<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
LIGHTSPAN, INC.
---------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
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9. Date Filed:
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<PAGE> 2
LIGHTSPAN, INC.
10140 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121-1520
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 2000
TO THE STOCKHOLDERS OF LIGHTSPAN, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Lightspan, Inc., a Delaware corporation (the "Company"), will be held on June
28, 2000 at 10:00 a.m. local time at The Radisson Hotel, 3299 Holiday Court, La
Jolla, CA 92037, for the following purposes:
1. To elect four Class I directors to hold office until the 2003 Annual
Meeting of Stockholders.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending January 31, 2001.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 4, 2000,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ KATHLEEN R. MCELWEE
--------------------------------
Kathleen R. McElwee
Secretary
San Diego, California
May 22, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
LIGHTSPAN, INC.
10140 CAMPUS POINT DRIVE
SAN DIEGO, CALIFORNIA 92121-1520
------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Lightspan, Inc, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on June 28, 2000, at 10:00 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at The Radisson Hotel, 3299 Holiday Court, La Jolla,
CA 92037. The Company intends to mail this proxy statement and accompanying
proxy card on or about May 22, 2000, to all stockholders entitled to vote at the
Annual Meeting.
REINCORPORATION AND NAME CHANGE
On January 31, 2000, the Company changed its state of incorporation from
California to Delaware. On April 10, 2000, the Company changed its name from
"The Lightspan Partnership, Inc." to "Lightspan, Inc." References to the
"Company" in this Proxy Statement refer both to the present Delaware company and
to the predecessor California company, as appropriate.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy card and any additional information furnished to stockholders. Copies
of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company or, at the Company's request, Corporate Investor Communications, Inc., a
professional proxy solicitation firm. No additional compensation will be paid to
directors, officers or other regular employees for such services, but Corporate
Investor Communications, Inc. will be paid its customary fee, estimated to be
about $1,000, if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on May
4, 2000 (the "Record Date") will be entitled to notice of and to vote at the
Annual Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 44,239,514 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes.
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Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 10140
Campus Point Drive, San Diego, California 92121-1520, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is February 28, 2001. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so no later than the close of business on March 30, 2001.
Stockholders are also advised to review the Company's Bylaws, which contain
additional requirements with respect to advance notice of stockholder proposals
and director nominations.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide
that the Board of Directors shall be divided into three classes, with each class
having a three-year term. Vacancies on the Board may be filled only by persons
elected by a majority of the remaining directors. A director elected by the
Board to fill a vacancy (including a vacancy created by an increase in the
number of directors) shall serve for the remainder of the full term of the class
of directors in which the vacancy occurred and until such director's successor
is elected and qualified.
The Board of Directors is presently composed of thirteen members. There
are five directors in the class whose term of office expires in 2000 ("Class
I"). L. John Doerr, who is currently a member of Class I, has decided not to
stand for re-election. As a result, effective as of the Annual Meeting, the
Board of Directors has approved a reduction in the size of the Board to twelve
members with the size of Class I being reduced to four members.
Each of the four nominees for election to Class I is currently a
director of the Company who was appointed by the Board. If elected at the Annual
Meeting, each of the nominees would serve until the 2003 annual meeting and
until his or her successor is elected and has qualified, or until such
director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the four nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated
and each person whose term of office as a director will continue after the
Annual Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING
JOHN H. BRANDON
Mr. John H. Brandon, age 44, has served as the Company's Executive Vice
President and President of Academic Systems since the Company acquired Academic
Systems in September 1999. From June 1997 to September 1999, he served as
President and Chief Executive Officer of Academic Systems. From 1987 to May
1997, Mr. Brandon held various management positions at Adobe Systems, a provider
of Web and print publishing software, and most recently was Vice President and
General Manager of Adobe North America. Mr. Brandon holds a Bachelor of Arts
from the University of California at Davis.
BARRY J. SCHIFFMAN
Mr. Barry J. Schiffman, age 54, has served as one of the Company's
directors since August 1997. Since 1996, Mr. Schiffman has served as President,
Chief Investment Officer and a director of JAFCO America Ventures, Inc., a
venture capital firm. Prior to JAFCO, he was a general partner at Weiss, Peck &
Greer Venture Partners, a venture capital firm. Mr. Schiffman is currently
chairman of AirGate PCS, Inc. (PCSA), an affiliate of Sprint, and member of the
board of several private companies. Mr. Schiffman holds a Bachelor of Science
from Georgia Institute of Technology and a Masters in Business Administration
from the Stanford Graduate School of Business.
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JEFFREY P. SANDERSON
Mr. Jeffrey P. Sanderson, age 41, has served as one of the Company's
directors since December 1998. Since June 1984, Mr. Sanderson has served as
General Manager of Business Development for the Consumer and Commerce Group of
Microsoft Corporation, a software company. Mr. Sanderson holds a Bachelor of
Arts from Princeton University and attended the Harvard Business School.
