<PAGE>
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
TRO Learning, 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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
DEAR STOCKHOLDERS:
Our directors and officers join me in extending a cordial invitation to
attend the Annual Meeting of Stockholders of TRO Learning, Inc., a Delaware
corporation, at 9:00 a.m. (Central Standard Time) on Thursday, April 16,
1998, at the Arlington Park Hilton, 3400 West Euclid Avenue, Arlington
Heights, Illinois 60005-1052.
The matters to be considered at the meeting are described in the accompanying
Proxy Statement. Regardless of your plans for attending in person, it is
important that your shares be represented at the meeting. Therefore, please
complete, sign, date and return the enclosed proxy card. This will enable
you to vote on the business to be transacted whether or not you attend the
meeting.
Our Annual Report, including financial statements for the fiscal year 1997,
is being mailed with this letter.
The continuing interest of the stockholders in the business of the Company is
gratefully acknowledged and we hope many will attend the meeting.
Sincerely,
William R. Roach
Chairman of the Board, President and
Chief Executive Officer
February 25, 1998
<PAGE>
TRO LEARNING, INC.
POPLAR CREEK OFFICE PLAZA
1721 MOON LAKE BOULEVARD, SUITE 555
HOFFMAN ESTATES, IL 60194
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 16, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of TRO Learning, Inc. ("the Company") will
be held at 9:00 a.m. (Central Standard Time) on Thursday, April 16, 1998, at
the Arlington Park Hilton, 3400 West Euclid Avenue, Arlington Heights,
Illinois 60005-1052 for the purpose of considering and voting on the
following matters:
1. To elect two directors to the Board of Directors.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the fiscal year ending October 31, 1998.
3. To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on February 17, 1998,
will be entitled to receive notice of and to vote at the meeting or any
adjournment thereof.
Your attention is directed to the accompanying Proxy Statement. Whether or
not you plan to attend the meeting in person, you are urged to complete,
sign, date and return the enclosed proxy card. If you attend the meeting and
wish to vote in person, you may withdraw your proxy and vote your shares
personally.
BY THE ORDER OF THE BOARD OF DIRECTORS,
Andrew N. Peterson
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
February 25, 1998
<PAGE>
TRO LEARNING, INC.
POPLAR CREEK OFFICE PLAZA
1721 MOON LAKE BOULEVARD, SUITE 555
HOFFMAN ESTATES, IL 60194
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of the
enclosed proxy by the Board of Directors of the Company for use at the Annual
Meeting of Stockholders to be held on April 16, 1998, at 9:00 a.m. (Central
Standard Time) at the Arlington Park Hilton, 3400 West Euclid Avenue,
Arlington Heights, Illinois 60005-1052, and at any adjournment thereof, for
the purpose set forth in the Notice of Annual Meeting of Stockholders.
Shares of Common Stock represented by proxies in the form solicited will be
voted in the manner directed by the stockholder. If no direction is made,
the proxy will be voted for the election of the nominees for director named
in this Proxy Statement and for the ratification of the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors. A
stockholder may revoke his or her proxy at any time before it is voted by
delivering to an officer of the Company a written notice of termination of
the proxy's authority, by filing with an officer of the Company another proxy
bearing a later date, or by appearing and voting at the meeting. This Proxy
Statement and the form of proxy enclosed are being mailed on or about
March 11, 1998.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed by the Company for the meeting, and the
number of stockholders present in person or by proxy will determine whether
or not a quorum is present. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
by the inspectors of election with respect to that matter.
Only the holders of the Company's Common Stock whose names appear of record
on the Company's books at the close of business on February 17, 1998 will be
entitled to vote at the Annual Meeting. At the close of business on February
17, 1998, a total of 6,414,085 shares of Common Stock were outstanding. Each
stockholder of Common Stock is entitled to one vote for each share held.
There is no right to cumulate voting as to any matter.
