on that date.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Shares of Common
Fiscal Stock Underlying All Other
Name and Principal Position Year Salary Bonus Stock Options(1) Compensation
--------------------------- ------ -------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Jerrell M. Baird(2)................... 2000 $161,692 $25,000 36,000 --
Chairman of the Board and 1999 146,154 -- 350,000 --
Chief Executive Officer 1998 100,000 -- -- --
David I. Perl(3)..................... 2000 161,692 25,000 36,000 --
Chief Operating Officer, 1999 130,912 -- 225,000 --
President 1998 14,243 -- 100,000 --
William J. Weronick(4)............... 2000 133,654 -- 9,500 --
Vice President, Finance 1999 41,346 -- 50,000 --
1998 -- -- -- --
</TABLE>
--------
(1) Includes repriced options. In October 1998, the Board approved an offer to
all employees of the Company, including the named executive officers, to
exchange all outstanding options for options with an exercise price equal
to the current trading price, or $1.15 per share. Amounts shown for fiscal
year 1999 include 250,000 and 100,000 repriced options for Messrs. Baird
and Perl, respectively.
17
<PAGE>
(2) Mr. Baird joined the Company in June 1997 and served as Chief Operating
Officer from then until February 1998, when he became Chief Executive
Officer.
(3) Mr. Perl joined the Company in June 1998 and served as Chief Operating
Officer from then until February 1999, when he became Chief Operating
Officer and President.
(4) Mr. Weronick joined the Company in March 1999.
OPTION GRANTS TABLE
The following table sets forth information concerning grants of stock
options to the named executive officers during the fiscal year ended July 31,
2000.
<TABLE>
<CAPTION>
% of Total
Shares of Common Options Granted Grant Date
Stock Underlying to Employees in Exercise Price Expiration Present
Executive Officer Stock Options(1) Fiscal Year Per Share(2) Date Value(3)
----------------- ---------------- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jerrell M. Baird........ 36,000 4.62% $11.00 4/17/05 $306,360
David I. Perl........... 36,000 4.62 11.00 4/17/05 306,360
William J. Weronick..... 9,500 1.22 11.00 4/17/05 80,845
</TABLE>
--------
(1) The options were granted under the Prosofttraining.com 1996 Stock Option
Plan for a term of five years, subject to earlier termination in certain
events related to termination of employment. The options vest on the first
anniversary of the grant date. To the extent not already exercisable, the
options generally become exercisable upon a merger or consolidation of the
Company with or into another corporation, or upon the acquisition by
another corporation or person of all or substantially all of the Company's
assets, unless the option is assumed or replaced with a comparable option
by the surviving entity.
(2) All options were granted at fair market value (the last price for the
Company's Common Stock on the day previous to the date of grant as reported
by Nasdaq).
(3) As suggested by the SEC's rules on executive compensation disclosure, the
Company used the Black-Scholes model of option valuation to determine grant
date pre-tax present value. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. The calculation is based on a five year term and upon the following
assumptions: annual dividend growth of 0 percent, volatility of
approximately 100%, and an interest rate of 6%. There can be no assurances
that the amounts reflected in this column will be achieved.
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth information concerning each exercise of stock
options during the fiscal year ended July 31, 2000 by each of the named
executive officers and the fiscal year-end value of unexercised stock options
held by such executive officers as of July 31, 2000.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options at
Shares Options at July 31, 2000 July 31, 2000
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerrell M. Baird........ -- -- 216,666 69,334 $3,054,991 $ 623,009
David I. Perl........... 40,000 $516,400 89,164 131,836 1,257,212 1,504,299
William J. Weronick..... -- -- 25,000 34,500 318,750 359,125
</TABLE>
--------
(1) Value of Unexercised, In-the-Money Options at 7/31/00 is calculated as
follows: [(Per Share Closing Sale Price on 7/31/00, the last trading day of
the fiscal year,)--(Per Share Exercise price)] X Number of Shares Subject
to Unexercised Options. The per share closing price on 7/31/00 was $15.25.
