<PAGE>
As filed with the Securities and Exchange Commission on July 26, 1999
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASYMETRIX LEARNING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 91-1276003
-------------- --------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
110-110th Avenue NE
Bellevue, Washington 98004
(425) 462-0501
(Address and Telephone Number of Registrant's Principal Executive Offices)
1998 Equity Incentive Plan
1999 Employee Stock Purchase Plan
(Full Title of the Plans)
John D. Atherly
Vice President, Finance and Administration and Chief Financial Officer
Asymetrix Learning Systems, Inc.
110-110th Avenue NE
Bellevue, Washington 98004
(425) 462-0501
(Name, Address and Telephone Number of Agent For Service)
Copies to:
Jeffrey R. Vetter, Esq.
Jason M. Garlick, Esq.
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Amount Proposed Maximum Proposed Maximum Amount of
to be Offering Price Per Aggregate Offering Registration
Title of Securities to be Registered Registered Share Price Fee
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 1,450,000 $7.21875 (2) $10,467,188 (2) $2,909.88
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Additional shares available for grant and not yet subject to outstanding
options as of May 25, 1999 under the 1998 Equity Incentive Plan (1,000,000
Shares) and available for issuance as of May 25, 1999 under the 1999
Employee Stock Purchase Plan (450,000).
(2) Estimated solely for the purpose of calculating the registration in
accordance with Rule 457(c) of the Securities Act of 1933, based on the
average of the high and low prices of the Registrant's Common Stock as
reported by the Nasdaq national Market on July 21, 1999.
<PAGE>
ASYMETRIX LEARNING SYSTEMS, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------ ---------------------------------------
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 31, 1999 pursuant to Section
13(a) of Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which Annual Report contains audited financial
statements for the year ended December 31, 1998; and
(b) The Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 filed on May 17, 1999 pursuant to Section
13(a) of the Exchange Act.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A originally filed
on May 19, 1998 and declared effective June 12, 1988 under
Section 12(g) of the Securities Exchange Act, including any
amendment or report filed for the purpose of updating such
description.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities registered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed incorporated by reference herein and to be a part hereof from the date
of the filing of such documents.
Item 4. Description of Securities.
- ------- -------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
- ------ --------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers and Limitation of Liability.
- ------ ---------------------------------------------------------------------
As permitted by the Delaware General Corporation Law (the "DGCL"), the
Registrant's Amended and Restated Certificate of Incorporation includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under section 174 of
the DGCL (regarding unlawful dividends and stock purchases) or (iv) for any
transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the Registrant's Bylaws provide that (i) the
Registrant is required to indemnify its directors and officers to the fullest
extent permitted by the DGCL, subject to certain very limited exceptions, (ii)
the Registrant may indemnify its other employees and agents to the extent that
it indemnifies its officers and directors, unless otherwise required by law, its
Amended and Restated Certificate of Incorporation, its Bylaws or agreements,
(iii) the Registrant is required to advance expenses, as incurred, to its
directors and executive officers in connection with a legal proceeding to the
fullest extent permitted by the DGCL, subject to certain very limited exceptions
and (iv) the rights conferred in the Bylaws are not exclusive.
2
<PAGE>
Registrant has entered into Indemnification Agreements with each of
its current directors and executive officers to give such directors and officers
additional contractual assurances regarding the scope of the indemnification set
forth in the Registrant's Amended and Restated Certificate of Incorporation and
Bylaws and to provide additional procedural protections. At present, there is no
pending litigation or proceeding involving a director, officer or employee of
the Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.
Item 7. Exemption from Registration Claimed.
- ------ -----------------------------------
Not applicable.
Item 8. Exhibits.
- ------ --------
4.01 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.04 of the Registrant's
Registration Statement on Form S-1, Registration No. 333-49037
originally filed with the Commission on April 1, 1998 and
declared effective June 12, 1998 (the "Form S-1")).
4.02 Registrant's Bylaws (incorporated herein by reference to Exhibit
3.06 of the Form S-1).
4.03 Registrant's 1998 Equity Incentive Plan as amended.
4.04 Registrant's 1999 Employee Stock Purchase Plan.
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP.
24.01 Power of Attorney (see page 5).
Item 9. Undertakings.
- ------ ------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do
-------- -------
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the Registration
Statement.
3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
----
fide offering thereof.
- ----
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
----
fide offering thereof.
