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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-72523
1,828,470 SHARES COMMON STOCK
TRO LEARNING, INC.
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All of the shares of common stock offered for sale under this prospectus are
being sold by certain selling stockholders. The selling stockholders are selling
up to 1,828,470 shares of common stock, par value $.01 per share of TRO
Learning, Inc., a Delaware corporation. See "Selling Stockholders and Plan of
Distribution."
The common stock offered hereby is issuable to the selling stockholders by
TRO upon (i) the conversion by the selling stockholders of TRO's Series C
Convertible Preferred Stock issued to such selling stockholders pursuant to a
Series C Convertible Preferred Stock Purchase Agreement dated January 13, 1999
among TRO and the holders of the Convertible Preferred Stock and (ii) the
exercise by the selling stockholders of the Warrants issued by TRO to such
selling stockholders in connection with the Stock Purchase Agreement.
The common stock to which this prospectus relates may be sold by the holders
thereof after conversion of the Convertible Preferred Stock or the exercise of
the Warrants from time to time through underwriters or dealers, through brokers
or other agents, or directly to one or more purchasers, at market prices
prevailing at the time of sale or at prices otherwise negotiated. See "Selling
Stockholders and Plan of Distribution."
Our common stock is quoted on the Nasdaq National Market under the symbol
"TUTR." On February 16, 1999, the last reported sale price for the common stock,
as reported on the Nasdaq National Market, was $6.875 per share.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS APRIL 1, 1999.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION CONTAINED IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT.
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TABLE OF CONTENTS
PAGE
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Available Information..................................................... 1
Information Incorporated By Reference..................................... 1
Prospectus Summary........................................................ 2
Forward-Looking Statements................................................ 4
Risk Factors.............................................................. 4
Use of Proceeds........................................................... 6
Description of Capital Stock.............................................. 7
Selling Stockholders and Plan of Distribution............................. 10
Legal Matters............................................................. 14
Experts................................................................... 14
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AVAILABLE INFORMATION
TRO files annual, quarterly, and current reports and other information with
the Securities and Exchange Commission. You may read and copy any reports,
statements or other information on file at the Commission's public reference
room in Washington, D.C. You can request copies of those documents, upon payment
of a duplicating fee, by writing to the commission.
TRO has filed a registration statement on Form S-3 with the Commission with
respect to the common stock offered hereby. This prospectus, which constitutes
part of the registration statement, does not contain all of the information
included in the registration statement. Certain information is omitted and you
should refer to the exhibits attached to the registration statement and its
exhibits. With respect to references made in this prospectus to any contract or
other document of TRO, such references are not necessarily complete and you
should refer to the exhibits attached to the registration statement for copies
of the actual contract or document.
You may review a copy of the registration statement at the Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices in New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of public reference rooms. TRO's Commission filings and registration
statements can also be reviewed by accessing the Commission's Internet site at
http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the Commission will automatically update and supersede the information in
this prospectus. We incorporate by reference the documents listed below and any
future filing we make with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until the selling stockholders sell
all of the shares offered by this prospectus:
- Annual Report on Form 10-K for the fiscal year ended October 31, 1998
(file no. 000-20842); and
- Report on Form 8-K filed January 25, 1999 (file no. 000-20842).
You may request a copy of these filings at no cost by writing or telephoning
us at the following address: TRO Learning, Inc., 1721 Moon Lake Boulevard, Suite
555, Hoffman Estates, Illinois 60194, Attention: Patricia A. Hlavacek,
Telephone: (847) 781-7800.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information that you
should consider before investing in the common stock. You should carefully read
the entire prospectus, including the documents incorporated by reference into
it. TRO's operations are comprised of the TRO business and the business of our
wholly-owned operating subsidiary, The Roach Organization, Inc., which has two
wholly-owned subsidiaries, TRO Learning (Canada), Inc. in Canada, and TRO
Learning (UK) Ltd., in the United Kingdom.
GENERAL
TRO is a leading developer and marketer of microcomputer-based, interactive,
self-paced instructional systems used in a wide variety of adult settings.
Offering more than 2,000 hours of comprehensive academic and applied skills
courseware designed for adolescents and adults, TRO's
PLATO-Registered Trademark- Learning Systems are marketed to middle schools and
high schools, colleges, job training programs, correctional institutions,
military education programs, and corporations. PLATO-Registered Trademark-
Learning Systems is delivered via networks, CD-ROM, the Internet and private
intranets.
