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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
PROSOFT I-NET SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
PROSOFT I-NET SOLUTIONS, INC.
3001 Bee Caves Rd., Suite 100
Austin, Texas 78746
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 18, 1998
To the Stockholders of Prosoft I-Net Solutions, Inc.:
Please take notice that the Annual Meeting of Stockholders of Prosoft I-Net
Solutions, Inc. (the "Company") will be held at the Company's headquarters,
located at 3001 Bee Caves Road, Suite 100, Austin, Texas, on Friday, December 18
1998, at 10:00 a.m. local time, for the following purposes:
1. To elect one Class II Director to serve for a term of three years;
2. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to change the name of the Company to
prosofttraining.com; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
At the Annual Meeting, the Board of Directors intends to present Jeffrey G.
Korn as a nominee for election to the Board of Directors.
Only stockholders of record on the books of the Company at the close of
business on November 12, 1998 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. In addition, the Meeting will be available live on the Internet; for
more information on how to connect, contact laurasi@prosofttraining.com. A
majority of the outstanding shares must be represented at the meeting in order
to transact business. Consequently, if you are unable to attend in person,
please execute the enclosed proxy and return it in the enclosed addressed
envelope. Your promptness in returning the proxy will assist in the expeditious
and orderly processing of the proxies. If you return your proxy, you may
nevertheless attend the meeting and vote your shares in person, if you
wish.
By Order of the Board of Directors,
PROSOFT I-NET SOLUTIONS, INC.
JERRELL M. BAIRD
Chairman of the Board
Austin, Texas
November 20, 1998
PROSOFT I-NET SOLUTIONS, INC.
3001 Bee Caves Rd., Suite 100
Austin, Texas 78746
ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 18, 1998
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Prosoft I-
Net Solutions, Inc. (the "Company") for use at the Company's Annual Meeting of
Stockholders to be held at the Company's headquarters, located at 3001 Bee Caves
Road, Suite 100, Austin, Texas, on Friday, December 18, 1998, at 10:00 a.m.
local time, and any and all adjournments or postponements thereof. All shares
represented by each properly executed, unrevoked proxy received in time for the
Annual Meeting will be voted in the manner specified therein. If the manner of
voting is not specified in an executed proxy received by the Company, the proxy
holders will vote for the election of the nominee for election to the Board of
Directors listed in the proxy, for amendment of the Company's Articles of
Incorporation to change the name of the Company from Prosoft I-Net Solutions,
Inc. to prosofttraining.com and, as to any other business which may properly
come before the meeting, in accordance with their best judgment. Any
stockholder has the power to revoke his or her proxy at any time before it is
voted. A proxy may be revoked by delivering a written notice of revocation to
the Secretary of the Company, by presenting at the meeting a later-dated proxy
executed by the person who executed the prior proxy, or by attendance at the
meeting and voting in person by the person who executed the prior proxy. This
Proxy Statement and form of Proxy are being mailed to the Company's stockholders
on or about November 20, 1998.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall constitute
a quorum and that, except as otherwise provided by statute, the Articles of
Incorporation of the Company or the Bylaws, all other matters coming before the
Annual Meeting shall be decided by the vote of the holders of a majority of the
stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat. Votes cast at the Annual Meeting will be tabulated by
the persons appointed by the Company to act as inspectors of election for the
Annual Meeting. The inspectors of election will treat shares of voting stock
represented by a properly signed and returned proxy as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Likewise, the inspectors of
election will treat shares of voting stock represented by "broker non-votes"
(i.e., shares of voting stock held in record name by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote; (ii) the broker or nominee does not have discretionary
voting power under applicable rules or the instrument under which it serves in
such capacity; or (iii) the recordholder has indicated on the proxy card or has
executed a proxy and otherwise notified the Company that it does not have
authority to vote such shares on that matter) as present for purposes of
determining a quorum. Directors will be elected by a favorable vote of a
plurality of the shares of voting stock present and entitled to vote, in person
or by proxy, at the Annual Meeting. Accordingly, abstentions or broker non-
votes as to the election of Directors will not affect the election of the
candidates receiving the plurality of votes. As an amendment to the Company's
Articles of Incorporation, Proposal 2 requires the approval of a majority of the
outstanding shares of voting stock. Therefore, abstentions as to this proposal
will have the same effect as votes against such proposal.
