<PAGE>
As filed with the Securities and Exchange Commission on August 16, 1995
File No. 33-61393
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
PRE-EFFECTIVE AMENDMENT NO. 1
TO FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
INDUSTRIAL TRAINING CORPORATION
_________________________________
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 7812 52-1078263
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
13515 Dulles Technology Drive, Herndon, Virginia 22071 (703)713-3335
_________________________________________________________________________
(Address, including zip code, and telephone number, including area code,
of principal executive offices)
Anne J. Fletcher, Esq.
Industrial Training Corporation
13515 Dulles Technology Drive
Herndon, VA 22071
_________________________________________________________________________
(Name, address, zip code, telephone number, including area code, of agent
for service)
__________________
Copies to:
Alan J. Berkeley, Esq. Melissa Allison Warren, Esq.
Kirkpatrick & Lockhart LLP Shapiro and Olander
1800 M Street, N.W. 36 south Charles Street, 20th Floor
Washington, D.C. 20036 Baltimore, MD 21201-3147
Telephone (202) 778-9050 Telephone (410) 385-4265
Facsimile (202) 778-9100 Facsimile (410) 539-7611
______________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable following the effective date of this Registration
Statement.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [X]
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
__________________________________________________________________
__________________________________________________________________
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CROSS REFERENCE SHEET
Item
Number Designation in Form SB-2 In Prospectus
------ ------------------------ -------------
1. Front of the Registration
Statement and Outside Front
Cover of Prospectus . . . . Outside Front Cover Page
2. Inside Front and Outside Inside Front Cover and Outside
Back Cover Pages of Back Cover Pages; Additional
Prospectus . . . . . . . . Information
3. Summary Information and
Risk Factors . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . Risk Factors; Use of Proceeds
5. Determination of Offering Price Range of Common Stock and
Price . . . . . . . . . . . Dividend Policy; Underwriting
6. Dilution . . . . . . . . . Risk Factors
7. Selling Security Holders . Selling Shareholders
8. Plan of Distribution . . . Underwriting
9. Legal Proceedings . . . . . Business
10. Directors, Executive Management; Principal
Officers, Promoters and Shareholders; Selling
Control Persons . . . . . . Shareholders
11. Security Ownership of Management; Principal
Certain Beneficial Owners Shareholders; Selling
and Management . . . . . . Shareholders
12. Description of Securities . Prospectus Summary; Description
of Securities
13. Interest of Named Experts
and Counsel . . . . . . . . Legal Opinions; Experts
14. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities . . . . . . . . Management
15. Organization Within Last Prospectus Summary; Management;
Five Years . . . . . . . . Certain Relationships and
Related Transactions; Principal
Shareholders; Selling
Shareholders
<PAGE>
Item
Number Designation in Form SB-2 In Prospectus
------ ------------------------ -------------
16. Description of Business . . Prospectus Summary; Summary
Consolidated Financial Data;
Risk Factors; Use of Proceeds;
Price Range of Common Stock and
Dividend Policy; Capitalization;
Selected Consolidated Financial
Data; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business;
Management; Certain
Relationships and Related
Transactions; Principal
Shareholders; Selling
Shareholders; Description of
Securities; Financial Statements
17. Management's Discussion and
Analysis or Plan of Management's Discussion and
Operation . . . . . . . . . Analysis of Financial Condition
and Results of Operations
18. Description of Property . . Prospectus Summary; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Business
19. Certain Relationships and
Related Transactions . . . Certain Relationships and
Related Transactions
20. Market for Common Equity
and Related Stockholder Outside Front Cover Page; Price
Matters . . . . . . . . . . Range of Common Stock and
Dividend Policy; Description of
Securities
21. Executive Compensation . . Management
22. Financial Statements . . . Index to Financial Statements
23. Changes in and
Disagreements with
Accountants on Accounting *
and Financial Disclosure .
* Text is omitted because response is negative or item is inapplicable.
<PAGE>
Subject to Completion, Dated August 16, 1995
1,050,000 Shares
INDUSTRIAL TRAINING CORPORATION
Common Stock
___________________________
Of the 1,050,000 shares of Common Stock offered hereby, 875,000 are being
issued and sold by Industrial Training Corporation (the "Company" or
"ITC") and 175,000 are being sold by the Selling Shareholders. The
Company will not receive any of the proceeds from the sale of shares by
the Selling Shareholders. See "Selling Shareholders." The Common Stock
is traded on the NASDAQ National Market System under the Symbol "ITCC."
On August 10, 1995, the last reported sale price of the Company's Common
Stock as reported by NASDAQ was $10 1/2 per share. See "Price Range of
Common Stock and Dividend Policy."
____________________________
Prospective investors should carefully consider the factors set forth on
page 6 under "Risk Factors"
____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Discounts and Proceeds to Selling
Price to Public Commissions(1) Company(2) Shareholders
<S> <C> <C> <C> <C>
Per share . . .
Total(3) . . .
</TABLE>
(1) See "Underwriting" for a description of indemnification
arrangements with the several Underwriters.
(2) Before deducting expenses estimated at $________ payable
by the Company. See "Underwriting."
(3) The Company and one of the Selling Shareholders have
granted the Underwriters an option, exercisable within 45
days after the date of this Prospectus, to purchase up to
an aggregate of 157,500 additional shares of Common
<PAGE>
Stock, solely to cover over-allotments, if any, on the
same terms and conditions as the shares offered hereby.
If the over-allotment option is exercised in full, such
Selling Shareholder may elect to sell up to 47,932
additional shares. If the over-allotment is partially
exercised, then the Company and that Selling Shareholder
may participate proportionately in the over-allotment.
Assuming full exercise of the over-allotment option, the
total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company, and Proceeds to Selling
Shareholders will be $______________, $____________,
$____________, and $______________, respectively. See
"Underwriting."
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
___________________________
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, withdrawal, cancellation or modification of the offer
without notice, delivery to and acceptance by the Underwriters and certain
other conditions. It is expected that delivery of the certificates for
the shares of Common Stock will be made at the offices of Ferris, Baker
Watts, Incorporated, 1720 Eye Street, N.W., Washington, D.C. on or about
________________, 1995.
______________________________
Ferris, Baker Watts
Incorporated
The date of this Prospectus is ___________, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SHARES OF COMMON STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM OR OTHERWISE
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE SHARES OF COMMON STOCK ON THE
NASDAQ NATIONAL MARKET SYSTEM IN ACCORDANCE WITH RULE 10b-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements, and other information with the Securities
and Exchange Commission (the "Commission"). These reports, proxy
statements, and other information may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048 and at its
Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material
can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates.
A registration statement on Form SB-2 relating to the Common Stock offered
hereby has been filed by the Company with the Commission (the
"Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Further information with respect to the Company and the Common
Stock offered hereby is included or incorporated by reference in the
Registration Statement and exhibits. A copy of the Registration Statement
may be inspected by anyone without charge and may be obtained at rates
prescribed by the Commission at the Public Reference Section of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, the
New York Regional Office located at 7 World Trade Center, New York, New
York 10048, and the Chicago Regional Office located at 500 West Madison
Street, Chicago, Illinois 60661-2511.
- 2 -
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere
in this Prospectus. Each investor is encouraged to read this Prospectus
in its entirety. Unless otherwise indicated, all information in this
Prospectus assumes that the Underwriters' over-allotment option will not
be exercised. Investors should carefully consider the information set
forth under the heading "Risk Factors."
The Company
ITC develops, produces, markets and distributes interactive multimedia
training solutions that improve productivity and reduce training time and
costs. ITC's broad array of interactive multimedia "courseware" combines
full-motion video, audio, animation, graphics and text into a single
training presentation. By packaging its courseware together with standard
multimedia personal computer systems and offering reliable customer
assurance and consultative support, ITC provides its customers with a
complete training solution that may command a premium price relative to
other technology-based training programs. While all of the Company's
products are available in analog laser video disc format, ITC recently
converted and released many of its "PC Skills" and all of its "Regulatory
Training" products in a digital CD-ROM format. ITC's five courseware
libraries, all marketed under the Activ(REGISTERED TRADEMARK) trademark,
include over 200 individual multimedia products to train users in "PC
Skills," "Regulatory Training," "Technical Skills," "Instrumentation
Training" and "Basic Skills." ITC's multimedia products provide an
alternative to traditional stand-up training. The Company's courseware is
highly interactive and is self-paced, allowing employees to adjust the
rate of training to their individual needs, competency levels and work
schedules.
ITC offers its courseware to customers in many markets, including the
industrial processing and manufacturing industries, government,
educational organizations, utilities and the service sector. The Company
acquired the "PC Skills Learning Library" in September 1993 enabling ITC
to expand its sales into service-based industries, such as
telecommunications and personnel services. The domestic market for all
training and employee education in 1994 was estimated by Training Magazine
to represent a $50.6 billion industry, of which approximately $7.0 billion
was estimated to be off-the-shelf products and hardware. See "Risk
Factors -- Developing Market, -- Dependence on Product Development."
In aggregate, ITC's Activ(REGISTERED TRADEMARK) courseware is used in over
5,000 companies, including many Fortune 1,000 companies, and other major
organizations. Among the better-known purchasers of ITC Activ(REGISTERED
TRADEMARK) courseware are the following companies or their affiliates: The
- 3 -
<PAGE>
Southern Companies, General Electric Company, NYNEX, Talent Tree Personnel
Services, Cargill, Inc., Ford Motor Company and Illinois Power Company.
The Company's objective is to accelerate its growth and profitability by
further penetrating the market for interactive multimedia training and
educational courseware. ITC's strategy for achieving this objective is to
expand product platforms and development efforts; increase distribution
capabilities; and pursue strategic acquisitions and marketing alliances.
See "Business -- Corporate Strategy."
ITC was incorporated in 1977 under the laws of the state of Maryland. The
Company's principal executive office address is 13515 Dulles Technology
Drive, Herndon, Virginia 22071. ITC's telephone number is (703) 713-3335.