A stockholder may, with respect to the election of directors, (i) vote "FOR"
the election of all named director nominees, (ii) "WITHHOLD" authority to
vote for all named director nominees or (iii) vote "FOR" the election of all
named director nominees other than any nominee with respect to whom the
stockholder withholds authority to vote by so indicating in the appropriate
space on the proxy card. A stockholder may, with respect to the proposal to
ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors, (i) vote "FOR" such proposal, (ii) vote "AGAINST" such
proposal or (iii) "ABSTAIN" from voting on such proposal.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company, who will receive no extra
compensation for their services, may solicit proxies by telephone,
telecopier, or personal calls.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED OCTOBER 31, 1997 IS
BEING FURNISHED TO EACH STOCKHOLDER WITH THIS PROXY STATEMENT. A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 1997 WILL
BE PROVIDED WITHOUT CHARGE TO EACH RECIPIENT HEREOF UPON WRITTEN REQUEST
DIRECTED TO MR. ANDREW N. PETERSON, SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, TREASURER AND SECRETARY, TRO LEARNING, INC., POPLAR CREEK OFFICE
PLAZA, 1721 MOON LAKE BOULEVARD, SUITE 555, HOFFMAN ESTATES, ILLINOIS 60194.
1
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors consists of six (6) persons and is divided into three
classes, each of whose members serves for a staggered three-year term. The
terms of the Class II Directors expire with this Annual Meeting of
Stockholders. Each of the nominees for Class II Director, if elected, will
serve three years until the 2001 Annual Meeting of Stockholders and until a
successor has been elected and qualified. The current Class III and I
Directors will continue in office until the 1999 and 2000 Annual Meetings,
respectively.
Directors will be elected at the Annual Meeting by a plurality of the votes
cast at the meeting by the holders of the shares entitled to vote in the
election represented in person or by proxy. Thus, assuming a quorum is
present, the two persons receiving the greatest number of votes will be
elected to serve as members of the Board of Directors. Accordingly,
abstentions and non-votes with respect to the election of directors will not
affect the outcome of the election of directors. If any of the nominees
should be unable or unwilling to serve as a director, an event that is not
anticipated, the proxies will be voted for substitute nominees designated by
the Board of Directors. The following sets forth information as to each of
the nominees for election and each director continuing in office.
NOMINEES FOR DIRECTORS
Class II - Nominees to Serve Until
2001 Annual Meeting
MAJOR GENERAL VERNON B. LEWIS, JR. (USA RET), age 67, has been a director of
the Company since January 1993. From 1989 to the present, he has served as
Chief Executive Officer, a member of the Board of Directors, and one of the
founders of Military Professional Resources, Inc., a military training
company. He previously served as Chief Executive Officer and Chairman of the
Board of Cypress International, a defense systems international marketing
company, from 1978 to 1989.
JOHN PATIENCE, age 50, has served as a director of the Company since its
formation in 1989. Mr. Patience is currently a General Partner with Crabtree
Partners, which invests capital and its management talent in technology based
businesses that are in a growth phase of development. From 1988 to 1995,
Mr. Patience was a General Partner of Marquette Venture Partners, L.P., a
private venture capital firm. Mr. Patience is currently a director of
Ventana Medical Systems, Inc. and Stericycle, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 1.
Unless otherwise indicated, proxies solicited by the Board of Directors will
be voted for the two Class II nominees of the Board of Directors named above.
DIRECTORS CONTINUING IN OFFICE
Class III - Serving Until 1999 Annual Meeting
JACK R. BORSTING, PH.D., age 69, has served as a director of the Company
since March 1993. From January 1994 to the present, he has served as the
E. Morgan Stanley Professor of Business Administration at the University of
Southern California. Dr. Borsting is also currently the Executive Director
for the Center for Telecommunications Management at the University of
Southern California. From 1988 to January 1994, he was Dean and Professor
of Business Administration at the University of Southern California, Los
Angeles. Dr. Borsting is currently a director of Northrop Grumman, Whitman
Education Group, and Bristol Technology.