The cost of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses will include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material
2
regarding the meeting to beneficial owners of the Company's Common Stock.
Further solicitation of proxies may be made by telephone or oral communication
with some stockholders by the Company's regular employees who will not receive
additional compensation for the solicitation. The Company has no plans to hire
special employees or paid solicitors to assist in obtaining proxies.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 11,770,242 shares of the Company's Common
Stock outstanding at the close of business on November 12, 1998 will be entitled
to notice of and to vote at the meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on November 12,
1998.
CERTAIN STOCKHOLDERS
Certain information with respect to (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the current Directors and nominees for election as
Directors, (iii) each of the Executive Officers listed in the compensation
tables herein, and (iv) all current Directors and Executive Officers as a group,
including the number of shares of the Company's Common Stock beneficially owned
by each of them as of November 1, 1998, is set forth below:
Percent of
Shares of Outstanding
Name of Individual Common Stock Common Stock
or Identity of Group(1) Beneficially Owned Beneficially Owned
----------------------- ------------------ ------------------
J.P. Morgan, Incorporated(2)
522 Fifth Ave., New York, NY 10036.......... 1,513,244 13.0%
Douglas Hartman
333 N. Wilshire Ave., Anaheim, CA 92801..... 685,921 5.8%
Jerrell M. Baird................................. 103,000 (3) *
Richard J. Groeneweg............................. 2,500 (4) *
Jeffrey G. Korn.................................. 53,000 (5) *
Andrew Stallman.................................. 108,500 (6) *
All Executive Officers and Directors
As a Group (8 persons)...................... 564,101 (7) 4.7%
_______________
* Less than 1% of the outstanding shares of Common Stock.
(1) Unless otherwise indicated, the named persons possess sole voting and
investment power with respect to the shares listed (except to the extent
such authority is shared with spouses under applicable law).
(2) J.P. Morgan & Co., Incorporated is the ultimate parent of the trustee of
four record stockholders, none of which individually own greater than 5% of
the Common Stock of the Company.
(3) Includes 75,000 options exercisable within 60 days of November 1, 1998.
(4) Includes 2,500 options exercisable within 60 days of November 1, 1998.
(5) Includes 30,000 options exercisable within 60 days of November 1, 1998.
(6) Includes 75,000 options exercisable within 60 days of November 1, 1998 and
held by an entity controlled by Mr. Stallman.
(7) Includes 311,416 options exercisable within 60 days of November 1, 1998.
3
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Bylaws provide for a Board of Directors of not less than
three nor more than twenty-five Directors, the exact number to be fixed by the
Board. The Board has currently fixed that number at five. The Board is divided
into three classes, with one class elected at each Annual Meeting to serve for a
term of three years. The Board of Directors has nominated one individual to be
elected in 1998 as the Class II Director, to serve until the Annual Meeting to
be held in 2001 and until his successor has been duly elected and qualified.
Jeffrey G. Korn, the nominee, is currently a Director of the Company.
Unless instructed to the contrary, the shares represented by the proxies
will be voted in favor of the election of the nominee named below. Although it
is anticipated that the nominee will be able to serve as a Director, should the
nominee become unavailable to serve, the proxies will be voted for such other
person as may be designated by the Company's Board of Directors. The nominee
receiving the highest number of votes will be elected as a Director.
NOMINEES
The following table sets forth information for the Director nominee.
Name Age Position Since
---- --- -------- -----
Class II Director Nominee Whose Term
of Office Will Continue Until 2001 if
Elected:
Jeffrey G. Korn 41 Director 1997
Jeffrey G. Korn. Mr. Korn has served as a Director of the Company since
June 1997. Mr. Korn is a partner in the law firm of Kosto & Rotella, P.A. in
Jacksonville, Florida, which he joined in 1983. Mr. Korn specializes in
corporate law, commercial litigation and bankruptcy. He graduated from the
State University of New York at New Paltz with a B.A. in Political Science in
1979, and received his J.D. degree from Stetson University in 1982.