- ----
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions discussed in Item 6 hereof, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on this 23rd day of
July, 1999.
ASYMETRIX LEARNING SYSTEMS, INC.
By: /s/ James A. Billmaier
------------------------------
James A. Billmaier
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints James A. Billmaier and John D. Atherly,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-8, and to file the same with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done or by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ James A. Billmaier Chief Executive Officer and July 23, 1999
- ---------------------------------- Director
James A. Billmaier
Principal Financial Officer and
Principal Accounting Officer:
/s/ John D. Atherly Vice President, Finance and July 23, 1999
- ---------------------------------- Administration and Chief Financial
John D. Atherly Officer
Additional Directors:
/s/ Sally Narodick Director July 23, 1999
- ----------------------------------
Sally Narodick
/s/ Joseph DiNucci Director July 23, 1999
- ----------------------------------
Joseph DiNucci
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Ronald S. Posner Director July 23, 1999
- ----------------------------------
Ronald S. Posner
/s/ Kevin Oakes President, General Manager, July 23, 1999
- ---------------------------------- Learning Services and Director
Kevin Oakes
/s/ Shelley Harrison Director July 23, 1999
- ----------------------------------
Shelley Harrison, Ph.D.
/s/ Berte Kolde Chairman of the Board July 23, 1999
- ----------------------------------
Berte Kolde
</TABLE>
6
<PAGE>
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
4.01 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.04 of the Form S-1).
4.02 Registrant's Bylaws (incorporated herein by reference to Exhibit
3.06 of the Form S-1).
4.03 Registrant's 1998 Equity Incentive Plan as amended.
4.04 Registrant's 1999 Employee Stock Purchase Plan.
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP.
24.01 Power of Attorney (see page 5).
7
<PAGE>
Exhibit 4.03
ASYMETRIX LEARNING SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted by the Board of Directors on December 29, 1997
And as Amended on May 25, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
-------
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, and any of its Parent
and Subsidiaries, by offering them an opportunity to participate in the
Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
--------------------------
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 2,500,000 Shares. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued, will again be available for
grant and issuance in connection with future Awards under this Plan. Any
authorized shares not issued or subject to outstanding grants under the
Company's 1995 Combined Incentive and Nonqualified Stock Option Plan (the "Prior
Plan") on the Effective Date (as defined below) and any shares that are issuable
upon exercise of options granted pursuant to the Prior Plan that expire or
become unexercisable for any reason without having been exercised in full, will
no longer be available for grant and issuance under the Prior Plan, but will be
available for grant and issuance under this Plan. In addition, any shares
issued under the Prior Plan which are repurchased or forfeited will be available
for grant and issuance under this Plan. At all times the Company shall reserve
and keep available a sufficient number of Shares as shall be required to satisfy
the requirements of all outstanding Options granted under this Plan and all
other outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
--------------------
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
-------- -------
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
-----------
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
--------
services not in connection with the offer and sale of securities in a capital-
raising transaction. No person will be eligible to receive more than 500,000
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent or Subsidiary
of the Company (including new employees who are also officers and directors of
the Company or any Parent or Subsidiary of the Company), who are eligible to
receive up to a maximum of 1,000,000 Shares in the calendar year in which they
commence their employment. A person may be granted more than one Award under
this Plan.