- 4 -
<PAGE>
The Offering
Securities Offered . . . . . . . . . . 1,050,000 shares of Common
Stock, $.10 par value
Securities Offered by the Company . 875,000 shares of Common
Stock, $.10 par value
Securities Offered by Selling 175,000 shares of Common
Shareholders . . . . . . . . . . . . . Stock, $.10 par value
Common Stock Outstanding After the 3,330,624 shares(1)
Offering . . . . . . . . . . . . . . .
Proposed Use of Proceeds . . . . . . . To reduce indebtedness; to
finance product expansion
through internal development
and acquisitions of
compatible businesses,
products or technologies; to
increase marketing efforts;
and, for working capital and
general corporate purposes.
See "Use of Proceeds."
NASDAQ National Market Symbol . . . . . ITCC
(1) Excluding 306,572 shares issuable upon the exercise of options and
warrants.
- 5 -
<PAGE>
Summary Consolidated Financial Data
(Amounts in thousands, except per share data)
The summary consolidated financial data set forth below should be read in
conjunction with, and are qualified by reference to, the Consolidated
Financial Statements of the Company and the Notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
Statement of Income Data: Years Ended December 31, (Unaudited)
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,229 $11,011 $11,135 $13,812 $22,337 $9,364 $11,256
Income before provision for
income taxes $853 $918 $1,114 $36(1) $1,965 $670 $1,231
Net income $514 $550 $701 $21 $1,160 $402 $726
Net income per common
share(2) $0.33 $0.35 $0.42 $0.01 $0.48 $0.17 $0.28
Weighted average shares
outstanding(2) 1,555 1,590 1,680 1,959 2,428 2,378 2,588
June 30, 1995
(Unaudited)
Balance Sheet Data: December 31, Actual As
1994 Adjusted(3)
Cash $440 $1,179 $7,621
Working capital $4,095 $4,620 $11,506
Total assets $17,130 $19,085 $25,527
Long-term debt, net of current portion $773 $1,614 $189
Total stockholders' equity $10,054 $10,851 $19,162
</TABLE>
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<PAGE>
(1) The decline in 1993 income before provision for income taxes resulted
from several factors including: lower overall gross margins, increased
selling, general and administrative costs as a result of increased
marketing, sales, and promotional efforts, and resources dedicated to
expanding the Company through acquisition. Effective September 30,
1993, the Company acquired CI Acquisition Corporation and its two
wholly-owned subsidiaries, Comsell Training, Inc. and ComSkill
Learning Centers, Inc.
(2) 1990 and 1991 data have been adjusted to reflect a 2 for 1 stock
split, which occurred in January 1992.
(3) Gives effect to the sale by the Company of 875,000 shares of Common
Stock at an assumed offering price of $10 1/2 per share and after
deducting estimated underwriting discounts, offering expenses, and the
applicable filing and registration fees. See "Use of Proceeds."
RISK FACTORS
Investors should carefully consider the following risk factors, in
addition to all of the other information contained in this Prospectus,
including the Consolidated Financial Statements and Notes to Consolidated
Financial Statements, before purchasing the Common Stock offered hereby.
Developing Market
The market for training and employee education is characterized by a high
degree of fragmentation and competition. Competitors include publishers
of text and videotape training products, providers of instructor-led
training, and developers and publishers of other multimedia products.
Technology-based training products represent a small portion of the
overall market for training. As a result, the Company's future success
and realization of the Company s strategic plan will depend, in part, on
the extent to which companies continue to adopt technology-based training
as a fundamental part of their employee education and development
programs. There can be no assurance that the current trend will continue
or that the Company will significantly increase or sustain current
distribution levels for its products.
Dependence on Product Development
Several of the Company's products, including the Company s "PC Skills
Learning Library" and, to a lesser degree, the Company s "Regulatory
Training Learning Library," are influenced by changes in the content of
the subject matter. Changes in the subject matter of any of the Company's
products could render such products obsolete. Therefore, the Company's
success may depend upon the Company s ability to adapt, modify and update
its products, to develop and introduce, in a timely manner, new and
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<PAGE>
competitive products, or to acquire new products. There can be no
assurance that the Company will be successful in these endeavors.
Acquisitions
The Company's continued growth depends, in part, on its ability to
successfully acquire complementary businesses or product lines. There can
be no assurance that any such acquisitions will be consummated, or if
consummated, that such acquisitions will be successful. The Company has
no current commitments, understandings or arrangements with respect to any
specific transaction. See "Business -- Corporate Strategy."
Distribution
Part of the Company's strategy is to expand distribution channels for its
courseware. Although the Company intends to hire additional salespersons,
add dealers, franchisees and distributors, and explore relationships with
other resellers, no assurance can be given that such expanded distribution
will either occur or have a positive effect on the Company's business
operations.
Changing Technologies
The Company utilizes several different personal computer-based hardware
platforms to deliver its products. These platforms range from standard
analog format, using laser video disc, to any of the several digital-based
CD-ROM platforms, such as "MPEG" (the Motion Pictures Experts Group
standard), "DVI" (Digital Video Interactive) and INDEO(REGISTERED
TRADEMARK). The Company also operates in an environment where its
customers face networking and portability issues. Delivery platforms are
constantly evolving as new and different technologies emerge. Changes in
technologies or the means through which the Company's products are
delivered could render the Company's products obsolete. There can be no
assurance that the Company will be able to anticipate and respond
adequately to technological changes that may affect the delivery of the
Company s products or that costs to develop such responses will not
adversely affect the financial condition of the Company.
Intellectual Property
The Company considers all of its products to be proprietary and relies
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 its
proprietary rights. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's courseware
or technology without authorization, or to develop similar courseware or
technology independently. The Company includes in its courseware
packaging an end-user agreement that restricts unauthorized use. If
unauthorized copying or misuse of the Company's products were to occur to
any substantial degree, the Company's business and results of operations
- 8 -
<PAGE>
could be materially and adversely affected. There can be no assurance
that the Company's means of protecting its proprietary rights will be
adequate or that the Company's competitors will not independently develop
similar technology. There can likewise be no assurance that third parties
will not claim that the Company's current or future products infringe upon
the proprietary rights of others. Any such claim, with or without merit,
could result in costly litigation or require the Company to enter into
royalty or licensing agreements. Such royalty or license agreements, if
required, may not be available on terms acceptable to the Company or at
all. See "Business -- Intellectual Property."
Dependence On and Need for Key Personnel
At the present time, the Company depends to a great extent upon the
efforts of each of its executive officers to administer the Company's
business. In addition, the Company's ability to accelerate growth and
profitability will depend, in part, on its ability to attract and retain
additional qualified personnel. There is significant competition for
qualified personnel, and there can be no assurance that the Company will
be successful in recruiting or training a sufficient number of employees
of the requisite caliber to enable the Company to operate its business and
implement its strategy as planned. See "Management."
Competition
The training and employee education industry is highly competitive, and
competition is increasing among providers of technology-based training.
Competitors include providers of traditional instructor-led training,
multimedia developers and sellers, textbook publishers, and manufacturers
and producers of videotape training materials and other products. These
competitors range from small to large firms, some of which have
substantially greater financial, personnel and marketing resources than
the Company. No assurance can be given that the Company will be able to
compete effectively with existing or future competitors in the training
industry. The inability to remain competitive could result in a reduction
of the Company's revenues and could have a material adverse effect on the
Company's overall financial condition. See "Business -- Competition."
Dilution
Purchasers of the shares of Common Stock offered hereby will suffer
immediate and substantial dilution (i.e., the difference between the
offering price of a share of Common Stock and the net tangible book value
thereof after giving effect to this Offering) of $5.38 per share in the
net tangible book value of their shares of Common Stock, assuming that all
shares offered by the Company are sold. At June 30, 1995, the net
tangible book value of the Company was approximately $8,748,084, or $3.56
per share based on 2,455,624 shares of Common Stock outstanding. Net
tangible book value per share of Common Stock represents the amount of the
Company's total assets less the amount of its intangible assets (goodwill)
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<PAGE>
and liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of 875,000
shares (at an assumed offering price of $10 1/2 per share) offered hereby
and the application of the estimated net proceeds therefrom, the pro forma
net tangible book value at June 30, 1995 would have been approximately
$17,059,089 or $5.12 per share of Common Stock. In the event that the
Underwriters exercise the over-allotment option in full, the pro forma net
tangible book value after this Offering (after deducting underwriting
discounts and estimated offering expenses to be paid by the Company) would
be $5.27 per share, and the public investors would experience dilution of
$5.23 per share.
Use of Proceeds
The net proceeds of this Offering are subject to reallocation by the
Company. See "Use of Proceeds."
- 10 -
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale by the Company of 875,000 shares of Common
Stock in this Offering will be approximately $8.3 million ($9.4 million if
the Underwriters' over-allotment option is exercised in full) based upon
an assumed offering price per share of $10 1/2 (the last reported sale
price on August 10, 1995). The Company will not receive any of the
proceeds from the sale of Common Stock by the Selling Shareholders. The
Company anticipates that the net proceeds will be used over the next
twelve to eighteen months for the purposes described below.
The Company expects to use approximately $1.9 million of the net proceeds
received by the Company to reduce its long-term borrowings. The long-term
debt consists of two term loans. The first term loan, the balance of
which was $615,000 as of June 30, 1995, was incurred for the Company's
acquisition of CI Acquisition Corp. ("CI") and its related subsidiaries in
September 1993. This loan bears interest at a rate of prime plus one
percent (1%) (10% as of June 30, 1995) and matures in November 1998. The
second term loan, the balance of which was $1,254,000 at June 30, 1995,
was incurred in connection with the February 17, 1995 acquisition of the
"INVOLVE(REGISTERED TRADEMARK) Instrumentation Learning Library" from the
Instrument Society of America ("ISA"). The second loan bears interest at
a rate of prime plus one-half percent (1/2%) (9.5% as of June 30, 1995)
and matures in March 2000.