LEE MASTERS
Mr. Lee Masters, age 48, has served as one of the Company's directors
since May 2000. Since January 1999, Mr. Masters has been President and Chief
Executive Officer of Liberty Digital, Inc., a new media investment company.
Prior to Liberty Digital, Mr. Masters was President and CEO of E! Entertainment
Television from January 1990 to December 1998. Mr. Masters was formerly
executive vice president and general manager of MTV. Mr. Masters attended
Philadelphia's Temple University where he studied mathematics and philosophy.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
DAVID D. HILLER
Mr. David D. Hiller, age 46, has served as one of the Company's
directors since September 1996. Since October 1993, Mr. Hiller has served as
Senior Vice President of Development at Tribune Company, a media company. He is
responsible for strategic planning and acquisitions for all Tribune businesses.
Mr. Hiller currently serves on the boards of directors of several private
companies. He holds a Bachelor of Arts from Harvard College and a Juris Doctor
from Harvard Law School.
BRUCE W. RAVENEL
Mr. Bruce W. Ravenel, age 50, has served as one of the Company's
directors since 1994. From June 1999 to March 2000, he served as a director and
Executive Vice President of Liberty Digital, Inc., a new media investment
company. From September 1998 to June 1999 he was employed by Liberty Media
Corporation in connection with the formation of Liberty Digital. From April 1998
to September 1998, Mr. Ravenel was Executive Vice President -- Interactive
Ventures of TCI Communications, Inc., a former subsidiary of
Tele-Communications, Inc. Mr. Ravenel also served as President and Chief
Executive Officer of TCI.Net, Inc. and Senior Vice President -- Internet
Services of TCI Communications, Inc. from January 1996 to April 1998. Mr.
Ravenel also served as Senior Vice President and Chief Operating Officer of TCI
Technology Ventures, Inc. from March 1994 to January 1996. Mr. Ravenel was a
founder and served on the board of directors of At Home Corporation, a media
company, from March 1995 until March 1999. He serves on the boards of directors
of several private companies. Mr. Ravenel holds a Bachelor of Arts from the
University of Colorado, where he also studied in the doctoral program in
computer science.
CARL ZEIGER
Mr. Carl Zeiger, age 57, co-founded Lightspan and has served as the
Company's President and Chief Operating Officer and as one of the Company's
directors since September 1993. Prior to founding Lightspan, Mr. Zeiger served
as the President and Chief Operating Officer of Jostens Learning Corporation.
Along with Mr. Kernan, Mr. Zeiger developed Jostens Learning into a leading
supplier of pre-kindergarten through adult educational software. Prior to
joining Jostens Learning, Mr. Zeiger served as Senior Vice President of Finance
for Integrated Software Systems Corporation, a leading provider of presentation
graphics software, and managed its initial and secondary public offerings and
its eventual sale to Computer Associates. Mr. Zeiger is a certified public
accountant in the State of California and holds a Bachelor of Science from the
University of Denver.
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JOHN E. KOLE
Mr. John E Kole, age 32, has served as one of the Company's directors
since May 2000. Since June 1999, Mr. Kole has served as Managing Director at
Comcast Interactive Capital and is responsible for evaluating and negotiating
new investments as well as strategic and financial counsel to portfolio
companies. Prior to joining Comcast Interactive Cable, Mr. Kole was an
investment banker in Credit Suisse First Boston's Media and Telecommunications
Group, where he advised both traditional and new media clients in strategic and
capital markets transactions. Previously, Mr. Kole was an Associate in the
Mergers & Acquisitions Group of Davis Polk & Wardwell. Mr. Kole currently serves
on the board of directors of CultureFinder, PlanSoft and QuickBuy. Mr. Kole
holds a Juris Doctorate from the University of Michigan and a Bachelor of Arts
from Princeton University.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING
JAMES W. BREYER
Mr. James W. Breyer, age 38, has served as one of the Company's
directors since December 1993. Since 1990, Mr. Breyer has been a partner at
Accel Partners, a venture capital firm. He is responsible for Accel's
involvement in more than twenty companies that have completed public offerings
or successful mergers. Mr. Breyer currently serves on the boards of directors of
Actuate, a provider of electronic business services, HearMe, a provider of
real-time Internet communication tools, RealNetworks, a provider of streaming
media technology on the Internet, and several private companies. Mr. Breyer
holds a Bachelor of Science degree from Stanford University and a Masters in
Business Administration from the Harvard Business School.
JOHN T. KERNAN
Mr. John T. Kernan, age 54, co-founded Lightspan and has served as the
Company's Chairman and Chief Executive Officer since September 1993. Prior to
founding Lightspan, Mr. Kernan served as Chairman and Chief Executive Officer of
Jostens Learning Corporation, an educational software company. Mr. Kernan
developed Jostens Learning from a start-up company in 1985 (then named Education
Systems Technology Corporation) to one of the largest educational software
businesses in the United States. Under Mr. Kernan's leadership, Jostens Learning
was a leading supplier of pre-kindergarten through adult educational software.