-1-
<PAGE>
Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to this
Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards; provided, however, that any single Award of more than
-------- -------
20,000 shares to any individual shall require the approval of the
entire Board;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or compensation
plan of the Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the
--------------------
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company
the authority to grant an Award under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
--------------------
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
-2-
<PAGE>
Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
5.2 Date of Grant. The date of grant of an Option will be the
-------------
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period and Exercisability. Options may be
----------------------------------
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
--------
however, that no Option will be exercisable after the expiration of ten (10)
- -------
years from the date the Option is granted; and provided further that no ISO
----------------
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company ("Ten Percent Stockholder") will
be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at
one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines. Unless otherwise
determined by the Committee, the Award Agreement for any Option granted to a
full time employee that becomes exercisable over time shall provide that if,
subsequent to the grant date of an Option, such employee's work schedule is
reduced such that the employee is working less than full time but has not been
Terminated, then the number of Shares or percentage of Shares that become
exercisable at the times specified in the Award Agreement shall be reduced in
proportion to the reduction in the employee's work schedule.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
------------------
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth
-----------
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3) months
after the Termination Date (or such shorter or longer time period
not exceeding five (5) years as may be determined by the Committee,
with any exercise beyond three (3) months after the Termination Date
deemed to be an NQSO), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after a
Termination other than because of Participant's death or
disability), then Participant's Options may be exercised only to the
extent that such Options would have been exercisable by Participant
on the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no later
than twelve (12) months after the Termination Date (or such shorter
or longer time period not exceeding five (5) years as may be
determined by the Committee, with any such
-3-
<PAGE>
Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
exercise beyond (a) three (3) months after the Termination Date when
the Termination is for any reason other than the Participant's death
or Disability, or (b) twelve (12) months after the Termination Date
when the Termination is for Participant's death or Disability,
deemed to be an NQSO), but in any event no later than the expiration
date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to any
Shares whatsoever, after termination of service, whether or not
after termination of service the Participant may receive payment
from the Company or Subsidiary for vacation pay, for services
rendered prior to termination, for services rendered for the day on
which termination occurs, for salary in lieu of notice, or for any
other benefits. In making such determination, the Board shall give
the Participant an opportunity to present to the Board evidence on
his or her behalf. For the purpose of this paragraph, termination of
service shall be deemed to occur on the date when the Company
dispatches notice or advice to the Participant that his or her
service is terminated.
5.7 Limitations on Exercise. The Committee may specify a
-----------------------
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
-------------------
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market
Value of Shares on the date of grant with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year exceeds $100,000,
then the Options for the first $100,000 worth of Shares to become exercisable in
such calendar year will be ISOs and the Options for the amount in excess of
$100,000 that become exercisable in that calendar year will be NQSOs. In the
event that the Code or the regulations promulgated thereunder are amended after
the Effective Date of this Plan to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISOs, such different limit
will be automatically incorporated herein and will apply to any Options granted
after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
----------------------------------
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
-------- -------
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
-------------------
this Plan, no term of this Plan relating to an ISO will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
----------------
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
-4-
<PAGE>
Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
6.1 Form of Restricted Stock Award. All purchases under a
------------------------------
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If
such person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
--------------
to a Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8
of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
--------------------------------
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
----------------------
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature,
length and starting date of any Performance Period for each Stock Bonus; (b)
select from among the Performance Factors to be used to measure the performance,
if any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
Bonuses have been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are subject to
different Performance Periods and different performance goals and other
criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
---------------
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash
or whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this Plan
-------
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274
of the Code; provided, however, that Participants who are not
-------- -------
employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD Dealer") whereby the
Participant irrevocably elects to exercise the Option and to
sell a portion of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company;
or
(f) by any combination of the foregoing.
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
8.2 Loan Guarantees. The Committee may help the Participant pay
---------------
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
9.1 Withholding Generally. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 Voting and Dividends. No Participant will have any of the
--------------------
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
-------- -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
10.2 Financial Statements. The Company will, upon the request of
--------------------
a Participant, provide the financial statements included in its most recent Form
10-K or 10-Q to Participant prior to such Participant's purchase of Shares under
this Plan, and will, upon the request of a Participant, provide such Participant
with the most recent annual report of the Company during the period such
Participant has Awards outstanding; provided, however, the Company will not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
---------------
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as determined by the Committee and
set forth in the Award Agreement with respect to Awards that are not ISOs.
During the lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award may be made only by the
Participant unless otherwise determined by the Committee and set forth in the
Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
cancellation of purchase money indebtedness, at the Participant's Exercise
Price or Purchase Price, as the case may be.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
-------- -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
----------------------------------------------
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
-----------------------
under this Plan will confer or be deemed to confer on any Participant any
right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any
way the right of the Company or any Parent or Subsidiary of the Company to
terminate Participant's employment or other relationship at any time, with or
without cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. In the
------------------------------------------------
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders
of the Company or their relative stock holdings and the Awards granted under
this Plan are assumed, converted or replaced by the successor corporation,
which assumption will be binding on all Participants), (c) a merger in which
the Company is the surviving corporation but after which the stockholders of
the Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (d) the sale of substantially all of the assets of the Company,
or (e) the acquisition, sale, or transfer of more than 50% of the outstanding
shares of the Company by tender offer or similar transaction, any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants. In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue,
in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided
above, pursuant to a transaction described in this Subsection 18.1, such
Awards will accelerate in full immediately prior to such transaction.