The Company intends to use up to $3 million of the net proceeds to fund
development of additional courseware products and to convert the Company's
existing analog courseware libraries of "Technical Skills" and
"Instrumentation Training" to a digital-based CD-ROM format.
The $3.4 million balance of net proceeds ($4.5 million if the Underwriters
exercise the over-allotment option in full), will be used to broaden and
expand the Company's range of training products by acquiring companies or
products, working capital and other general corporate purposes. With
respect to future acquisitions, the Company is regularly reviewing
potential acquisitions, although it has no current agreements,
understandings or commitments with respect to any material transactions.
Amounts allocated to working capital may be used, in part, to finance
expanded distribution efforts.
The foregoing represents the Company's estimate of the allocation of the
net proceeds of this Offering based upon the current status of its
business operations, its current plans and current economic conditions.
Future events, as well as changes in competitive conditions affecting the
Company's business and the success or lack thereof of the Company's
marketing efforts, may make shifts in the allocation of funds necessary or
desirable. A change in the use of proceeds or timing of such use will be
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<PAGE>
at the Company's discretion. Pending application of the net proceeds from
this Offering, the net proceeds will be invested in short-term,
investment-grade, interest bearing securities. See "Risk Factors -- Use
of Proceeds."
The Company may incur additional borrowings in the next twelve to eighteen
months to support its development plans and to effect acquisitions.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market
System under the symbol ITCC. The following table states the high and low
closing sale prices by quarter for the Company's Common Stock based on
actual trading, as reported by NASDAQ.
1993 High Low
----
1st Quarter 7 1/4 6 1/4
2nd Quarter 7 7/8 6 3/8
3rd Quarter 7 1/2 5 1/4
4th Quarter 6 4 3/4
1994
----
1st Quarter 5 1/4 4
2nd Quarter 4 1/2 3 5/8
3rd Quarter 8 1/2 3 5/8
4th Quarter 8 1/2 7 1/4
1995
----
1st Quarter 10 1/2 6 1/4
2nd Quarter 10 1/2 8
3rd Quarter (through August 10, 1995) 11 1/4 9 3/4
The last reported sale price on the NASDAQ National Market System on
August 10, 1995 was $10 1/2.
As of June 30, 1995, there were 2,455,624 shares of the Company's Common
Stock outstanding, held by 1,037 holders of record.
Shareholders of the Company's Common Stock are entitled to receive,
ratably, such dividends as may be declared by the Board of Directors out
of funds legally available. No cash dividends have been declared since
1984. Future cash dividends, if any, will be determined by the Company's
Board of Directors and will be based upon the Company's earnings, capital
requirements, financial condition, and other factors deemed relevant by
the Board of Directors.
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<PAGE>
The transfer agent and registrar for ITC's Common Stock is American
Securities Transfer, 938 Quail Street, Suite 101, Lakewood, Colorado
80215.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1995, and as adjusted to reflect the sale of 875,000 shares of
Common Stock offered by the Company hereby at an assumed public offering
price of $10 1/2 per share and the application of estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in
conjunction with the detailed information included in the Consolidated
Financial Statements and the Notes thereto contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
As of June 30, 1995
Actual As Adjusted
------ -----------
<S> <C> <C>
Current installments of long-term debt $ 580,726 $ 136,726
Long-term debt, net of current installments 1,614,198 189,198
Stockholders' equity:
Common stock, $.10 par value, 4,000,000 shares
authorized; 2,455,624 shares outstanding; 3,330,624
shares outstanding, as adjusted(1) 245,562 333,062
Additional paid-in capital 5,654,864 13,878,369
Note receivable from ESOP (304,177) (304,177)
Retained earnings 5,254,461 5,254,461
----------- ---------
Total stockholders' equity 10,850,710 19,161,715
----------- -----------
$13,045,634 $19,487,639
Total capitalization =========== ===========
</TABLE>
(1) The number of shares of the Company's Common Stock outstanding, the
value of Common Stock and the value of Additional Paid-in Capital have
been reduced by 17,704 shares, $1,771 and $59,538, respectively, to
reflect treasury stock that the Company repurchased prior to June 30,
1995.
- 15 -
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands, except per share data)
The following selected consolidated financial data for, and as of the end
of, each of the years in the five year period ended December 31, 1994 are
derived from the audited consolidated financial statements of the Company.
The following selected interim consolidated data for, and as of the end
of, the six month periods ended June 30, 1994 and 1995 have been derived
from unaudited financial statements of the Company, which, in the opinion
of management, have been prepared on the same basis as the audited
Consolidated Financial Statements included herein, and reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of such data. The results of the interim periods are not
indicative of the results of a full year. The selected consolidated
financial data set forth below should be read in conjunction with, and are
qualified by reference to, the Consolidated Financial Statements of the
Company and the Notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
Years Ended December 31, (unaudited)
Statement of Income Data: 1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,229 $11,011 $11,135 $13,812 $22,337 $ 9,364 $11,256
5,007 6,024 5,681 8,215 13,629 5,585 6,453Cost of sales
Gross margin 4,222 4,987 5,454 5,597 8,708 3,779 4,803
Selling, general &
administrative expenses 3,157 3,914 4,327 5,554 6,693 3,091 3,596
Equity in earnings of
-- -- (135) (124) (136) (70) (78)affiliates
Income before interest and
provision for income taxes 1,066 1,074 1,262 167 2,151 758 1,285
213 156 148 131 186 88 54Interest expense, net
Income before provision for
income taxes 853 918 1,114 36(1) 1,965 670 1,231
339 368 413 15 805 268 505Income tax expense
$ 514 $ 550 $ 701 $ 21 $ 1,160 $ 402 $ 726Net income
Net income per common
share(2) $0.33 $ 0.35 $ 0.42 $ 0.01 $ 0.48 $ 0.17 $ 0.28
Weighted average shares
outstanding(2) 1,555 1,590 1,680 1,959 2,428 2,378 2,588
December 31, June 30,
Balance Sheet Data: 1990 1991 1992 1993 1994 1995
(unaudited)
Cash $ 144 $ 114 $ 168 $ 126 $ 440 $ 1,179
Working capital $2,118 $1,686 $2,643 2,139 4,095 $4,620
Total assets $6,840 $7,656 $8,358 14,642 17,130 $19,085
Long-term debt, net of current
portion $1,043 $1,328 $963 1,101 773 $1,614
Total stockholders' equity $3,795 $3,715 $5,001 8,418 10,054 $10,851
- 17 -
<PAGE>
</TABLE>
(1) The decline in 1993 income before provision for income taxes resulted
from several factors including lower overall gross margins, increased
selling, general and administrative costs as a result of increased
marketing, sales, and promotional efforts, and resources dedicated to
expanding the Company through acquisition. Effective September 30,
1993, the Company acquired CI Acquisition Corporation and its two
wholly-owned subsidiaries, Comsell Training, Inc. and ComSkill
Learning Centers, Inc.
(2) 1990 and 1991 data have been adjusted to reflect a 2 for 1 stock
split, which occurred in January 1992.
- 18 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Since ITC was formed in 1977, the focus of the Company's business has
evolved from linear-based videotape training products to interactive
multimedia programs, delivered in analog laser video disc and digital-
based CD-ROM platforms. Until 1993, the Company derived the majority of
its revenues from the distribution and sale of its "Technical Skills
Learning Library" and "Basic Skills Learning Library" to companies in the
industrial processing and manufacturing markets.
With the development of its "Regulatory Training Learning Library" and the
addition of the "PC Skills Learning Library" upon the acquisition of CI
and its subsidiaries, Comsell Training, Inc. ("Comsell") and ComSkill
Learning Centers, Inc. ("ComSkill"), in September 1993, the Company was
able to enter new markets and increase revenues significantly. In
February 1995, the Company acquired the "INVOLVE(REGISTERED TRADEMARK)
Instrumentation Learning Library," which it had developed for the
Instrument Society of America ("ISA"). As a result of this acquisition,
the Company is no longer required to pay royalties upon the sale of
INVOLVE(REGISTERED TRADEMARK) products. For additional information
regarding the CI acquisition and purchase of the INVOLVE(REGISTERED
TRADEMARK) products, see Notes 2 and 13, respectively, to the Company's
Consolidated Financial Statements included herein.
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Percentage of Revenues
Years Ended Six Months Ended
December 31, June 30,
------------------ -----------------
1993 1994 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 59.5 61.0 59.6 57.3
----- ----- ----- -----
Gross margin 40.5 39.0 40.4 42.7
Selling, general & administrative 40.2 30.0 33.0 31.9
expenses
Equity in earnings of affiliates (0.9) (0.6) (0.7) (0.6)
----- ----- ----- -----
Income before interest and
provision for income taxes 1.2 9.6 8.1 11.4
Interest expense, net 0.9 0.8 0.9 0.4
----- ---- ----- -----
Income before provision for
income taxes 0.3 8.8 7.2 11.0
Income tax expense 0.1 3.6 2.9 4.5
----- ----- ----- -----
Net income 0.2% 5.2% 4.3% 6.5%
===== ===== ==== =====
</TABLE>
Six Months Ended June 30, 1995 Compared with Six Months Ended June 30,
1994
- 20 -
<PAGE>
Total revenues for the six months ended June 30, 1995 were $11,256,000,
compared to $9,364,000 for the comparable six months of 1994, an increase
of approximately 20%. The strong growth in revenues for the six months
ended June 30, 1995 was due primarily to expansion of distribution
channels and product development efforts during 1994, which resulted in a
record performance for the Company's core multimedia training products.
Total revenues for the six months ended June 30, 1995 were positively
affected by the increase in sales of multimedia hardware systems.
Hardware revenues for the six months ended June 30, 1995 aggregated
$2,400,000, which represents an increase of $710,000 or 42% relative to
1994. While hardware sales do not add significantly to the Company's
earnings, Management believes that increased hardware sales are an
important factor in developing the demand for the Company's off-the-shelf
courseware.