TONY J. CHRISTIANSON, age 45, has served as a director of the Company since
its formation in 1989. Mr. Christianson is Managing General Partner of
Cherry Tree Investments, Inc. ("Cherry Tree"), a private venture capital firm
focused on health and education enterprises. Cherry Tree is a principal
stockholder of the Company. Mr. Christianson was a founder of Cherry Tree in
1980 and is currently on the Board of Directors of Fourth Shift Corporation
and Transport Corp. of America.
2
<PAGE>
Class I - Serving Until 2000 Annual Meeting
WILLIAM R. ROACH, age 57, has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since its formation in
1989. Prior to founding the Company, from 1987 to 1988 Mr. Roach was
President and Chief Executive Officer of Applied Learning International, Inc.
("ALI"), a training and education company and successor to Advanced Systems
Inc. ("ASI"), and a director and Senior Vice President of ALI's parent,
National Education Corporation ("NEC"). NEC is a training and education
company. From 1981 to 1987, Mr. Roach was the Chief Executive Officer of
ASI, a New York Stock Exchange listed training and education company which
was acquired by NEC in 1987. After leaving ALI in 1988, Mr. Roach led a
group of investors in pursuing an acquisition in the field of training and
education.
JOHN L. KRAKAUER, age 56, a private investor and consultant, has been a
director of the Company since January 1993. From June 1989 to March 1995,
Mr. Krakauer served as Executive Vice President of HealthCare COMPARE Corp.,
a medical cost management company. From May 1994 to March 1995, he served as
a director, and from July 1994 to December 1994, he served as interim
President and Chief Executive Officer of Cardiac Alliance, Inc., a home
health care company specializing in cardiac care.
DIRECTOR COMPENSATION
Directors who are not employees or affiliates of the Company are paid a
$1,000 fee for attendance at each Board meeting. Committee Chairs receive
$750 and committee members receive $500 for each meeting attended. Directors
who are employees of the Company receive no additional compensation for their
services as directors of the Company.
Directors who are not employees or affiliates of the Company are eligible to
receive grants of stock options. Eligible directors received options on
March 25, 1997, to acquire an aggregate of 20,000 shares of the Company's
Common Stock. The exercise price of these options is $8.00 per share (being
the fair market value of the Company's stock on the date of grant). These
options vest ratably over three years beginning one year from the date of
grant and expire ten years following the date of grant.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee consisting of
Messrs. Christianson (Chairman), Krakauer and Patience, and a Compensation
Committee consisting of Messrs. Borsting (Chairman), Krakauer and Lewis. The
Company has no standing Nomination Committee; rather, the entire Board of
Directors performs the functions which would otherwise be delegated to such
committee.
During the year ended October 31, 1997, the Board of Directors held six
meetings. Each of the Company's current directors attended 100% of the
meetings of the Board and Committees of which they were members, except for
Mr. Patience who attended 71%. In addition to the meetings, the Board passed
several resolutions during 1997 by written consent.
The Audit Committee met once in fiscal 1997. The Audit Committee reviews the
results and scope of the audit and other services provided by the Company's
independent auditors and recommends the appointment of independent auditors
to the Board of Directors.
The Compensation Committee met twice in fiscal 1997. The Compensation
Committee administers and makes awards under the Company's stock option and
stock incentive plans and also studies and recommends the implementation of
all compensation programs for directors and officers of the Company.
3
<PAGE>
PROPOSAL 2. APPOINTMENT OF AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as independent
auditors for the Company for the fiscal year ending October 31, 1998. A
proposal to ratify this appointment will be presented at the Annual Meeting.
Coopers & Lybrand L.L.P. was appointed in 1992 to examine the Company's
financial statements. Representatives from Coopers & Lybrand L.L.P. are
expected to be present at the Annual Meeting, will have an opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions from stockholders.