TRO was incorporated in June 1989 as Edu Corp., and in October 1992 we
changed our name to TRO Learning, Inc. TRO's wholly-owned operating subsidiary
is The Roach Organization, Inc. The Roach Organization has two wholly-owned
subsidiaries, one in Canada, TRO Learning (Canada), Inc., and one in the United
Kingdom, TRO Learning (UK) Ltd.
In September 1998, TRO announced the sale of its Aviation Training business
which marketed PC-based instructional systems to airlines worldwide for use by
commercial airline pilots, maintenance crews, and cabin personnel. We will focus
exclusively on our PLATO-Registered Trademark- brand going forward.
TRO's principal business offices are located at 1721 Moon Lake Boulevard,
Suite 555, Hoffman Estates, Illinois 60194; Telephone: (847) 781-7800.
STRATEGY
TRO's strategy is to address the needs of adolescent and adult learners by
providing a broad range of interactive, multimedia, self-paced educational and
training courseware delivered on personal computers. The critical elements of
our business strategy are as follows:
- Target growing market niches that serve adolescent and adult learners
rather than pre-school and elementary school-aged children.
- Work closely with clients to design a program of instruction which meets
their specific educational and training needs by providing comprehensive,
solution-oriented courseware, and services to our clients.
- Emphasize sales of solution-oriented education and training courseware and
services which generate high profit margins and greater opportunities for
growth.
- Utilize the design and structural advantages inherent in its proprietary
software development systems to design and produce new courseware and
services.
- Focus on developing the broadest delivery system for its instructional
management system and courseware library, including the use of Internet
and Intranet delivery.
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THE OFFERING
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<S> <C>
The Offering...................... The common stock offered hereby will be issued to the
selling stockholders upon (i) conversion of the
Convertible Preferred Stock and (ii) the exercise of the
Warrants, each issued pursuant to the Stock Purchase
Agreement.
Conversion Price of Series C
Convertible Preferred Stock..... Shares of Series C Convertible Preferred Stock are
convertible, at the option of the holder, into common
stock at a conversion price of the lower of (i) $9.51 or
(ii) the applicable percentage of the average of the
lowest three per share market values of the common stock
during the thirty trading days immediately preceding the
conversion date. The applicable percentage is adjusted
over time from 90% to 82%. See "Description of Capital
Stock."
Exercise Price of the Warrants.... The Warrants are exercisable, at the option of the
holder, into common stock at an exercise price of $9.51
per share of common stock subject to adjustments. See
"Description of Capital Stock."
Aggregate Amount of common stock
offered by the selling
stockholders.................... 1,828,470 shares
Number of shares of common stock
outstanding as of January 29,
1999(1)......................... 6,445,832
Nasdaq Symbol..................... TUTR
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(1) Does not include (i) shares of common stock, issuable pursuant to
outstanding employee and director options, (ii) 50,805 and 125,000 shares of
common stock issuable pursuant to warrants dated March 27, 1997 and January
13, 1999, respectively, or (iii) shares of common stock issuable pursuant to
the Convertible Preferred Stock.
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FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this prospectus are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The statements are subject to the safe harbor
provisions of the Reform Act. Such forward-looking statements include our
statements about:
- the competitiveness of the computer-based education and training industry;
- the ability to keep up with changing trends in the industry;
- our strategies; and
- other statements that are not historical facts.
When used in this prospectus, the words "anticipate", "believe", "estimate",
and similar expressions are generally intended to identify forward-looking
statements. Because such forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements, including:
- Declines in annual financial results;
- Unpredictability of government appropriations;
- Ability to keep up with changing trends in the industry;
- Changes in economic and business conditions (including in the
computer-based education and training industry);
- Changes in business strategies; and
- Other factors discussed in "Risk Factors".
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in shares of common stock.
VARIABILITY IN ANNUAL RESULTS MAKE IT UNCERTAIN AS TO WHETHER WE CAN SUSTAIN
PROFITABILITY.