Franchise related revenues (fees and royalties) achieved for the six
months ended June 30, 1995 amounted to $304,000. This compares to $55,000
achieved during the first six months of 1994, an increase of $249,000 or
453%. The Company has sold two franchise territories in 1995, with a
total of 17 territories sold to date.
Sales of the Company's linear products (primarily videotape and text-based
products), marketed under the label USA Training, amounted to $461,000 for
the six months ended June 30, 1995. This represents a decrease of
$155,000 or 25% for the comparable period in 1994. The decline in sales
of these products is consistent with industry trends. Due to the relative
size of ITC's linear products division in comparison to ITC, this decline
is not considered significant.
Cost of sales represented 57.3% and 59.6% of total revenues for the six
months ended June 30, 1995 and June 30, 1994, respectively. The relative
decrease in cost of sales on a comparative basis is attributable to an
increase in the sale of higher margin Company-owned courseware.
Selling, general and administrative expenses aggregated $3,596,000 for the
six months ended June 30, 1995. This compares to expenses of $3,091,000
for the same period in 1994. The increase of $505,000 was due primarily
to additional operational, sales and marketing costs. The amount of
selling, general and administrative expenses as a percentage of sales has
decreased slightly, from 33% to 32% for the six months ended June 30,
1995, relative to the same period in 1994.
For the six months ended June 30, 1995, income before provision for income
taxes totaled $1,231,000, as compared to $670,000 for 1994, an increase
over the prior year of $561,000 or 84%. The significant improvement in
income before provision for income taxes over 1994 was a result of several
- 21 -
<PAGE>
factors, including the Company's improved revenue performance, the
reduction in royalty expense due to the Company's purchase of the
INVOLVE(REGISTERED TRADEMARK) products in February 1995, and the Company's
efforts to control costs.
Net income for the six months ended June 30, 1995 aggregated $726,000 or
28 cents per share, as compared to $402,000 or 17 cents during the first
six months of 1994. The substantial increase in net income during 1995
was a result of the same factors that contributed to the increases in
income before provision for income taxes.
As a result of the Company's available tax loss carryforwards (as
described in Note 9 to the Consolidated Financial Statements included
elsewhere herein), the Company has, historically, paid a minimal amount of
income taxes. However, as a result of the Company's increasing level of
profitability, combined with the restrictions on the utilization of the
net operating losses acquired with CI, the Company began to pay a larger
amount of income taxes beginning in the second quarter of 1995. These
increased levels of tax payments are expected to continue, provided the
Company continues to improve its level of profitability.
Fiscal Year 1994 Compared to Fiscal Year 1993
Total revenues for 1994 were $22,337,000, representing a 62% increase over
the prior year's revenue of $13,812,000. The Company continued to be
positively impacted by the September 30,1993 acquisition of CI, its
subsidiaries, Comsell and ComSkill, and the related "PC Skills Learning
Library." Revenues for 1994 included a full year of CI's results of
operations, while 1993 consolidated results of operations included only
three months of CI's revenues and expenses. The dramatic improvement in
revenues also resulted from increases in demand for nearly all of the
Company's products and services. Sales of the Company's off-the-shelf
multimedia products, hardware systems, linear training products and
ComSkill franchises all increased substantially, while the only area that
experienced a decline was the Company's custom services business.
Revenues from off-the-shelf courseware increased 84% to $15,597,000 in
1994, as compared to revenues of $8,473,000 during 1993. Several factors
that contributed to the increase include additional resources and channels
being focused on sales and distribution of off-the-shelf courseware, an
aggressive product development schedule that resulted in the release of 32
new courses in 1994 and a product marketing strategy that positioned all
of the Company's four "Learning Libraries" as a single product family.
The Company anticipates that revenues will continue to grow due to the
Company's broadened product lines, additional sales and distribution
channels, and continued investments in new products and technologies.
- 22 -
<PAGE>
During 1994, sales of hardware systems aggregated $4,353,000, representing
a 103% increase from the revenue level achieved in 1993 of $2,149,000.
Similar to 1993, in 1994 increases in hardware sales resulted from
competitive pricing strategies and the increase in off-the-shelf
courseware sales.
Revenues from custom courseware and consulting services amounted to
$2,387,000 in 1994, a decrease of $802,000 or 25% over the corresponding
period in 1993. The decline in custom and consulting revenues was the
result of the Company's decision to de-emphasize the custom business as an
independent endeavor, while focusing only on those custom opportunities
that satisfy the needs of the Company's existing customer base.
Cost of sales represented 61% and 59% of total revenues for the years
ended 1994 and 1993, respectively. The relative increase in cost of sales
on a comparative basis is attributable to several factors including the
significant increase in hardware sales that bear extremely low margins and
an increase in sales of third party and partnership courseware that bear
much lower margins than sales of Company-owned courseware. However, for
the most part, these increases in cost of sales have been offset by
increases in sales of Company-owned courseware and franchise fees. Sales
from products owned solely by the Company accounted for 72% and 36% of
total multimedia courseware sales in 1994 and 1993, respectively.
Selling, general and administrative expenses totalled $6,693,000 in 1994,
an increase of $1,139,000 or 21% over the corresponding period of 1993.
The overall increase in selling, general and administrative expenses was
due primarily to the acquisition of CI and expanded operational support
for ComSkill. The Company realized substantial savings relative to the
independent operations of ITC and CI, as indicated by the decline in
selling, general and administrative expenses as a percentage of revenue
from 40% in 1993 to 30% in 1994.
Income before the provision for income taxes aggregated $1,965,000 in
1994. This represents an increase of $1,929,000 over the corresponding
result of $36,000 achieved for fiscal 1993. The dramatic increase in
income before the provision for income taxes in 1994 has resulted from
several factors including substantial savings in general and
administrative expenses as a result of combining the overhead structures
of ITC and CI, substantial increases in sales of off-the-shelf courseware,
and sales of new ComSkill franchises.
Net income for 1994 was $1,160,000, compared to $21,000 in 1993, an
increase of $1,139,000. The significant increase in net income for 1994
resulted from the same factors that affected the increase in income before
the provision for income taxes.
- 23 -
<PAGE>
Due to the Company's available net operating loss carryforwards, the
Company paid minimal taxes during 1994 and 1993. As of December 31, 1994,
the Company had available $1,500,000 of net operating loss carryforwards
of which $1,400,000 is restricted in use to approximately $245,000 per
year, as such net operating loss carryforwards were acquired from CI.
Quarterly Results
The following table sets forth certain quarterly financial information.
This information is derived from unaudited consolidated financial
statements which include, in the opinion of Management, all normal and
recurring adjustments which the Company considers necessary for a fair
treatment of the results for such periods. The operating results for any
quarter are not necessarily indicative of results for any future periods.
<TABLE>
<CAPTION>
Net Income
Net Income (Loss) Per
Net Revenues Gross Margin (Loss) Share
(Amounts in thousands, except per share data)
1993 Quarters
<S> <C> <C> <C> <C>
First $ 2,734 $ 1,226 $ 45 $ .03
Second 2,498 1,145 (32) (.02)
Third 3,335 1,211 21 .01
Fourth 5,245 2,015 (13) (.01)
-------- ------- ----- ----
Total $ 13,812 $ 5,597 $ 21 $ .01
======= ======= ----- =====
1994 Quarters
First $ 4,168 $ 1,759 $ 111 $ .05
Second 5,266 2,090 290 .12
Third 5,497 2,009 262 .11
Fourth 7,406 2,850 497 .20
Total $ 22,337 $ 8,708 $ 1,160 $ .48
======== ======= ======= =====
1995 Quarters
First $ 4,970 $ 2,177 $ 265 $ .10
Second 6,286 2,626 461 .18
Total $ 11,256 $ 4,803 $ 726 $ .28
======== ======= ====== =====
</TABLE>
- 24 -
<PAGE>
The Company's net revenues have steadily increased on a comparable
quarterly basis with the fourth quarter of each year being the Company's
strongest. Management believes that the fourth quarter will continue to
be the Company's strongest because many of the Company's customers expend
a disproportionate share of their annual training budgets during the last
quarter of the calendar year. Additionally, gross margin and net income
on a quarterly basis are affected by the relative sales mix between
courseware and hardware related products.
Liquidity and Capital Resources
Working capital at June 30, 1995 was $4,620,000 as compared with
$4,095,000 at December 31, 1994. The increase of $525,000 or 13% was due
to the strong results of operations of the Company during the first six
months of 1995, as described above.
The Company experienced an increase in cash provided from operations in
the first six months of 1995. Operations generated approximately
$2,171,000 of cash compared with $1,375,000 for the six month periods
ended June 30, 1995 and 1994, respectively. Additionally, in February
1995, the Company incurred $1,320,000 of long term debt in order to
finance the acquisition of the INVOLVE(REGISTERED TRADEMARK) products as
described below. The cash flow provided by operations and the proceeds
from long-term debt was used primarily as follows: $2,154,000 to fund the
Company's product development efforts, $361,000 for certain capital
expenditures, $212,000 for principal payments on the Company's long-term
debt, and $80,000 for repayment of the Company's revolving line of credit.
The Company's borrowings against its revolving credit line decreased from
$80,000 at December 31, 1994 to zero at June 30, 1995. Subsequent to June
30, 1995, the Company negotiated an increase in the amount available
pursuant to its line of credit from $2,000,000 to $2,500,000. Any
borrowings under this line of credit will bear interest at prime plus one-
half percent.
Accounts receivable at June 30, 1995 aggregated $7,258,000 due primarily
to two factors: the strong revenue performance in the second quarter of
1995 and a $1,713,000 sale to a customer at the end of the second quarter.
Although the entire order was shipped and billed prior to June 30, 1995,
due to the specific terms of this contract, only $578,000 was recognized
as revenue in the second quarter of 1995.
