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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
[_] Definitive Additional Materials Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
ASYMETRIX LEARNING SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF ASYMETRIX CORPORATION]
April 22, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
(the "Meeting") of Asymetrix Learning Systems, Inc. ("Asymetrix") to be held
at Asymetrix's headquarters, 110 110th Avenue NE, Bellevue, Washington, on
Tuesday, May 25, 1999, at 10:00 a.m., Pacific Daylight Time. The matters
expected to be acted upon at the Meeting include the following: (1) the
election of Class I Directors, (2) the amendment of Asymetrix's 1998 Equity
Incentive Plan, (3) the approval of Asymetrix's 1999 Employee Stock Purchase
Plan and (4) the ratification of KPMG LLP as Asymetrix's independent
accountants for 1999. Each of these proposals is described in detail in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Please use this opportunity to take part in Asymetrix's affairs by voting on
the business to come before this Meeting. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. Returning the proxy does not
deprive you of your right to attend the Meeting and to vote your shares in
person. If you do plan to attend the Meeting in person, please mark the
appropriate box on the enclosed proxy so that we can plan appropriately for
the Meeting.
We hope to see you at the Meeting.
Sincerely,
/s/ James A. Billmaier
------------------------------
James A. Billmaier
Chief Executive Officer
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
110 - 110th Avenue NE
Bellevue, Washington 98004
----------------
Notice of 1999 Annual Meeting of Stockholders
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of Asymetrix Learning Systems, Inc. ("Asymetrix") will be held at
Asymetrix's headquarters, 110 - 110th Avenue NE, Bellevue, Washington on
Tuesday, May 25, 1999, at 10:00 a.m. Pacific Daylight Time.
At the Meeting, you will be asked to consider and vote upon the following
matters:
1. The election of two Class I directors of Asymetrix, each to serve until
the Annual Meeting of Stockholders held in 2002, and until his or her
successor has been elected and qualified or until his or her earlier
resignation, death or removal. Asymetrix's Board of Directors intends to
present the following nominees for election as directors:
Sally Narodick
Joseph DiNucci
2. A proposal to approve an amendment of Asymetrix's 1998 Equity Incentive
Plan to increase the number of shares of common stock reserved for issuance
thereunder from 1,500,000 shares to 2,500,000 shares.
3. A proposal to approve Asymetrix's 1999 Employee Stock Purchase Plan as
adopted by the Board of Directors.
4. A proposal to ratify the selection of KPMG LLP as Asymetrix's
independent accountants for 1999.
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close
of business on April 1, 1999 are entitled to notice of and to vote at the
meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ James A. Billmaier
----------------------------
James A. Billmaier
Chief Executive Officer
Bellevue, Washington
April 22, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
110 - 110th Avenue NE
Bellevue, Washington 98004
----------------
PROXY STATEMENT
----------------
April 22, 1999
The accompanying proxy is solicited on behalf of the Board of Directors of
Asymetrix Learning Systems, Inc. ("Asymetrix"), a Delaware corporation, for
use at the 1999 Annual Meeting of Stockholders of Asymetrix to be held at the
company's headquarters, 110 - 110th Avenue NE, Bellevue, Washington 98004, on
Tuesday, May 25, 1999, at 10:00 a.m., Pacific Daylight Time (the "Meeting").
This Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about April 22, 1999. An annual report for the year ended
December 31, 1998 is enclosed with this Proxy Statement.
Record Date; Quorum
Only holders of record of Asymetrix's common stock at the close of business
on April 1, 1999 (the "Record Date") are entitled to vote at the Meeting. A
majority of the shares outstanding on the Record Date will constitute a quorum
for the transaction of business at the Meeting.
Outstanding Shares
At the close of business on the Record Date, Asymetrix had 13,990,906 shares
of common stock outstanding and entitled to vote that were held of record by
approximately 315 stockholders. Asymetrix has been informed that there are
approximately 2,800 beneficial owners of its common stock.
Voting Rights; Required Vote
Holders of Asymetrix's common stock are entitled to one vote for each share
held as of the Record Date. Shares of common stock may not be voted
cumulatively. In the event that a broker, bank, custodian, nominee or other
record holder of Asymetrix common stock indicates on a proxy that it does not
have discretionary authority to vote certain shares on a particular matter (a
"broker non-vote"), then those shares will not be considered present and
entitled to vote with respect to that matter, although they will be counted in
determining whether or not a quorum is present at the Meeting.
With respect to Proposal 1, the Class I directors will be elected by a
plurality of the votes of the shares of common stock present in person or
represented by proxy at the Meeting and entitled to vote on the election of
directors. Broker non-votes and abstentions will have no effect on the
election of directors.
Approval of Proposals 2, 3 and 4 requires the affirmative vote of a majority
of shares of common stock present in person or represented by proxy at the
Meeting that are voted "for", "against" or "abstain" on the proposal. Broker
non-votes will not be counted as a vote "for", "against" or "abstain" on
Proposals 2, 3 and 4.
All votes will be tabulated by the inspector of elections appointed for the
Meeting, who will separately tabulate affirmative votes, negative votes,
abstentions and broker non-votes on each proposal.
Voting of Proxies
The proxy accompanying this Proxy Statement is solicited on behalf of the
Asymetrix Board of Directors (the "Board") for use at the Meeting and any
adjournment thereof. Stockholders are requested to complete, date
<PAGE>
and sign the accompanying proxy card and promptly return it in the enclosed
envelope or otherwise mail it to Asymetrix. All executed, returned proxies
that are not revoked will be voted in accordance with the instructions
contained therein. Returned signed proxies that give no instructions as to how
they should be voted on a particular proposal at the Meeting will be counted
as votes "for" such proposal (or, in the case of the election of directors, as
a vote "for" election to the Board of all the nominees presented by the
Board). So far as is known to the Board, no other matters are to be brought
before the Meeting. However, as to any business that may properly come before
the Meeting, it is intended that proxies in the form enclosed will be voted in
accordance with the judgment of the persons holding such proxies.
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy
at the Meeting.
The expenses of soliciting proxies in the enclosed form will be paid by
Asymetrix. Following the original mailing of the proxies and other soliciting
materials, Asymetrix will request brokers, custodians, nominees and other
record holders to forward copies of the proxy and other soliciting materials
to persons for whom they hold shares of common stock and to request authority
for the exercise of proxies. In such cases, Asymetrix, upon the request of the
record holders, will reimburse such holders for their reasonable expenses.
Proxies may also be solicited by Asymetrix's directors, officers and regular
employees, without additional compensation, in person or by telephone.
Revocability of Proxies
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by written notice delivered
to Asymetrix stating that the proxy is revoked, by a subsequent proxy that is
signed by the person who signed the earlier proxy and is presented at the
Meeting, or by attendance at the Meeting and voting in person. Please note
that if a stockholder's shares are held of record by a broker, bank or other
nominee and that stockholder wishes to vote at the Meeting, the stockholder
must bring to the Meeting a letter from the broker, bank or other nominee
confirming such stockholder's beneficial ownership of the shares and that such
broker, bank or other nominee is not voting such shares.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The size of the Board is currently fixed at seven members. Asymetrix's
Certificate of Incorporation and Bylaws divide the Board into three classes.
The members of each class of directors serve for staggered three-year terms.
Paul Allen and Gary Rieschel are Class I directors whose terms expire at this
Annual Meeting of Stockholders. Neither Mr. Allen nor Mr. Rieschel is standing
for re-election to the Board. Sally Narodick and Joseph DiNucci are nominees
for election as Class I directors of Asymetrix. The Board is also composed of
three Class II directors (Ronald S. Posner, Kevin Oakes and Dr. Shelley
Harrison) whose terms expire upon the election and qualification of directors
at the Annual Meeting of Stockholders to be held in 2000, and two Class III
directors (James A. Billmaier and Bert Kolde) whose terms expire upon the
election and qualification of directors at the Annual Meeting of Stockholders
to be held in 2001.
Mr. Allen is the founder of Asymetrix and has served as a director since the
inception of Asymetrix in December 1984. Mr. Allen has decided not to serve on
the board of directors of any publicly-traded company other than Microsoft
Corporation, of which he is a co-founder. Although Mr. Allen will not stand
for re-election to the Board, Asymetrix expects that as its largest
stockholder and chief technical advisor he will remain involved with Asymetrix
in the future, continuing to contribute in many of the same ways he had while
he was a member of the Board. There has been no disagreement between Asymetrix
and Mr. Allen on any matter relating to Asymetrix's operations, policies or
practices.
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Mr. Rieschel is a Senior Vice President of SOFTBANK Holdings, Inc. and has
served as a director since October 1996, when SOFTBANK made an investment in
Asymetrix. Mr. Rieschel was elected to the Board in connection with its
investment in Asymetrix, and his right to continue as a director expired upon
completion of Asymetrix's initial public offering. It is SOFTBANK's policy
that its representatives not serve on the boards of directors of its portfolio
companies following such companies' public offerings, and as a result Mr.
Rieschel will not stand for re-election. There has been no disagreement
between Asymetrix and Mr. Rieschel on any matter relating to Asymetrix's
operations, policies or practices.
To fill the Board positions previously held by Mr. Allen and Mr. Rieschel,
the Board has nominated and recommends that Sally Narodick and Joseph DiNucci
be elected as Class I directors, to hold office until the Annual Meeting of
Stockholders to be held in the year 2002 or until their successors have been
duly elected and qualified or until their earlier resignation or removal.
Shares represented by the accompanying proxy will be voted "for" the election
of the nominees recommended by the Board unless the proxy is marked in such a
manner as to withhold authority so to vote. If any nominee for any reason is
unable to serve, the proxies may be voted for such substitute nominee as the
proxy holder may determine. Asymetrix is not aware of any nominee who is
unable or unwilling to serve as a director. Class I directors will be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the Meeting and entitled to vote in the election of directors. The
nominees for election as Class I directors who receive the greatest number of
votes cast for the election of directors at the Meeting with a quorum being
present will become directors at the conclusion of the tabulation of votes.