18.2 Other Treatment of Awards. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from time
-----------------------------------
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
---------------------------------
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective
Date"). This Plan shall be approved by the stockholders of the Company
(excluding Shares issued pursuant to this Plan), consistent with applicable
laws, within twelve (12) months before or after the date this Plan is adopted
by the Board. Upon the Effective Date, the Committee may grant Awards pursuant
to this Plan; provided, however, that: (a) no Option may be exercised prior to
-------- -------
initial stockholder approval of this Plan; (b) no Option granted pursuant to an
increase in the number of Shares subject to this Plan approved by the Board will
be exercised prior to the time such increase has been approved by the
stockholders of the Company; and (c) in the event that stockholder approval of
such increase is not obtained within the time period provided herein, all Awards
granted pursuant to such increase will be canceled, any Shares issued pursuant
to any Award granted pursuant to such increase will be canceled, and any
purchase of Shares pursuant to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of Washington.
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
-------- -------
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
--------------------------
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
-----------
the following meanings:
"Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the commission of an act of theft, embezzlement, fraud,
dishonesty, intoxication at work, disclosure of confidential information or a
breach of fiduciary duty to the Company or a Parent or Subsidiary of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board.
"Company" means Asymetrix Learning Systems, Inc. or any successor
corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which
the Common Stock is listed or admitted to trading as reported in The
---
Wall Street Journal;
-------------------
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal;
--------------
(d) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in the
initial public offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the Securities Act;
or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
"Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under this Plan.
"Performance Factors" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or earnings
before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder return
growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
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Asymetrix Learning Systems, Inc.
1998 Equity Incentive Plan
"Plan" means this Asymetrix Corporation 1998 Equity Incentive Plan,
as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
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<PAGE>
Exhibit 4.04
ASYMETRIX LEARNING SYSTEMS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted by the Board of Directors on May 25, 1999
1. ESTABLISHMENT OF PLAN. Asymetrix Learning Systems, Inc. (the
"Company") proposes to grant options for purchase of the Company's Common Stock
to eligible employees of the Company and its Participating Subsidiaries (as
hereinafter defined) pursuant to this Employee Stock Purchase Plan (this
"Plan"). "Participating Subsidiaries" are those "parent corporations" and
"subsidiary corporations" of the Company (as defined in Sections 424(e) and
424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code")) that the Board of Directors of the Company (the "Board") designates
from time to time as corporations that shall participate in this Plan. The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined
in this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein. A total of 450,000 shares of the Company's Common
Stock is reserved for issuance under this Plan. In addition, on each January 1,
the aggregate number of shares reserved for issuance under the Plan will be
increased automatically by the number of shares purchased under the Plan in the
preceding calendar year; provided that the aggregate number of shares issued
over the term of the Plan shall not exceed 4,500,000 shares. Such number shall
be subject to adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees
of the Company and Participating Subsidiaries with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). Subject to the provisions of this
Plan and the limitations of Section 423 of the Code or any successor provision
in the Code, all questions of interpretation or application of this Plan shall
be determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
<PAGE>
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary ten days before the beginning of such Offering Period;
(b) employees who are customarily employed for 20 hours or less per
week;
(c) employees who are customarily employed for five months or less
in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, 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 the Company or any
of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, 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 the Company or any of its
Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an
"Offering Period") shall be of 24 months duration commencing on February 1 and
August 1 of each year and ending on July 31 and January 31 of each year. Each
Offering Period shall consist of four six-month purchase periods (individually,
a "Purchase Period") during which payroll deductions of the participants are
accumulated under this Plan. The first business day of each Offering Period is
referred to as the "Offering Date". The last business day of each Purchase
Period is referred to as the "Purchase Date". The first Offering Date shall be
August 1, 1999. The Committee shall have the power to change the duration of
Offering Periods or Purchase Periods with respect to offerings without
stockholder approval if such change is announced at least 15 days prior to the
scheduled beginning of the first Offering Period or Purchase Period to be
affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement in the form of Exhibit A (a "Subscription Agreement") to the Company's
human resources department (the "HR Department") not later than five days before
such Offering Date unless a later time for filing the Subscription Agreement is
set by the Committee for all eligible employees with respect to a given Offering
Period. An eligible employee who does not deliver a Subscription Agreement to
the HR Department by such date after
<PAGE>
becoming eligible to participate in such Offering Period shall not participate
in that Offering Period or any subsequent Offering Period unless such employee
enrolls in this Plan by filing a subscription agreement with the HR Department
not later than five days preceding a subsequent Offering Date. Once an
employee becomes a participant in an Offering Period, such employee will
automatically participate in the Offering Period commencing immediately
following the last day of the prior Offering Period unless the employee
withdraws or is deemed to withdraw from this Plan or terminates further
participation in the Offering Period as set forth in Section 11 below. Such
participant is not required to file any additional Subscription Agreement in
order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i) 85% of the
fair market value of a share of the Company's Common Stock on the Offering Date,
or (ii) 85% of the fair market value of a share of the Company's Common Stock
on the Purchase Date, provided, however, that the number of shares of the
Company's Common Stock subject to any option granted pursuant to this Plan
shall not exceed the lesser of (a) the maximum number of shares set by the
Committee pursuant to Section 10(c) below with respect to the applicable
Purchase Date (if any), or (b) the maximum number of shares which may be
purchased pursuant to Section 10(b) below with respect to the applicable
Purchase Date. The fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 8 hereof.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be 85% of the lesser of:
(a) the fair market value on the Offering Date; or
(b) the fair market value on the Purchase Date.