18
<PAGE>
Employment and Termination of Employment Agreements and Change in Control
Arrangements
On February 1, 2000, the Company entered into an employment agreement with
Jerrell M. Baird, its Chief Executive Officer and Chairman. Mr. Baird's
agreement has a term of twenty-four months and provides for a base annual
salary of $200,000. Mr. Baird is entitled to receive an annual bonus, as
determined by the Board of Directors, of up to $80,000 pursuant to certain
stock price performance criteria being achieved. In the event of termination of
Mr. Baird's employment for any reason other than gross negligence or
malfeasance, the Company is obligated to pay an amount equal to his cash
compensation for the previous 12 months, plus acceleration and immediate
vesting of all unvested options. The Company has agreed that if a change of
control of the Company occurs where Mr. Baird is not Chairman and Chief
Executive Officer of the ultimate parent, then a payment shall be made to Mr.
Baird equal to $300,000. In addition, all of Mr. Baird's unvested options shall
vest upon any change of control.
On February 1, 2000, the Company entered into an employment agreement with
David I. Perl, its Chief Operating Officer and President. Mr. Perl's agreement
has a term of twenty-four months and provides for a base salary of $180,000.
Mr. Perl is entitled to receive an annual bonus, as determined by the Board of
Directors, of up to $72,000 pursuant to certain stock price performance
criteria being achieved. In the event of termination of Mr. Perl's employment
for any reason other than gross negligence or malfeasance, the Company is
obligated to pay an amount equal to his cash compensation for the previous 12
months, plus acceleration and immediate vesting of all unvested options. The
Company has agreed that if a change of control of the Company occurs where Mr.
Perl is not President and Chief Operating Officer of the ultimate parent, then
a payment shall be made to Mr. Perl equal to $250,000. In addition, all of Mr.
Perl's unvested options shall vest upon any change of control.
COMPENSATION COMMITTEE REPORT
Overview and Philosophy
The Compensation Committee of the Board of Directors reviews and establishes
compensation strategies and programs to ensure that the Company attracts,
retains, properly compensates, and motivates qualified executives and other key
associates. The Committee consists of three non-employee Directors: Messrs.
McCusker, Holland and Walsh.
The philosophy of the Compensation Committee is (i) to provide competitive
levels of compensation that integrates pay with the individual executive's
performance and the Company's annual and long-term performance goals; (ii) to
motivate key executives to achieve strategic business goals and reward them for
their achievement; (iii) to provide compensation opportunities and benefits
that are comparable to those offered by other companies in the training
industry, thereby allowing the Company to compete for and retain talented
executives who are critical to the Company's long-term success; and (iv) to
align the interests of key executives with the long-term interests of
stockholders and the enhancement of stockholder value through the granting of
stock options. The compensation of the Company's executive officers (other than
Jerrell Baird, the Company's Chairman and Chief Executive Officer, and David
Perl, the Company's President and Chief Operating Officer) is currently
comprised of annual base salary, bonus plan pursuant to certain performance
criteria being achieved, and long-term performance incentives in the form of
stock option grants under the stock option plans.
The Compensation Committee believes that equity compensation aligns
associates' long-term objectives with those of the stockholders in striving to
maximize the Company's value. The Company's Stock Option Plan provides
associates with the opportunity to receive stock options. In determining
whether to grant stock options to executive officers, the Compensation
Committee evaluates each officer's performance, and then recommends awards that
reflect individual performance. Stock options are granted to company associates
after completion of a probationary employment period. Additional options are
awarded to enhance motivation and retention of key associates. Stock options
generally have been granted with a three-year term and an exercise price
equivalent to 100% of the fair market value of the Common Stock on the grant
date.
19
<PAGE>
Chief Executive Officer Compensation
The Compensation Committee set the 2000 annual compensation for the
Company's Chief Executive Officer, Mr. Baird. Mr. Baird's base salary is
$200,000, plus a target annual bonus of $80,000 payable in September of each
year, pursuant to certain stock price performance criteria being achieved. Mr.
Baird received a grant of stock options during the fiscal year 2000 (see Option
Grants Table). Options granted in 2000 vest on the first anniversary from the
grant date. Upon a change in control, all unvested options vest. The
Compensation Committee believes that, under Mr. Baird's management, the Company
continues to effectively accomplish its business plan and goals in addition to
capitalizing upon the rapidly changing global demand for Internet/intranet
training and certification.
By the Compensation Committee:
Charles McCusker
J.R. Holland, Jr.
Dr. Edward Walsh
October 2, 2000
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during the fiscal year
ended July 31, 2000 were Charles McCusker, J.R. Holland, Jr., Jeffrey Korn
(until May 2000) and Dr. Edward Walsh (after May 2000). Each member of the
Compensation Committee during fiscal 2000 was a non-employee director of the
Company while serving on the Committee.