For fiscal year ended October 31, 1998, we reported a net income of
$3,068,000, an increase from the net loss of ($20,217,000) we sustained for the
fiscal year ended October 31, 1997. In fiscal 1996, 1995, and 1994, our net
income was $982,000, $3,752,000, and $3,361,000, respectively. After TRO
sustained net losses for the fiscal year 1997, we implemented cost control
measures for fiscal 1998 and thereafter; however, there can be no assurance that
we can sustain profitability. Future revenues and profits, if any, will depend
upon various factors, including continued market acceptance of our products and
services. Potential investors should consider the risks, expenses and
difficulties frequently encountered in connection with the operation and
development of a new and expanding business including, but not limited to,
delays in the expansion and addition of sales and distribution channels, the
ability to attract qualified employees and innovation in the design and
development of new products and product enhancements.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AFFECT REVENUES AND PROFITABILITY
FOR SUCH QUARTERLY PERIODS.
TRO's revenues and profitability may vary significantly among quarterly
periods. In addition, our revenues and profitability may fluctuate as a result
of many factors, including the size, timing and product mix of orders, increased
competition, loss of significant customers, announcements of new products by TRO
or any of our competitors, delays in shipment of existing or new products, and
capital spending patterns of TRO's customers. Many of our education and training
sales are to customers who purchase
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systems and license courseware on a single procurement basis. Accordingly, new
customers must be found or new or additional products must be sold to existing
customers in order to maintain and expand TRO's education and training revenue
stream.
FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES AND
MEET EVOLVING INDUSTRY STANDARDS.
The computer-based educational and training industry is characterized by
technological change, frequent product introductions, and evolving industry
standards. Although we believe we compete favorably in the markets in which we
participate, our future success will depend, to a significant extent, on our
ability to enhance our existing products, develop and introduce new products,
satisfy an expanded range of customer needs and achieve market acceptance. There
can be no assurance that we will have sufficient resources to make the necessary
investments or that we will be able to develop and implement the technological
advances required to maintain our competitive position. We are not aware of any
emerging standards or new products which could render our existing products
obsolete. However, there can be no assurance that TRO's products will not be
rendered obsolete or that we will be able to develop and market new products.
FINANCING RISK.
In fiscal 1998, TRO from time to time did not meet certain financial ratios
specified in our credit facility agreement. On each such occasion, the lender
waived the default upon the payment of a fee by TRO. There can be no assurance
that we will not in the future again be in breach of our obligations under the
credit facility. In such event, we might be required to pay additional fees to
the lender or may be required to refinance our obligations. There can be no
assurance that refinancing would be available to TRO in such circumstances on
acceptable terms.
RELIANCE ON GOVERNMENT FUNDING COULD HAVE A NEGATIVE EFFECT ON REVENUES.
A substantial portion of our total revenues are derived from clients
substantially dependent on government funding, such as public school systems,
community-based organizations and correctional facilities. The government
appropriations process is often slow, unpredictable and subject to factors
outside our control and several proposals are currently being made to reduce
government spending. Curtailments or substantial reductions in government funded
or sponsored programs and termination or renegotiation of government-funded
contracts could have a material adverse impact on, or result in the delay or
termination of, TRO's revenues associated with these programs and contracts.
THERE IS NO ASSURANCE THAT KEY MANAGEMENT PERSONNEL WILL REMAIN WITH US.
TRO's future success depends in large part on the continued service of our
key technical, marketing, sales and management personnel, in particular on
William R. Roach, our President and Chief Executive Officer, and on our ability
to continue to attract, motivate and retain highly qualified employees. Our key
employees may terminate their employment with us at any time. There is
competition within the industry for such employees and the process of locating
key technical and management personnel with suitable skills and attributes to
execute TRO's strategy is often lengthy. Accordingly, the loss of the services
of key personnel, in particular Mr. Roach, could have a material adverse effect
on TRO.
COMPETITION COULD ADVERSELY AFFECT OUR PERFORMANCE.
The computer-based education and training industry is competitive and demand
for particular software and courseware products, systems hardware, and services
may be affected adversely by the increasing number of competitive products from
which a prospective customer may choose. We compete primarily against other
organizations offering educational and training software and services. TRO's
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competitors include several large companies with substantially greater
financial, technical and marketing resources than those of TRO, including
divisions within Pearson PLC and Mc-Graw Hill McMillan, as well as a number of
smaller companies. Existing competitors may broaden their product lines and
potential competitors, may enter the market and/or increase their focus on
computer-based education and training, resulting in greater competition for TRO.
These changes or potential changes in the market could have a material adverse
effect on our operating results.
FLUCTUATIONS IN DEMAND COULD ADVERSELY AFFECT OUR PROFITABILITY.
Certain of the our customers and potential customers are in industries, such
as education, that experience cyclical variations in funding or profitability,
which may affect such customers' willingness or ability to purchase products and
services offered by TRO. These fluctuations in demand could have a material
adverse effect on our future profitability.