Prior to founding Jostens Learning, Mr. Kernan was an executive with Gill Cable
Corporation, a Northern California cable TV operator. He also was Vice President
of Product Development for DELTAK, Inc. (now NETg), then the nation's largest
provider of video-based training for technical professionals. Mr. Kernan was the
President of the Software Publishers Association, has been named "Educator of
the Decade" by Electronic Learning Magazine and regional "Entrepreneur of the
Year" by Inc. Magazine, among other distinctions. Mr. Kernan helped found
Academic Systems, which has since been acquired by Lightspan, and Elemental
Software, which has since been acquired by Macromedia. Mr. Kernan sits on the
boards of Teach.com and TechNet. Mr. Kernan holds a Bachelor of Science from
Loyola College.
BARRIE USHER
Mr. Barrie Usher, age 58, has served as one of the Company's directors
since May 2000. Since March 2000, Mr. Usher has served as President and Chief
Executive Officer of Cinar Corporation an integrated entertainment and education
company that develops, produces, markets and distributes high quality
non-violent programming and supplemental education products for children,
families and educators worldwide. Prior to joining Cinar, Mr. Usher was Senior
Vice-President of Canadian Individual Insurance Operations of Manulife
Financial, Canada's largest Life Insurance Company. Prior to that he was
President and Chief Executive Officer of New York Life Canadian subsidiary. Mr.
Usher was also in the Canadian Banking Industry and he held Senior Executive
positions with two of Canada's major Banks. Mr. Usher holds a Bachelor of
Commerce McGill University.
DAVID M. WOODROW
Mr. Woodrow, age 54, has served as one of the Company's directors since
May 2000. Since July 1999 Mr Woodrow has been Executive Vice President of
Business Development for Cox Communications, Inc. Prior to his current position,
Mr. Woodrow has held several positions at Cox Communications, Inc. since joining
in 1982
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including Senior Vice President of Broadband Services, Senior Vice President of
Operations, Vice President and General Manager for Cox Cable in Santa Barbara,
California, Western Regional Manager and Director of Business Development. Prior
to joining Cox Communication, Inc., Mr. Woodrow worked with the Office Systems
and Technology Components Group of Exxon Enterprises in New York, and was
responsible for the establishment of new business ventures. He was employed by
Pitney Bowes, Inc., in Stamford, Conn. for six years before joining Exxon. Mr.
Woodrow holds both a Bachelor of Science and a Master of Science from Purdue
University, and a Masters in Business Administration from the University of
Connecticut.
CURRENT DIRECTORS NOT STANDING FOR RE-ELECTION
L. JOHN DOERR
Mr. L. John Doerr, age 48, has served as one of the Company's directors
since December 1993. Since 1980, Mr. Doerr has been a partner at Kleiner Perkins
Caufield & Byers, a venture capital firm. Mr. Doerr was the founding Chief
Executive Officer of Silicon Compilers. Mr. Doerr currently serves on the boards
of directors of Intuit, a producer of electronic finance software, Amazon.com,
an online retailer, Excite@home, a broadband interactive media company, Epicor
Software Corporation, an enterprise software company, Healtheon, an online
healthcare company, Homestore.com, an online real-estate company, Drugstore.com,
an online drugstore, MSCO, a marketing company and Sun Microsystems, a provider
of network computing products and services, as well as several privately held
companies. Mr. Doerr co-manages the Technology Network, the high-technology
community's political action organization. He holds a Bachelor of Science and
Master of Science from Rice University and a Masters in Business Administration
from the Harvard Business School.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended January 31, 2000, the Board of Directors
held seven meetings. The Board has an Audit Committee and a Compensation
Committee.
The Audit Committee meets with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of three
non-employee directors: Messrs. Hiller, Sanderson and Schiffman. It met one time
during the fiscal year ended January 31, 2000.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two non-employee directors:
Messrs. Breyer and Doerr. It met one time during the fiscal year ended January
31, 2000. The Board will appoint a successor to Mr. Doerr when his directorship
ends.
During the fiscal year ended January 31, 2000, each Board member
attended 75% or more of the aggregate of the meetings of the Board and of the
committees on which he served and held during the period for which he was a
director or committee member, respectively.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 31, 2001 and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has
audited the Company's financial statements since its inception in 1993.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the Annual Meeting
will be required to ratify the selection of Ernst & Young LLP. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 31, 2000 by: (i) each
current director and each nominee for director; (ii) each of the executive
officers named in the Summary Compensation Table; (iii) all executive officers
and current directors of the Company as a group; and (iv) all those known by the
Company to be beneficial owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-------------------------------------------
SHARES
ACQUIRABLE
WITHIN 60
TOTAL DAYS OF
NUMBER OF MARCH 31, PERCENT OF
BENEFICIAL OWNER SHARES 2000 TOTAL
- ------------------------------------------ ---------- -------- ----------
<S> <C> <C> <C>
John T. Kernan 1,301,834 1,263 2.9%
Carl Zeiger 1,288,500 -- 2.9%
John H. Brandon 237,368 116,158 *
Kathleen R. McElwee 61,978 61,978 *
Winifred Wechsler 61,978 14,583 *
James W. Breyer (2) 3,130,503 18,579 7.1%
Accel Partners
L. John Doerr (3) 3,077,501 19,011 7.0%
Kleiner, Perkins, Caufield & Byers
Jeffrey P. Sanderson (4) 2,940,440 16,657 6.6%
Microsoft Corporation
David D. Hiller (5) 1,966,840 90,425 4.4%
Tribune Company
John E. Kole (6) 2,406,130 -- 5.4%
Comcast Interactive Capital LP
Lee Masters (7) 4,071,076 11,773 9.2%
Liberty Digital, Inc
Barry J. Schiffman (8) 1,307,900 -- 3.0%
JAFCO America Ventures, Inc.