Nominees and Directors
The following table sets forth the nominees for Class I directors
recommended to be elected at the Meeting and each director whose term of
office will extend beyond or expire at the Meeting, the year such nominee or
director was first elected a director, the principal positions held by the
nominees and each director with Asymetrix, the year each nominee's or
director's term will expire, the class of each nominee and each director, and
certain additional biographical information regarding the two nominees:
<TABLE>
<CAPTION>
Director Term
Name of Nominee or Director Age Position with Asymetrix Since Class Expires
--------------------------- --- ----------------------- -------- ----- -------
<C> <C> <S> <C> <C> <C>
Nominees:
Sally Narodick............... 53 None -- I 2002
Joseph DiNucci............... 56 Senior Vice President, -- I 2002
Worldwide Sales
Continuing Directors:
Kevin Oakes.................. 35 President; General 1997 II 2000
Manager, Learning
Services and Director
Shelley Harrison, Ph.D. (2).. 56 Director 1997 II 2000
Ronald S. Posner (1)......... 56 Director 1998 II 2000
Bert Kolde (1)(2)............ 43 Chairman of the Board 1984 III 2001
James A. Billmaier........... 43 Chief Executive Officer 1995 III 2001
and Director
Non-continuing Directors:
Paul G. Allen................ 46 Director 1984 I 1999
Gary Rieschel (2)............ 42 Director 1996 I 1999
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Ms. Narodick has been President and CEO of APEX Online Learning, Inc., which
provides online distance learning courses to high achieving high school
students, since October 1998. Before joining APEX Online Learning, she was an
independent consultant on educational technology. Prior to that, she was
Chairman and
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CEO of Edmark Corporation, a publicly held educational software company, from
1989 until Edmark was sold to IBM in December 1996. From December 1996 through
March 1998 she served as an educational technology consultant to the Consumer
Software Division of IBM. Ms. Narodick is on the boards of Penford
Corporation, a publicly held specialty chemical company; Puget Sound Energy, a
publicly held gas and electric utility; and APEX Online Learning.
Mr. DiNucci has been Asymetrix's Senior Vice President, Worldwide Sales
since October 1998. Prior to joining Asymetrix, Mr. DiNucci, was the Vice
President of Business Development for E.piphany, Inc., which markets
enterprise relationship management systems, where he recruited the initial
sales force and first customers. Previously, Mr. DiNucci spent five years at
Silicon Graphics, a graphics workstation company, as Vice President of
Marketing. Prior to that Mr. DiNucci was the Senior Vice President and General
Manager of MIPS Computer Systems, where he ran the systems business. Prior to
MIPS, Mr. DiNucci spent seventeen years at Digital Equipment Company, where he
held a variety of positions, including general manager of DEC's workstation
business. Mr. DiNucci is also on the boards of Rand Technologies, a company in
Toronto, Ontario and Realax, a company in Frankfurt, Germany.
Additional biographical information regarding Asymetrix's continuing
directors and the Class I directors whose terms will expire at the Meeting and
who will not stand for re-election is available at page 14 of this Proxy
Statement under "Directors and Executive Officers of Asymetrix."
Board of Directors Meetings and Committees
Board of Directors. During 1998, the Board met four times, including
telephone conference meetings, and acted by unanimous written consent nine
times (including meetings and actions by written consent of Asymetrix's
Washington predecessor). No director attended fewer than 75% of the aggregate
of the number of meetings of the Board (held during the part of 1998 for which
he was a director) and the number of meetings held by all committees of the
Board on which such director served (during the part of 1998 that such
director served), except for Paul Allen who attended 25% of the aggregate of
such meetings, but who participated in all actions taken by written consent.
Standing committees of the Board include an Audit Committee and a Compensation
Committee. The Board does not have a nominating committee or a committee
performing similar functions.
Audit Committee. Mr. Kolde, Dr. Harrison and Mr. Rieschel are the current
members of the Audit Committee. The Audit Committee was established in
connection with Asymetrix's initial public offering in June 1998. The Audit
Committee will meet with Asymetrix's independent accountants to review the
adequacy of Asymetrix's internal control systems and financial reporting
procedures; review the general scope of Asymetrix's annual audit and the fees
charged by the independent accountants; review and monitor the performance of
non-audit services by Asymetrix's auditors; review the fairness of any
proposed transaction between Asymetrix and any officer, director or other
affiliate of Asymetrix (other than transactions subject to the review of the
Compensation Committee), and after such review, make recommendations to the
full Board; and perform such further functions as may be required by any stock
exchange or over-the-counter market upon which Asymetrix's common stock may be
listed. The Audit Committee did not meet during 1998.
Compensation Committee. Prior to Asymetrix's initial public offering, it did
not have a Compensation Committee and all compensation decisions with respect
to executive officers, other than grants of stock options, were made by the
full Board or the Chief Executive Officer. Between October 1997 and June 1998,
grants of stock options were made by Asymetrix's Stock Option Plan
Administration Committee, which was comprised of Mr. Billmaier and Mr. Kolde.
During 1998 the Stock Option Administration Committee acted by written consent
four times. Neither Mr. Billmaier nor Mr. Oakes has participated in Board
deliberations regarding his respective compensation, and the Stock Option Plan
Administration Committee has not granted any options to its members.
In June 1998, the Board established a Compensation Committee to review and
approve the compensation and benefits for Asymetrix's executive officers,
administer Asymetrix's stock option, stock purchase and equity incentive plans
and make recommendations to the Board regarding such matters. The Compensation
Committee
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is currently comprised of Mr. Kolde and Mr. Posner. Mr. Kolde and Mr. Posner
are both "non-employee directors" as defined in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
"outside directors" as defined pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). During 1998 the Compensation
Committee met twice (in conjunction with meetings of the full Board) and acted
by written consent twice. Mr. Kolde was an executive officer of Asymetrix from
December 1984 until November 1994. No interlocking relationship exists between
the Board or Compensation Committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
Director Compensation
Directors do not receive any cash fees for their service on the Board or any
Board committee, but they are entitled to reimbursement of all reasonable out-
of-pocket expenses incurred in connection with their attendance at Board and
Board committee meetings. In July 1995, Asymetrix granted to Mr. Allen and Mr.
Kolde options to purchase 75,000 shares and 90,000 shares, respectively, of
its common stock under its 1995 Plan, each with an exercise price per share of
$1.55.
In May 1998 the stockholders approved the 1998 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 187,500 shares of the common
stock for issuance thereunder. Members of the Board who are not employees of
Asymetrix or any parent, subsidiary or affiliate of Asymetrix are eligible to
participate in the Directors Plan. Option grants under the Directors Plan are
automatic and nondiscretionary, and the exercise price of such options is the
fair market value of the common stock on the date of grant. Under the
Directors Plan, Mr. Allen, Mr. Kolde, Mr. Rieschel and Dr. Harrison were each
granted an initial option to purchase 7,500 shares on June 11, 1998, the
effective date of the Directors Plan. Mr. Posner was granted an initial option
to purchase 7,500 shares on September 2, 1998, the date he first became a
director. Any other eligible director joining the Board will receive an
initial grant of 7,500 shares on the date he or she first becomes a director.
The per share exercise price for such options is the fair market value of a
share of Asymetrix common stock on the grant date.
On each anniversary of the initial grant to such director, each eligible
director will automatically be granted an additional option to purchase 7,500
shares if such director has served continuously as a member of the Board since
the date of the initial grant. The term of these options is ten years, but
they will terminate seven months following the date such director ceases to be
a member of the Board or a consultant to Asymetrix or twelve months if the
termination is due to death or disability. All options granted under the
Directors Plan will vest as to 2.77% of the shares each month after the date
of grant for so long as the recipient continues as a director or a consultant
of Asymetrix. Additionally, immediately prior to the dissolution or
liquidation of Asymetrix or a "change in control" transaction, all options
granted pursuant to the Directors Plan will accelerate and will be exercisable
for a period of up to six months following the transaction, after which any
unexercised options will expire.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES NAMED ABOVE.
PROPOSAL NO. 2--AMENDMENT OF 1998 EQUITY INCENTIVE PLAN
Stockholders are being asked to approve an amendment of Asymetrix's 1998
Equity Incentive Plan (the "Incentive Plan") to increase the number of shares
of common stock reserved for issuance thereunder from 1,500,000 shares to
2,500,000 shares. Due to a number of factors, the number of options granted by
Asymetrix since the Incentive Plan was adopted was larger than Asymetrix
expects would typically be the case for a similar nine-month period, and has
significantly depleted the number of options available for grant to new or
continuing employees. The reasons for the large number of grants include: (1)
the acquisition of Meliora Systems, Inc. ("Meliora") and the grant of options
to all employees of Meliora in connection with the acquisition; (2) the grant
of significant options in connection with the hiring of a new Senior Vice
President, Worldwide Sales as
5
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well as several regional sales Vice Presidents and significant sales staff;
and (3) the grant of additional options in order to provide ongoing equity
incentives to key employees whose original stock option grants are becoming
fully vested.
The Board believes that the increase in the number of shares reserved for
issuance under the Incentive Plan is in the best interests of Asymetrix
because of the continuing need to provide stock options to attract and retain
quality employees and remain competitive in the industry. The granting of
equity incentives under the Incentive Plan plays an important role in
Asymetrix's efforts to attract and retain employees of outstanding ability.
Competition for skilled engineers and other key employees in the software
industry is intense and the use of significant stock options for retention and
motivation of such personnel is pervasive in the high technology industries.
The Board believes that the additional reserve of shares with respect to which
equity incentives may be granted will provide Asymetrix with adequate
flexibility to ensure that Asymetrix can continue to meet those goals and
facilitate Asymetrix's expansion of its employee base.
The Board approved the proposed amendment on March 24, 1999, to be effective
upon stockholder approval. Below is a summary of the principal provisions of
the Incentive Plan. The summary is not necessarily complete, and reference is
made to the full text of the Incentive Plan.
Summary of the 1998 Equity Incentive Plan
Incentive Plan History
In December 1997 the Board adopted and in May 1998 Asymetrix's stockholders
approved the Incentive Plan and reserved 1,500,000 shares of common stock for
issuance thereunder (following the 3-for-4 reverse split of Asymetrix's common
stock in June 1998). The Incentive Plan became effective upon Asymetrix's
initial public offering. The Incentive Plan replaced Asymetrix's 1995 Combined
Incentive and Non-qualified Stock Option Plan (the "1995 Plan"). Any shares
available for grant under the 1995 Plan on the effective date of the Incentive
Plan as well as any shares subject to options granted under the 1995 Plan
which options are canceled prior to exercise will be available for grant under
the Incentive Plan. The purpose of the Incentive Plan is to offer eligible
persons an opportunity to participate in Asymetrix's future performance
through awards of stock options, restricted stock and stock bonuses.