MISUSE OR MISAPPROPRIATION OF OUR PROPRIETARY RIGHTS COULD ADVERSELY AFFECT OUR
PERFORMANCE.
We regard our courseware and software as proprietary and rely primarily on a
combination of statutory and common law copyright, trademark and trade secret
laws, customer licensing agreements, employee and third-party nondisclosure
agreements and other methods to protect our proprietary rights. TRO owns the
Federal registration of the PLATO-Registered Trademark- trademark. In addition,
in 1989 Control Data Corporation assigned to TRO Federally registered copyrights
in the PLATO-Registered Trademark- courseware. TRO has not recorded the
assignment of these copyrights because we believe that the additional statutory
rights resulting from recordation are not necessary for the protection of our
rights therein. TRO has Federal copyrights in all PLATO-Registered Trademark-
courseware produced since 1989. We have not applied for trademark registration
at the state level, but have instead relied on our Federal registrations and
state common law rights to protect our proprietary information. We do not
include in our products any mechanisms to prevent or inhibit unauthorized
copying, but we generally require the execution of a license agreement which
restricts copying and use of the courseware and software. We have no knowledge
of the unauthorized copying of our products. However, if such copying or misuse
were to occur to any substantial degree, TRO could be materially adversely
affected.
USE OF PROCEEDS
We will receive no proceeds from the sale by the selling stockholders of the
shares of common stock.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of TRO consists of 25,000,000 shares of common
stock, $.01 par value per share, and 5,000,000 shares of preferred stock, par
value $.01 per share, of which 6,445,832 shares of common stock (exclusive of
treasury shares) were issued and outstanding on January 29, 1999. As of January
13, 1999, TRO has 540 shares of Series C Convertible Preferred Stock issued and
outstanding.
SERIES C CONVERTIBLE PREFERRED STOCK
On January 13, 1999, TRO completed a $5 million private placement of Series
C Convertible Preferred Stock. The Convertible Preferred Stock is convertible
into shares of TRO's common stock, at the option of the holder, up to ten years
from the issue date. Conversion is mandatory for all such securities still
outstanding ten years from the issue date. The conversion price is the lower of
$9.51 or the applicable percentage of the average of the lowest three per share
market values during the thirty trading days immediately preceding the
conversion date. The applicable percentage is adjusted over time from 90% to
82%. The conversion price is also subject to ceiling and floor limitations,
which may be adjusted based on our financial performance.
TRO may redeem the Convertible Preferred Stock in accordance with the
formula set forth in the Stock Purchase Agreement. In addition, upon the
occurrence of certain triggering events, the Convertible Preferred Stock is
subject to a mandatory redemption. The triggering events include the following:
(i) the failure of this registration statement to be declared effective
on or prior to the 180th day after the date of issuance of the Convertible
Preferred Stock;
(ii) the failure of TRO shares of common stock to be listed for trading
on NASDAQ or the suspension of the TRO common stock from trading on NASDAQ,
in either case, for more than five trading days in the aggregate;
(iii) TRO shall be a party to any change of control transaction, shall
agree to sell all or substantially all or in excess of 50% of its assets in
one or more transaction or shall redeem more than a de minimis number of
shares of TRO common stock or the other TRO securities; or
(iv) TRO shall fail to have available a sufficient number of authorized
and unreserved shares of its common stock to issue to the holders of the
Convertible Preferred Stock upon the conversion of such securities.
1999 WARRANTS
Concurrently with the issuance of the Convertible Preferred Stock, we issued
Warrants to purchase 125,000 shares of TRO's common stock at an exercise price
of $9.51 per share. These Warrants expire in 2004. The exercise price of the
Warrants are subject to adjustment from time to time if TRO shall (i) pay a
stock dividend (except scheduled dividends paid on outstanding preferred stock
as of the date hereof which contain a stated dividend rate) or otherwise make a
distribution or distributions on shares of its common stock or on any other
class of capital stock payable in shares of common stocks, (ii) subdivide
outstanding shares of common stock into a larger number of shares, or (iii)
combine outstanding shares of common stock into a smaller number of shares.
In connection with the Convertible Preferred Stock and the Warrants, and
pursuant to the Registration Rights Agreement between the selling stockholders
and TRO, we are obligated to register the common stock into which the
Convertible Preferred Stock are convertible and the Warrants exercisable. We are
also required to provide the selling stockholders with a current prospectus upon
request for such selling stockholders to use in the resale of the common stock.