If a quorum is present, in order to approve the proposal to ratify the
appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors, a majority of the shares present in person or by proxy at the
Annual Meeting and entitled to vote on such proposal must vote in favor of
it. Accordingly, abstentions will have the same effect as votes against and
non-votes will reduce the number of shares considered present and entitled to
vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 2. If
the appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors is not ratified by the stockholders, the Board of Directors is not
obligated to appoint other auditors, but the Board of Directors will give
consideration to such unfavorable vote.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which may
come before the meeting. However, if any matters other than those referred
to above should properly come before the meeting calling for a vote of the
stockholders, it is the intention of the persons named in the accompanying
proxy card to vote on such matters in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a stockholder to be presented at the next Annual Meeting must
be received at the Company's principal executive offices, Poplar Creek Office
Plaza, 1721 Moon Lake Boulevard, Suite 555, Hoffman Estates, Illinois 60194
not later than October 28, 1998.
BY THE ORDER OF THE BOARD OF DIRECTORS
Andrew N. Peterson
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information relating to
compensation paid to, or accrued by the Company on behalf of, the Company's
Chief Executive Officer and the other four most highly compensated executive
officers of the Company as of October 31, 1997 (the "Named Officers") for the
years ended October 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------- --------------
Securities All
Name and Principal Underlying Other
Position at 10/31/97 Year Salary Bonus(1) Options (#)(2) Compensation
- -------------------- ---- -------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
William R. Roach, 1997 $225,865 --- --- $12,480 (3)
President and 1996 227,116 --- 50,000 12,480 (3)
Chief Executive Officer 1995 175,658 --- 30,000 12,480 (3)
- -----------------------------------------------------------------------------------------------------------------------------------
G. Thomas Ahern, 1997 95,365 $104,628 8,000 ---
Senior Vice President, 1996 95,846 97,831 13,000 ---
Sales and Marketing 1995 80,308 71,748 17,000 ---
- -----------------------------------------------------------------------------------------------------------------------------------
Wellesley R. Foshay, Ph.D., 1997 128,769 --- 6,000 ---
Vice President, Instructional Design 1996 126,040 --- 10,000 ---
and Cognitive Learning 1995 115,191 --- 4,000 ---
- -----------------------------------------------------------------------------------------------------------------------------------
John Murray, 1997 123,984 --- 8,000 ---
Senior Vice President, 1996 103,716 35,052 10,000 36,121 (4)
Operations 1995 81,256 63,036 7,000 20,368 (4)
- -----------------------------------------------------------------------------------------------------------------------------------
Andrew N. Peterson, 1997 74,307 --- 29,000 ---
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary(5)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes sales commissions and bonuses.
(2) None of the Named Officers has been granted stock appreciation rights
("SARs"), or holds shares of restricted stock which are subject to
performance-based conditions on vesting.
(3) Amount consists of premiums paid by the Company for term life insurance
(of which the Company is not the beneficiary).
(4) Amount includes value of car allowance and health insurance premiums paid
by the Company and contributions made by the Company to a retirement
savings plan. For 1996, amount also includes $27,945 for relocation
expenses.
(5) Mr. Peterson joined the Company in April 1997 at an annual salary of
$140,000.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth information relating to grants of stock options to
the Named Officers during the year ended October 31, 1997. No SARs were
granted to the Named Officers in fiscal 1997, and none of the Named Officers
held SARs as of October 31, 1997.
<TABLE>
<CAPTION>
Percent of Potential Realizable Value at
Total Assumed Annual Rates of
Number of Options Stock Price Appreciation for
Securities Granted to Option Term(2)
Underlying Employees Exercise -----------------------------
Options Granted in Fiscal Price Expiration
Name (#)(1) 1997 ($/Share) Date 5% 10%
- -------------------- --------------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
William R. Roach --- --- --- --- --- ---
G. Thomas Ahern 8,000 6% $9.375 9/23/07 $122,166 $194,533
Wellesley R. Foshay 6,000 5% 9.375 9/23/07 91,627 145,900
John Murray 8,000 6% 9.375 9/23/07 122,166 194,533
Andrew N. Peterson 25,000 19% 8.500 4/23/07 346,142 551,170
4,000 3% 9.375 9/23/07 61,084 97,264
</TABLE>
(1) All options granted in fiscal 1997 were granted at 100% of the fair market
value of the Company's stock on the date of grant. Options vest ratably
over a three-year period beginning one year from the date of grant and
expire ten years following the date of grant.