For purposes of this Plan, the term "Fair Market Value" means, as of any
date, the value of a share of the Company's Common Stock determined as follows:
(i) if such Common Stock is then quoted on the Nasdaq National Market, its
closing price on the Nasdaq National Market on the date of determination as
reported in The Wall Street Journal;
(ii) if such Common Stock is publicly traded and is then listed on a national
securities exchange, its closing price on the date of determination on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading as reported in The Wall Street Journal;
<PAGE>
(iii) if such Common Stock is publicly traded but is not quoted on the Nasdaq
National Market nor listed or admitted to trading on a national securities
exchange, the average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal; or
(iv) if none of the foregoing is applicable, by the Board in good faith.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made
as a percentage of the participant's compensation in 1% increments of not less
than 1%, nor greater than 10% or such lower limit set by the Committee.
Compensation shall mean total cash compensation paid by the Company, including
base salary, commissions, bonuses and incentive compensation not to exceed
$250,000 per calendar year, provided however, that for purposes of determining
a participant's compensation, any election by such participant to reduce his
or her regular cash remuneration under Sections 125 or 401(k) of the Code
shall be treated as if the participant did not make such election. Payroll
deductions shall commence on the first payday of the Offering Period and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided in this Plan.
(b) A participant may decrease or increase the rate of payroll
deductions during an Offering Period by filing with the HR Department a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than 15 days after the
HR Department's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such
change in the rate of payroll deductions may be made at any time during an
Offering Period, but not more than one change may be made effective during any
Offering Period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the HR Department
a new authorization for payroll deductions not later than 15 days before the
beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the HR Department
a request for cessation of payroll deductions. Such reduction shall be
effective beginning with the next payroll period starting more than 15 days
after the HR Department's receipt of the request and no further payroll
deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date
of the request shall be used to purchase Common Stock in accordance with
Section 9(e) below. A participant may not resume making payroll deductions
during the Offering Period in which he or she reduced his or her payroll
deductions to zero.
<PAGE>
(d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in effect
(and provided that the participant has not withdrawn from the Offering Period
Pursuant to Section 11), the Company shall apply the funds then in the
participant's account to the purchase of whole shares of Common Stock reserved
under the option granted to such participant with respect to the Offering
Period to the extent that such option is exercisable on the Purchase Date. The
purchase price per share shall be as specified in Section 8 of this Plan. Any
cash remaining in a participant's account after such purchase of shares shall
be refunded to such participant in cash, without interest; provided, however
that if the amount remaining in such participant's account on a Purchase Date
is less than the amount necessary to purchase a full share of Common Stock of
the Company, such amount shall be carried forward, without interest, into the
next Purchase Period or Offering Period, as the case may be. In the event that
this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practical after the Purchase Date, the number of
shares of Common Stock purchased by each participant shall be deposited into an
account established in the participant's name at a stock brokerage or other
financial services firm designated by the Company (the "ESPP Broker"). Subject
to the notice requirements of Section 17, a participant shall be free to (i)
undertake a disposition (as that term is defined in Section 424(c) of the Code)
of the shares in the ESPP Broker account at any time, whether by sale, exchange,
gift, or other transfer of legal title, (ii) move those shares to another
brokerage account of participant's choosing or (iii) request that a stock
certificate representing the shares be issued and delivered to the participant.