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1997 DEBENTURES
In March 1997, we issued $3,050,000 of 10% subordinated convertible
debentures with a scheduled maturity date in March 2004. Pursuant to the 1997
Debentures, we filed a registration statement on Form S-3 dated January 21,
1998, covering the resales by the selling securityholders of the common stock
upon conversion of the 1997 Debentures and shall use our best efforts to cause
such registration statement to remain effective for such period as may be
necessary for the holders of such common stock to dispose of such common stock;
provided, however, that we shall not be required to maintain effectiveness of
such registration statement at such time as the holders of the common stock are
able to sell the common stock underlying the 1997 Debentures under Rule 144(k)
under the Securities Act or any successor thereto, which allows unrestricted
resales by nonaffiliates of TRO after a holding period of two years. At the
option of each holder of the 1997 Debentures, the 1997 Debentures are
convertible into TRO's common stock at a conversion price, subject to
adjustments, of $9.60 per share. The conversion price of the common stock into
which the 1997 Debentures are convertible is subject to adjustment if we (i)
subdivide or combine our outstanding shares of common stock or declare a
dividend payable in common stock of TRO; (ii) reorganize or reclassify our
capital stock, consolidate or merge with another corporation or sell all or
substantially all of our assets to another corporation; (iii) distribute to all
holders of our common stock any assets or debt securities or any rights or
warrants to purchase debt securities, assets or other securities; or (iv) issue
or sell shares of our common stock at less than the conversion price, or issue
any options or warrants or other rights to purchase TRO's common stock at a
price per share less than the conversion price or issue securities convertible
into TRO's common stock at a price per share less than the conversion price. TRO
may redeem the 1997 Debentures at 101% of principal, plus interest, subject to
certain terms and conditions. In addition, the 1997 Debentures are subject to
mandatory redemption at 25% of principal annually beginning in 2001.
1997 WARRANTS
In connection with TRO's offering of the 1997 Debentures, in March 1997, we
issued warrants to investors (the "Investor Warrants") to purchase 31,743 shares
of the our common stock at an exercise price of $9.60 per share. The exercise
price is subject to adjustment if we issue or sell shares of our common stock at
less than the exercise price, or issues any options or warrants or other rights
to purchase our common stock at a price per share less than the exercise price
or issue securities convertible into our common stock at a price per share less
than the exercise price. The Investor Warrants expire in 2002. TRO also issued
warrants to the placement agents for the 1997 Debentures (the "Placement Agent
Warrants") to purchase 19,062 shares of our common stock at an exercise price of
$9.60. The Placement Agent Warrants expire in 2007 and the exercise price for
the Placement Agent Warrants is subject to the same adjustments as are
applicable to the exercise price for the Investor Warrants.
COMMON STOCK
Subject to the rights of holders of any outstanding preferred stock, the
holders of outstanding shares of common stock are entitled to share ratably in
dividends declared out of assets legally available therefor at such time and in
such amounts as our board of directors may from time to time lawfully determine.
TRO's ability to pay dividends is restricted by TRO's facility credit agreement.
Each common stock holder is entitled to one vote for each share held by him.
Common stockholders are not entitled to cumulate votes for the election of
directors. The common stock is not entitled to conversion or preemptive rights
and is not subject to redemption or assessment. The common stock presently
outstanding is, and the common stock issued upon conversion of the 1997
Debentures and the Convertible Preferred Stock will be fully paid and
nonassessable.
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REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement between TRO and the selling
stockholders, we agreed to file a registration statement of which this
prospectus constitutes a part, covering the resales by the selling stockholders
of the common stock upon (i) conversion of the Convertible Preferred Stock and
(ii) exercise of the Warrants. We agreed to use our best efforts to cause the
registration statement to remain effective for such period as may be necessary
for the selling stockholders of the common stock to dispose of such common
stock. However, we shall not be required to maintain effectiveness of the
registration statement after the earlier of (i) when the selling stockholders
are able to sell the common stock underlying the Convertible Preferred Stock and
the Warrants under Rule 144(k) under the Securities Act or any successors
thereto or (ii) three years.