Barrie Usher (9) 1,250,000 -- 2.8%
CINAR Corporation
David M. Woodrow (10) 1,041,667 -- 2.4%
Cox Communications Holding, Inc.
Bruce W. Ravenel (11) 10,000 -- *
All directors and officers as a group (15 persons) 24,153,715 350,427 54.2%
</TABLE>
- ----------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless
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otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, the Company believes that each
of the stockholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 44,220,515 shares outstanding on
March 31, 2000, adjusted as required by rules promulgated by the SEC.
(2) Mr. Breyer's business address is 428 University Avenue, Palo Alto, CA
94301.
The shares shown as beneficially owned by Mr. Breyer include:
- 2,271,960 shares held by Accel IV L.P. and 14,068 shares that Accel IV
L.P. has the right to acquire on or before May 31, 2000 by exercising
a warrant it holds, which together represents 5.2% of the total number
of shares outstanding.
- 91,769 shares held by Accel Investors `93 L.P., and 568 shares that
Accel Investors `93 L.P. has the right to acquire on or before May 31,
2000 by exercising a warrant it holds, which represents less than 1%
of the total number of shares outstanding;
- 47,124 shares held by Accel Keiretsu L.P., and 291 shares that Accel
Keretsu L.P. has the right to acquire on or before May 31, 2000 by
exercising a warrant it holds, which represents less than 1% of the
total number of shares outstanding;
- 602,921 shares held by Accel III L.P., and 3,141 shares that Accel III
L.P. has the right to acquire on or before May 31, 2000 by exercising
a warrant it holds, which represents 1.4% of the total number of
shares outstanding;
- 42,064 shares held by Accel Investors `92 L.P., and 219 shares that
Accel Investors `92 L.P. has the right to acquire on or before May 31,
2000 by exercising a warrant it holds, which represents less than 1%
of the total number of shares outstanding; and
- 56,086 shares held by Accel Japan L.P., and 292 shares that Accel
Japan L.P. has the right to acquire on or before May 31, 2000 by
exercising a warrant it holds, which represents less than 1% of the
total number of shares outstanding.
Mr. Breyer shares voting and investment power over the shares held by
each of these entities. Mr. Breyer disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest therein.
(3) Mr. Doerr's business address is 2750 Sand Hill Road, Menlo Park, CA
94025.
Percentage of shares outstanding includes:
- 2,776,651 shares and an additional 19,011 shares issuable under a
warrant exercisable by May 31, 2000, all held by Kleiner, Perkins,
Caufield & Byers VI, which represents 6.3 %, of the total number of
shares outstanding; and
- 275,448 shares and 6,391 shares issued under a warrant held by KPCB VI
Founders Fund, which represents less than 1% of the total number of
shares outstanding.
Mr. Doerr shares voting and investment power over the shares held by
each of these entities.
(4) Mr. Sanderson's business address is One Microsoft Way, Redmond, WA
98052. Percentage of shares outstanding includes 2,913,783 shares held
by Microsoft Corporation and 16,657 shares which Microsoft Corporation
may acquire on or before May 31, 2000 by exercising a warrant it holds.
Mr. Sanderson shares voting and investment power over these shares.
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<PAGE> 12
(5) Mr. Hiller's business address is 435 North Michigan Avenue, Chicago, IL
60611. Percentage of shares outstanding includes 1,875,415 shares held
by Tribune Company and 90,425 shares which Tribune Company may acquire
on or before May 31, 2000 by exercising a warrant it holds. Mr. Hiller
shares voting and investment power over these shares.
(6) Mr. Kole's business address is 1500 Market Street, Philadelphia, PA
19102. Percentage of shares outstanding includes 2,404,130 shares held
by entities affiliated with Comcast Interactive Capital L.P.
(7) Mr. Masters' business address is 12312 West Olympic Blvd., Los Angeles,
CA 90064. Percentage of shares outstanding includes 4,059,303 shares
held by entities controlled by Liberty Digital, Inc. and 11,773 shares
which entities controlled by Liberty Digital, Inc. may acquire on or
before May 31, 2000 by exercising warrants they hold. Mr. Masters shares
voting and investment power over these shares.