As of March 31, 1999, options to purchase an aggregate of 1,284,207 shares
of common stock were outstanding under the Incentive Plan, with exercise
prices ranging from $3.69 to $11.00 per share, and options to purchase 540,761
shares were available for grant, 332,468 of which were originally reserved for
issuance under the 1995 Plan. As of March 31, 1999, options to purchase an
aggregate of 2,981,220 shares of common stock were outstanding under the 1995
Plan, with exercise prices ranging from $1.55 to $11.00 per share, and no
additional options were available for grant. From the adoption of the 1995
Plan through March 31, 1999, options to purchase a total of 6,940,250 shares
had been granted to all employees as a group (including all current executive
officers) under both the 1995 Plan and the Incentive Plan, of which options to
purchase 2,040,529 shares had been canceled. As of March 31, 1999, Asymetrix's
current executive officers as a group (eight persons) had been granted options
under the Incentive Plan and the 1995 Plan to purchase an aggregate of
1,508,368 shares and options to purchase an aggregate of 3,319,353 shares had
been granted to current employees other than executive officers. For a list of
options granted to Named Executive Officers (as defined in "Executive
Compensation") during 1995, 1996 and 1997 under both the Incentive Plan and
the 1995 Plan, see the chart on page 19.
Shares
The stock subject to issuance under the Incentive Plan consists of shares of
Asymetrix's authorized but unissued common stock. The number of shares of
common stock currently reserved for issuance under the Incentive Plan is
1,500,000 shares, plus those shares not granted or becoming available as a
result of
6
<PAGE>
cancellations under the 1995 Plan (consisting of 332,468 shares as of March
31, 1999). Proposal No. 2 seeks to increase the number of shares reserved for
issuance under the Incentive Plan from 1,500,000 shares to 2,500,000 shares
(plus any shares available or becoming available under the 1995 Plan). Shares
subject to an option granted pursuant to the Incentive Plan or 1995 Plan that
expires or terminates for any reason without being exercised, shares subject
to an award granted pursuant to the Incentive Plan that is forfeited or is
repurchased by Asymetrix at the original issue price, and shares subject to an
award granted pursuant to the Incentive Plan that otherwise terminates without
shares being issued will again become available for grant and issuance
pursuant to awards under the Incentive Plan. This number of shares is subject
to proportional adjustment to reflect stock splits, stock dividends and other
similar events.
Eligibility
Employees, officers, directors, consultants, independent contractors and
advisors of Asymetrix or any parent or subsidiary of Asymetrix are eligible to
receive awards under the Incentive Plan. No person will be eligible to receive
more than 500,000 shares in any calendar year pursuant to awards granted under
the Incentive Plan. Notwithstanding the foregoing, a new employee is eligible
to receive up to a maximum of 1,000,000 shares pursuant to the Incentive Plan
in the calendar year in which he or she commences employment. As of March 31,
1999, approximately 307 persons were in the class of persons eligible to
participate in the Incentive Plan (not including consultants, independent
contractors and advisors), 968,812 shares had been issued upon exercise of
options under the Incentive Plan and the 1995 Plan, 4,265,427 shares were
subject to outstanding options under the Incentive Plan and the 1995 Plan, and
no shares had been issued pursuant to stock bonus awards. As of that date,
540,761 shares were available for future grant, including shares becoming
available as a result of cancellations under the 1995 Plan but not including
the proposed amendment to the Incentive Plan. If the proposed amendment had
been approved by the stockholders as of such date, there would have been
1,540,761 shares available under the Incentive Plan. The closing price of
Asymetrix's common stock on the Nasdaq National Market was $4.69 per share as
of March 31, 1999, the last trading day before the Record Date.
Administration
The Incentive Plan is administered by the Compensation Committee, the
members of which are appointed by the Board. The Compensation Committee
currently consists of Bert Kolde and Ronald S. Posner, both of whom are "non-
employee directors," as defined in Rule 16b-3 promulgated under the Exchange
Act and "outside directors," as defined pursuant to Section 162(m) of the
Code.
Subject to the terms of the Incentive Plan, the Compensation Committee
determines the persons who are to receive awards, the number of shares subject
to each such award, and the terms and conditions of such awards, except that
Mr. Billmaier may not participate in any decision with respect to the grant of
options to him. The Compensation Committee also has the authority to construe
and interpret any of the provisions of the Incentive Plan or any awards
granted thereunder.
Stock Options
The Incentive Plan permits the granting of options that are intended to
qualify either as Incentive Stock Options ("ISOs") or Nonqualified Stock
Options ("NQSOs"). ISOs may be granted only to employees (including officers
and directors who are also employees) of Asymetrix or any parent or subsidiary
of Asymetrix. The option exercise price for each ISO share must be no less
than 100% of the "fair market value" (as defined in the Incentive Plan) of a
share of common stock at the time the ISO is granted. The per share exercise
price of an ISO granted to a 10% stockholder must be no less than 110% of the
fair market value of a share of common stock at the time the ISO is granted.
The option exercise price for each NQSO share must be no less than 85% of the
fair market value of a share of common stock at the time of grant. Asymetrix
has does not intend to grant options under the Incentive Plan at less than
fair market value in the foreseeable future.
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<PAGE>
The exercise price of options granted under the Incentive Plan may be paid
(to the extent the following are approved by the Compensation Committee at the
time of grant): (1) in cash (by check); (2) by cancellation of indebtedness of
Asymetrix to the participant; (3) by surrender of shares of Asymetrix's common
stock owned by the participant for at least six months and having a fair
market value on the date of surrender equal to the aggregate exercise price of
the option; (4) by tender of a full recourse promissory note; (5) by waiver of
compensation due to or accrued by the participant for services rendered; (6)
by a "same-day sale" commitment from the participant and a National
Association of Securities Dealers, Inc. ("NASD") broker; (7) by a "margin"
commitment from the participant and a NASD broker; or (8) by any combination
of the foregoing.
Restricted Stock Awards
The Compensation Committee may grant participants restricted stock awards to
purchase stock either in addition to, or in tandem with, other awards under
the Incentive Plan, under such terms, conditions and restrictions as the
Compensation Committee may determine. The purchase price for such awards must
be no less than 85% of the fair market value of Asymetrix's common stock on
the date of the award (and in the case of an award granted to a 10%
stockholder, the purchase price shall be 100% of fair market value) and can be
paid for in any of the forms of consideration listed in items (1) through (5)
in "Stock Options" above, as are approved by the Compensation Committee at the
time of grant. Asymetrix has not granted any restricted stock awards under the
Incentive Plan to date, and does not intend to do so in the foreseeable
future.
Stock Bonus Awards
The Compensation Committee may grant participants stock bonus awards either
in addition to or in tandem with other awards under the Incentive Plan, under
such terms, conditions and restrictions as the Compensation Committee may
determine. Asymetrix has not granted any stock bonus awards under the
Incentive Plan to date, and does not intend to do so in the foreseeable
future.
Mergers, Consolidations, Change of Control
In the event of a merger, consolidation, dissolution or liquidation of
Asymetrix, the sale of substantially all of its assets, or any other similar
corporate transaction, the successor corporation may assume awards under the
Incentive Plan, substitute equivalent awards in exchange for those granted
under the Incentive Plan, or provide consideration substantially similar to
that which is provided to stockholders of Asymetrix in such transaction. In
the event that the successor corporation does not assume or substitute awards,
then the vesting of all awards granted pursuant to the Incentive Plan will
accelerate immediately prior to the transaction.
Amendment of the Incentive Plan
The Board may at any time terminate or amend the Incentive Plan, including
amending any form of award agreement or instrument to be executed pursuant to
the Incentive Plan. However, the Board may not amend the Incentive Plan in any
manner that requires stockholder approval pursuant to the Code or the
regulations promulgated thereunder, or pursuant to the Exchange Act or Rule
16b-3 (or its successor) promulgated thereunder.
Term of the Incentive Plan
Unless terminated earlier as provided in the Incentive Plan, the Incentive
Plan will expire in December 2007, ten years from the date it was adopted by
the Board.
Federal Income Tax Information
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO ASYMETRIX AND PARTICIPANTS UNDER
8
<PAGE>
THE INCENTIVE PLAN. FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE AND
LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR HER
INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT HAS BEEN AND IS ENCOURAGED TO SEEK
THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE INCENTIVE PLAN.
Incentive Stock Options. A participant will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the participant is subject
to the alternative minimum tax ("AMT")). If the participant holds shares
acquired upon exercise of an ISO (the "ISO Shares") for more than one year
after the date the option was exercised and for more than two years after the
date the option was granted, the participant generally will realize capital
gain or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.
If the participant disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized
upon such disposition, up to the difference between the fair market value of
the ISO Shares on the date of exercise (or, if less, the amount realized on a
sale of such shares) and the option exercise price, will be treated as
ordinary income. Any additional gain will be long-term or short-term capital
gain, depending upon the amount of time the ISO Shares were held by the
participant.
Alternative Minimum Tax. The difference between the fair market value of the
ISO Shares on the date of exercise and the exercise price is an adjustment to
income for purposes of AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is 26% of the portion of an individual taxpayer's
alternative minimum taxable income that would otherwise be taxable as ordinary
income (28% in the case of alternative minimum taxable income in excess of
$175,000). A maximum 20% AMT rate applies to the portion of alternative
minimum taxable income that would otherwise be taxable as net capital gain.
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference
items (including the difference between the fair market value of the ISO
Shares on the date of exercise and the exercise price), and reducing this
amount by the applicable exemption amount ($45,000 in case of a joint return,
subject to reduction under certain circumstances). If a disqualifying
disposition of the ISO Shares occurs in the same calendar year as exercise of
the ISO, there is no AMT adjustment with respect to those ISO Shares. Also,
upon a sale of ISO Shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the
fair market value of the ISO Shares at exercise over the amount paid for the
ISO Shares.