CERTAIN CHARTER PROVISIONS
The Certificate of Incorporation of TRO provides that, to the fullest extent
permitted by the Delaware General Corporation Law, a director of TRO shall not
be liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director. In addition, our By-laws provide for the indemnification of
officers and directors to the fullest extent permitted by Delaware law. In
furtherance thereof, the Board of Directors is expressly authorized to amend
TRO's By-laws to give full effect to any changes in applicable law,
notwithstanding possible self-interest of the directors in the action being
taken.
TRO's Certificate of Incorporation and By-laws contain certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of our Board of Directors and which may have the effect of delaying,
deferring or preventing a future takeover or change in control of TRO unless
such takeover or change in control is approved by our Board of Directors. Such
provisions may also render the removal of the current Board of Directors and
management more difficult.
The Certificate of Incorporation establishes an advance notice procedure
with regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors and with regard to certain
matters to be brought before a TRO annual meeting of stockholders. In general,
notice must be received by TRO not less than 60 days prior to the meeting and
must contain certain specified information concerning the person to be nominated
or the matter to be brought before the meeting and concerning the stockholder
submitting the proposal.
Pursuant to the Certificate of Incorporation, TRO's Board of Directors is
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for cause. Vacancies on the Board of Directors may only
be filled by the remaining directors and not by the stockholders, except that in
the case of newly created directorships, if the remaining directors fail to fill
any such vacancy, the stockholders may do so at the next annual or special
meeting called for that purpose.
The preferred stock may be issued from time to time in one or more series
and with such designations and preferences for each series as shall be stated in
the resolutions providing for the designation and issue of each such series
adopted by TRO's Board of Directors. The Board of Directors is authorized in
TRO's Certificate of Incorporation to determine the voting, dividend, redemption
and liquidation preferences and limitations pertaining to such series. As of
January 13, 1999, TRO has 540 shares of Series C Convertible Preferred Stock
issued and outstanding.
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation not to be governed by the Delaware anti-takeover law (TRO has not
made such an election), (ii) the business combination was approved by the board
of directors of the corporation before the other party to the business
combination became an interested
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stockholder, (iii) upon consummation of the transaction that made it an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan), or (iv) the business
combination was approved by the board of directors of the corporation and
ratified by 66 2/3 of the voting stock which the interested stockholder did not
own. The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an "interested stockholder," transactions with an "interested stockholder"
involving the assets or stock of the corporation or its majority-owned
subsidiaries and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as those stockholders who become beneficial owners of 15% or more of a
Delaware corporation's voting stock after it becomes subject to the Delaware
antitakeover law.
TRANSFER AGENT
The Transfer Agent and Registrar for TRO's common stock is Harris Bank,
Chicago, Illinois.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
SELLING STOCKHOLDERS
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NUMBER OF SHARES OF
COMMON STOCK NUMBER OF SHARES OF
BENEFICIALLY OWNED PRIOR COMMON STOCK
TO THE OFFERING NUMBER OF SHARES BENEFICIALLY OWNED
------------------------ OF COMMON STOCK FOLLOWING THE
NAME AND ADDRESS OF SELLING STOCKHOLDERS # OF SHARES % OF CLASS OFFERED HEREBY OFFERING(11)
- --------------------------------------------- ----------- ----------- ----------------- -----------------------
<S> <C> <C> <C> <C>
KA Investments LDC........................... 339,183(1) 4.999% 1,353,068(2) 0
Stark International.......................... 170,401(3) 2.6% 365,694(4) 0
Industricorp & Co., FBO...................... 25,561(5) * 54,854(6) 0
Twin City Carpenters Pension Plan
First Trust National Association............. 12,781(7) * 27,427(8) 0
TTEE FBO Gary Kohler IRA
Gary S. Kohler............................... 12,781(9) * 27,427(10) 0
</TABLE>
- ------------------------
* Represents less than one percent of the common stock outstanding.
(1) The certificate of designation governing the Convertible Preferred Stock
prohibits KA from converting shares of Convertible Preferred Stock to the
extent that such conversion would result in KA beneficially owning in excess
of 4.999% of the outstanding shares of common stock following such
conversion. Such restriction may be waived by such holder upon not less than
75 days' notice to TRO. The number of shares of common stock listed as
beneficially owned by KA represents the number of shares of common stock
issuable to KA, subject to the limitation set forth in the first sentence of
this footnote, (i) upon conversion of 399.6 shares of Convertible Preferred
Stock, acquired on January 13, 1999, at an assumed conversion price of
$6.338 (which price will fluctuate from time to time based on changes in the
market price of the common stock and provisions in the formula for
determining the conversion price), and (ii) upon exercise of the warrant
issued to KA in conjunction with the sale of the Convertible Preferred Stock
for 92,500 shares of common stock ("Convertible"). Because the number of
shares of common stock issuable upon conversion of the Convertible Preferred
Stock is
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dependent in part upon the market price of the common stock prior to a
conversion, the actual number of shares of common stock that will be issued
in respect of such conversions and consequently the number of shares of
common stock that will be beneficially owned by KA will fluctuate daily and
cannot be determined at this time.