(g) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any
Subsidiary, exceeds $25,000 in fair market value, determined as of the
Offering Date (or such other limit as may be imposed by the Code) for each
calendar year in which the employee participates in this
<PAGE>
Plan. The Company shall automatically suspend the payroll deductions of any
participant as necessary to enforce such limit provided that when the Company
automatically resumes such payroll deductions, the Company must apply the rate
in effect immediately prior to such suspension.
(b) No more than 200% of the number of shares that could have been
purchased at a purchase price of 85% of the fair market value of a share of the
Company's Common Stock on the Offering Date may be purchased by a participant on
any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than 30 days prior to the commencement of any Offering Period, the Committee
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the
"Maximum Share Amount"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. In no event shall the Maximum Share Amount
exceed the amounts permitted under Section 10(b) above. If a new Maximum Share
Amount is set, then all participants must be notified of such Maximum Share
Amount prior to the commencement of the next Offering Period. Once the Maximum
Share Amount is set, it shall continue to apply with respect to all succeeding
Purchase Dates and Offering Periods unless revised by the Committee as set
forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such
event, the Company shall give written notice of such reduction of the number of
shares to be purchased under a participant's option to each participant affected
thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of
the applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the HR Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be
elected at any time at least 15 days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest,
and his or her interest in this Plan shall terminate. In the event a
participant voluntarily elects to withdraw from this Plan, he or she may not
resume his or her participation in this Plan during the same Offering Period,
but he or she may participate in any Offering Period
<PAGE>
under this Plan which commences on a date subsequent to such withdrawal by
filing a new authorization for payroll deductions in the same manner as set
forth above for initial participation in this Plan.
(c) If the purchase price on the first day of any current Offering
Period in which a participant is enrolled is higher than the purchase price on
the first day of any subsequent Offering Period, the Company will
automatically enroll such participant in the subsequent Offering Period. Any
funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period. A participant does not need to file any forms with the Company to
automatically be enrolled in the subsequent Offering Period.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee of the Company or of a
Participating Subsidiary, immediately terminates his or her participation in
this Plan. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representative, without interest. For purposes of this
Section 12, an employee will not be deemed to have terminated employment or
failed to remain in the continuous employ of the Company or of a Participating
Subsidiary in the case of sick leave, military leave, or any other leave of
absence approved by the Board; provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll deductions
of a participant in this Plan.
14. CAPITAL CHANGES.
(a) Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each option under
this Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under this Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under this Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Committee, whose determination shall be final,
<PAGE>
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this
Plan prior to such termination.
(c) In the event of (i) a merger or consolidation in which the
Company is not the surviving corporation (other than a merger or consolidation
with a wholly-owned subsidiary, a reincorporation of the Company in a
different jurisdiction, or other transaction in which there is no substantial
change in the stockholders of the Company or their relative stock holdings and
the options under this Plan are assumed, converted or replaced by the
successor corporation, which assumption will be binding on all participants),
(ii) a merger in which the Company is the surviving corporation but after
which the stockholders of the Company immediately prior to such merger (other
than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of
substantially all of the assets of the Company or (iv) the acquisition, sale,
or transfer of more than 50% of the outstanding shares of the Company by
tender offer or similar transaction, the Plan shall continue for all Offering
Periods which began prior to the transaction and shares will be purchased
based on the fair market value of the surviving corporation's stock on each
Purchase Date (taking into account the exchange ratio, where necessary).
(d) The Committee may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, or in the event of the Company being consolidated with or merged
into any other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the
end of each Purchase Period a
<PAGE>
report of his or her account setting forth the total payroll deductions
accumulated, the number of shares purchased, the per share price thereof and
the remaining cash balance, if any, carried forward to the next Purchase
Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two years from the
Offering Date or within one year from the Purchase Date on which such shares
were purchased (the "Notice Period"). The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section
423 or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company,
the Committee or the Board, be reformed to comply with the requirements of
Section 423. This Section 19 shall take precedence over all other provisions
in this Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the date that is the First Offering
Date (as defined above). This Plan shall be approved by the stockholders of the
Company, in any manner permitted by applicable corporate law, within twelve
months before or after the date this Plan is adopted by the Board. No purchase
of shares pursuant to this Plan shall occur prior to such stockholder approval.