Nonqualified Stock Options. A participant will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO, the
participant must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the participant's exercise price. The included amount must be treated as
ordinary income by the participant and may be subject to withholding by
Asymetrix (either by payment in cash or withholding out of the participant's
salary). Upon resale of the shares by the participant, any subsequent
appreciation or depreciation in the value of the shares will be treated as
capital gain or loss.
Restricted Stock and Stock Bonus Awards. Restricted stock and stock bonus
awards will generally be subject to tax at the time of receipt, unless there
are restrictions that enable the participant to defer tax. At the time the tax
is incurred, the tax treatment will be similar to that discussed above for
NQSOs.
Maximum Tax Rates. The maximum tax rate applicable to ordinary income and
short-term capital gains is 39.6%. Long-term capital gain will be taxed at a
maximum of 20%. For this purpose, in order to receive long-term capital gain
treatment, the shares must be held for more than 12 months. Capital gains may
be offset by capital losses and up to $3,000 of capital losses may be offset
annually against ordinary income.
9
<PAGE>
Tax Treatment of Asymetrix. Asymetrix generally will be entitled to a
deduction in connection with the exercise of an NQSO by a participant or the
receipt of restricted stock or stock bonuses by a participant to the extent
that the participant recognizes ordinary income and Asymetrix withholds tax.
Asymetrix will be entitled to a deduction in connection with the disposition
of ISO Shares only to the extent that the participant recognizes ordinary
income on a disqualifying disposition of the ISO Shares.
ERISA. The Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
New Plan Benefits
The amounts of future option grants under the Incentive Plan to (1)
Asymetrix's Chief Executive Officer; (2) the Named Executive Officers; (3) all
current executive officers as a group; (4) all current directors who are not
executive officers as a group; and (5) all employees, including all officers
who are not executive officers, as a group, are not determinable because under
the terms of the Incentive Plan such grants are made in the discretion of the
Compensation Committee or its designees. Future option exercise prices under
the Incentive Plan are not determinable because they are based upon the fair
market value of Asymetrix's common stock on the date of grant.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
1998 EQUITY INCENTIVE PLAN.
PROPOSAL NO. 3--APPROVAL OF 1999 EMPLOYEE STOCK PURCHASE PLAN
Stockholders are being asked to approve Asymetrix's 1999 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), which was adopted by the Board on
March 24, 1999, to be effective upon stockholder approval. The Board believes
that the approval of the Stock Purchase Plan is in the best interests of
Asymetrix because of the need to provide equity participation to attract and
retain quality employees and remain competitive in the industry, as similar
plans are offered by most companies with which Asymetrix competes for
employees. The Stock Purchase Plan will continue until the earliest to occur
of its termination by the Board, issuance of the maximum aggregate number of
shares of common stock permitted to be issued under the Stock Purchase Plan or
March 24, 2009, ten years from the date the Board adopted the Stock Purchase
Plan.
The purpose of the Stock Purchase Plan is to provide employees of Asymetrix
and its subsidiaries and affiliates designated by the Board as eligible to
participate in the Stock Purchase Plan with a convenient means to acquire an
equity interest in Asymetrix through payroll deductions, to enhance such
employees' sense of participation in the affairs of Asymetrix and to provide
an additional incentive for continued employment.
Shares
The stock subject to issuance under the Stock Purchase Plan consists of
shares of Asymetrix's authorized but unissued common stock. The Board has
reserved 450,000 shares of common stock for issuance under the Stock Purchase
Plan. In addition, on each January 1 during the term of the Stock Purchase
Plan, the aggregate number of shares reserved for issuance will be increased
automatically by the number of shares purchased under the Stock Purchase Plan
in the preceding calendar year. However, the aggregate number of shares issued
over the term of the Stock Purchase Plan shall not exceed 4,500,000 shares.
This number of shares is subject to proportional adjustment to reflect stock
splits, stock dividends and other similar events.
Eligibility
All employees of Asymetrix, or any parent or subsidiary, are eligible to
participate in an Offering Period (as defined below) under the Stock Purchase
Plan, except the following:
. employees who are not employed by Asymetrix ten days before the beginning
of such Offering Period;
. employees who are customarily employed for less than 20 hours per week;
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<PAGE>
. employees who are customarily employed for less than five months in a
calendar year; and
. employees who own stock or hold options to purchase stock or who, as a
result of participation in the Stock Purchase Plan, would own stock or
hold options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of Asymetrix.
As of March 31, 1999, approximately 302 persons would be eligible to
participate in the Stock Purchase Plan. As of March 31, 1999 (the last trading
day prior to the Record Date), the closing price of Asymetrix's common stock
on the Nasdaq National Market was $4.69 per share. Employees will participate
in the Stock Purchase Plan through payroll deductions. An employee will set
the rate of such payroll deductions, which may not be less than 1% nor more
than 10% of the employee's total cash compensation, before any deductions from
the employee's cash compensation pursuant to Sections 125 or 401(k) of the
Code. No employee is permitted to purchase shares under the Stock Purchase
Plan at a rate which, when aggregated with such employee's rights to purchase
stock under all similar purchase plans of Asymetrix, exceeds $25,000 in fair
market value for each calendar year (determined as of the Offering Date,
described below).
Administration
The Stock Purchase Plan will be administered by the Compensation Committee.
The Compensation Committee's interpretation or construction of any provisions
of the Stock Purchase Plan will be final and binding on all participants.
Offering Periods
Each offering of common stock under the Stock Purchase Plan is for a period
of 24 months (the "Offering Period"). Offering Periods are planned to commence
on February 1 and August 1 of each year and to end on January 31 and July 31
of each year, respectively. Each Offering Period consists of four six-month
purchase periods (individually, a "Purchase Period") during which payroll
deductions of the participants are accumulated under the Stock Purchase Plan.
The Board has the power to set the beginning of any Offering Period and to
change dates or the duration of Offering Periods or Purchase Periods without
stockholder approval if such change is announced at least 15 days before the
scheduled beginning of the first Offering Period or Purchase Period to be
affected. The first day of each Offering Period is the "Offering Date" for
such Offering Period and the last business day of each Purchase Period is the
"Purchase Date" for such Purchase Period.
Participating employees would participate in the Stock Purchase Plan during
each Offering Period through regular payroll deductions as described above.
Employees may elect to participate in any Offering Period by enrolling as
provided under the terms of the Stock Purchase Plan. Once enrolled, an
employee will automatically participate in each succeeding Offering Period
unless the employee withdraws from the Offering Period or the Stock Purchase
Plan is terminated. After the rate of payroll deductions for an Offering
Period has been set by an Employee, that rate will continue to be effective
for the remainder of the Offering Period (and for all subsequent Offering
Periods in which the employee is automatically enrolled) unless otherwise
changed by the employee. The employee may increase or lower the rate of
payroll deductions for any Offering Period, but no more than one change may be
made during a single Offering Period, except that the employee may at any time
elect to reduce payroll deductions to zero without withdrawing from the Stock
Purchase Plan (but may not thereafter resume payroll deductions in that
Offering Period).
Purchase Price
The purchase price of shares that may be acquired in any Purchase Period
under the Stock Purchase Plan is 85% of the lesser of the fair market value of
the shares on the Offering Date or the fair market value of the shares on the
Purchase Date. The fair market value of a share of Asymetrix's common stock is
deemed to be the closing price of Asymetrix's common stock on the Nasdaq
National Market on the date of determination as reported in The Wall Street
Journal.
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<PAGE>
Purchase of Stock Under the Stock Purchase Plan
The number of whole shares an employee will be able to purchase in any
Purchase Period will be determined by dividing the total payroll amount
withheld from the employee pursuant to the Stock Purchase Plan during the
Purchase Period by the purchase price for each share determined as described
above. The purchase will take place automatically on the Purchase Date for
such Purchase Period.
Withdrawal
An Employee may withdraw from any Offering Period. Upon withdrawal, the
accumulated payroll deductions will be returned to the withdrawing employee,
without interest, provided that the withdrawal occurs at least 15 days before
the related Purchase Date. If the withdrawal occurs less than 15 days before
such Purchase Date, payroll deductions will continue for the remainder of that
Purchase Period. No further payroll deductions for the purchase of shares will
be made for the succeeding Offering Period unless the employee enrolls in the
new Offering Period at least 15 days before the Offering Date.
Amendment of the Stock Purchase Plan
The Board may at any time amend, terminate or extend the term of the Stock
Purchase Plan, except that any such termination cannot affect the terms of an
option to purchase shares previously granted under the Stock Purchase Plan,
nor may any amendment make any change in the terms of an option to purchase
shares previously granted which would adversely affect the right of any
participant, nor may any amendment be made without stockholder approval if
such amendment would: (1) increase the number of shares that may be issued
under the Stock Purchase Plan; (2) change the designation of the employees (or
class of employees) eligible for participation in the Stock Purchase Plan; or
(3) constitute an amendment for which stockholder approval is required in
order to comply with Rule 16b-3 (or any successor rule) of the Exchange Act.
Term of the Stock Purchase Plan
The Stock Purchase Plan will continue until the earlier to occur of: (1)
termination of the Stock Purchase Plan by the Board; (2) the issuance of all
the shares of common stock reserved for issuance under the Stock Purchase
Plan; or (3) March 24, 2009, ten years after the date the Stock Purchase Plan
was adopted by the Board.
Federal Income Tax Information
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO ASYMETRIX AND EMPLOYEES PARTICIPATING
IN THE STOCK PURCHASE PLAN. FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING EMPLOYEE WILL DEPEND UPON HIS
OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS BEEN AND IS
ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISER REGARDING THE TAX
CONSEQUENCES OF PARTICIPATION IN THE STOCK PURCHASE PLAN.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
Tax Treatment of the Employees. Employees will not recognize income for
federal income tax purposes either upon enrollment in the Stock Purchase Plan
or upon the purchase of shares. All tax consequences are deferred until an
employee sells the shares, disposes of the shares by gift or dies.
If shares are held for more than one year after the date of purchase and
more than two years from the beginning of the applicable Offering Period, or
if the employee dies while owning the shares, the employee realizes ordinary
income on a sale (or a disposition by way of gift or upon death) to the extent
of the lesser of
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<PAGE>
15% of the fair market value of the shares at the beginning of the Offering
Period or the actual gain (the amount by which the market value of the shares
on the date of sale, gift or death exceeds the purchase price). All additional
gain upon the sale of shares is treated as capital gain, taxed at a rate that
depends on how long the shares have been held. If the shares are sold and the
sale price is less than the purchase price, there is no ordinary income and
the employee has a capital loss for the difference between the sale price and
the purchase price.