On February 17, 1995, ITC purchased all right, title and interest in the
51 lessons in the INVOLVE(REGISTERED TRADEMARK) Series. These products,
which were developed for ISA by ITC, had previously been sold by the
Company under an exclusive third party sales and marketing agreement. The
aggregate purchase price for this transaction was approximately
- 25 -
<PAGE>
$1,590,000. The price included the forgiveness of a receivable from ISA
of approximately $90,000, and purchase of approximately $180,000 of
INVOLVE(REGISTERED TRADEMARK) inventory. The Company borrowed $1,000,000
under its available line of credit and paid $500,000 in cash.
Subsequently, the Company paid down the line of credit borrowings with the
proceeds from a 5-year term loan in the original principal amount of
$1,320,000.
During 1993, and in order to effectuate the acquisition of CI and its
subsidiaries, Comsell and ComSkill, the Company exchanged 620,000 shares
of its Common Stock for all of the issued and outstanding equity of CI and
its affiliates. Additionally, the Company borrowed $971,000 from a bank
($900,000 of which was in the form of a then new five-year term loan) in
order to refinance an obligation of CI.
- 26 -
<PAGE>
BUSINESS
History
The Company was founded in 1977 to provide videotape-based technical
skills training primarily for the industrial processing and manufacturing
marketplace. During the 1980's, the Company converted its training
programs from linear-based videotape to interactive multimedia laser video
disc in order to utilize emerging computer technologies and to enhance the
effectiveness and quality of its training products. In addition to
technological enhancements, the Company focused on developing new training
courseware and expanding its customer base. In 1985, the Company merged
with the International Institute of Applied Technology, a publicly held
hardware systems integrator, and began trading on NASDAQ under the symbol
ITCC.
In September 1993, ITC acquired Comsell and ComSkill, the operating
subsidiaries of CI. The acquisition of CI brought to ITC an additional
product line (the "PC Skills Learning Library") and additional
distribution channels including dealers, distributors and the ComSkill
franchise network. In February 1995, the Company purchased
INVOLVE(REGISTERED TRADEMARK), an instrumentation learning library, from
ISA. This courseware was originally developed by the Company for ISA.
Management believes that these acquisitions, in addition to the internal
development of the "Technical Skills," "Basic Skills," and "Regulatory
Training" learning libraries, and further expansion of the "PC Skills
Learning Library," have strategically positioned the Company to meet the
evolving and diverse training needs of its customers.
Corporate Strategy
The Company's objective is to accelerate its growth and profitability by
further penetrating the market for interactive multimedia training and
educational courseware. ITC's strategy for achieving this objective is
to:
. Expand product platforms and development efforts;
. Increase distribution capabilities; and
. Pursue strategic acquisitions and marketing alliances.
Expand Product Platforms and Development Efforts. The Company must adapt
its products to changing multimedia delivery platforms. The Company
currently delivers its "PC Skills" and "Regulatory Training" products in
both analog and digital formats, while the "Basic Skills," "Technical
Skills," and "Instrumentation Training" programs are offered only in
analog laser video disc format. Recently, the Company accelerated its
conversion efforts for release of these products in a digital format,
because the Company regards digital delivery, including the use of CD-ROM,
as the future of the industry, although laser video disc remains today's
standard of performance and reliability.
- 27 -
<PAGE>
As the market for interactive multimedia training expands, customers can
be expected to analyze and demand more performance features and benefits
such as portability and networking. In addition to improving ITC's
current product features (such as customization capabilities,
administration and record keeping), ITC anticipates investing in and
developing new elements of multimedia to further increase performance.
See "Risk Factors -- Changing Technologies, -- Dependence on Product
Development, -- Intellectual Property."
Increase Distribution Capabilities. The Company seeks to expand its
United States and international distribution channels, including direct
sales, dealers, distributors and franchises. Management anticipates
hiring additional persons to support the Company's direct sales efforts
and to continue to expand reseller channels. This effort is intended to
result in a more focused approach to the customer.
As the market for technology-based training continues to develop, ITC
intends to increase its efforts to distinguish its products from
competitive products and services. As a result, the Company intends to
hire additional marketing specialists to further develop the Company's
corporate, library, and product marketing strategies in support of the
Company's sales and distribution efforts. See "Risk Factors -- Developing
Market, -- Distribution."
Pursue Strategic Acquisitions and Marketing Alliances. The Company
intends to broaden and expand its range of training products by acquiring
companies or products and, potentially, entering into marketing alliances
with developers of compatible products. The acquisitions of CI and of the
"INVOLVE(REGISTERED TRADEMARK) Instrumentation Learning Library" reflect
the Company's commitment to this strategy. The Company intends to use a
portion of the net proceeds realized from the Offering to fund the
Company's acquisition strategy. There can be no assurance that the
Company will locate suitable acquisition candidates or consummate
acquisitions on terms favorable to the Company. See "Risk Factors --
Acquisitions."
In certain product areas, such as "PC Skills," the Company intends to
enter into development and marketing alliances with key software
applications developers to assist in the production of ITC training
programs. The Company believes that these alliances might provide a
number of competitive advantages, including access to partners' product
development plans, source material and distribution channels. To date,
the Company has not entered into any marketing alliances with key software
applications developers. There can be no assurance that the Company will
enter into marketing alliances with any software applications developers.
- 28 -
<PAGE>
Industry Overview
The proliferation of personal computers throughout organizations and the
increase in multimedia capabilities of computers are two factors driving
the demand for interactive training and educational courseware. According
to Training Magazine, the domestic market for off-the-shelf and custom
training products, outside services and hardware increased from $6.2
billion in 1991 to $7.0 billion in 1994. Training Magazine also estimates
that the total domestic market for corporate training (including training
staff salaries and expenditures for seminars) increased from $43.2 billion
in 1991 to $50.6 billion in 1994. Training Magazine reports that 46% of
companies utilized computer-based training in 1994.
Management believes that the demand for its products and services is being
driven by (i) an increasingly competitive environment in which businesses
seek to improve efficiency and productivity through a more skilled
workforce; (ii) corporate downsizing, resulting in increased training
requirements for employees who perform multiple job tasks; (iii) the
significant increase in the use of computers throughout all levels of
organizations, increasing the number of employees who need training; and
(iv) the continuous introduction and evolution of computer technologies,
contributing to the need for continuing education and training. Moreover,
International Data Corporation ("IDC") has concluded that technology-based
applications are an extremely effective method of communicating
instructional information to learners. Studies by IDC indicate that the
time required for instruction is measurably reduced by using interactive
technologies in a training environment, and that comprehension and
retention rates are improved appreciably as well.
The foregoing industry trends suggest the potential demand for certain of
ITC's specific product libraries. For example, growth in the "PC Skills"
training market is being fueled by the expanded use of personal computers.
The demand for "Regulatory Training" has already increased due to new
Federal government mandated training for Occupational Safety and Health
Act ("OSHA") regulations and other safety related issues. Demand for the
Company's "Technical Skills" and "Instrumentation Training" programs has
also increased because of both an increasingly competitive operating
environment and the restructuring and downsizing of corporate America
that, together, drive the need for more efficient cross-trained employees.
ITC's management believes that the Company is well positioned to
capitalize on both the increases in the overall training market and the
transition to technology-based learning solutions. See "Risk Factors --
Developing Market, --Changing Technologies, - Competition."
Products and Services
ITC is a full-service training company specializing in the development,
production, marketing and sale of both off-the-shelf and custom
- 29 -
<PAGE>
interactive multimedia training courseware for corporate, educational and
governmental organizations. The Company offers in excess of 200 titles in
its Activ(REGISTERED TRADEMARK) learning libraries, and 300 videotape
programs. ITC's courseware employs the power of full-screen, full-motion
video on a PC platform. These courses combine high quality video and
sound with the PC's capabilities for graphics and automatic recordkeeping.
Although the analog laser video disc system remains today's standard for
quality multimedia, the Company recognizes the importance of emerging
digital technologies. ITC has begun the process of converting its
courseware to digital-based CD-ROM platforms. Currently ITC's "Regulatory
Training" and "PC Skills" learning libraries are available in both MPEG
and DVI digital formats, while "Basic Skills," "Technical Skills" and
"Instrumentation Training" are in the process of being converted to MPEG.
The Company expects the conversion to expand the possibilities for
portability and networking.
The vast majority of ITC's products are interactive multimedia programs;
however, the Company does market, sell and distribute certain linear
training products (primarily videotape and text-based) through its USA
Training division.
Along with its products, the Company offers a variety of services to
support the customer's training programs. ITC works with each customer to
determine technological requirements and appropriate courseware. If
desired, certain courses can be customized to meet customer needs. Upon
request, ITC personnel handle the on-site installation of hardware and
courseware. Customer assurance representatives respond promptly to
customer inquiries received during and after business hours. The Company
believes that its training solutions can command a premium price relative
to other technology-based training programs.
Activ(REGISTERED TRADEMARK) Learning Libraries
The Activ(REGISTERED TRADEMARK) "PC Skills Learning Library" provides a
powerful, yet flexible, approach to understanding personal computers while
unlocking the productivity power of today's new software tools. This
Activ(REGISTERED TRADEMARK) learning library includes introductory courses
on PCs, Windows(REGISTERED TRADEMARK) software applications, including
Microsoft(REGISTERED TRADEMARK), Lotus(REGISTERED TRADEMARK), and
WordPerfect(REGISTERED TRADEMARK) products, as well as several programs on
DOS-based applications.
The Activ(REGISTERED TRADEMARK) "Regulatory Training Learning Library"
addresses many of the OSHA, Environmental Protection Agency and Department
of Transportation regulations. Titles include "Confined Space Entry,"
"Transport of Hazardous Material," "Lockout/Tagout," "Environmental
Awareness," "Powered Industrial Vehicles," and "Bloodborne Pathogens."
ITC's Activ(REGISTERED TRADEMARK) regulatory courses provide broad
regulatory training coverage and updates for regulatory changes.