CONTINUING DIRECTORS
The following table sets forth information for each Class I and Class III
Director continuing in office.
Director
Name Age Position Since
---- --- -------- -----
Class I Director Nominees Whose Terms
of Office Will Continue Until 2000 if
Elected:
Jerrell M. Baird 42 Chairman and Chief Executive Officer 1997
Richard J. Groeneweg 52 Director 1997
Class III Director Nominees Whose
Term of Office Will Continue Until 1999
if Elected:
Uday Om Pabrai 35 Vice Chairman and Chief Technology Officer 1998
Andrew Stallman 41 Director 1997
4
Jerrell M. Baird. Mr. Baird joined the Company as Chief Operating Officer
in June 1997 and became President of the Company in August 1997, a Director in
December 1997 and Chairman and Chief Executive Officer in February 1998. Prior
to joining the Company, Mr. Baird served as the Chief Information Officer of
IBM's Consumer Product Division from March 1996 to June 1997. In 1992, Mr. Baird
founded Baird Information Systems, an information technology outsourcing company
where he served as President until 1994. From 1978 to 1992 and from 1994 to
1996, Mr. Baird served in a variety of positions at Mrs. Baird's Bakeries, a
wholesale baking company, including Plant Manager, Director of Information
Technology and Vice President of Marketing. Mr. Baird graduated from Washington
and Lee University with a B.S. in Business Administration in 1978, and earned an
M.B.A. from Harvard University in 1982.
Richard J. Groeneweg. Mr. Groeneweg has served as a Director of the
Company since December 1997 and has been President of Residential Resources,
Inc., an issuer of asset backed securities since 1991. Prior to that, he served
as President of Mid Valley Mortgage Corp. from 1986 to 1991 and Senior Vice
President, Field Operations and Secondary Market, of Lion Funding Corporation
from 1982 to 1986. From 1968 to 1984, Mr. Groeneweg served in various
capacities, first with Beneficial Management Corporation and then with Granite
Financial Corporation. He also served in the United States Navy from 1966 to
1968.
Uday Om Pabrai. Mr. Pabrai joined the Company as Chief Technology Officer
and Vice-Chairman in January 1998 with Prosoft's acquisition of Net Guru
Technologies, the Internet skills training and certification company he founded
in 1992. Prior to founding Net Guru Technologies, Pabrai led the system
integration group at Fermi National Accelerator Laboratory, U.S. Department of
Energy, from 1987 to 1991 and served as network manager at Teradyne's Telecom
Division from 1991 to 1992. He is a graduate of Clemson University and Illinois
Institute of Technology.
Andrew Stallman. Mr. Stallman has served as a Director of the Company
since June 1997. Mr. Stallman is a full-time private investor and has been
investing his own capital in hedge fund trading and technology company deals
since 1991. Prior to becoming a full-time private investor, Mr. Stallman was a
portfolio manager at Soros Fund Management and at Steinhardt Partners. Mr.
Stallman has also been a research analyst in Transportation and Technology at
Lehman Brothers Asset Management and an analyst in the Corporate Finance
Department of E.F. Hutton. Mr. Stallman graduated from the State University of
New York at New Palz with a B.A. in History in 1979, and earned an M.B.A. in
Finance from Harvard University in 1982.
The Board of Directors held six meetings during the fiscal year ended July
31, 1998. Each incumbent Director attended at least 75% of the total number of
meetings of the Board of Directors and of Board of Director Committees on which
that Director served which were held during the period for which he was a
Director. Directors, other than employees or officers of the Company, receive
$500 per Board meeting attended and $250 per committee meeting attended, other
than committee meetings held in conjunction with meetings of the Board of
Directors. Directors are reimbursed for expenses incurred in connection with
attendance at Board and committee meetings. Directors who are officers or
employees of the Company are not compensated separately for service on the Board
of Directors.