(2) Assumes appreciation in value from the date of grant to the end of the
option term at the indicated rate. The dollar amounts under these columns
are the result of calculations at the 5% and 10% rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Company's stock
price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following sets forth information relating to exercises of stock options
during fiscal 1997 and holdings of unexercised stock options at October 31,
1997 by the Company's Named Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options Held at in-the-Money Options at
Value October 31, 1997 October 31, 1997(1)
Shares Acquired Realized ($) --------------------------- ---------------------------
Name on Exercise (#) (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William R. Roach(2) --- --- 302,400 30,000 --- ---
G. Thomas Ahern --- --- 35,221 22,333 $84,526 $7,291
Wellesley R. Foshay 7,200 $72,696 14,152 14,002 12,530 2,084
John Murray --- --- 15,199 17,001 4,166 2,084
Andrew N. Peterson --- --- --- 29,000 --- ---
</TABLE>
(1) Aggregate market value on exercise date or October 31, 1997, as
appropriate, less aggregate exercise price.
(2) The number of options held at October 31, 1997 reflects a voluntary
forfeiture of 20,000 options during fiscal 1997.
6
<PAGE>
OTHER COMPENSATION ARRANGEMENTS
William R. Roach, the Company's Chief Executive Officer, and Andrew N.
Peterson, the Company's Chief Financial Officer, have each entered into a
Severance and Non-Competition Agreement (the "Severance Agreement") with the
Company. Mr. Roach's Severance Agreement provides for two years salary and
benefits upon termination without cause or resignation after a material
adverse change or reduction in position or responsibilities, and precludes
employment in any capacity, during or for two years after termination of
employment with the Company, in any business or activity competitive with the
Company's principal businesses. Mr. Peterson's Severance Agreement has
similar terms for a period of one year. The total amount payable by the
Company under these agreements is approximately $590,000.
In November 1997, the Company announced that it had retained BancAmerica
ROBERTSON STEPHENS to advise it regarding strategic alternatives to enhance
shareholder value.
In December 1997, the other Named Officers entered into an Employment
Security Agreement ("Employment Agreement") with the Company. If there is a
change in control of the Company, the Employment Agreement provides for a
lump sum cash payment to the Named Officer as long as the Named Officer is
still employed by the Company. In addition, within twelve months after a
change in control, if the Named Officer's employment is terminated without
good cause or the Named Officer should voluntarily terminate such employment
with good reason, the Employment Agreement provides for severance payments
equal to 12-18 months of current compensation. The following sets forth the
potential cash payments to the Named Officers:
<TABLE>
<CAPTION>
Lump Sum Severance Severance
Payment Payments Period
-------- --------- ---------
<S> <C> <C> <C>
G. Thomas Ahern $140,000 $210,000 18 months
Wellesley R. Foshay 140,000 140,000 12 months
John Murray 140,000 210,000 18 months
Andrew N. Peterson 140,000 210,000 18 months
-------- ---------
$560,000 $770,000
-------- ---------
-------- ---------
</TABLE>
Additionally, three other executive officers of the Company have entered into
an Employment Agreement with the Company with potential cash payments in
excess of $100,000 each.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of directors Borsting, Krakauer, and
Lewis. Mr. Lewis is the Chief Executive Officer of Military Professional
Resources, Inc. William R. Roach, Chairman of the Board of Directors and
Chief Executive Officer of the Company, was a member of the Board of
Directors of Military Professional Resources, Inc. until December 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by Messrs. Borsting, Krakauer, and Lewis in their
capacity as the Board of Directors' Compensation Committee and addresses the
Company's compensation policies for fiscal 1997 as they affected the Chief
Executive Officer ("the CEO") and the other executive officers of the Company
(including the Named Officers).