- 30 -
<PAGE>
The Activ(REGISTERED TRADEMARK) "Technical Skills Learning Library" is
designed to increase technical competency. These uniquely customizable
courses use "real world" workplace situations and terminology, providing a
practical atmosphere for the learner. The Activ(REGISTERED TRADEMARK)
"Technical Skills Learning Library" offers nearly 100 courses that address
specific technical training needs in the areas of fundamentals, quality,
safety, mechanical and electrical/electronics.
The Activ(REGISTERED TRADEMARK) "INVOLVE(REGISTERED TRADEMARK)
Instrumentation Learning Library" offers "Technical Skills" courses
relating to instrumentation topics. Developed by ITC in association with
ISA, the 51 customizable courses comprising the library communicate
complex instrument, multi-craft and process operations. Lessons are
available on every level from the basic principles of process control to
the hands-on skills necessary to keep a process running. The
Activ(REGISTERED TRADEMARK) "INVOLVE(REGISTERED TRADEMARK) Instrumentation
Learning Library" includes broad training topics ranging from distributed
control to instrument calibration and from troubleshooting to industrial
measurement.
The Activ(REGISTERED TRADEMARK) "Basic Skills Learning Library" provides
students with a working understanding of math, reading, writing and
interpersonal skills. The courses can be customized to highlight
situations that may be encountered by employees on the job.
Activ(REGISTERED TRADEMARK) Administration System
The Company's proprietary Activ(REGISTERED TRADEMARK) Administration
System offers customers a method of managing, reporting and tracking their
employees' individual and group training data and progress when training
with ITC's Activ(REGISTERED TRADEMARK) programs.
Hardware
The Company sells personal computers and related multimedia hardware
products to customers who require hardware to implement training programs.
In addition to being an authorized IBM Industry Remarketer and a Value
Added Reseller, the Company utilizes the products of Compaq, Gateway and
other computer hardware manufacturers. Such hardware is integrated with
ITC's Activ(REGISTERED TRADEMARK) courseware to provide a full-service
solution to the training needs of ITC's clients.
All materials used in the Company's products are available from numerous
sources of supply. The Company does not foresee any shortage of such
materials. Further, ITC does not believe that the loss of any single
supplier would have a material adverse effect on the Company taken as a
whole.
- 31 -
<PAGE>
Product Development
The Company has made substantial investments in product development. ITC
products are developed both internally and with third party contractors.
After a subject has been researched and identified for product
development, the first step in developing a new training program is to
develop a working knowledge of the underlying content by consulting
subject matter experts, existing courses, and product reference materials.
The Company then writes a program script, which covers all of the relevant
concepts, tasks to be completed, interactive features and tests to measure
achievement and to reinforce the lesson. During and after development of
a script, the Company's developers, programmers, video directors, and
graphic designers simultaneously plan and develop the course's performance
characteristics and video graphics. The final script and graphics are
integrated into a single file. Video and audio are recorded onto a master
videotape which is subsequently mastered as a laser video disc and a CD-
ROM. The workbook is finalized and printed, then course diskettes are
prepared. The program is then tested to ensure that each course delivers
the desired education and training. After testing is complete, the
product is released for sale.
The Company performs most of its own courseware development activities and
retains control over course development performed by outside developers
and subcontractors. All deliverables produced by outside developers or
subcontractors remain the Company's property.
Expenditures for product development were $969,870 in fiscal year 1993,
$1,543,128 in fiscal year 1994, and $755,576 for the six-month period
ended June 30, 1995 (excluding the INVOLVE(REGISTERED TRADEMARK) product
purchase of $1,398,507). See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Risk Factors --
Dependence on Product Development," and "Use of Proceeds."
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<PAGE>
Sales, Marketing and Customer Support
Distribution of the Company's products is managed through a number of
channels. Primarily, the Company employs a direct sales force that is
responsible for sales of the Company's interactive multimedia products
throughout North America. The Company also markets its products through
dealers, distributors and, in the case of the Activ(REGISTERED TRADEMARK)
"PC Skills Learning Library," its ComSkill franchisees. In foreign
markets, with the exception of Canada, the Company markets its products
through dealers and distributors.
Direct Sales
The Company's direct sales force and support organization is responsible
for the distribution of ITC's interactive multimedia products throughout
North America, with the exception of those territories that have been sold
to ComSkill franchisees as exclusive territories for distribution of the
Activ(REGISTERED TRADEMARK) "PC Skills Learning Library." The efforts of
the direct sales and support personnel accounted for approximately 84% of
the Company's multimedia revenues in 1994. At June 30, 1995, ITC employed
fifteen direct sales people responsible for generating new customer sales
and eight customer service representatives providing ongoing support for
the Company's existing customer base. In addition, the Company employs an
internal sales staff to assist the direct sales force and customer service
representatives. With the exception of Canada, the Company does not have
a direct sales employee presence in international markets.
The Company develops direct sales contacts from many sources. The Company
has established a presence at many of the training industry's national and
regional trade shows. Trade shows permit the Company to promote and
enhance its image as a leading publisher and distributor of self-directed
training programs and to initiate customer contacts, which are followed by
a direct salesperson or customer service representative communication.
The Company also contacts potential clients referred by existing
customers.
Indirect Sales
The Company also distributes its products through a variety of indirect
sales channels, which include dealers, distributors and franchises. The
indirect sales channels generated 16% of the Company's revenues in 1994.
The Company believes that utilizing indirect sales channels offers the
Company additional opportunities to broaden its customer base. By having
the Company's dealers, distributors and franchises establish their own
presence in local markets, ITC accesses customers in some markets that
could not be targeted as cost-effectively by the Company's direct sales
force. The Company currently utilizes approximately twelve dealers and
distributors in foreign markets, excluding Canada.
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<PAGE>
The franchises sold through ITC's ComSkill subsidiary employ their own
direct sales personnel to market and sell ITC's products throughout their
protected territories. ComSkill franchises have exclusive rights to sell
"PC Skills" products and nonexclusive rights to sell other ITC products.
In connection with the Company's strategy to expand distribution channels,
ITC intends to explore relationships with additional prospective resellers
of its courseware.
ComSkill Franchises
ComSkill offers and sells franchises to independent operators or
franchisees throughout the United States and Canada for the sale and
distribution of ITC "PC Skills" courseware and the operation of personal
computer multimedia learning centers within exclusive territories. Under
the terms of the franchise agreements, the franchisees have the right to
resell and lease "PC Skills" courseware to third parties. Territories are
based on IDC's statistical survey of personal computer distribution in
each of the top 150 Metropolitan Statistical areas in the United States as
of January 1, 1993, and on county and postal zip codes. All franchise
agreements are for a ten-year term, with eligibility for renewal for an
additional ten years, subject to certain terms and conditions.
Franchisees are also granted the right to use the trademark "ComSkill"
with logo, registered with the U.S. Patent and Trademark Office on January
3, 1995, Registration No. 1,871,652. ComSkill currently has seventeen
territories established.
Customer Support
The Company provides customer support in several ways. First, each sale
is based upon an analysis of the customer's training needs. Second, ITC
offers "1-800" telephone support to its customers during normal business
hours. Third, the Company solicits feedback from new and existing
customers regarding service improvements and requests for new products.
Customers
ITC's Activ(REGISTERED TRADEMARK) courseware has been purchased by over
5,000 companies, including many Fortune 1,000 companies, and other major
organizations. These organizations span a wide range of industries
including industrial processing and manufacturing, telecommunications,
utilities, government and education. The following table lists certain of
the Company's customers within each of the identified industries. The
organizations listed below (or their affiliates) represent some of the
customers that have purchased in excess of $100,000 of products from the
Company since January 1, 1994.
- 34 -
<PAGE>
<TABLE>
<CAPTION>
Process/Mfg. Telecommunications Utilities Government Education Other
<S> <C> <C> <C> <C> <C>
Anheuser-Busch BellSouth Carolina Power Administrative DeKalb County CSX
Telecommunications, and Lighting Offices of the (GA) Board of Transportation
Inc. Company U.S. Courts Education
Ford Motor NYNEX Illinois Power Health Canada Excel
Company Company Corporation
General PEPCO Navy Public First Union
Electric Works Center National Bank
Company of North
Carolina, N.A.
Martin The Southern Revenue Canada Talent Tree
Marietta Companies Personnel
Utility Services
Services, Inc.
North Star Statistics
Steel Company Canada
</TABLE>
No customer accounted for more than 7% of revenues in 1994. Less than 10%
of the Company's 1994 revenues were derived from foreign sales.
Intellectual Property
The Company considers its training programs to be proprietary and relies
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 its
proprietary rights. Certain of the Company's "Basic Skills" and
"Technical Skills" products are owned by limited partnerships in which the
Company acts as a general partner and, in some cases, the Company also
participates as a limited partner.
The Company is the owner of certain trademarks and/or servicemarks filed
in the United States Patent and Trademark Office:
-- ACTIV, Reg. No. 1,542,258 expiring June 6, 2009
-- ACTIV (with logo), Reg. No. 1,541,251, expiring May 30, 2009
-- ITC (with logo), Reg. No. 1,456,363, expiring Sept. 8, 2007
-- ITC, Reg. No. 1,483,827, expiring Apr. 5, 2008
- 35 -
<PAGE>
-- ComSkill (with logo), Reg. No. 1,871,652, expiring Jan. 3, 2001
-- INVOLVE, Reg. No. 1,655,283 (originally registered in the name of
Instrument Society of America and assigned to the Company by
assignment dated March 13, 1995 and filed in the United States Patent
and Trademark Office), expiring September 1996
The Company's trademarks are eligible for renewal at the time of their
expiration and may be maintained indefinitely by the Company, provided the
Company is still using the trademark and fulfills the United States Patent
and Trademark Office's filing requirements.