This Plan shall continue until the earlier to occur of (a) termination of this
Plan by the Board (which termination may be effected by the Board at any time),
(b) issuance of all of the shares of Common Stock reserved for issuance under
this Plan, or (c) ten years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
<PAGE>
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the
event of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or automated quotation system upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Washington.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 hereof within twelve months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan; or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
<PAGE>
(c) Notwithstanding the foregoing, the Committee may make such
amendments to the Plan as the Committee determines to be advisable if the
continuation of the Plan of any Offering Period would result in financial
accounting treatment for the Plan that is different from the financial
accounting treatment in effect on the date this Plan is adopted by the Board.
<PAGE>
EXHIBIT 5.01
------------
July 23, 1999
Asymetrix Learning Systems, Inc.
110 - 110th Avenue, NE
Bellevue, WA 98004
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about July 26, 1999 in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 1,450,000 shares of your Common Stock, $0.01 par value per share
(the "Stock"), subject to issuance as follows: (a) an aggregate of 1,000,000
additional shares of your Common Stock reserved for issuance by you under your
1998 Equity Incentive Plan (the "Equity Plan") and (b) an aggregate of 450,000
additional shares of your Common Stock, reserved for issuance by you upon
exercise of purchase rights to be granted under your 1999 Employee Stock
Purchase Plan (the "Purchase Plan"). In rendering this opinion, we have
examined the following:
(1) your registration statement on Form 8-A (File Number 000-24289) filed
with the Commission on May 19, 1998 and declared effective on June 12,
1998;
(2) your Annual Report on Form 10-k for the year ended December 31, 1998;
(3) your Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
(4) the Registration Statement, together with the Exhibits filed as a part
thereof;
(5) the Prospectuses prepared in connection with the Registration
Statement;
(6) the NASDAQ National Market Notification Form for Listing Additional
Shares prepared in connection with the Registration Statement;
(7) the Purchase Plan and related award grant and exercise agreement
forms;
(8) the Equity Incentive Plan and related award grant and exercise
agreement forms;
(9) your Amended and Restated Certificate of Incorporation filed with the
Delaware Secretary of State on June 17, 1998 and your Bylaws, each of
which are listed as exhibits to the Registration Statement;
<PAGE>
(10) the minutes of meetings and actions by written consent of your
stockholders and Board of Directors that are contained in your minute
books that are in our possession;
(11) the stock records that you have provided to us (consisting of
certificate from your transfer agent of even date herewith verifying
the number of your issued and outstanding shares of capital stock as
of the date hereof and a list of option and warrant holders respecting
your capital and of any rights to purchase capital stock that was
prepared by you and dated of even date herewith verifying the number
of such issued and outstanding securities).
(12) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and other
representations.
We have also confirmed the continued effectiveness of your registration
under the Securities Exchange Act of 1934, as amended, by telephone call to the
offices of the Commission and have confirmed your eligibility to use Form S-8.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due execution and
delivery of all documents where due execution and delivery are prerequisites to
the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from records referred to
above. We have made no independent investigation or other attempt to verify the
accuracy of any of such information or to determine the existence or non-
existence of any other factual matters; however, we are not aware of any facts
-------
that would cause us to believe that the opinion expressed herein is not
accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the United States of America and
the State of California and (without reference to case law or secondary sources)
the existing Delaware General Corporation Law.
Based upon the foregoing, it is our opinion that the 1,450,000 shares of
Stock that may be issued and sold by you upon the exercise of (a) purchase
rights granted or to be granted under the Purchase Plan, and (b) stock options
granted or to be granted under the Equity Incentive Plan, when issued and sold
in accordance with the applicable plan and stock option or purchase agreements
to be entered into thereunder, and in the manner referred to in the Prospectuses
associated with the Registration Statement, will be validly issued, fully paid
and nonassessable.
<PAGE>
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
/s/ Fenwick & West LLP
FENWICK & WEST LLP
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Asymetrix Learning Systems, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-8 of Asymetrix Learning Systems, Inc. of our reports relating to the
consolidated balance sheets of Asymetrix Learning Systems, Inc. and subsidiaries
as of December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, and related financial statement
schedule, which reports appear in the 1998 Annual Report on Form 10-K of
Asymetrix Learning Systems, Inc.
/s/ KPMG LLP
KPMG LLP
Seattle, Washington
July 21, 1999