If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (a "disqualifying disposition") within
either the one-year or the two-year holding periods described above, the
employee realizes ordinary income at the time of sale or other disposition,
taxable to the extent that the fair market value of the shares at the date of
purchase is greater than the purchase price. This excess will constitute
ordinary income (not currently subject to withholding) in the year of the sale
or other disposition even if no gain is realized on the sale or if a
gratuitous transfer is made. The difference, if any, between the proceeds of
sale and the aggregate fair market value of the shares at the date of purchase
is a capital gain or loss. Capital gains may be offset by capital losses, and
up to $3,000 of capital losses may be used annually against ordinary income.
Tax Treatment of Asymetrix. Asymetrix will be entitled to a deduction in
connection with the disposition of shares acquired under the Stock Purchase
Plan only to the extent that an employee recognizes ordinary income on a
disqualifying disposition of the shares. Asymetrix will treat any transfer of
record ownership of shares as a disposition, unless it is notified to the
contrary. In order to enable Asymetrix to learn of disqualifying dispositions
and ascertain the amount of the deductions to which it is entitled,
participating employees will be required to notify Asymetrix in writing of the
date and terms of any disposition of shares purchased under the Stock Purchase
Plan.
ERISA. The Stock Purchase Plan is not subject to any of the provisions of
ERISA nor is it qualified under Section 401(a) of the Code.
New Plan Benefits
The amounts of future purchases under the Stock Purchase Plan by (1)
Asymetrix's Chief Executive Officer; (2) the Named Executive Officers; (3) all
current executive officers as a group; (4) all current directors who are not
executive officers as a group; and (5) all employees, including all officers
who are not executive officers, as a group, are not determinable because under
the terms of the Stock Purchase Plan such purchases are based on participant
contributions. Future purchase prices under the Stock Purchase Plan are not
determinable because they are based on the fair market value of Asymetrix's
common stock at the beginning of each Offering Period and on each Purchase
Date.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE
1999 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 4--RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Asymetrix has selected KPMG LLP as its independent accountants to perform
the audit of Asymetrix's financial statements for 1999, and the stockholders
are being asked to ratify such selection. KPMG LLP has been engaged as
Asymetrix's independent accountants since 1997. Representatives of KPMG LLP
will be present at the Meeting, will have the opportunity to make a statement
at the Meeting if they desire to do so, and will be available to respond to
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF KPMG LLP.
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DIRECTORS AND EXECUTIVE OFFICERS OF ASYMETRIX
The following table sets forth certain information regarding the executive
officers and directors of Asymetrix as of March 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James A. Billmaier...... 43 Chief Executive Officer and Director
Kevin M. Oakes.............. 35 President, General Manager, Learning Services and
Director
Joseph DiNucci.............. 56 Senior Vice President, Worldwide Sales
John M. Kellum.............. 48 Vice President and General Manager, Online Learning
Products
Steven Martino.............. 40 Vice President, Marketing
John D. Atherly............. 40 Vice President, Finance and Administration and Chief
Financial Officer
Steven Esau................. 36 Vice President, General Counsel and Corporate Secretary
Gordon Rogers............... 43 Vice President, Strategic Alliances
Bert Kolde(1)(2)............ 43 Chairman of the Board
Paul G. Allen(3)............ 46 Director
Shelley Harrison, Ph.D.(2).. 56 Director
Gary Rieschel(2)(3)......... 42 Director
Ronald S. Posner(1)......... 56 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Term expires at the 1999 annual meeting of stockholders and will not stand
for re-election
Mr. Billmaier has served as Chief Executive Officer and a director of
Asymetrix since July 1995 and served as President from July 1995 until
September 1997. From January 1994 until July 1995 he was the Vice President
and General Manager of the Network Software Products Business of Sun
Microsystems, Inc. From February 1992 until January 1994 he was Vice President
of Marketing and Business Development for SunSoft, Sun Microsystems' software
business division. Prior to joining Sun Microsystems, Mr. Billmaier served as
the Vice President of Software Marketing and Business Development at MIPS
Technologies, Inc., a developer of computer microprocessors, and before that
he was responsible for UNIX workstation products and strategies at Digital
Equipment Corporation.
Mr. Oakes has served as President and General Manager, Learning Services,
since he joined Asymetrix in September 1997. Prior to that time, Mr. Oakes was
the President of each of the Oakes Companies which he founded in March 1993,
January 1996 and March 1997, respectively, and each of which Asymetrix
acquired in September 1997. Prior to forming the Oakes Companies, Mr. Oakes
was a Senior Account Representative for The Minnesota Mutual Life Insurance
Company.
Mr. DiNucci joined Asymetrix in October 1998 as Senior Vice President,
Worldwide Sales. Prior to joining Asymetrix, Mr. DiNucci was the Vice
President of Business Development for E.piphany, Inc., which markets
enterprise relationship management systems, where he recruited the initial
sales force and first customers. Previously, Mr. DiNucci spent five years at
Silicon Graphics, a graphics workstation company, as Vice President of
Marketing. Prior to that Mr. DiNucci was the Senior Vice President and General
Manager of MIPS Computer Systems, where he ran the systems business. Prior to
MIPS, Mr. DiNucci spent seventeen years at Digital Equipment Company, where he
held a variety of positions, including general manager of DEC's workstation
business. Mr. DiNucci is a director of Rand Technologies in Toronto, and
Realax in Frankfurt.
Mr. Kellum has served as Vice President and General Manager, Online Learning
Products since November 1995, and prior to that was Senior Director of
Business Development since he joined Asymetrix in September 1995. From May
1993 to September 1995 he served as Director of Technology and Business
Development at
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SunSoft. From 1987 to May 1993 he served as Director of Engineering at
Intergraph Corporation, a graphics workstation company. Prior to that time, he
served as Director of Operating Systems at Fairchild Research Center and as a
Senior Research Scientist at Honeywell Research Center.
Mr. Martino has served as Asymetrix's Vice President, Marketing since
January 1999. From October 1998 until January 1999, he was Vice President,
Strategic Relationships. From October 1997 until October 1998 he was Vice
President, Sales, and prior to that was Vice President and General Manager,
Professional Services from February 1997 to October 1997 and Vice President,
Marketing from September 1995, when he joined Asymetrix, to February 1997.
From 1990 to September 1995 Mr. Martino was with Sun Microsystems, most
recently as the Senior Director of Marketing for SunSoft. Prior to that time,
he was a Senior Manager at Price Waterhouse, and held various sales and
marketing positions at Xerox Corporation.
Mr. Atherly has served as Vice President, Finance and Administration and
Chief Financial Officer of Asymetrix since February 1995, and prior to that
was Director of Finance and Operations, Treasurer and Secretary from February
1993 until February 1995. Mr. Atherly held various other positions since he
joined Asymetrix in June 1990, including controller from February 1991 until
February 1993. Prior to joining Asymetrix, Mr. Atherly was a Finance and
Operations Manager at MicroDisk Services, a software manufacturing services
company.
Mr. Esau has served as General Counsel of Asymetrix since October 1995 and
also as a Vice President and Secretary of Asymetrix since January 1997. Prior
to that time, Mr. Esau was the Director of Legal Affairs from February 1995
until October 1995, and before that he was counsel to Asymetrix since joining
Asymetrix in February 1994. From 1988 until February 1994, he was in private
law practice, first with Stoel Rives LLP in Seattle and then with his own law
firm, where he focused on advising software and technology startup companies.
Mr. Rogers joined Asymetrix in July of 1998, and currently holds the
position of Vice President of Strategic Alliances at Asymetrix. Prior to that
time, he was President and CEO of Meliora Systems, Inc., a software
development and training company which he founded in 1988. From 1986 to 1988,
he worked as a research associate at the University of Rochester. From 1979 to
1986, he was employed by Canadian National Railways, serving in a variety of
functions, including market development, pricing, and operations planning.
Mr. Kolde was appointed Chairman of the Board of Asymetrix in July 1997, and
has been a director since Asymetrix was founded in December 1984. Mr. Kolde
served as Executive Vice President of Asymetrix from December 1984 until April
1993, and thereafter as President until November 1994. Mr. Kolde is Vice
Chairman of Trail Blazers Inc., Football Northwest LLC, First & Goal Inc. and
Oregon Arena Corporation and a Vice President of Vulcan Ventures, Inc. Mr.
Kolde serves as a director of MetaCreations Corp. and Beyond.com Corp. Prior
to joining Asymetrix, Mr. Kolde was the Vice President of Management Reporting
of Seafirst Corporation.
Mr. Allen founded Asymetrix in 1984 and has served as a director since that
time. Mr. Allen also served as the President of Asymetrix from its founding
until April 1993, and as the Chief Executive Officer from Asymetrix's founding
until July 1995. Mr. Allen was a co-founder of Microsoft Corporation and is a
member of Microsoft's board of directors. Mr. Allen is Chairman and Chief
Executive Officer of Vulcan Ventures, Inc. which owns and invests in a suite
of companies exploring the potential of multimedia digital communications. Mr.
Allen is the owner of Interval Research Corp., Vulcan Ventures, Inc., Trail
Blazers Inc. and Football Northwest LLC, is a partner in the entertainment
studio Dreamworks SKG, and holds investments in more than 35 technology
companies. Mr. Allen is also a director of USA Networks, Inc.
Dr. Harrison has served as a director of Asymetrix since September 1997,
when Asymetrix acquired Aimtech Corporation. Dr. Harrison serves as Chairman
and Chief Executive Officer of Spacehab, Incorporated, a developer of
habitable modules for the United States space shuttle fleet. From 1987 until
its dissolution in December 1998, Dr. Harrison was a Managing General Partner
of Poly Ventures, Limited Partnership, a venture
15
<PAGE>
capital fund. Prior to that time, Dr. Harrison co-founded and served as
Chairman and Chief Executive Officer of Symbol Technologies, Inc., a provider
of bar code laser scanners and portable terminals. Dr. Harrison is also a
director of Netmanage, Inc. and Globecomm Systems Inc.
Mr. Rieschel has served as a director of Asymetrix since October 1996. Mr.