(8) Mr. Schiffman's business address is 505 Hamilton Avenue, Palo Alto, CA
94301.
Percentage of shares outstanding includes:
- 511,559 shares held by U.S. Information Technology Investment
Enterprise Partnership, which represents 1.2% of the total number of
shares outstanding;
- 531,559 shares held by U.S. Information Technology #2 Investment
Enterprise Partnership, which represents 1.2% of the total number of
shares outstanding;
- 53,525 shares held by JAFCO G-7 (B) Investment Enterprise Partnership,
which represents less than 1% of the total number of shares
outstanding;
- 53,525 shares held by JAFCO G-7 (A) Investment Enterprise Partnership,
which represents less than 1% of the total number of shares
outstanding;
- 45,803 shares held by JAFCO R-2 Investment Enterprise Partnership,
which represents less than 1% of the total number of shares
outstanding;
- 51,770 shares held by JAFCO JS-2 Investment Enterprise Partnership,
which represents less than 1% of the total number of shares
outstanding; and
- 56,159 shares held by JAFCO Co. Ltd., which represents less than 1% of
the total number of shares outstanding.
Mr. Schiffman shares voting and investment power over these shares.
(9) Mr. Usher's business address is 1055, boul. Rene-Levesque Est, Montreal,
Quebec H2L 4S5, Canada. Percentage of shares outstanding includes
1,250,000 shares held by CINAR Corporation. Mr. Usher shares voting and
investment power over these shares.
(10) Mr. Woodrow's business address is 1400 Lake Hearn Dr. N.E., Atlanta, GA
30319. Percentage of shares outstanding includes 1,041,667 shares held
by Cox Communications Holding, Inc. Mr. Woodrow shares voting and
investment power over these shares.
(11) Mr. Ravenel's business address is 326 Mountain Bluebell Rd., Keystone,
CO 80435.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"1934 Act") requires the Company's directors and executive officers, and persons
who own more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of
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<PAGE> 13
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
During the fiscal year ended January 31, 2000, no officer, director or
greater than ten percent beneficial owner of the Company was required to comply
with Section 16(a) of the 1934 Act.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company directors do not currently receive any cash compensation for
services on the Board of Directors or any committee thereof, but directors may
be reimbursed for certain expenses in connection with attendance at Board and
committee meetings. In addition, all directors are eligible to participate in
the Company's 2000 Equity Incentive Plan (the "2000 Plan").
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended January 31, 2000
and 1999, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive officers
at January 31, 2000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
BONUS COMPEN- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) SATION($) OPTIONS(#) ($)
- --------------------------- ---- -------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
John T. Kernan 2000 $246,000 $100,000 125,000
Chief Executive 1999 $200,000
Officer and Chairman
Carl Zeiger 2000 $246,000 $100,000 125,000
President, Chief 1999 $200,000
Operating Officer
and Director
Kathleen R. McElwee 2000 $174,000 $ 75,000 200,000
Vice President of 1999 $ 7,000 $58,000(2)
Financing and Chief
Financial Officer
John H. Brandon 2000 $ 83,000 $100,000 125,000 $200,000(3)
Executive Vice
President, President
of Academic Systems
and Director
Winifred B. Wechsler 2000 $266,000 $200,000 300,000 $ 50,000(4)
Executive Vice President
and General Manager of
Internet and
Broadband Services
</TABLE>
- --------------------
(1) Amount represents bonuses accrued under the Company's Management
Incentive Plan for 2000.
(2) Represents a relocation assistance allowance of $58,000.
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<PAGE> 14
(3) Amount represents a $200,000 payment made to John Brandon pursuant to an
employment agreement requiring such payment as a result of the Company's
acquisition of Academic Systems Corporation.
(4) Amount represents signing bonus.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 2000
Plan. As of March 31, 2000, options to purchase a total of 3,818,745 shares were
outstanding under the 2000 Plan and the 1992 Stock Option Plan, which the
Company assumed from Academic Systems upon its acquisition of Academic Systems,
and options to purchase 1,190,253 shares remained available for grant under the
2000 Plan. The Company no longer grants options under the 1992 Stock Option
Plan.
The following tables show for the fiscal year ended January 31, 2000,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
% OF REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE MARKET PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE VALUE ON FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE GRANT EXPIRATION ----------------------
NAME (#)(1) YEAR(2) ($/SH) DATE(3) DATE 5% ($) 10% ($)
- ------------------ -------- -------- ------ ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
John T. Kernan 125,000 4.19% $ 4.00 $ 9.00 7/14/04 $314,447 $796,871
Carl Zeiger 125,000 4.19% $ 4.00 $ 9.00 7/14/04 $314,447 $796,871
Kathleen R. McElwee 175,000 5.86% $ 2.00 $ 6.60 2/11/04 $ 96,699 $213,679
25,000 0.84% $10.00 $11.00 10/28/04 $157,224 $398,436
John H. Brandon 125,000 4.19% $ 4.00 $ 9.00 7/14/04 $314,447 $796,871
Winifred B. Wechsler 175,000 5.86% $ 2.00 $ 6.60 2/15/04 $ 96,699 $213,679
75,000 2.51% $ 4.00 $ 9.00 7/14/04 $ 82,884 $183,153
50,000 1.67% $ 8.26 $ 9.00 9/15/04 $259,733 $658,216
</TABLE>
- --------
(1) Options generally vest over a four year period, 25% after one year and
2.777% of the remaining shares per month thereafter. The options will
fully vest upon a change of control, as defined in the Company's option
plans, unless the acquiring company assumes the options or substitutes
similar options. The Board of Directors may reprice the options under
the terms of the Company's option plans.