Compensation Philosophy
The Company's compensation philosophy, as developed under the supervision of
the Compensation Committee, is highly incentive oriented, particularly for
executive officers. The goals of the executive compensation program are to
attract, retain, and reward executive officers who contribute to the success
of the Company. Compensation opportunities are aligned with the Company's
business objectives. The compensation programs are designed to motivate
executive officers to meet annual corporate performance goals and enhance
long-term stockholder value.
7
<PAGE>
In designing and administering the individual elements of the executive
compensation program, the Committee strives to balance short and long-term
incentive objectives and use prudent judgment in establishing performance
criteria, evaluating performance, and determining incentive awards.
Overview of Executive Compensation Policy
The executive compensation program is designed to be closely linked to
corporate performance and returns to stockholders. Accordingly, the Company
has developed an overall compensation strategy and specific compensation
plans that tie a significant portion of executive compensation to the
Company's success in meeting specified performance goals. The overall
objectives of this strategy are to motivate the CEO and executive officers to
achieve the goals inherent in the Company's business strategy, to link
executive and stockholder interests through equity-based plans to maintain a
high quality core of executives, and finally, to provide a compensation
package that recognizes individual contributions, as well as overall business
results.
The Compensation Committee receives the recommendations of the CEO for the
compensation to be paid to executive officers, including the Named Officers,
and after due deliberation determines the compensation of such executive
officers and the CEO. This process is designed to ensure consistency
throughout the executive compensation program. The key elements of the
Company's executive compensation program consist of base salary, annual cash
incentive compensation for the sales executives, and stock option incentives.
The Compensation Committee believes the CEO's compensation should be heavily
influenced by Company performance, including the achievement of long-term
strategic objectives, profitable growth, and increased stockholder value.
Therefore, although there is necessarily some subjectivity in setting the
CEO's base salary, major elements of the compensation package are directly
tied to Company performance. The CEO's annual salary was approximately
$225,000 in fiscal 1997 and fiscal 1996, and $175,000 in fiscal 1995. The
CEO did not receive any stock option grants in fiscal 1997.
The Compensation Committee's policies with respect to each of the
compensation program elements are discussed below. In addition, while the
elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package
provided by the Company, including group health and life insurance and
participation in the Company's 401(k) Plan.
Base Salaries
Salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual,
as well as their contribution to the achievement of Company goals. The
Committee believes that the Company generally establishes relatively
conservative executive officer base salaries. These base salaries are
reviewed annually by the Committee in view of overall Company performance and
may be adjusted to reflect changes in responsibilities and the executive's
personal contribution to corporate performance.
Annual Cash Incentive Compensation
The annual incentive portion of the sales executive compensation program
provides for sales commissions and bonuses. Commissions are based on revenues
and bonuses are based on the achievement of pre-established annual goals.
Stock Option Incentives
Stock options provide executives with the opportunity to build an equity
interest in the Company and to share in the appreciation of the value of the
Company's stock. Stock options are granted at the fair market value of the
stock on the date of the grant, are subject to vesting over time, and only
have future value for the executives if the stock price appreciates from the
date of grant. Factors influencing stock option grants to executive officers
include the performance of the Company, the relative levels of
responsibility, contributions to the business of the Company, and
competitiveness with other growth-oriented companies. Stock options granted
to executive officers are approved by the Committee.
8
<PAGE>
Benefits
Benefits offered to executive officers are largely those that are offered to
the general employee population, such as group health and life insurance
coverage and participation in the Company's 401(k) Plan. In addition, the
CEO is provided with supplemental life insurance. These benefits are not
tied directly to corporate performance.