Additionally, the Company has filed trademark applications for the
trademarks "Enginuity" (one for products and another for services) and
"USA Training," which applications are currently pending in the United
States Patent and Trademark Office. See "Risk Factors -- Intellectual
Property."
Competition
There are many companies engaged in the business of providing training and
instructional materials. These companies include providers of traditional
instructor-led training, multimedia developers and sellers, textbook
publishers, manufacturers of videotapes, training films and others, all of
which compete for available training funds. At present, there are also
several providers of interactive multimedia training products. Management
believes that the number of companies providing interactive multimedia
training products will continue to increase in the future. Some of these
companies are larger and have greater resources than ITC, while others
offer only specialized training materials. Management believes that its
five "Learning Libraries" offer the broadest array of interactive
multimedia training products and services available. See "Risk Factors --
Competition."
Employees
At June 30, 1995, the Company and its subsidiaries employed a total of 78
people, all of whom are full-time. The Company utilizes free-lance and
temporary personnel who are familiar with ITC's development and production
process to support increased personnel requirements that arise from time
to time. The Company is not a party to any collective bargaining
agreements, and believes that relations with its employees are good.
Facilities
The Company currently occupies 28,431 square feet of office, warehouse and
production space in a commercial building located at 13515 Dulles
Technology Drive, Herndon, Virginia. The lease expires in June of 1999.
Further, the Company occupies approximately 6,450 square feet of office
space in a commercial building located at One Buckhead Plaza, Suite 1500,
3060 Peachtree Road, Atlanta, Georgia. This lease expires in January of
- 36 -
<PAGE>
1996. All facilities are in good condition and are adequate for the
Company's use.
Legal Proceedings
The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings.
- 37 -
<PAGE>
MANAGEMENT
<TABLE>
<CAPTION>
Directors and Executive Officers
The Directors and Executive Officers of the Company are as follows:
Name Age Title
<S> <C> <C>
James H. Walton 62 Chairman of the Board, President and Chief
Executive Officer
Gerald H. Kaiz 56 Vice Chairman of the Board, Executive Vice
President and Secretary
Steven L. Roden 45 Director, Executive Vice President and
Chief Executive Officer of ComSkill
Elaine H. Babcock 38 Senior Vice President of Sales
Philip J. Facchina 33 Vice President, Treasurer and Chief
Financial Officer
Elizabeth E. Tomaszewicz 49 Vice President, President of ComSkill
Robert VanStry 45 Vice President
Thomas M. Balderston 39 Director
Daniel R. Bannister 65 Director
John D. Sanders 57 Director
Richard E. Thomas 68 Director
</TABLE>
James H. Walton is Chairman of the Board, President and Chief Executive
Officer of ITC. Mr. Walton has been a Director and officer of ITC since
1977. Prior to the founding of ITC in 1977, he was responsible for
audiovisual production at NUS Corporation, an engineering and consulting
firm (1973-1977). Mr. Walton holds a B.S. and M.A. from the University of
Nebraska.
Gerald H. Kaiz is Vice Chairman of the Board, Executive Vice President and
Secretary of ITC. Mr. Kaiz has been a Director and officer of ITC since
1977. Prior to the founding of ITC, Mr. Kaiz was Manager of Training
Consulting for NUS Corporation (1967-1977). Mr. Kaiz holds a B.S. in
- 38 -
<PAGE>
Physics and an M.S. in Nuclear Engineering from the Massachusetts
Institute of Technology.
Steven L. Roden, a Director since 1993, is Chief Executive Officer of
ComSkill and Executive Vice President of ITC. Mr. Roden served as
President and Chief Executive Officer of Comsell from 1987 until its
liquidation into ITC in January 1995. Prior to joining Comsell, he was
President of Digital Controls Video, Inc., Vice President of Coloney,
Inc., and Vice President of First Florida Bank Corp. Mr. Roden holds an
M.B.A. in Finance and Marketing and a B.S. from Florida State University.
Elaine H. Babcock is Senior Vice President of Sales of ITC. In this
capacity, she is responsible for all distribution of off-the-shelf product
sales of the Company and its affiliates in North America, with the
exception of sales through the ComSkill franchise network. Prior to
January 1994, Ms. Babcock used her sales and management expertise to build
ITC's Custom Services Department. Ms. Babcock joined the Company in 1978
as a Video Production Specialist with a Communications degree from the
University of Maryland.
Philip J. Facchina is Vice President, Treasurer and Chief Financial
Officer of ITC. Prior to joining ITC in October 1992, Mr. Facchina served
as Treasurer and Chief Financial Officer of Facchina Construction Company,
Inc. Prior to then, Mr. Facchina served as Vice President of Finance and
Administration for E. C. Ernst, Inc. He is a former audit manager of
Arthur Young & Company (now Ernst & Young LLP). Mr. Facchina holds an
M.B.A. from the University of Pennsylvania's Wharton Business School, a
B.S. in Accounting from the University of Maryland, and is a C.P.A.
Elizabeth E. Tomaszewicz, is a Vice President of ITC and President of
ComSkill. Prior to joining the Company, Ms. Tomaszewicz served as Senior
Vice President of Sales and Marketing of TRO Learning, Inc. ("TRO") from
1989 to 1993. Prior to TRO, she served as Executive Vice President,
Marketing and Field Operations of Applied Learning International, Inc.
Ms. Tomaszewicz holds a B.S. from the University of Massachusetts.
Robert F. VanStry is a Vice President of ITC. Mr. VanStry joined the
Company in May 1978 as Senior Training Associate and subsequently
fulfilled the responsibilities of Manager of Engineering Projects, Manager
of Project Development, and Vice President of Training Services.
Thomas M. Balderston, a Director since 1993, has been a partner of TDH, a
venture capital fund group, from 1985 to present. He is also Director of
Actronics, Inc. Prior to TDH, he was Assistant Vice President of Middle
Market Lending for the Bank of Boston. Mr. Balderston holds an M.B.A.
from the Anderson School of Management at UCLA and a B.A. from Williams
College.
Daniel R. Bannister, a Director since 1988, has been President and Chief
Executive Officer of DynCorp, a leading professional and technical
- 39 -
<PAGE>
services firm, since 1985. He was Executive Vice President and Senior
Vice President of its Technical Services Group from 1983 to 1984.
John D. Sanders, a Director since 1977, is Chairman and Chief Executive
Officer of Tech News Inc., publishers of Washington Technology newspaper.
He holds a B.E.E. from the University of Louisville, Kentucky, and an M.S.
and Ph.D. in Electrical Engineering from Carnegie Mellon University. In
addition, Mr. Sanders is a registered representative (inactive) with
Wachtel & Co., Inc. Mr. Sanders is a member of the Board of Directors of
the following public companies: Daedalus Enterprises, Inc., an electronics
specialty consultant; Information Analysis, Inc., a supplier of computer
software services; and Data Measurement Corporation, a manufacturer of
specialized measuring equipment.
Richard E. Thomas, a Director since 1982, was Chairman of the Board,
President and Chief Executive Officer of Radiation Systems, Inc., a
communications systems manufacturer, from 1978 until 1994, at which time
Radiation Systems, Inc. was merged into COMSAT Corporation and Mr. Thomas
became the President of COMSAT RSI.
The Company has three classes of directors. Each class serves staggered
terms of three years in duration. The terms of Messrs. Balderston, Roden,
and Walton are due to expire in 1997. The terms of Messrs. Bannister and
Kaiz are due to expire in 1996. The terms of Messrs. Sanders and Thomas
are due to expire in 1998. Directors are elected by a plurality of the
votes cast at the Company's annual meeting of shareholders. Directors who
are employees of the Company receive no extra compensation for serving as
Directors. Non-employee Directors are paid $1,500 per quarter and $250
per meeting.
- 40 -
<PAGE>
Committees of the Board of Directors
Compensation Committee - The Board of Directors has a three-member
Compensation Committee, the members of which are outside directors.
Messrs. Thomas, Sanders and Bannister serve on this Committee. The
Committee recommends salaries and other compensation of the executive
officers of the Company for action by the whole Board.
Audit Committee - The Board of Directors also has established an Audit
Committee which is comprised of the same outside directors as the
Compensation Committee. The Audit Committee acts in an oversight capacity
to review quarterly and year-end financial processes, and meets with the
Company's auditors to review their reports and recommendations.
Employment Agreements
The Company has entered into employment agreements with its executive
officers. The agreements are generally subject to termination upon (i)
death (with certain individuals' beneficiaries receiving up to $5,000 in
death benefits); (ii) disability; or (iii) upon 45-60 days notice
(depending upon the individuals) by the Company. The agreements provide
for 34 months of severance pay to Messrs. Walton and Kaiz, 12 months of
severance pay to Messrs. Facchina and Roden and Ms. Tomaszewicz, and 10
months of severance pay to Ms. Babcock and Mr. VanStry (with certain
exceptions for liquidation other than in connection with the transfer of
all Company assets to another entity as in a merger or consolidation).
The agreements with Ms. Babcock, Ms. Tomaszewicz and Mr. Facchina specify
that upon certain changes of control, Ms. Babcock and Ms. Tomaszewicz
would receive 12 months salary as severance pay if they are terminated or
voluntarily leave within one year of the effective date of such an
occurrence and Mr. Facchina would receive 24 months salary as severance
pay upon a change of control.
In addition to basic salary, each officer is eligible to receive salary
increases, bonuses, stock option grants, pension and profit sharing
arrangements and other employee benefits that may from time to time be
awarded or made available. Messrs. Walton and Kaiz are required to give
the Company 12 months notice of resignation, while the other executive
officers must provide from 45-120 days notice. During the notice period,
all officers receive salary. The agreements also provide for certain paid
sick or disability leave and reimbursement of certain other medical
expenses not covered by the Company's group insurance. See "Risk
Factors -- Dependence On and Need for Key Personnel."
Executive Compensation Summary Table
The following information is being furnished with respect to the Company's
compensation of its Chief Executive Officer ("CEO") and its executive
officers whose annual salary and bonus exceeded $100,000 for the most
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<PAGE>
recent fiscal year, for services rendered to the Company during each of
the last three completed fiscal years.