Rieschel has been a Senior Vice President of SOFTBANK Holdings, Inc., a
venture capital fund, since January 1996. Prior to that time, Mr. Rieschel
served as Vice President of Marketing for nCUBE from August 1994 to December
1995, as Director of Channel Sales for Cisco Systems from September 1993 to
August 1994, and as General Manager, Asia for Sequent Computer from January
1989 to July 1993. Mr. Rieschel is a director of OnLive! Technologies, Inc.,
Concentric Network Corporation, USWeb Corporation and several private
companies.
Mr. Posner became a director of Asymetrix in September 1998. Mr. Posner is
Chairman of PS Capital, a venture capital firm based in San Francisco, New
York and London. Prior to that Mr. Posner was Chairman of Graphix Zone, a
multimedia publisher and was CEO of StarPress Multimedia, which was acquired
by Graphix Zone. Prior to that, Mr. Posner was CEO of WordStar, a business
productivity software company. In addition, Mr. Posner has over 20 years
experience in the technology industry, having held executive positions with a
number of high technology companies, including CyberMedia, Peter Norton
Computing, Ansa Software and Ashton-Tate. He is also a director of Select
Software and Beyond.com.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Asymetrix with
respect to the beneficial ownership of Asymetrix's common stock as of March
31, 1999 by: (1) each person who is known by Asymetrix to own beneficially
more than 5% of Asymetrix's common stock, (2) each director of Asymetrix, (3)
each of the Named Executive Officers and (4) all directors and executive
officers of Asymetrix as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common Stock
Name of Beneficial Owner Beneficially Owned Beneficially Owned (1)
------------------------ ------------------ --------------------------
<S> <C> <C>
Paul G. Allen (2)............ 5,927,291 42.1%
Kevin M. Oakes (3)........... 517,294 3.7
James A. Billmaier (4)....... 497,654 3.4
Gary Rieschel (5)............ 293,585 2.1
John D. Atherly (6).......... 98,498 *
Bert Kolde (7)............... 92,291 *
Steven Martino (8)........... 89,841 *
John M. Kellum (9)........... 68,591 *
Ronald S. Posner (10)........ 41,666 *
Shelley Harrison, Ph.D.
(11)........................ 4,942 *
All officers and directors as
a group (13 persons)(12).... 7,948,530 53.1
</TABLE>
- --------
* Less than 1% of Asymetrix's outstanding common stock
(1) Percentage ownership is based on 13,990,906 shares outstanding as of
March 31, 1999. Shares of common stock subject to options currently
exercisable or exercisable within 60 days of March 31, 1999 are deemed
outstanding for the purpose of computing the percentage ownership of the
person holding such options but are not deemed outstanding for computing
the percentage ownership of any other person. The address for each holder
of more than 5% of Asymetrix common stock is c/o Asymetrix Learning
Systems, Inc., 110-110th Avenue NE, Bellevue, Washington 98004. Unless
otherwise indicated below, the persons and entities named in the table
have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
16
<PAGE>
(2) Includes 77,291 shares subject to stock options exercisable within 60
days of March 31, 1999. Mr. Allen is the founder and a director of
Asymetrix.
(3) Includes 6,827 shares subject to stock options exercisable within 60 days
of March 31, 1999. Mr. Oakes is President and General Manager, Learning
Services and a director of Asymetrix.
(4) Represents shares subject to stock options exercisable within 60 days of
March 31, 1999. Mr. Billmaier is the Chief Executive Officer and a
director of Asymetrix.
(5) Includes 2,291 shares subject to stock options exercisable within 60 days
of March 31, 1999 and 291,294 shares held of record by SoftVen No. 2
Investment Enterprise Partnership. Mr. Rieschel, a Senior Vice President
of SOFTBANK Holdings, Inc., an affiliate of SoftVen No. 2 Investment
Enterprise Partnership, is a director of Asymetrix. Mr. Rieschel
disclaims beneficial ownership of such 291,294 shares.
(6) Includes 97,423 shares subject to stock options exercisable within 60
days of March 31, 1999. Mr. Atherly is Vice President, Finance and
Administration and Chief Financial Officer of Asymetrix.
(7) Represents shares subject to stock options exercisable within 60 days of
March 31, 1999. Mr. Kolde is Chairman of the Board of Asymetrix.
(8) Represents shares subject to stock options exercisable within 60 days of
March 31, 1999. Mr. Martino is Vice President, Marketing of Asymetrix.
(9) Represents shares subject to stock options exercisable within 60 days of
March 31, 1999. Mr. Kellum is Vice President and General Manager, Online
Learning Products of Asymetrix.
(10) Includes 1,666 shares subject to stock options exercisable within 60 days
of March 31, 1999. Mr. Posner is a director of Asymetrix.
(11) Includes 2,291 shares subject to stock options exercisable within 60 days
of March 31, 1999. Dr. Harrison is a director of Asymetrix. Includes
2,428 shares held of record by Poly Ventures Associates, L.P.
Dr. Harrison is a general partner of Poly Ventures Associates, L.P. Dr.
Harrison disclaims beneficial ownership of shares held by Poly Ventures
except to the extent of his pecuniary interest therein. Includes 30
shares held of record by Dr. Harrison's spouse.
(12) Represents the shares described in footnotes (2) (11), plus an additional
321,331 shares beneficially owned by two other executive officers, of
which 50,081 shares were subject to stock options exercisable within 60
days of March 31, 1999, and of which 118,627 are owned of record by the
spouse of one of such officers.
17
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to Asymetrix
in all capacities during the year ended December 31, 1998 by Asymetrix's Chief
Executive Officer and the four most highly compensated executive officers,
other than the Chief Executive Officer, who were serving as executive officers
at the end of 1998 (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term Compensation
Compensation Awards
---------------- ----------------------
Name and Principal Securities Underlying
Position(1) Year Salary Bonus Options(#)
------------------ ------- -------- ------- ----------------------
<S> <C> <C> <C> <C>
James A. Billmaier.......... 1998 $259,616 $47,343(2) --
Chief Executive Officer.... 1997 250,000 74,875(3) 187,499
1996 250,000 70,950(4) --
Kevin Oakes................. 1998 144,231 24,855(2) --
President and General 1997(5) 37,500 -- 17,250
Manager, Learning Services 1996(5) -- -- --
Steven Martino.............. 1998 155,769 35,507(2) 7,499
Vice President, Marketing 1997 133,404 36,075(3) 37,499
1996 125,000 10,936(4) 7,500
John D. Atherly............. 1998 130,038 18,695(2) 15,000
Vice President, Finance and 1997 119,326 28,260(3) 15,000
Administration and Chief 1996 115,000 10,061(4) --
Financial Officer
John M. Kellum.............. 1998 131,640 17,398(2) 7,499
Vice President and General 1997 121,827 26,644(3) 37,499
Manager, Online Learning 1996 114,615 4,943(4) 7,500
Products
</TABLE>
- --------
(1) Joseph DiNucci, Asymetrix's Senior Vice President, Worldwide Sales joined
Asymetrix in October 1998, and Gordon Rogers, Asymetrix's Vice President,
Strategic Alliances joined Asymetrix in July 1998. Based on their annual
salaries and incentive compensation, Mr. DiNucci and Mr. Rogers would have
been Named Executive Officers if they had been with Asymetrix during all
of 1998.
(2) Includes certain bonus or incentive compensation earned in 1997 but not
paid until 1998, and does not include bonus compensation earned in 1998
but not paid in 1998.
(3) Includes certain bonus or incentive compensation earned in 1996 but not
paid until 1997, and does not include bonus compensation earned in 1997
but not paid in 1997.
(4) Includes certain bonus or incentive compensation earned in 1995 but not
paid until 1996, and does not include bonus compensation earned in 1996
but not paid in 1996.
(5) Mr. Oakes joined Asymetrix on September 30, 1997. No compensation was paid
during 1996 and compensation paid in 1997 is limited to salary for the
last three months of the fiscal year.
18
<PAGE>
Option Grants in Fiscal 1998
The following table sets forth certain information regarding stock options
granted to each of the Named Executive Officers during the year ended December
31, 1998.
<TABLE>
<CAPTION>
Potential
Individual Grants (1) Realizable Value
---------------------------------------------- at Assumed
Number of Percent of Annual Rates of
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Terms(2)
Options Employees in Price Per Expiration ----------------
Name Granted Fiscal Year(3) Share(4) Date 5% 10%
- ---- ---------- -------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
James A. Billmaier...... -- -- -- -- -- --
Kevin Oakes............. -- -- -- -- -- --
Steven Martino.......... 7,499 0.48% $11.00 6/8/08 $51,877 $131,466
John D. Atherly......... 15,000 0.97% 11.00 6/8/08 103,768 262,968
John M. Kellum.......... 7,499 0.48% 11.00 6/8/08 51,877 131,466
</TABLE>
- --------
(1) Options granted in 1998 were granted under Asymetrix's 1995 Combined
Incentive and Non-qualified Stock Option Plan (the "1995 Plan"). These
options become exercisable with respect to 25% of the shares covered by
the option on the first anniversary of the date of grant and with respect
to an additional 2.08% of these shares each month thereafter, subject to
acceleration upon certain changes in control of Asymetrix. These options
have a term of ten years.
(2) Potential realizable value is based on the assumption that the common
stock of Asymetrix appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the ten-year
term. These numbers are calculated based on Securities and Exchange
Commission requirements and do not reflect Asymetrix's projection or
estimate of future stock price growth.
(3) Asymetrix granted options to purchase an aggregate of 1,552,579 shares of
common stock to all employees during 1998.
(4) Options were granted at an exercise price equal to the fair market value
of Asymetrix's common stock as determined by the Board.
Fiscal Year End Option Values
The following table sets forth for each of the Named Executive Officers the
number and year-end value of exercisable and unexercisable options for the
year ended December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at
Shares Options at 12/31/98(1) 12/31/98(2)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A. Billmaier...... -- -- 431,248 206,251 $1,087,778 $185,722
Kevin Oakes............. -- -- 5,390 11,860 0 0
Steven Martino.......... -- -- 77,497 50,001 185,716 47,759
John D. Atherly......... -- -- 90,197 30,352 240,225 16,029
John M. Kellum.......... 20,000 $109,000 56,247 51,251 125,578 51,297
</TABLE>
- --------
(1) Options shown were granted under the 1995 Plan and are subject to vesting
as described in footnote (1) to the option grant table above.