The Board of Directors has standing Compensation and Audit Committees which
were established in June 1997, but does not have a Nominating Committee.
The Compensation Committee is responsible for reviewing the structure,
performance and compensation of the Company's senior executives and determining
awards under the Company's Stock Option Plan. The Compensation Committee is
comprised of Messrs. Groeneweg, Stallman and Korn. The Compensation Committee
met two times during the fiscal year ended July 31, 1998.
The Audit Committee is responsible for making recommendations concerning
the engagement of independent public accountants, reviewing with the independent
public accountants the plans and results of the audit engagement, considering
the range of audit and non-audit fees and reviewing the adequacy of the
Company's internal accounting
5
controls. The Audit Committee is comprised of Messrs. Groeneweg, Stallman and
Korn. The Audit Committee met two times during the fiscal year ended July 31,
1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Directors, Executive Officers and greater-than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended July 31, 1998 all Section
16(a) filing requirements applicable to its Directors, Executive Officers and
greater-than ten percent beneficial owners were satisfied.
6
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
Name Age Position
---- --- --------
Jerrell M. Baird 42 Chairman and Chief Executive Officer
Uday Om Pabrai 35 Vice Chairman and Chief Technology Officer
John J. Buckley 45 President
David I. Perl 36 Chief Operating Officer
Kimberly V. Johnston 32 Chief Financial Officer and Secretary
For additional information with respect to Messrs. Baird and Pabrai, who
are also Directors of the Company, see "Proposal 1 -- Election of Directors."
John J. Buckley. Mr. Buckley became President of the Company in February
1998. He was the Chief Technology Officer of the Company from and prior to the
March 1996 reorganization (the "Reorganization") of the Company and Pro-Soft
Development Corp., a California corporation ("Old ProSoft"), and served in the
same capacities with Old ProSoft, which he joined in February 1996. Mr. Buckley
was Vice President of Business Development for Gestalt Systems, Inc., an
Internet training company, from July 1993 through January 1996. From May 1992
through June 1993, Mr. Buckley was an Information Technology Consultant to
corporations in the Washington, D.C. metropolitan area, where he specialized in
the design and implementation of Novell LANs. From October 1987 through April
1992, Mr. Buckley served as President of Communication Services International, a
company specializing in LAN consulting and implementation services for
corporations in the Mid-Atlantic U.S. Mr. Buckley graduated from the University
of Maryland at College Park with a B.A. in Political Science in 1974, and earned
an M.B.A in 1976 from the same institution.
David I. Perl. Mr. Perl joined the Company in June 1998 as its Chief
Operating Officer. Prior to joining the Company, Mr. Perl served as the first
president and general manager of Otis Transit Systems, Inc., a wholly owned
subsidiary of Otis Elevator Company, which is a division of United Technologies
Corporation. He joined Otis Elevator in 1988, and held positions of increasing
responsibility in strategic planning, sales, project management and general
management. From 1984 to 1986, Mr. Perl worked for Trammell Crow Company, a
Dallas-based, global real estate developer, where his responsibilities ranged
from information systems to human resources. Mr. Perl earned a B.S. in economics
from the Wharton School at the University of Pennsylvania in 1984 and obtained
his M.B.A from Harvard Business School in 1988.
Kimberly V. Johnston. Ms. Johnston joined Prosoft in June 1998 as its Chief
Financial Officer. Prior to joining the Company, Ms. Johnston was principal of
Mercury Financial, an investor relations firm she founded in February 1997. Ms.
Johnston worked within the private investment department at Lehman Brothers from
February 1996 to October 1996 and the private investment department at Salomon
Brothers from August 1992 to October 1995. From 1989 to 1990 she worked as a tax
accountant in the tax department of Hunt Petroleum. Ms. Johnston served as a tax
consultant during 1988 at the accounting firm of Deloitte & Touche. Ms. Johnston
earned a B.S. in accounting from the University of Minnesota in 1988 and an
M.B.A from the University of Texas at Austin in 1992. She also holds a CPA
license and the series 7, 63 and 3 securities licenses.