(2) Based on options to purchase 2,986,588 shares granted in fiscal 2000.
(3) Fair market value of the Company's Common Stock as determined by its
Board of Directors.
(4) The potential realizable value is based on the term of the option at its
time of grant. It is calculated by assuming that the stock price on the
date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. These amounts represent certain assumed rates of appreciation
only, in accordance with the rules of the SEC, and do not reflect the
Company's estimate or projection of future stock price performance.
Actual gains, if any, are dependent on the actual future performance of
the Company's Common Stock and no gain to the optionee is possible
unless the stock price increases over the option term, which will
benefit all stockholders.
12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FY-END
AT FY-END (#)(1) (2) ($)(1) (3)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John T. Kernan 1,009 125,254 $ 8,425 $ 752,121
Carl Zeiger 0 125,000 $ 0 $ 750,000
Kathleen R. McElwee 47,395 252,605 $379,160 $1,020,840
John H. Brandon 95,956 150,254 $801,233 $ 960,871
Winifred B. Wechsler 47,395 252,605 $379,160 $1,557,840
</TABLE>
- ----------
(1) Reflects shares vested and unvested at January 31, 2000. Certain options
granted under the 2000 Plan are immediately exercisable, but are subject
to the Company's right to repurchase unvested shares on termination of
employment.
(2) All options are "in-the-money" as there were no "out-of-the money"
options. "In-the-money" options are options with exercise prices below
the market price of the Company's Common Stock at January 31, 2000.
(3) Fair market value of the Company's Common Stock at January 31, 2000, as
determined by the Company's Board of Directors to be $11.00, minus the
exercise price of the options.
EMPLOYMENT SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
Mr. Brandon's employment agreement with Academic Systems Corporation
provided that in the event of a change of control of Academic Systems, (i) he
would be paid a cash amount equal to his annual base salary and (ii) the vesting
of the shares underlying his stock option would immediately accelerate as to
that number of shares that would have normally vested during the one year
following the change of control. As a result of the Company's acquisition of
Academic Systems Corporation in September 1999, the Company paid to Mr. Brandon
$200,000 in compliance with this agreement and agreed to vest all of the
unvested shares underlying his stock option.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors ("Committee") is
composed of Mr. Breyer and Mr. Doerr, neither of whom are currently officers or
employees of the Company. The Committee is responsible for establishing the
Company's compensation programs for all employees, including executives. For
executive officers, the Committee evaluates performance and determines
compensation policies and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are:
- --------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any filing
of the Company under the 1933 Act or 1934 Act, whether made before or after the
date hereof and irrespective of any general incorporation language contained in
such filing.
13
<PAGE> 16
- The Company pays competitively with technology companies with which
the Company competes for talent. To ensure that pay is competitive,
the Company regularly compares its pay practices with these companies
and sets it pay parameters based on this review.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
- The Company provides equity-based incentives for executives and other
key employees to ensure that they are motivated over the long-term to
respond to the Company's business challenges and opportunities as
owners and not just as employees.
BASE SALARY. The Committee annually reviews each executive officer's
base salary. When reviewing base salaries, the Committee considers individual
and corporate performance, levels of responsibility, prior experience, breadth
of knowledge and competitive pay practices.
ANNUAL INCENTIVE. The Management Incentive Plan, an annual incentive
award plan, is the variable pay program for officers and other senior managers
of the Company to earn additional annual compensation. The actual incentive
award earned depends on the extent to which Company and individual performance
objectives are achieved. At the start of each year, the Committee and the full
Board of Directors review and approve the annual performance objectives for the
Company and individual officers. The Company objectives consist of operating,
strategic and financial goals that are considered to be critical to the
Company's fundamental long-term goal - building stockholder value. For fiscal
year 2000, these goals were:
- financial performance related to revenue;
- development and implementation of an Internet strategy and
- successful integration of acquired businesses.
After the end of the year, the Committee evaluates the degree to which
the Company has met its goals and awards incentive compensation based on each
participant's performance against objectives. Awards are paid in cash, and
distributions are made in March following the performance year.