(2) Represents shares of common stock issuable to KA upon (i) conversion of its
Convertible Preferred Stock, and (ii) exercise of the Warrant issued to KA.
Because the number of shares of common stock issuable upon conversion of the
Convertible Preferred Stock is dependent in part upon the market price of
the common stock prior to a conversion, the actual number of shares of
common stock that will be issued in respect of such conversions and,
consequently, offered for sale under this Registration Statement, cannot be
determined at this time. However, TRO has contractually agreed to include
herein for KA 1,353,068 shares of common stock issuable upon conversion of
its Convertible Preferred Stock and exercise of its Warrant.
(3) The number of shares of common stock listed as beneficially owned by Stark
represents the number of shares of common stock issuable to Stark (i) upon
conversion of 108 shares of Convertible Preferred Stock, acquired on January
13, 1999, at an assumed conversion price of $6.338 (which price will
fluctuate from time to time based on changes in the market price of the
common stock and provisions in the formula for determining the conversion
price), and (ii) upon exercise of a Warrant issued to Stark in conjunction
with the sale of the Convertible Preferred Stock for 25,000 shares of common
stock. Because the number of shares of common stock upon conversion of the
Convertible Preferred Stock is dependent in part upon the market price of
the common stock prior to a conversion, the actual number of shares of
common stock that will be issued in respect of such conversions and
consequently the number of shares of common stock that will be beneficially
owned by Stark will fluctuate daily and cannot be determined at this time.
(4) Represents shares of common stock issuable to Stark upon (i) conversion of
its Convertible Preferred Stock, and (ii) exercise of the Warrant issued to
Stark. Because the number of shares of common stock issuable upon conversion
of the Convertible Preferred Stock is dependent in part upon the market
price of the common stock prior to a conversion, the actual number of shares
of common stock that will be issued in respect of such conversions and,
consequently, offered for sale under this Registration Statement, cannot be
determined at this time. However, TRO has contractually agreed to include
herein for Stark 365,694 shares of common stock issuable upon conversion of
its Convertible Preferred Stock and exercise of its Warrant.
(5) The number of shares of common stock listed as beneficially owned by Twin
City represents the number of shares of common stock issuable to Twin City
(i) upon conversion of 16.2 shares of Convertible Preferred Stock, acquired
on January 13, 1999, at an assumed conversion price of $6.338 (which price
will fluctuate from time to time based on changes in the market price of the
common stock and provisions in the formula for determining the conversion
price), and (ii) upon exercise of a Warrant issued to Twin City in
conjunction with the sale of the Convertible Preferred Stock for 3,750
shares of common stock. Because the number of shares of common stock
issuable upon conversion of the Convertible Preferred Stock is dependent in
part upon the market price of the common stock prior to a conversion, the
actual number of shares of common stock that will be issued in respect of
such conversions and consequently the number of shares of common stock that
will be beneficially owned by Twin City will fluctuate daily and cannot be
determined at this time.
(6) Represents shares of common stock issuable to Twin City upon (i) conversion
of its Convertible Preferred Stock, and (ii) exercise of the Warrant issued
to Twin City. Because the number of shares of common stock issuable upon
conversion of the Convertible Preferred Stock is dependent in part upon the
market price of the common stock prior to a conversion, the actual number of
shares of common stock that will be issued in respect of such conversions
and, consequently, offered for sale under this Registration Statement,
cannot be determined at this time. However, TRO has contractually agreed to
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include herein for Twin City 54,854 shares of common stock issuable upon
conversion of its Convertible Preferred Stock and exercise of its Warrant.