The Compensation Committee believes that the Company's executive compensation
policies and programs serve the interests of the Company and its stockholders.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Jack R. Borsting, Ph.D., Chairman
John L. Krakauer
Major General Vernon B. Lewis, Jr. (USA Ret)
9
<PAGE>
STOCK PERFORMANCE GRAPH
In accordance with Securities and Exchange Commission regulations, the
following performance graph compares the cumulative total stockholder return
on the Company's Common Stock to the cumulative total return on the NASDAQ
Index and the weighted average return of three peer issuers (described below)
from December 23, 1992, the date of the Company's initial public offering,
through October 31, 1997, assuming an initial investment of $100 and the
reinvestment of all dividends.
The peer group represents three companies which have training and education
operations: The Learning Company, Broderbund Software, and Apollo Group. The
Learning Company has been added to the peer group for this Proxy Statement,
replacing National Education Corporation which was acquired by Harcourt
General during 1997. Harcourt General is not considered a member of the peer
group for this analysis. Although the businesses of the companies in the
peer group include operations outside of the training and education industry,
and/or serve markets different than those of the Company, the Company
believes the selection of these issuers for comparison purposes is reasonable.
[CHART]
<TABLE>
<CAPTION>
12/23/92 10/31/93 10/31/94 10/31/95 10/31/96 10/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
TRO Learning $100.0 $90.0 $67.5 $78.8 $177.5 $75.0
Peer Group 100.0 140.9 168.9 162.2 80.0 89.4
NASDAQ Comp. 100.0 117.9 117.7 156.8 184.8 241.1
</TABLE>
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 17, 1998, information about
the ownership of Common Stock of the Company by each stockholder who is known
by the Company to own beneficially more than 5% of the outstanding Common
Stock of the Company. Except as otherwise indicated, the stockholders listed
in the table have sole voting and investment powers with respect to the
shares indicated.
<TABLE>
<CAPTION>
Name and Address of Number of Shares
Beneficial Owner Beneficially Owned Percent of Class(1)
----------------------------------- ------------------ -------------------
<S> <C> <C>
William R. Roach (2)
Poplar Creek Office Plaza
1721 Moon Lake Boulevard
Suite 555
Hoffman Estates, Illinois 60194 1,234,168 19%
Cherry Tree Investments, Inc.
Centennial Lakes Office Park
7601 France Avenue South, Suite 225
Edina, MN 55435 788,360 12%
</TABLE>
(1) Percent of class calculation is based on the number of shares of the
Company's Common Stock outstanding as of February 17, 1998.
(2) Excludes an aggregate of 42,128 shares of Common Stock held of record by
the adult children of William R. Roach, and 147,609 shares held of
record by a family limited partnership, over which Mr. Roach maintains
voting authority but disclaims beneficial ownership. Includes 312,402
shares subject to currently exercisable options and options which become
exercisable within 60 days of February 17, 1998 ("currently exercisable
options").
The following table sets forth, as of February 17, 1998, information about
the beneficial ownership of Common Stock of the Company by each director,
each Named Officer, and by all directors and all executive officers as a
group. Except as otherwise indicated, the stockholders listed in the
following table have sole voting and investment powers with respect to the
shares indicated.
<TABLE>
<CAPTION>
Directors and Number of Shares Percent of Class
Executive Officers Beneficially Owned(1) (2)
------------------------------------ --------------------- ----------------
<S> <C> <C>
G. Thomas Ahern(3) 50,645 1%
Jack R. Borsting(4) 17,000 *
Tony J. Christianson(5) 788,360 12%
Wellesley R. Foshay(6) 31,872 *
John L. Krakauer(7) 84,000 1%
Vernon B. Lewis, Jr.(4) 38,450 1%
John Murray(8) 23,662 *
John Patience 51,179 1%
Andrew N. Petersn 463 *
William R. Roach(9) 1,234,168 19%
All directors and executive officers
as a group (15 individuals)(5)(10) 2,396,102 35%
</TABLE>
* Less than 1%
11
<PAGE>
(1) Under regulations of the Securities and Exchange Commission, persons who
own or have the power to vote or dispose of shares, either alone or
jointly with others, are deemed to be the beneficial owners of such
shares. Such persons are also deemed to be the beneficial owners of
shares beneficially owned by certain family members.