LONG-TERM INCENTIVES. The Company's long-term incentive program consists
of the 2000 Equity Incentive Plan and for Academic Systems, the 1992 Stock
Option Plan, which the Company assumed with the closing of the acquisition. The
option program utilizes vesting periods (generally four years) to encourage key
employees to continue in the employ of the Company. Through option grants,
executives receive significant equity incentives to build long-term stockholder
value. Grants are made at 100% of fair market value on the date of grant.
Executives receive value from these grants only if the Company's Common Stock
appreciates over the long-term. The size of option grants is determined based on
competitive practices at leading companies in the educational technology
industry and the Company's philosophy of significantly linking executive
compensation with stockholder interests.
CORPORATE PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Kernan's base salary at the beginning of fiscal year 2000 as Chief
Executive Officer and Chairman was $200,000. Following a review of compensation
paid by other technology companies, the Committee set Mr. Kernan's base annual
salary for fiscal year 2000 at $250,000. This amount, in addition to the annual
incentive provided by the Management Incentive Plan, was estimated to provide an
annual cash compensation level at the average as compared to a selected group of
technology companies. In setting this amount, the Committee took into account
(i) its belief that Mr. Kernan is one of the CEOs of leading educational
companies who has significant and broad-based experience in the education
technology industry, (ii) the scope of Mr. Kernan's responsibility, and (iii)
the Board's confidence in Mr. Kernan to lead the Company's continued
development.
14
<PAGE> 17
During fiscal year 2000, the Company achieved all of its corporate
objectives. The Company exceeded its revenue targets, introduced a new Internet
site and successfully integrated the acquisitions of Academic Systems, Global
Schoolhouse and StudyWeb. This performance level resulted in a management
incentive plan award to him of $100,000 for fiscal year 2000; in addition, he
was granted an option to purchase 125,000 shares of Common Stock (representing
less than 1% of the Company's fully diluted equity) as an incentive for future
performance, an amount the Committee determined was consistent with competitive
practices.
CONCLUSION
Through the plans described above, a significant portion of the
Company's compensation program and Mr. Kernan's compensation are contingent on
Company performance, and realization of benefits is closely linked to increases
in long-term stockholder value. The Company remains committed to this philosophy
of pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE
Jim Bryer
John Doerr
PERFORMANCE MEASUREMENT COMPARISON (1)
The following graph shows the total stockholder return of an investment
of $100 in cash on February 10, 2000 through March 31, 2000 for (i) the
Company's Common Stock, (ii) the Nasdaq Stock Market Composite Index (the
"NASDAQ") and (iii) a peer group selected by the Company. All values assume
reinvestment of the full amount of all dividends and are calculated as of the
end of each period.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT SINCE FEBRUARY 10, 2000(2)
LIGHTSPAN PARTNERSHIP INC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------
2/10/00 2/00 3/00
<S> <C> <C> <C>
LIGHTSPAN PARTNERSHIP, INC. 100.00 91.67 147.92
PEER GROUP 100.00 102.03 103.95
NASDAQ STOCK MARKET (U.S.) 100.00 104.78 102.78
</TABLE>
(1) This Section is not "soliciting material," is not deemed "filed" with
the SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language
in any such filing.
(2) Peer Group index includes: Advantage Learning Systems, Inc. (ALSI);
Scientific Learning Corp. (SCIL); SmartForce (SMTF); Riverdeep Group
(RVDP) and Zapme Corp. (IZAP).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 31, 2000, James W. Breyer and L.
John Doerr served as members of the Company's compensation committee. During
that fiscal year, none of the Company's executive officers or employees served
as a director or as a member of the compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or compensation committee.
15
<PAGE> 18
RELATED-PARTY TRANSACTIONS
The following is a description of transactions occurring after February 1,
1999 to which the Company has been a party, in which the amount involved exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of the Company's capital stock had or will have a direct or indirect material
interest, other than compensation arrangements.
The following affiliates of the Company's directors purchased securities in
the amounts set forth in the chart below. Certain additional issuances are
discussed in more detail in the paragraphs below.
<TABLE>
<CAPTION>
SERIES E
PREFERRED
PURCHASER STOCK WARRANTS
--------- ----------- --------
<S> <C> <C>
Entities Affiliated with Directors
Entities affiliated with Accel Partners(1).. 1,219,302 130,740
Comcast Cable Corporation(2)................ 1,000,000 --
Entities affiliated with JAFCO America
Ventures, Inc.(3)........................... -- 430,859
Entities affiliated with Kleiner,
Perkins, Caufield & Byers(4).............. 1,235,593 134,296
Entities affiliated with Liberty Digital, 3,661,951 65,500
Inc.(5).....................................
Microsoft Corporation(6).................... 1,203,243 129,587
Tribune Company(7).......................... 200,000 180,849
Price Per Share:............................ $ 5.00 $ 0.01-$5.00
</TABLE>
- ----------
(1) Mr. James W. Breyer, one of the Company's directors, is a partner of
Accel Partners.
(2) Mr. Bradley P. Dusto, one of the Company's directors at the time of the
transaction, is the Chief Technology Officer and Executive Vice
President of Comcast Cable Communications, Inc.