J.R. Holland, Jr., a director of the Company, is President and CEO of Hunt
Capital Management, LLC. In June 2000, the Company sold 2,091,126 shares in a
private placement of common stock to certain investors at $11.00 per share.
Among these investors was Hunt Capital Growth Fund II, L.P., an affiliate of
Hunt Capital Management, LLC.
20
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following chart shows a comparison of the cumulative total return of the
Company's Common Stock, the CRSP Total Return Index for The Nasdaq Stock Market
(U.S. Index) ("NASDAQ Index"), and the weighted average return of a peer group
(described below) for the period commencing on November 27, 1996 and ending on
July 31, 2000. The historical stock performance shown on the chart is not
intended to and may not be indicative of future stock performance.
The peer group consists of companies with technology training operations.
Although the businesses of some of these companies include other operations, or
serve markets different than those of the Company, the Company believes the
selection of these companies for comparison purposes is reasonable.
Included in the peer group for the entire period of comparison are: Wave
Technologies International, Inc., Learn2.com, Inc., Smart Force, Computer
Learning Centers, Inc., Learning Tree International, Inc., ARIS Corporation,
New Horizons Worldwide, Inc., Sylvan Learning Systems, Inc., and Apollo Group,
Inc.
Comparison of Cumulative Total Return from November 27, 1996
through July 31, 2000 (1)
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
July 31, July 31, July 31, July 31, July, 31,
1996 1997 1998 1999 2000
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
ProsoftTraining.com............... $100 $ 55 $ 24 $ 16 $ 84
Peer Group........................ $100 $141 $197 $128 $171
NASDAQ Index...................... $100 $124 $145 $205 $293
</TABLE>
--------
(1) Assumes that $100 was invested on November 27, 1996 in the Company's Common
Stock at $18.25 per shares, the closing price for the Company's Common
Stock on that date, and at the closing price for each Index on that date,
and that all dividends were reinvested. No cash dividends have been
declared on the Company's Common Stock.
21
<PAGE>
CERTAIN TRANSACTIONS
In June 2000, the Company sold 2,091,126 shares in a private placement of
common stock to certain investors at $11.00 per share. Among these investors
was Hunt Capital Growth Fund II, L.P., which owned greater than five percent of
the Company's outstanding Common Stock at that time. J.R. Holland, Jr., a
director of the Company, is President and CEO of Hunt Capital Management, LLC,
an affiliate of Hunt Capital Growth Fund II, L.P.
NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws of the Company require that all nominations for persons to be
elected to the Board of Directors, other than those made by or at the direction
of the Board of Directors, be made pursuant to written notice to the Secretary
of the Company. The notice must be received not less than 35 days prior to the
meeting at which the election will take place (or not later than 10 days after
public disclosure of such meeting date is given or made to stockholders if such
disclosure occurs less than 50 days prior to the date of such meeting). Notice
must set forth the name, age, business address and residence address of each
nominee, their principal occupation or employment, the class and number of
shares of stock which they beneficially own, their citizenship and any other
information that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the Securities Exchange Act of 1934, as
amended. The notice must also include the nominating stockholder's name and
address as they appear on the Company's books and the class and number of
shares of stock beneficially owned by such stockholder.
In addition, the Bylaws require that for business to be properly brought
before an annual meeting by a stockholder, the Secretary of the Company must
have received written notice thereof (i) in the case of an annual meeting that
is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not less than 120 days in
advance of the anniversary date of the Company's proxy statement for the
previous year's annual meeting, nor more than 150 days prior to such
anniversary date and (ii) in the case of an annual meeting that is called for a
date that is not within 30 days before or after the anniversary date of the
immediately preceding annual meeting, not later than the close of business on
the 10th day following the day on which notice of the date of the meeting was
mailed or public disclosure of the date of the meeting was made, whichever
occurs first. The notice must set forth the name and address of the stockholder
who intends to bring business before the meeting, the general nature of the
business which he or she seeks to bring before the meeting and a representation
that the stockholder is a holder of record of shares entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to bring the
business specified in the notice before the meeting.