(2) Shares subject to currently exercisable options are considered outstanding
for the purpose of determining the percent of class held by the holder of
such option or warrant, but not for the purpose of computing the
percentage held by others. For the purpose of computing these
percentages, the number of shares outstanding as of February 17, 1998 was
6,414,085, excluding currently exercisable options.
(3) Includes 40,221 shares subject to currently exercisable options.
(4) Includes 12,500 shares subject to currently exercisable options.
(5) Includes 788,360 shares held of record by Cherry Tree Investments, Inc. as
to which Mr. Christianson (an affiliate of Cherry Tree Investments, Inc.)
disclaims beneficial ownership.
(6) Includes 16,487 shares subject to currently exercisable options.
(7) Includes 4,000 shares subject to currently exercisable options.
(8) Includes 17,535 shares subject to currently exercisable options.
(9) Excludes an aggregate of 42,128 shares of Common Stock held of record by
the adult children of William R. Roach, and 147,609 shares held of record
by a family limited partnership, of which Mr. Roach maintains voting
authority but disclaims beneficial ownership. Includes 312,402 shares
subject to currently exercisable options.
(10) Includes 471,803 shares subject to currently exercisable options.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten
percent (10%) of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Executive officers, directors, and greater than
ten percent (10%) beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
and written representations from the executive officers and directors, the
Company believes that all Section 16(a) filing requirements applicable to its
executive officers and directors were complied with during its fiscal year
1997, except for John Patience, who filed a Form 4 late.
12
<PAGE>
TRO LEARNING, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. -
This proxy, when properly executed, shall be voted in accordance with the
instructions given and, in the absence of such instructions, shall be voted for
the nominees listed in Proposal 1 and in favor of Proposal 2. If other business
is presented at said meeting, this proxy shall be voted on those matters in
accordance with the best judgment of the named proxies.
WITHHOLD
FOR AUTHORITY
1. ELECTION OF CLASS II DIRECTORS: ALL FOR ALL
John Patience and
Maj. Gen. Vernon B. Lewis, Jr. 0 0
FOR ALL EXCEPT THOSE WHOSE NAME(s) APPEAR BELOW:
______________________________________________
2. Ratification of the appointment of FOR AGAINST ABSTAIN
Coopers & Lybrand as the 0 0 0
Company's independent auditors
for the upcoming year.
3. In their discretion upon such other matters as may properly come before
the meeting and any adjournments or postponements thereof.
PLEASE COMPLETE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
Dated : ____________________________________________________, 1998
Signature(s) _____________________________________________________
___________________________________________________________________
IMPORTANT: PLEASE DATE THIS PROXY AND SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY. IF SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING
OF
TRO LEARNING, INC.
THURSDAY, APRIL 16, 1998
9:00 A.M. (CST)
ARLINGTON PARK HILTON
3400 WEST EUCLID AVENUE
ARLINGTON HEIGHTS, IL 60005-1052
<PAGE>
TRO LEARNING, INC.
ANNUAL MEETING OF STOCKHOLDERS, APRIL 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of TRO Learning, Inc. ("the Company") does hereby
acknowledge receipt of Notice of said Annual Meeting and the accompanying Proxy
Statement and does hereby constitute and appoint William R. Roach and Andrew N.
Peterson, or either of them, with full power of substitution, to vote all shares
of stock of the Company that the undersigned stockholder is entitled to vote, as
fully as the undersigned could do if personally present, at the Annual Meeting
of Stockholders of the Company to be held on April 16, 1998 at 9:00 a.m.
(Central Standard Time), at the Arlington Park Hilton, 3400 West Euclid Avenue,
Arlington Heights, Illinois 60005-1052, and any adjournment thereof, as
indicated on the reverse side of this card.
/ / Check here for address change. / / Check here if you plan to attend
the meeting.
New Address: _________________________
________________________________________
________________________________________