(2) Based on the closing price of Asymetrix common stock on the Nasdaq
National Market on December 31, 1998 of $4.38 per share, net of exercise
price.
19
<PAGE>
Employment Agreements
In July 1998, in connection with Asymetrix's acquisition of Meliora Systems,
Inc., Asymetrix entered into an Employment Agreement with Gordon Rogers,
Asymetrix's Vice President, Strategic Alliances. Pursuant to the terms of this
agreement, Mr. Rogers currently receives an annual salary of at least
$120,000, has a target bonus of 30% of his annual salary, and is eligible to
receive a maximum bonus of 100% of his annual salary. In addition, Mr. Rogers
was granted an option to purchase 132,500 shares of Asymetrix common stock at
a price per share of $8.94, in accordance with the terms of the Asymetrix 1998
Equity Incentive Plan. Upon the involuntary termination of Mr. Rogers
employment during the two-year term of the employment agreement for other than
"Cause" (as defined in the agreement), Mr. Rogers shall be entitled to receive
his then-current base salary and health and dental insurance for a period
ending two years after the effective date of the agreement and he will be paid
all compensation accrued through the date of termination (including a pro rata
portion of any bonus payable for the quarter in which termination occurred).
If Mr. Rogers employment is involuntarily terminated other than for Cause
prior to July 1, 2002, then the option for 132,500 shares of Asymetrix common
stock (but no subsequently granted options) shall become exercisable in full.
In September 1997, in connection with Asymetrix's acquisitions of the Oakes
Companies, Asymetrix entered into an Employment Agreement with Kevin Oakes,
Asymetrix's President and General Manager, Learning Services. Pursuant to the
terms of this agreement, Mr. Oakes received an annual salary of $150,000, has
a target bonus of 35% of his annual salary, and is eligible to receive a
maximum bonus of 100% of his annual salary. In addition, Mr. Oakes was granted
an option to purchase 17,250 shares of the Company's Common Stock at a price
per share of $6.00, in accordance with the terms of the Asymetrix's 1995
Incentive and Non-qualified Stock Option Plan. Mr. Oakes' Employment Agreement
expired in September 1998, and he is currently employed with Asymetrix on an
at will basis at the same salary and on the same bonus plan as set forth in
the Employment Agreement.
REPORT ON EXECUTIVE COMPENSATION
This Report of the Compensation Committee is required by the SEC and shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that Asymetrix
specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such acts.
Final decisions regarding executive compensation and stock option grants to
executives and employees are made by the Compensation Committee of the Board.
The Compensation Committee is composed of two independent non-employee
directors.
General Compensation Policy
The Compensation Committee acts on behalf of the Board to establish the
general compensation policy for executives officers of Asymetrix. The
Compensation Committee reviews and approves the general executive bonus plan
and individual incentive compensation plans for certain executive officers who
do not participate in the general executive bonus plan at or about the
beginning of each year. Executive salaries are considered by the Compensation
Committee in connection with Asymetrix's company-wide employee review cycle.
The Compensation Committee also administers Asymetrix's incentive and equity
plans, including the 1998 Equity Incentive Plan (the "Incentive Plan"), the
1998 Directors Stock Option Plan (the "Directors Plan") and will administer
(upon its approval by the stockholders) the 1999 Employee Stock Purchase Plan
(the "Purchase Plan").
The Compensation Committee's general philosophy in compensating executive
officers, including the Chief Executive Officer, is to relate compensation to
corporate performance. Long-term equity incentives for executive officers are
effected through the granting of stock options under the Incentive Plan. Stock
options generally have
20
<PAGE>
value for the executive only if the price of Asymetrix's stock increases above
the fair market value on the grant date and the executive remains employed by
Asymetrix for the period required for the shares to vest. In addition, the
executive bonus plan or individual incentive compensation plans account for a
significant portion of the target compensation for executive officers. Bonuses
are determined solely by corporate performance targets, while executives with
revenue generating responsibility have incentive compensation plans tied to
the recognition of revenue for which they are responsible.
The base salaries and stock option grants of the executive officers are
determined in part by the Compensation Committee informally reviewing data on
prevailing compensation practices in technology companies with whom Asymetrix
competes for executive talent and by their evaluating such information in
connection with the Asymetrix's corporate goals. To this end, the Compensation
Committee attempts to compare the compensation of Asymetrix's executive
officers with the compensation practices of comparable companies to determine
base salary, target bonuses and target total cash compensation. With respect
to the compensation of executive officers other than the CEO, the Compensation
Committee also considers the recommendations of the CEO. In addition to their
base salaries, Asymetrix's executive officers, including the CEO, are each
eligible to participate in the Incentive Plan, and will be eligible to
participate in the Purchase Plan.
In preparing the stock price performance graph included with this Proxy
Statement, Asymetrix used the Nasdaq Computer & Data Processing Services
Stocks Index as its published line of business index. However, the
compensation practices of most of the companies in the Nasdaq Computer & Data
Processing Services Stocks Index are not reviewed by the Compensation
Committee when setting executive salaries because such companies are not
competitive with Asymetrix for executive talent.
1998 Executive Compensation
Base Compensation. Base compensation for 1998 was determined prior to the
formation of the Compensation Committee, and was set either by the full Board
or by the CEO. During 1999, the Compensation Committee intends to review the
recommendations and performance and market data outlined above and establish a
base salary level for each executive officer, including the CEO.
Incentive Compensation. Under the current executive bonus plan, bonuses are
paid in the quarter following a quarter in which corporate performance goals
are met. Asymetrix paid cash bonuses to its executive officers in the first
quarter of 1998 with respect to corporate performance goals for the fourth
quarter of 1997, and in the second quarter of 1998 with respect to corporate
performance goals for the first quarter. Bonuses will be paid in 1999 only if
corporate performance goals are met. Certain executives with revenue
generating responsibility do not participate in the executive bonus plan, but
have incentive compensation plans tied to the revenue for which they are
responsible.
Stock Options. Stock options are granted to certain executive officers as
incentives to become employees or to aid in the retention of executive
officers and to align their interests with those of the stockholders. Stock
options typically have been granted to executive officers when the executive
first joins Asymetrix, in connection with a significant change in
responsibilities and to reward continued performance. The Compensation
Committee may, however, grant additional stock options to executives for other
reasons. The number of shares subject to each stock option granted is within
the discretion of the Compensation Committee and is based on anticipated
future contribution and ability to impact corporate and/or business unit
results, past performance or consistency within the executive's peer group. In
the discretion of the Compensation Committee, executive officers may also be
granted stock options under the Incentive Plan to provide a greater incentive
to continue their employment with Asymetrix and to strive to increase the
value of Asymetrix's common stock.
In 1998, the Compensation Committee did not make any grants to executive
officers. Prior to the establishment of the Compensation Committee, stock
option grants were determined by an Option Plan Administration Committee,
which did make grants to executive officers in 1998. In making grants to
executive
21
<PAGE>
officers during 1998, the Option Plan Administration Committee generally
considered these same factors. The stock options generally become exercisable
over a four-year period and are granted at an exercise price that is equal to
the fair market value of Asymetrix's common stock on the date of grant.
Company Performance and CEO Compensation. Mr. Billmaier received bonus
compensation in 1998 based on corporate performance goals achieved during the
fourth quarter of 1997 and the first quarter of 1998. He did not receive any
stock options in that year.
Compliance with Section 162(m) of the Internal Revenue Code of
1986. Asymetrix intends to comply with the requirements of Section 162(m) of
the Internal Revenue Code. The Incentive Plan is already in compliance with
Section 162(m) by limiting stock awards to Named Executive Officers. Asymetrix
does not expect cash compensation for any executive officer during 1999 to be
in excess of $1,000,000 or consequently to be affected by the requirements of
Section 162(m).
MEMBERS OF THE COMPENSATION COMMITTEE
Bert Kolde
Ronald S. Posner
22
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act or under the Exchange Act, except to the extent that Asymetrix
specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
The graph below compares the cumulative total stockholder return on (1) the
common stock of Asymetrix with (2) the Nasdaq US Stocks Index and (3) the
Nasdaq Computer and Data Processing Services Stocks Index from June 12, 1998
(the effective date of Asymetrix's registration statement with respect to the
Asymetrix initial public offering) to December 31, 1998 (assuming the
investment of $100 in the Asymetrix's common stock and in each of the other
indices on the date of Asymetrix's initial public offering, and reinvestment of
all dividends).
The comparisons in the graph below are based on historical data and are not
intended to forecast the possible future performance of Asymetrix's common
stock.
[GRAPH APPEARS HERE]
The above graph was plotted using the following data:
<TABLE>
<CAPTION>
Nasdaq Computer
and Data
Processing
Nasdaq US Stocks Services Stocks
Asymetrix Index Index
----------------- ---------------- -----------------
Market Investment Investment Investment
Date Price Value Index Value Index Value
---- ------ ---------- ----- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
6/12/98................. $11.00 $100 $576 $100 $1,430 $100
6/30/98................. 9.06 82 627 109 1,673 116
9/30/98................. 6.38 58 568 99 1,577 110
12/31/98................ 4.38 38 733 127 2,042 143
</TABLE>
23
<PAGE>
Prior to June 12, 1998 Asymetrix's common stock was not publicly traded.
Comparative data is provided only for the period since that date. The stock
price performance shown on the graph above is not necessarily indicative of
future price performance. Information used in the graph was obtained from the
Nasdaq National Market, a source believed to be reliable, but Asymetrix is not
responsible for any errors or omissions in such information.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1998 there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which Asymetrix or any of
its subsidiaries was or is to be a party in which the amount involved exceeded
or will exceed $60,000 and in which any director, executive officer, holder of
more than 5% of the common stock of Asymetrix or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest other than (1) compensation agreements and other
arrangements, which are described where required in "Executive Compensation"
and (2) the transactions described below.
Meliora Acquisition. In July 1998, Asymetrix acquired Meliora Systems, Inc.