Any proposal of a stockholder intended to be presented at the Company's 2001
Annual Meeting of Stockholders and included in the proxy statement and form of
proxy for that meeting is required to be received by the Company no later than
June 14, 2001. Management proxies will have discretionary voting authority as
to any proposal not received by that date if it is raised at that annual
meeting, without any discussion of the matter in the proxy statement.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal year ended July 31, 2000 accompanies this Proxy Statement. THE COMPANY
WILL SEND A STOCKHOLDER UPON REQUEST, WITHOUT CHARGE, A COPY OF THE ANNUAL
REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED JULY 31, 2000,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE COMPANY HAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REQUEST MUST BE DIRECTED
TO THE ATTENTION OF CORPORATE SECRETARY, AT THE ADDRESS OF THE COMPANY SET
FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT.
22
<PAGE>
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter that will be acted upon at the Annual
Meeting. If any other matter is presented properly for action at the Annual
Meeting or at any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
ProsoftTraining.com
/s/ JERRELL M. BAIRD
Jerrell M. Baird
Chairman of the Board
Austin, Texas
October 16, 2000
23
<PAGE>
APPENDIX A
PROSOFTTRAINING.COM
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
1. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Prosofttraining.com, a Nevada corporation, by providing eligible employees
with the opportunity to acquire a proprietary interest in the Corporation
through participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
2. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
3. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall be limited to One Hundred
Thousand (100,000) shares.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2001, by
an amount equal to one-half percent (.5%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
One Hundred Fifty Thousand (150,000) shares.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable by all Participants in the aggregate on any one Purchase
Date, (iv) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year pursuant to the
provisions of Section 3.B above and (v) the number and class of securities and
the price per share in effect under each outstanding purchase right in order to
prevent the dilution or enlargement of benefits thereunder.
<PAGE>
4. PURCHASE PERIODS
Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive Purchase Periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
5. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any Purchase Period under the Plan may enter that Purchase Period on such start
date.
B. To participate in the Plan for a particular Purchase Period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) in advance of that Purchase Period and in accordance with such terms
and conditions as the Plan Administrator may impose.
6. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during a Purchase Period may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during the
Purchase Period, up to a maximum of fifteen percent (15%). The deduction rate so
authorized shall continue in effect, except to the extent such rate is changed
in accordance with the following guidelines:
(i) The Participant may, at any time during the Purchase Period,
reduce his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
Purchase Period.
(ii) The Participant may, prior to the commencement of any new
Purchase Period, increase the rate of his or her payroll deduction by
filing the appropriate form with the Plan Administrator. The new rate
(which may not exceed the fifteen percent (15%) maximum) shall become
effective on the start date of the first Purchase Period following the
filing of such form.
B. Payroll deductions shall begin on the first pay day
administratively feasible following the beginning of the Purchase Period and
shall (unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that Purchase Period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
<PAGE>
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date.
7. PURCHASE RIGHTS
A. Grant of Purchase Right. A Participant shall be granted a
-----------------------
separate purchase right for each Purchase Period in which he or she
participates. The purchase right shall be granted on the first business day of
the Purchase Period and shall provide the Participant with the right to purchase
shares of Common Stock upon the terms set forth below. The Participant shall
execute a stock purchase agreement embodying such terms and such other
provisions (not inconsistent with the Plan) as the Plan Administrator may deem
advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised on each successive Purchase Date, and shares of Common
Stock shall accordingly be purchased on behalf of each Participant on each such
Purchase Date. The purchase shall be effected by applying the Participant's
payroll deductions for the Purchase Period ending on such Purchase Date to the
purchase of whole shares of Common Stock at the purchase price in effect for the
Participant for that Purchase Date.
C. Purchase Price. The purchase price per share at which Common
--------------
Stock will be purchased on the Participant's behalf on each Purchase Date shall
be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value
-----
per share of Common Stock on the first business day of the Purchase Period or
(ii) the Fair Market Value per share of Common Stock on that Purchase Date.
D. Number of Purchasable Shares. The number of shares of Common
----------------------------
Stock purchasable by a Participant on each Purchase Date shall be the number of
whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during the Purchase Period ending with that Purchase
Date by the purchase price in effect for the Participant for that Purchase Date.
However, the maximum number of shares of Common Stock purchasable per
Participant on any one Purchase Date shall not exceed 1,000 shares, subject to
periodic adjustments in the event of certain changes in the Corporation's
capitalization. In addition, the maximum number of shares of Common Stock
purchasable in the aggregate by all Participants on any one Purchase Date shall
not exceed 100,000 shares, subject to periodic adjustments in the event of
certain changes in the Corporation's capitalization. However, the Plan
Administrator shall have the discretionary authority, exercisable prior to the
start of any Purchase Period under the Plan, to increase or decrease the
limitations to be in effect for the number of shares purchasable per Participant
and in the aggregate by all Participants on each Purchase Date.