7
SUMMARY COMPENSATION TABLE
Information is set forth below concerning the compensation for services in
all capacities to the Company for the fiscal years ended July 31, 1996, 1997 and
1998 for (i) those individuals serving as Chief Executive Officer during the
last fiscal year and (ii) any other executive officers as of July 31, 1998 whose
compensation exceeded $100,000 for the fiscal year ending on that date (the
"Named Executive Officers").
Long-Term
Compensation
Annual Compensation Awards
---------------------- -------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus Options(#) Compensation
- --------------------------- ------ ------ ------------ ------------- ------------
Jerrell M. Baird(1)
Chairman of the Board and 1998 $100,000 -- -- --
Chief Executive Officer....... 1997 8,654 $ 30,000(2) 150,000 --
1996 -- -- -- --
Keith D. Freadhoff(3).......... 1998 $ 26,808 -- -- --
1997 60,000 -- -- --
1996 35,000 -- -- $190,500(4)
____________________
(1) Mr. Baird joined the Company in June 1997 and served as Chief Operating
Officer from then until February 1998, when he became Chief Executive
Officer.
(2) Mr. Baird received a signing bonus of $30,000 upon joining the Company as
Chief Operating Officer.
(3) Mr. Freadhoff served as Chief Executive Officer of the Company from the
Reorganization in March 1996 until January 1998. The amounts disclosed
include compensation received as an executive officer of Old ProSoft prior
to the Reorganization, as well as compensation received as an executive
officer of the Company.
(4) Upon the formation of Old ProSoft, Mr. Freadhoff received 1,000,000 shares
of Old ProSoft Common Stock in exchange for $9,500. For financial
statement purposes, these shares were valued at $.20 per share and the
receipt thereof was treated as compensation of $190,500 to Mr. Freadhoff.
8
The following table sets forth information concerning the fiscal year-end
value of unexercised stock options held by the Named Executive Officers as of
July 31, 1998. No options were exercised by the Named Executive Officers in
fiscal 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options/SARs Options/SARs
at FY- at FY-End
End (#) ($)(1)
Shares Acquired Value -------------------------------------
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
------------------------------------------------------------------
Jerrell M. Baird -- -- 60,000/90,000 --
Keith D. Freadhoff -- -- -- --
Employment Arrangements
The Company has agreed that if a change of control of the Company occurs
where Mr. Baird is not Chairman and Chief Executive Officer of the ultimate
parent, then a payment shall be made to Mr. Baird equal to two times the
previous twelve months' cash compensation, or $300,000, whichever is greater. In
addition, all of Mr. Baird's unvested options shall vest upon a change of
control. The Company has also agreed that if Mr. Baird is involuntarily relieved
of his duties as Chairman and Chief Executive Officer for any reason other than
gross negligence or malfeasance, he will be entitled to a cash payment equal to
his previous twelve months' cash compensation or $150,000, whichever is greater.
On January 1, 1998, Mr. Pabrai entered into an employment agreement with
the Company in connection with the purchase by the Company of Net Guru
Technologies, Inc., of which Mr. Pabrai was the sole shareholder. Mr. Pabrai's
agreement has a term of three years and provides for a base salary of $150,000
per year. In the event of termination of Mr. Pabrai's employment without cause,
the Company is obligated to pay his base salary for the remaining term of the
Agreement. The Agreement also contains a noncompetition provision effective
through the term of the Agreement.
9
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors reviews and
establishes compensation strategies and programs to ensure that the Company
attracts, retains, properly compensates, and motivates qualified executives and
other key employees. The Committee consists of the three non-employee Directors:
Messrs. Groeneweg, Stallman and Korn.