(7) The number of shares of common stock listed as beneficially owned by Kohler
IRA represents the number of shares of common stock issuable to Kohler IRA
(i) upon conversion of 8.1 shares of Convertible Preferred Stock, acquired
on January 13, 1999, at an assumed conversion price of $6.338 (which price
will fluctuate from time to time based on changes in the market price of the
common stock and provisions in the formula for determining the conversion
price), and (ii) upon exercise of a Warrant issued to Kohler IRA in
conjunction with the sale of the Convertible Preferred Stock for 1,875
shares of common stock. Because the number of shares of common stock upon
conversion of the Convertible Preferred Stock is dependent in part upon the
market price of the common stock prior to a conversion, the actual number of
shares of common stock that will be issued in respect of such conversions
and consequently the number of shares of common stock that will be
beneficially owed by Kohler IRA will fluctuate daily and cannot be
determined at this time.
(8) Represents shares of common stock issuable to Kohler IRA upon (i) conversion
of its Convertible Preferred Stock, and (ii) exercise of the Warrant issued
to Kohler IRA. Because the number of shares of common stock issuable upon
conversion of the Convertible Preferred Stock is dependent in part upon the
market price of the common stock prior to a conversion, the actual number of
shares of common stock that will be issued in respect of such conversions
and, consequently, offered for sale under this Registration Statement,
cannot be determined at this time. However, TRO has contractually agreed to
include herein for Kohler IRA 27,427 shares of common stock issuable upon
conversion of its Convertible Preferred Stock and exercise of its Warrant.
(9) The number of shares of common stock listed as beneficially owned by Kohler
represents the number of shares of common stock issuable to Kohler (i) upon
conversion of 8.1 shares of Convertible Preferred Stock, acquired on January
13, 1999, at an assumed conversion price of $6.338 (which price will
fluctuate from time to time based on changes in the market price of the
common stock and provisions in the formula for determining the conversion
price), and (ii) upon exercise of a Warrant issued to Kohler in conjunction
with the sale of the Convertible Preferred Stock for 1,875 shares of common
stock. Because the number of shares of common stock upon conversion of the
Convertible Preferred Stock is dependent in part upon the market price of
the common stock prior to a conversion, the actual number of shares of
common stock that will be issued in respect of such conversions and
consequently the number of shares of common stock that will be beneficially
owned by Kohler will fluctuate daily and cannot be determined at this time.
(10) Represents shares of common stock issuable to Kohler upon (i) conversion of
its Convertible Preferred Stock, and (ii) exercise of the Warrant issued to
Kohler. Because the number of shares of common stock issuable upon
conversion of the Convertible Preferred Stock is dependent in part upon the
market price of the common stock prior to a conversion, the actual number of
shares of common stock that will be issued in respect of such conversions
and, consequently, offered for sale under this Registration Statement,
cannot be determined at this time. However, TRO has contractually agreed to
include herein for Kohler 27,427 shares of common stock issuable upon
conversion of its Convertible Preferred Stock and exercise of its Warrant.
(11) Assumes sale of all shares of common stock offered hereby.
Pursuant to the terms of the Registration Rights Agreement, TRO has agreed
to indemnify the holders of the common stock issuable upon the conversion of the
Convertible Preferred Stock and the exercise of the Warrants against all losses
and liabilities caused by an untrue statement of material fact contained in this
prospectus or the registration statement of which this prospectus constitutes a
part or any omission to state a material fact required to be stated therein.
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PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 14 under the Securities
Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of TRO or derivatives of
TRO's securities and may sell or deliver shares in connection with these trades.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser or shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Neither TRO nor the selling stockholder can
presently estimate the amount of such commission or discount. TRO knows of no
existing arrangements between the selling stockholders and any broker-dealers or
agents.
TRO is required to pay all fees and expenses incident to the registration of
the shares, including fees and disbursements of counsel to the selling
stockholders. TRO has agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
EXPENSES
TRO has agreed to pay the expenses incurred in connection with the
preparation and filing of this prospectus and the related registration
statement, except for commissions of brokers or dealers and any transfer fees
incurred in connection with the sales of the common stock by the selling
stockholders, which
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will be paid by the selling stockholders. We have also agreed to pay the fees
and expenses incurred in connection with the registration or qualification of
the common stock for sale under state securities laws.
LEGAL MATTERS
Winston & Strawn, Chicago, Illinois has rendered an opinion (filed as an
exhibit to the Registration Statement) with respect to the validity of the
common stock.
EXPERTS
The consolidated financial statements and schedule to Form 10-K of TRO
Learning, Inc. for the year ended October 31, 1998 have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of PricewaterhouseCoopers LLP, independent certified public accountants, also
incorporated by reference herein, and given upon the authority of said firm as
experts in accounting and auditing.
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