<PAGE>
E. Excess Payroll Deductions. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.
F. Termination of Purchase Right. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date, terminate his or her outstanding purchase right by filing
the appropriate form with the Plan Administrator (or its designate), and no
further payroll deductions shall be collected from the Participant with
respect to the terminated purchase right. Any payroll deductions collected
during the Purchase Period in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the purchase of
shares on the next Purchase Date. If no such election is made at the time
such purchase right is terminated, then the payroll deductions collected
with respect to the terminated right shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the Purchase Period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent Purchase Period, such individual must re-
enroll in the Plan (by making a timely filing of the prescribed enrollment
forms).
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Period in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business
day of the Purchase Period in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for that
Purchase Period or (b) have such funds held for the purchase of shares on
his or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return to
active service (x) within ninety (90) days following the commencement of
such leave or (y) prior to the expiration of any longer period for which
such Participant's right to reemployment with the Corporation is guaranteed
by statute or contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began,
unless the Participant withdraws from the Plan prior to his or her return.
An individual who returns to active employment following a leave of absence
which exceeds in duration the applicable (x) or (y) time period will be
treated as a new Employee for purposes of subsequent participation in the
Plan and must accordingly re-enroll in the Plan (by making a timely filing
of the prescribed enrollment forms).
<PAGE>
G. Change in Control. Each outstanding purchase right shall
-----------------
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Period in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
-----
Stock on the first business day of the Purchase Period in which such Change in
Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate by all participants.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. Proration of Purchase Rights. Should the total number of shares
----------------------------
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. The purchase right shall be exercisable only by
-------------
the Participant and shall not be assignable or transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder
------------------
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
8. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000.00) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
<PAGE>
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue on each successive Purchase Date on which such
right remains outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one or more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000.00) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Period, then the payroll
deductions which the Participant made during that Purchase Period with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Section and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Section shall be controlling.
9. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on September 20, 2000 and shall
become effective at the Effective Time, provided no purchase rights granted
--------
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial Purchase Period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in December 2010, (ii) the date
--------
on which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Change in Control. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
10. AMENDMENT OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase Period.
In addition, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to
<PAGE>
assure that the Corporation will not recognize, for financial reporting
purposes, any compensation expense in connection with the shares of Common Stock
offered for purchase under the Plan, should the financial accounting rules
applicable to the Plan at the Effective Time be subsequently revised so as to
require the Corporation's recognition of compensation expense in the absence of
such amendment or termination.
B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.
11. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Texas without resort to that State's conflict-of-laws rules.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Base Salary shall mean the regular base salary paid to a
-----------
Participant by one or more Participating Companies during such individual's
period of participation in one or more Purchase Periods under the Plan. Base
Salary shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any and all contributions made by the Participant to any
Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. Base Salary shall not include (i) any overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive-type payments
received during the period of participation in the Plan and (ii) any
contributions made on the Participant's behalf by the Corporation or any
Corporate Affiliate to any employee benefit or welfare plan now or hereafter
established (other than Code Section 401(k) or Code Section 125 contributions
deducted from Base Salary).
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership of the
-----------------
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly by an person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Affiliate shall mean any parent or subsidiary
-------------------
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
<PAGE>
G. Corporation shall mean Prosofttraining.com, a Nevada corporation,
-----------
and any corporate successor to all or substantially all of the assets or voting
stock of Prosofttraining.com which shall by appropriate action adopt the Plan.
H. Effective Time shall mean January 1, 2001. Any Corporate
--------------
Affiliate which becomes a Participating Corporation after such Effective Time
shall designate a subsequent Effective Time with respect to its employee-
Participants.
I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
K. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
L. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
M. Participating Corporation shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
<PAGE>
N. Plan shall mean the Corporation's Employee Stock Purchase Plan,
----
as set forth in this document.
O. Plan Administrator shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.
P. Purchase Date shall mean the last business day of each Purchase
-------------
Period. The initial Purchase Date shall be June 29, 2001.
Q. Purchase Period shall mean each successive approximate six (6)-
---------------
month period, beginning on the first business day in each of January and July
and ending on the last business day in each of June and December of each year,
at the end of which there shall be purchased shares of Common Stock on behalf of
each Participant.
R. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
<PAGE>
Schedule A
----------
Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------
None
<PAGE>
APPENDIX B
PROSOFTTRAINING.COM
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
1.1 PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
Prosofttraining.com, a Nevada corporation, by providing eligible persons in the
Corporation's service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
1.2 ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Plan with respect to Section 16 Insiders. Administration of the
Plan with respect to all other persons eligible to participate may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee,
or the Board may retain the power to administer the Plan with respect to all
such persons. However, any discretionary option grants for members of the
Primary Committee shall be made by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the provisions of the
Plan and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan or any grants thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.
<PAGE>
1.3 ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of
any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
with respect to the option grants under the Plan, which eligible persons are to
receive such grants, the time or times when those grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding.
C. The Plan Administrator shall have the absolute discretion to grant
options in accordance with the Plan.
1.4 STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall not exceed 4,731,695
shares. Such reserve shall consist of (i) the number of shares estimated to
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plans, including the shares subject to outstanding options under
those Predecessor Plans, (ii) plus an additional increase of approximately
2,000,000 shares to be approved by the Corporation's stockholders in connection
with the adoption of this Plan.
B. No one person participating in the Plan may receive options for
more than 200,000 shares of Common Stock in the aggregate per calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently canceled or repurchased by the
Corporation at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, should the exercise price of an option under
<PAGE>
the Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock issued
to the holder of such option.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted stock options under the Plan per
calendar year, (iii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option under the Plan, and (iv)
the number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANTS
2.1 OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date. The Plan
Administrator may not reset the exercise price of outstanding options and may
not grant new options in exchange for the cancellation of outstanding options
with a higher exercise price.
2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section 3.1 of Article
Three and the documents evidencing the option, be payable in one or more of the
forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide
<PAGE>
irrevocable instructions to (a) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the Corporation
to deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such period of
time thereafter as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.
(ii) Any option held by the Optionee at the time of death and
exercisable in whole or in part at that time may be subsequently exercised by
the personal representative of the Optionee's estate or by the person or persons
to whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the Optionee's designated beneficiary or beneficiaries of that
option.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
<PAGE>
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable post-
Service exercise period, not only with respect to the number of vested shares of
Common Stock for which such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
2.2 INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section 2.2, all the
provisions of Articles One, Two and Three
<PAGE>
shall be applicable to Incentive Options. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to the terms of this Section 2.2.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
2.3 CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
the total number of shares of Common Stock at the time subject to such option
and may be exercised for any or all of those shares as fully vested shares of
Common Stock. However, an outstanding option shall NOT become exercisable on
such an accelerated basis if and to the extent: (i) such option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the
<PAGE>
number and class of securities which would have been issuable to the Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction. Appropriate adjustments to
reflect such Corporate Transaction shall also be made to (i) the exercise price
payable per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same, (ii) the maximum number
and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one
person may be granted stock options under the Plan per calendar year.
E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Plan so that those options
shall, immediately prior to the effective date of such Corporate Transaction,
become fully exercisable for the total number of shares of Common Stock at the
time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock, whether or not those options are
to be assumed in the Corporate Transaction. In addition, the Plan Administrator
shall have the discretionary authority to structure one or more of the
Corporation's repurchase rights under the Plan so that those rights shall not be
assignable in connection with such Corporate Transaction and shall accordingly
terminate upon the consummation of such Corporate Transaction, and the shares
subject to those terminated rights shall thereupon vest in full.
F. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Nonstatutory Option under the
Federal tax laws.
G. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
ARTICLE THREE
MISCELLANEOUS
3.1 FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price under the Plan by delivering a full-recourse, interest bearing
promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion. In no event may
the maximum credit available to the Optionee exceed the sum of (i) the aggregate
option exercise price (less the par value of those shares) plus (ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee in connection with the option exercise.
<PAGE>
3.2 TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their
options. Such right may be provided to any such holder in either or both of the
following formats:
Stock Withholding: The election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such Non-
Statutory Option, a portion of those shares with an aggregate Fair Market Value
equal to the percentage of the Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised, one or more shares of Common Stock
previously acquired by such holder (other than in connection with the option
exercise or share vesting triggering the Withholding Taxes) with an aggregate
Fair Market Value equal to the percentage of the Withholding Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
3.3 EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon stockholder
approval of the Plan. Options may be granted under the Plan at any time on or
after such stockholder approval.