The philosophy of the Compensation Committee is: to provide competitive
levels of compensation that integrate pay with the individual executive's
performance and the Company's annual and long-term performance goals; to
motivate key executives to achieve strategic business goals and reward them for
their achievement; to provide compensation opportunities and benefits that are
comparable to those offered by other companies in the training industry, thereby
allowing the Company to compete for and retain talented executives who are
critical to the Company's long-term success; and to align the interests of key
executives with the long-term interests of stockholders and the enhancement of
stockholder value through the granting of stock options. The compensation of
the Company's executive officers (other than Jerrell Baird, the Company's
Chairman and Chief Executive Officer) is currently comprised of annual base
salary and long-term performance incentives in the form of stock option grants
under the Stock Option Plan.
Annual base salaries for executive officers are targeted at competitive
market levels for their respective position, level of responsibility and
experience based in part on the Compensation Committee's analysis of publicly
reported comparable companies, and the recommendation of the Chief Executive
Officer. Salary adjustments are determined and made on an annual basis.
The Compensation Committee believes that equity compensation aligns
employees' long-term objectives with those of the shareholders in striving to
maximize the Company's value. The Company's Stock Option Plan provides all
employees with the opportunity to receive stock options. In determining whether
to grant stock options to executive officers, the Compensation Committee
evaluates each officer's performance, and awards reflect individual performance
reviews. Stock options generally have been granted with a three-year term and an
exercise price equivalent to 100% of the fair market value of the Common Stock
on the grant date.
The 1998 annual compensation for the Company's Chief Executive Officer, Mr.
Baird, was set by the Compensation Committee. Mr. Baird's base salary was
$100,000 and he did not receive any option grants during the fiscal 1998 year,
although in September 1998 Mr. Baird was granted an option under the Company's
Stock Option Plan to purchase 100,000 shares of Common Stock at $3.50 per share.
One-half of this option vests in annual one-third installments beginning August
1, 1999 and the remaining one-half vests in one-third installments upon the
average closing price of the Company's Common Stock during a 90-day period
exceeding certain thresholds. The Compensation Committee believes that, under
Mr. Baird's management, the Company continues to effectively accomplish its
business plan and goals in addition to capitalizing upon the rapidly changing
global demand for Internet/intranet training and certification.
By the Compensation Committee:
Richard J. Groeneweg
Jeffrey G. Korn
Andrew Stallman
November 13, 1998
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since June 1997 all executive officer compensation decisions have been made
by the Compensation Committee. The Compensation Committee reviews and makes
recommendations regarding the compensation for top management and key employees
of the Company, including salaries, granting of stock options, and bonuses. The
current members of the Compensation Committee are Richard Groeneweg, Andrew
Stallman and Jeffrey Korn. No member of the Compensation Committee was or is an
officer of the Company. Prior to June 1997, and the creation of the
Compensation Committee, all Directors participated in deliberations of the
Company's executive compensation.
10
In April 1998, the Company entered into a consulting agreement with
Investment Transaction, LLC ("Consultant"), of which Andrew Stallman, a director
of the Company, is owner and president. Under the Consulting Agreement,
Consultant provides consultation with management of the Company on the Company's
corporate finance strategy and strategic direction, and assists the Company in
structuring and implementing corporate financing. As compensation under the
Consulting Agreement, the Company granted Consultant a nonstatutory stock option
to purchase 100,000 shares at $5.00 per share. This option is for a five-year
term and vests one-twelfth per month, with vesting accelerated upon the closing
of a financing by the Company resulting in net proceeds of at least $5 million
or upon a change in control of the Company. Consultant is also entitled to
reimbursement of its reasonable expenses incurred in the performance of its
duties under the Consulting Agreement. This Consulting Agreement terminates
December 31, 1999. If the Consulting Agreement is terminated without cause prior
to that date, Consultant is entitled to a termination fee equal to $9,600 times
the months remaining under the Agreement.
COMPANY STOCK PRICE PERFORMANCE
The following chart shows a comparison of the cumulative total return of
the Company's Common Stock, the CRSP Total Return Index for The Nasdaq Stock
Market (U.S. Index) ("Nasdaq Index") and the Hambrecht & Quist Internet Index
("H&Q Internet Index") for the period commencing on November 27, 1996 and ending
on July 31, 1998. The historical stock performance shown on the chart is not
intended to and may not be indicative of future stock performance.