(3) Mr. Barry J. Schiffman, one of the Company's directors, is President and
Chief Investment Officer of JAFCO America Ventures, Inc.
(4) Mr. L. John Doerr, one of the Company's directors, is a partner of
Kleiner, Perkins, Caufield & Byers.
(4) Mr. Bruce W. Ravenel, one of the Company's directors, was an Executive
Vice President of Liberty Digital, Inc. at the time of the transaction.
(6) Mr. Jeffrey P. Sanderson, one of the Company's directors, is General
Manager of Business Development of Microsoft Corporation.
(7) Mr. David D. Hiller, one of the Company's directors, is Senior Vice
President of Development of Tribune Company.
16
<PAGE> 19
In September 1999, the Company acquired Academic Systems. John Brandon and
funds associated with four of the Company's other directors, Messrs. Breyer,
Doerr, Ravenel and Sanderson, were shareholders of Academic Systems and received
shares of the Company's common stock and Series E preferred stock in the
acquisition.
In October 1999, CINAR Corporation purchased 2.5 million shares of the
Company's Series E preferred stock (which converted into 1.25 million shares of
common stock at the close of the Company's initial public offering (the
"Offering") on February 15, 2000) at $5.00 per share. CINAR also purchased
833,333 shares of the Company's common stock in a private placement that
occurred concurrently with the Offering at the initial public offering price of
$12.00. The Company also granted CINAR a warrant to purchase 500,000 shares of
the Company's Series E preferred stock (which became a warrant to purchase
250,000 shares of common stock at the close of the Offering) that will vest upon
the achievement of various agreed-to strategic goals. As part of the Company's
agreement with CINAR, Ronald A. Weinberg joined the Company's Board.
In January 2000, the Company agreed to pursue strategic initiatives with Cox
Communications Holdings, Inc. As part of the Company's agreement, Cox
Communications agreed to purchase $12.5 million of the Company's common stock,
or 1,041,667 shares, in a private placement that occurred concurrently with the
Offering. The Company also agreed to grant to Cox Communications a warrant to
purchase 750,000 shares of the Company's common stock that will vest upon the
achievement of various agreed-to strategic goals. As part of the Company's
agreement with Cox Communications, Thomas F. Nagel, Cox Communications Inc.'s
Vice President of Business Development at the time of the transaction, joined
the Company's Board upon the close of the Offering. Mr. Nagel subsequently
resigned form the Board on March 31, 2000.
The Company believes that the foregoing transactions were in its best
interest and were made on terms no less favorable to us than could have been
obtained from unaffiliated third parties. All future transactions between the
Company and any of the Company's officers, directors or principal stockholders
will be approved by a majority of the independent and disinterested members of
the Board of Directors, will be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties and will be in connection with
the Company's bona fide business purposes.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION ON LIABILITY
The Company's bylaws provide that it must indemnify its directors and
officers and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law, except with respect to certain proceedings initiated
by these persons. The Company's bylaws also allow us to enter into
indemnification contracts with the Company's directors and officers and to
purchase insurance on behalf of any person the Company is required or permitted
to indemnify. Pursuant to this provision, the Company has entered into
indemnification agreements with each of the Company's directors and executive
officers.
In addition, the Company's restated certificate provides that the Company's
directors will not be personally liable to the Company or its stockholders for
monetary damages for any breach of their fiduciary duties as a director, except
for liability for any breach of the director's duty of loyalty to the Company or
its stockholders; for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; under Section 174 of the
Delaware General Corporation Law; or for any transaction from which the director
derives an improper personal benefit. The restated certificate also provides
that if the Delaware General Corporation Law is amended after the Company's
stockholders' approval of the restated certificate to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of the Company's directors shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
The provision does not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws.
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in
17
<PAGE> 20
actions or proceedings which he is or may be made a party be reason of his
position as a director, officer or other agent of the Company, and otherwise to
the full extent permitted under Delaware law and the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ KATHLEEN R. MCELWEE
------------------------------------
Kathleen R. McElwee
Secretary
May 22, 2000
18
<PAGE> 21
LIGHTSPAN, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 2000
The undersigned hereby appoints Carl Zieger and Kathleen McElwee, and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Lightspan, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Lightspan, Inc. to be held at the Radisson Hotel, 3299 Holiday Court, La Jolla,
California 92037 on June 28, 2000 at 10:00 a.m. (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
-----------------------------DETACH HERE---------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect four directors to hold office until the 2003 Annual Meeting
of Stockholders.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary below). listed below.
NOMINEES: John H. Brandon, Barry J. Schiffman, Jeffrey P. Sanderson, Lee Masters
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)' NAME(S)
BELOW:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To ratify selection of ERNST & YOUNG LLP as independent auditors of
the Company for its fiscal year ending JANUARY 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on other side)
<PAGE> 22
(Continued from other side)
Dated
----------------- -----------------------------------
-----------------------------------
SIGNATURE(S)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