B. The Plan shall serve as the successor to each of the Predecessor
Plans, and no further option grants shall be made under the Predecessor Plans
after stockholder approval of the Plan. All options outstanding under the
Predecessor Plans upon stockholder approval of the Plan shall be incorporated
into the Plan at that time and shall be treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Corporate
Transactions, may, in the Plan Administrator's discretion, be extended to one or
more options incorporated from the Predecessor Plans which do not otherwise
contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i) November
28, 2010, (ii) the date on which all shares available for issuance under the
Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Should the
Plan terminate on November 28, 2010, then all option
<PAGE>
grants and unvested stock issuances outstanding at that time shall continue to
have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.
3.4 AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall (i) adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee consents to such amendment or modification or (ii)
unless approved by the stockholders, permit the Plan Administrator to reset the
exercise price of outstanding options or grant new options in exchange for the
cancellation of outstanding options with a higher exercise price. In addition,
certain other amendments may require stockholder approval pursuant to applicable
laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Plan that are in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued shall be held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees the exercise price paid for any excess shares issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow, and such shares
shall thereupon be automatically cancelled and cease to be outstanding.
3.5 USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
3.6 REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock upon the exercise
of any granted option shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the shares of Common Stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
<PAGE>
3.7 NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
E. CORPORATION shall mean Prosofttraining.com, a Nevada corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Prosofttraining.com which shall by appropriate action adopt the Plan.
F. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
G. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
H. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National Market. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any stock
exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the stock exchange determined
by the Plan Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the
<PAGE>
date in question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
stock exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate.
I. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
J. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
K. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
L. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
M. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
N. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
P. PLAN shall mean the Corporation's 2000 Stock Incentive Plan, as set
forth in this document.
Q. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Plan with respect to one or more classes of eligible persons, to
the extent such entity is carrying out its administrative functions with respect
to the persons under its jurisdiction.
R. PLAN EFFECTIVE DATE shall mean November 28, 2000.
<PAGE>
S. PREDECESSOR PLANS shall mean the Corporation's (i) 1996 Stock
Option Plan and (ii) the 2000 Stock Option Plan, as each of those plans is in
effect immediately prior to the Plan Effective Date hereunder.
T. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.
U. SECONDARY COMMITTEE shall mean a committee of one or more Board
members appointed by the Board to administer the Plan with respect to eligible
persons other than Section 16 Insiders.
V. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
W. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
X. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Y. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
Z. WITHHOLDING TAXES shall mean the Federal, state and local income
and employment withholding taxes to which the holder of Non-Statutory Options
may become subject in connection with the exercise of those options.
<PAGE>
ProsoftTraining.com
3001 Bee Caves Rd., Suite 300
Austin, Texas 78746
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints each of
Jerrell M. Baird and Jeffrey G. Korn, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of
ProsoftTraining.com which the undersigned is entitled to represent and vote at
the Annual Meeting of Stockholders of the Company to be held at the Company's
headquarters at 3001 Bee Caves Road, Suite 300, Austin, Texas on November 28,
2000, at 2:00 p.m., and at any and all adjournments or postponements thereof, as
fully as if the undersigned were present and voting at the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5.
<TABLE>
<CAPTION>
<S> <C>
1. Election of Directors:
[ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY to vote for nominees listed below
Jerrell M. Baird
J. William Fuller
</TABLE>
INSTRUCTION: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below.
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2. Approval of the Company's Employee Stock Purchase Plan described in the
accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the Company's 2000 Stock Incentive Plan described in the
accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of an amendment to the Company's Amended and Restated Articles of
Incorporation to increase the total authorized shares of Common Stock of the
Company from 50,000,000 to 75,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Ratification of the appointment of Grant Thornton LLP as independent
auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
<PAGE>
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3, PROPOSAL 4 AND PROPOSAL 5.
IMPORTANT - PLEASE SIGN, DATE AND RETURN PROMPTLY
DATED: __________________________2000
_____________________________________
(Signature)
Please sign exactly as name appears hereon.
Executors, administrators, guardians, officers of
corporations and others signing in a fiduciary capacity
should state their full titles as such.
PLEASE SIGN THIS CARD AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE. IF YOUR
ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN THIS PROXY, WHICH MAY BE
REVOKED AT ANY TIME PRIOR TO ITS USE.
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