Comparison of Cumulative Total Return from November 27, 1996 through
July 31, 1998
-------------------------------------------------
November 27, 1996 July 31, 1997 July 31, 1998
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Nasdaq Index $100 $124 $145
- ---------------------------------------------------------------------------
H&Q Internet Index $100 $108 $193
- ---------------------------------------------------------------------------
Prosoft I-Net Solutions,
Inc. $100 $ 55 $ 24
- ---------------------------------------------------------------------------
_______________
(1) Assumes that $100 was invested on November 27, 1996 in the Company's Common
Stock at $18.25 per share, the closing price for the Company's Common Stock
on that date, and at the closing price for each Index on that date, and
that all dividends were reinvested. No cash dividends have been declared
on the Company's Common Stock.
11
CERTAIN TRANSACTIONS
During the period January 1996 through April 1997, the Company loaned
approximately $206,350 to Mr. Freadhoff at an interest rate of 10%. The balance
which remained outstanding at November 1, 1997 was $73,292. This loan was
discharged during fiscal 1998 in connection with Mr. Freadhoff's termination of
employment with the Company.
In January 1998, the Company purchased 100% of the outstanding common
stock of Net Guru Technologies, Inc. ("Net Guru") in exchange for $1 million and
152,809 shares of Common Stock of the Company. Uday Om Pabrai was the sole
shareholder of Net Guru and became Chief Technology Officer and a Director of
the Company subsequent to this acquisition.
In June 1998, the Company loaned $300,000 to Mr. Pabrai at an
interest rate of 12%, secured by his shares of Common Stock of the Company. The
balance which remained outstanding at November 1, 1998 was $313,413. Principal
and interest on this loan is due and payable on demand, but no later than May
30, 1999, or earlier upon termination of Mr. Pabrai's employment with the
Company or the purchase by the Company of Mr. Pabrai's interest in Internet
Certification Institute International, Ltd.
For a description of a consulting agreement between the Company and an
entity controlled by one of its outside directors, see "Compensation Committee
Interlocks and Insider Participation".
All transactions between the Company and its officers, directors and
principal stockholders have been on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties.
PROPOSAL 2
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO CHANGE
THE CORPORATE NAME
The Board has approved, subject to stockholder approval, an amendment
to the Company's Articles of Incorporation to change the name of the Company
from Prosoft I-Net Solutions, Inc. to prosofttraining.com.
The Board believes that the change of corporate name is desirable in
that the new name will clearly communicate to customers and investors that
Prosoft is an Internet training company while retaining the equity already
established under the brand Prosoft. The new name also matches the Company's
Internet address and will promote recognition of the Company's website.
The change of the Company's name will not affect, in any way, the
validity or transferability of currently outstanding stock certificates, nor
will the Company's stockholders be required to surrender or exchange any stock
certificates that they currently hold. In addition, the Company will request
that Nasdaq allow the Company to continue to use the ticker symbol "POSO."
Proposal
At the Annual Meeting, stockholders will be asked to approve the name
change. Such approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock. If the
proposal is approved, a Certificate of Amendment amending the Company's Articles
of Incorporation will be filed in the Office of the Secretary of the State of
Nevada as soon as possible and the name change will then become effective.
The Board of Directors recommends a vote "FOR" the proposal.
12
APPOINTMENT OF INDEPENDENT AUDITORS
The Company has not yet selected its independent public auditors for
the fiscal year ending July 31, 1999. The Audit Committee is expected to make a
decision in the near future. Grant Thornton LLP were the independent auditors
for the Company for the fiscal year ended July 31, 1998. Representatives of
Grant Thornton LLP are expected to be present at the Annual Meeting and will be
available to respond to appropriate questions and to make such statements as
they may desire.
NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws of the Company require that all nominations for persons to
be elected to the Board of Directors, other than those made by the Board of
Directors, be made pursuant to written notice to the Secretary of the Company.
The notice must be received not less than 35 days prior to the meeting at which
the election will take place (or not later than 10 days after public disclosure
of such meeting date is given or made to stockholders if such disclosure occurs
less than 50 days prior to the date of such meeting). Notice must set forth the
name, age, business address and residence address of each nominee, their
principal occupation or employment, the class and number of shares of stock
which they beneficially own, their citizenship and any other information that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to the Securities Exchange Act of 1934, as amended. The notice must
also include the nominating stockholder's name and address as they appear on the
Company's books and the class and number of shares of stock beneficially owned
by such stockholder.
In addition, the Bylaws require that for business to be properly
brought before an annual meeting by a stockholder, the Secretary of the Company
must have received written notice thereof (i) in the case of an annual meeting
that is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not less than 120 days in
advance of the anniversary date of the Company's proxy statement for the
previous year's annual meeting, nor more than 150 days prior to such anniversary
date and (ii) in the case of an annual meeting that is called for a date that is
not within 30 days before or after the anniversary date of the immediately
preceding annual meeting, not later than the close of business on the 10th day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
The notice must set forth the name and address of the stockholder who intends to
bring business before the meeting, the general nature of the business which he
or she seeks to bring before the meeting and a representation that the
stockholder is a holder of record of shares entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to bring the business
specified in the notice before the meeting.
Any proposal of a stockholder intended to be presented at the
Company's 1999 Annual Meeting of Stockholders and included in the proxy
statement and form of proxy for that meeting must be received by the Company no
later than July 24, 1999. In addition, if notice of a proposal is not received
by that date, management proxies will have discretionary voting authority as to
that proposal if it is raised at that annual meeting, without any discussion of
the matter in the proxy statement.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements
for the fiscal year ended July 31, 1998 accompanies this Proxy Statement. THE
COMPANY WILL SEND A STOCKHOLDER UPON REQUEST, WITHOUT CHARGE, A COPY OF THE
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED JULY 31, 1998,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE COMPANY HAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REQUEST MUST BE DIRECTED
TO THE ATTENTION OF CORPORATE SECRETARY, AT THE ADDRESS OF THE COMPANY SET FORTH
ON THE FIRST PAGE OF THIS PROXY STATEMENT.
13
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matter is presented properly for action at the Annual
Meeting or at any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
PROSOFT I-NET SOLUTIONS, INC.
JERRELL M. BAIRD
Chairman of the Board
Austin, Texas
November 20, 1998
14
PROSOFT I-NET SOLUTIONS, INC.
3001 Bee Caves Rd., Suite 100
Austin, Texas 78746
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates, constitutes and appoints Jerrell M.
Baird and Uday Om Pabrai, and each of them individually, the attorney, agent and
proxy of the undersigned, with full power of substitution, to vote all stock of
PROSOFT I-NET SOLUTIONS, INC., which the undersigned is entitled to represent
and vote at the 1998 Annual Meeting of Stockholders of the Company to be held at
the Company's headquarters at 3001 Bee Caves Road, Suite 100, Austin, Texas on
December 18, 1998, at 10:00 a.m., and at any and all adjournments or
postponements thereof, as fully as if the undersigned were present and voting at
the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1 AND 2.
1. Election of Directors:
[_] FOR the nominee listed [_] WITHHOLD AUTHORITY to vote
below for the nominees listed below
Class II - Jeffrey G. Korn.
INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided below:
_______________________________________________________________________________
2. Approval of the amendment of the Company's Articles of Incorporation to
change its corporate name from Prosoft I-Net Solutions, Inc. to
prosofttraining.com.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
IMPORTANT -- PLEASE SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY
Dated:_______________, 1998
______________________________
(Signature)
Please sign your name exactly as it appears hereon. Executors,
administrators, guardians, officers of corporations and others
signing in a fiduciary capacity should state their full titles
as such.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN THIS PROXY,
WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.