("Meliora"). In connection with the acquisition of Meliora, Asymetrix issued
an aggregate of 237,254 shares of its common stock in exchange for all of the
outstanding shares of common stock of Meliora. Asymetrix issued an additional
30,746 shares of its common stock to convert into equity debts owed by Meliora
to Gordon Rogers. The aggregate dollar value of the common stock issued in
connection with the acquisition of Meliora (including the conversion of debt
into equity) was $2.4 million. Gordon Rogers, Asymetrix's Vice President,
Strategic Alliances, who at the time of the Meliora acquisition was the
President and Chief Executive Officer and a principal shareholder of Meliora,
received an aggregate of 149,373 shares of Asymetrix common stock, including
the 30,746 shares issued in connection with the conversion of debt into
equity. Furthermore, Mr. Rogers' spouse, Veda Storey, who at the time of the
Meliora acquisition was an executive officer and a principal shareholder of
Meliora, also received an aggregate of 118,627 shares of Asymetrix common
stock in connection with the Meliora acquisition. 11,862 shares of the common
stock received by each of Mr. Rogers and Ms. Storey are being held in escrow
with the Commerce Bank of Washington until July 1, 1999 to secure certain
representations and warranties of Mr. Rogers and Ms. Storey under the
Agreement and Plan of Reorganization dated as of June 22, 1998.
Vulcan Transactions. From January 1, 1998 until October 31, 1998, Asymetrix
subleased approximately 8,200 square feet of office space to Vulcan Northwest
Inc. ("Vulcan Northwest"), a company controlled by Mr. Allen. Pursuant to the
terms of this sublease, Vulcan Northwest paid rent of $18.25 per square foot
per year in monthly installments plus its pro rata portion of any additional
rent Asymetrix was required to pay under the prime lease. In connection with
Asymetrix's renewal of the prime lease, which was effective as of November 1,
1998, it discontinued its lease of this space. Rent accrued by Vulcan
Northwest under this sublease was approximately $166,658 in 1998 of which
$132,390 has been paid as of March 31, 1999. Asymetrix expects the remainder
will be paid in 1999.
In March 1998, Asymetrix entered into a Directed Engineering Agreement (the
"Engineering Agreement") with Vulcan Northwest, d/b/a APEX, the predecessor in
interest to APEX Online Learning, Inc. ("APEX"), pursuant to which Asymetrix
agreed to develop customized extensions of its Librarian product. The terms of
the Engineering Agreement are similar to other custom development arrangements
which Asymetrix has entered into with other third parties related to its
Librarian product. Pursuant to the terms of the Engineering Agreement,
Asymetrix retains all intellectual property rights to these extensions,
subject to a non-exclusive license to APEX to use the extension in connection
with its use of the Librarian product. Asymetrix recognized aggregate revenue
of $314,300 under the Engineering Agreement in 1998 and $31,200 through March
31, 1999. In July 1998, Asymetrix entered into a Services Agreement pursuant
to which it agreed to develop certain documentation for use together with the
customized version of Librarian created pursuant to the Engineering Agreement.
Pursuant to the terms of the Services Agreement, Asymetrix retains all
intellectual property rights to the documentation.
24
<PAGE>
Asymetrix recognized aggregate revenue of $50,562 under the Services Agreement
in 1998. Revenue under both agreements was recognized based on the percentage
of completion method. APEX also purchased an unlimited license to Librarian in
June 1998 for $50,000.
SuperCede Transactions. Throughout 1998 Asymetrix held 3,500,000 shares of
the Series B Preferred Stock of SuperCede, Inc., which was spun-off from
Asymetrix in September 1997. In January 1999, SuperCede sold substantially all
of its assets and ceased conducting any business. The total proceeds received
by SuperCede from such sale were less than the liquidation preference on the
Series A Preferred Stock, and Asymetrix does not expect to receive any further
value from its investment in SuperCede.
From January 1, 1998 until October 31, 1998, Asymetrix subleased
approximately 8,500 square feet of office space to SuperCede, Inc. Pursuant to
the terms of this sublease, SuperCede paid rent of $20.00 per square foot per
year in monthly installments plus its pro rata portion of any additional rent
Asymetrix was required to pay under the prime lease. In connection with
Asymetrix's renewal of the prime lease, which was effective as of November 1,
1998, it discontinued its lease of this space. Payments by SuperCede under
this sublease were approximately $132,390 in 1998.
Infomodelers Transactions. At the beginning of 1998 Asymetrix held 700,000
shares of the Series A Preferred Stock and 19 shares of the common stock of
Infomodelers, Inc. In March 1998, Asymetrix sold all 700,000 shares of its
Infomodelers Series A Preferred Stock for an aggregate purchase price of
approximately $2.0 million in cash, and sold 16 of its 19 shares of its
Infomodelers common stock for an aggregate purchase price of approximately
$390,000 in cash to Vulcan Ventures, Inc., an entity controlled by Mr. Allen.
In June 1998, Infomodelers sold all of its assets to Visio Corporation in
exchange for Visio common stock. In February 1999, Infomodelers was dissolved
and its assets (which consisted solely of Visio common stock) were distributed
to its shareholders. In connection with such dissolution, Asymetrix received
1,902 shares of Visio common stock.
From January 1998 through May 1998, Asymetrix subleased approximately 6,350
square feet of office space to Infomodelers. Rent was payable directly from
Infomodelers to the prime landlord in accordance with the terms of Asymetrix's
prime lease on the property. Infomodelers terminated this sublease in May
1998, and the space is now occupied by Asymetrix. Infomodelers accrued rent
under this sublease of $104,165 in 1998 none of which was paid in 1998. In
February 1999, Infomodelers paid $48,215 of this amount, and the remaining
balance was written off as uncollectable.
Asymetrix believes that the terms of each of the transactions described
above, taken as a whole, were no less favorable than Asymetrix could have
obtained from unaffiliated third parties. All future transactions between
Asymetrix and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested outside directors.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at Asymetrix's 2000
Annual Meeting of Stockholders must be received by Asymetrix at its principal
executive offices no earlier than February 26, 2000 and no later than March
26, 2000 in order to be included in Asymetrix's Proxy Statement and form of
proxy relating to that meeting, unless such meeting is held before April 25,
2000 or after July 24, 2000, in which case such proposals must be received by
Asymetrix at its principal executive offices no earlier than the close of
business on the 90th day prior to meeting date and no later than the later of
(i) the close of business on the 60th day prior to the meeting date or (ii)
the close of business on the 10th day following the day Asymetrix first makes
a public announcement of the meeting date.
Notwithstanding the foregoing, if the number of Class II directors to be
elected at the meeting is increased and there is no public announcement by
Asymetrix made before March 16, 2000 (or if such meeting is held
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before April 25, 2000 or after July 24, 2000, then before the 70th day prior
to the meeting date) naming all of the nominees for Class II director or
specifying the increased number of Class II directors to be elected at the
meeting, then proposals for nominees for any new positions created by the
increase in the number of Class II directors (but not proposals for any other
business) must be received by Asymetrix at its principal executive offices no
later than the close of business on the 10th day following the day Asymetrix
first makes a public announcement of the increase in the number of Class II
directors.
Asymetrix's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission for the year ended December 31, 1998 is available without
charge by writing to or calling Asymetrix's headquarters. Requests should be
directed to Asymetrix's Investor Relations Department at 110--110th Avenue NE,
Bellevue, Washington 98004, or [email protected].
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16 of the Exchange Act requires Asymetrix's directors and officers,
and persons who own more than 10% of Asymetrix's common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC and the
Nasdaq National Market. Such persons are required by SEC regulation to furnish
Asymetrix with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms provided to Asymetrix, Asymetrix
believes that all Section 16(a) filing requirements were met during 1998,
except Gordon Rogers was late in filing his Form 3, and was a single day late
in filing his Form 5.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
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PROXY
ASYMETRIX LEARNING SYSTEMS, INC.
110-110th Avenue NE
Bellevue, Washington 98004
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE MAY 25, 1999 ANNUAL MEETING OF STOCKHOLDERS OF
ASYMETRIX LEARNING SYSTEMS, INC.
The undersigned hereby appoints John D. Atherly and Steven Esau and each of
them as proxies, each with full powers of substitution, and hereby authorizes
them to represent and to vote, as designated below, all shares of common stock
of Asymetrix Learning Systems, Inc. ("Asymetrix") held of record by the
undersigned on April 1, 1999, at the Annual Meeting of Stockholders of Asymetrix
to be held on Tuesday, May 25, 1999, and at any continuations or adjournments
thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Annual Meeting and any adjournments or postponements thereof in the
manner described herein. If no contrary indication is made, the proxy will be
voted FOR the Class I Director nominees, FOR Proposals 2, 3 and 4, and in
accordance with the judgment of the persons named as proxies herein on any other
matters that may properly come before the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to signed and dated on reverse side.)
SEE REVERSE
SIDE
. FOLD AND DETACH HERE .
<PAGE>
Please mark your votes
as in this example. [X]
The Board of Directors unanimously recommends that you vote FOR the Class I
Director nominees and FOR Proposals 2, 3 and 4.
1. Election of Directors
[_] FOR all nominees listed below except as marked.
[_] WITHHOLD AUTHORITY to vote for all nominees.
To withhold authority to vote for any individual nominee, strike a line through
that nominee's name:
Sally Narodick Joseph DiNucci
2. Proposal to approve the amendment to Asymetrix's 1998 Equity Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Proposal to approve the adoption of Asymetrix's 1999 Employee Stock Purchase
Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Proposal to ratify the appointment KPMG LLP as independent auditors for
1999.
FOR AGAINST ABSTAIN
[_] [_] [_]
In accordance with their judgment, the proxies are authorized to vote upon such
other matters as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE ENCLOSED ENVELOPE.
PLEASE CHECK THE FOLLOWING BOX IF YOU PLAN TO ATTEND THE MEETING IN PERSON SO
ASYMETRIX CAN PLAN APPROPRIATELY
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This Proxy must be signed exactly as your
name appears hereon. If more than one
name appears, all persons so designated
should sign. Attorneys, executors,
administrators, trustees and guardians
should indicate their capacities. If the
signer is a corporation, please print
full corporate name and indicate capacity
of duly authorized officer executing on
behalf of the corporation. If the signer
is a partnership, please print full
partnership name and indicate capacity of
duly authorized person executing on
behalf of the partnership.
Signature:
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Date: , 1999
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Signature:
------------------------------
Date: , 1999
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. FOLD AND DETACH HERE .