- 42 -
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
ANNUAL COMPENSATION
Securities
Underlying
Name and Principal Other Annual Options
Position Year Salary ($) Bonus($)(b) Compensation($)(c) Granted (#)
<S> <C> <C> <C> <C> <C>
James H. Walton 1994 133,183 80,000 13,470 0
President & CEO 1993 132,088 0 10,455 0
1992 117,808 48,000 11,713 2,000
Gerald H. Kaiz 1994 112,332 30,000 11,858 0
Executive Vice President 1993 117,783 0 9,220 0
& Secretary 1992 109,965 10,000 10,998 0
Steven L. Roden 1994 120,609 45,000 12,930 0
Executive VP - ITC 1993 29,800(a) 0 2,503 30,000
CEO - ComSkill 1992 0 0 0 0
Elaine H. Babcock Senior 1994 86,770 37,500 9,150 30,000
Vice President 1993 80,233 0 6,688 0
1992 72,106 10,000 7,469 0
Philip J. Facchina Vice 1994 87,366 60,000 23,460(d) 0
President, Chief 1993 72,852 0 28,906(d) 15,000
Financial Officer & 1992 11,181 5,000 0 9,000
Treasurer
Robert F. VanStry 1994 90,623 30,000 8,078 0
Vice President 1993 75,670 0 6,166 0
1992 71,595 7,875 7,469 0
</TABLE>
a) Mr. Roden was hired by the Company as of September 30, 1993, the date
of the CI acquisition. Salary compensation represents amounts paid by
the Company to Mr. Roden after the acquisition of CI.
b) Bonus compensation represents amounts paid to the executive pursuant
to the Company's Incentive Compensation Plan for the year earned.
c) Represents the fair market value of shares allocated pursuant to the
Company's Employee Stock Ownership Plan.
d) Includes amounts paid by Company for certain education related
expenses.
Option Grants for Fiscal 1994 and Potential Realizable Values
Ms. Babcock received options to purchase 30,000 shares during Fiscal 1994.
Messrs. Walton and Facchina received options to purchase 50,000 shares and
25,000 shares, respectively, during the first quarter of 1995.
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<PAGE>
Option Exercises and Values for Fiscal 1994
The following table sets forth, as to each of the named executive
officers, information with respect to option exercises during Fiscal 1994
and the status of their options on December 31, 1994.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-
Options at Fiscal Year the-Money Options at
Shares Value End (#) Exercisable Fiscal Year End ($)
Acquired on Realized (E)/ Exercisable(E)/
Name Exercise (#) ($) Unexercisable (U) Unexercisable (U)
<S> <C> <C> <C> <C>
James H. Walton - - 28,000 (E) 74,674 (E)
Gerald H. Kaiz - - 26,000 (E) 63,674 (E)
Steven L. Roden - - 10,000 (E) 55,000 (E)
20,000 (U) 110,000 (U)
Elaine H. Babcock - - 13,000 (E) 33,125 (E)
30,000 (U) 0 (U)
Philip J. Facchina - - 10,000 (E) 57,500 (E)
14,000 (U) 85,000 (U)
Robert F. VanStry - - 13,000 (E) 32,125 (E)
</TABLE>
Stock Options and Warrants
At June 30, 1995, the Company had outstanding options to purchase Common
Stock under three separate incentive stock option plans. Two plans, the
1992 Director Incentive Stock Option Plan and the 1992 Key Employee
Incentive Stock Option Plan, were adopted by the Board of Directors and
approved by the shareholders during 1992. These plans have effectively
replaced the Company's 1982 Incentive Stock Option Plan that expired in
1992.
Pursuant to the 1982 Incentive Stock Option Plan, at June 30, 1995, there
were 72,000 options outstanding at exercise prices ranging from $2.00 to
$3.16. This plan has no additional options available for grant. Options
exercisable at June 30, 1995 expire as follows: 48,000 in 1995 and 24,000
in 1996.
Pursuant to the 1992 Key Employee Incentive Stock Option Plan, at June 30,
1995, there were 94,000 options outstanding at exercise prices ranging
from $4.13 to $6.75, and 20,500 options were available for additional
grants. Options outstanding at June 30, 1995 expire as follows: 2,000 in
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<PAGE>
1996 and 92,000 in 1997 through 2002. Options for 34,000 shares were
exercisable at June 30, 1995.
Pursuant to the 1992 Director Incentive Stock Option Plan, at June 30,
1995, there were 6,000 options outstanding at an exercise price of $5.00,
and 29,000 options are available for additional grants. All 6,000 of
these options were exercisable at June 30, 1995 and expire in 1997. All
options granted pursuant to this plan are nonqualified.
From time to time, the Company has granted other nonqualified options to
certain individuals. At June 30, 1995, there were 120,000 of these
options outstanding at exercise prices ranging from $2.13 to $7.50.
Options outstanding at June 30, 1995 expire as follows: 9,000 in 1995 and
6,000 in 1996, and 105,000 in 1999 through 2001. Options for 90,000
shares were exercisable at June 30, 1995.
In connection with a 1987 $1,275,000 debenture financing, the Company
entered into warrant agreements with certain investment advisors.
Pursuant to the warrant agreements, these advisors may purchase up to
7,286 shares (14,572 shares adjusted for the 1992 stock split) of the
Company's Common Stock at an original purchase price of $7.00 per share
($3.50 per share as adjusted for the 1992 stock split). Such purchase
must occur in increments of 1,000 shares or more. The warrant agreements
expire July 31, 1998 and are transferrable only once. The warrant
agreements grant the holders certain "piggyback" registration rights only
if the Company registers shares represented by other outstanding warrants
or options. The Company has no current plans to register for sale any
shares underlying outstanding warrants or options.
Incentive Compensation Plan
Historically, the Company has adopted an Incentive Compensation Plan
("ICP") for each fiscal year, designed to provide additional incentive to
the Company's officers to achieve the growth and profitability goals of
the Company. The maximum compensation payable under the ICP is determined
by the Board of Directors at the beginning of each fiscal year and no
payments are made under the ICP in the event that the targeted revenues
and net income for ITC, as set forth in the ICP, are not achieved.
Payments to the participants in the ICP are based upon the participant
achieving targeted revenues, or in the case of those officers with both
revenue and net income responsibilities, achieving both targeted revenues
and targeted net income. Payments made under the ICP are calculated at
the end of each fiscal year and are paid to the eligible participants
within 15 days after completion of the annual audit of the Company's
financial statements and the Company's filing of its Annual Report on Form
10-KSB with the Commission.
Employee Stock Ownership Plan
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<PAGE>
Effective January 1, 1992, the Company established an Employee Stock
Ownership Plan ("ESOP") for the benefit of substantially all employees.
The purpose of the ESOP is to enable participating employees to share in
the growth of the Company. The ESOP requires that the greater of 33,334
shares or the amount of shares equal to five percent of total compensation
of eligible employees be allocated to employee accounts annually. Each
participating employee is allocated shares based upon his or her relative
annual compensation. The shares vest over time and are fully vested when
an employee has six years of service with the Company. The ESOP does not
require any monetary contribution from the participating employee, but has
a minimum eligibility requirement of 1,000 hours of service in any plan
year.
The ESOP is administered by three Trustees who are subject to the terms
and conditions of a separate trust agreement which specifies their duties.
Each ESOP participant is eligible for distribution of benefits no later
than the sixtieth (60th) day after the close of the plan year in which any
of the following events occur: (i) the participant attains the age of 65;
(ii) the occurrence of the tenth anniversary in which the participant
commenced participation in the plan; or (iii) the participant terminates
his service with the Company.
Limitation of Liability of Directors and Indemnification of Directors and
Officers
The Company's Restated Bylaws provide that in the absence of fraud or bad
faith, the Company will indemnify its directors and officers to the full
extent authorized by Maryland law against all liability and expenses
actually and reasonably incurred in connection with or resulting from any
action, suit or proceeding in which such person becomes involved by reason
of having been an officer or director of the Company. Insofar as
indemnification for liabilities arising under the Securities Act of 1933,
as amended ("Securities Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in
the Securities Act, and is therefore unenforceable.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is
the Company aware of any pending or threatened litigation that may result
in claims for indemnification by any director or officer.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of the Company's 1993 acquisition of CI and its subsidiaries,
Comsell and ComSkill, all of the issued and outstanding equity securities
of CI were converted into the Company's Common Stock (the "Conversion").
In connection with the Conversion, a total of 610,000 shares of ITC Common
Stock ("Conversion Shares") were issued to 15 persons, including the
Selling Shareholders. Mr. Roden received 63,811 shares of ITC Common
Stock. TDH II Limited ("TDH"), of which Mr. Balderston is a partner,
received 432,911 shares of ITC Common Stock in exchange for its equity
interest in CI, and an additional 10,000 shares of ITC Common Stock for
certain consulting services related to the transaction. 113,278 shares of
ITC Common Stock were issued to CI's other shareholders in the CI
acquisition. The Conversion Shares and the 10,000 additional shares
issued to TDH are subject to certain resale restrictions under Rule 144
promulgated under the Securities Act. To the extent that these shares are
not sold in this Offering, they will begin to become eligible for future
sale subject to the limitations of Rule 144 commencing in October 1995.
Piggyback Registration Rights
As part of the acquisition of CI, the Company granted certain "piggyback"
registration rights to the holders of Conversion Shares. Under the
Agreement and Plan of Merger, dated September 30, 1993, between CI and ITC
(the "Merger Agreement"), ITC must, upon request, include former CI
shareholders' Conversion Shares in any registration statement that ITC
files with the Commission relating to a public offering of ITC Common
Stock. Such "piggyback" rights are conditioned upon inclusion of
Conversion Shares in the offering by the managing underwriter for the
offering. Notwithstanding such "piggyback" rights, the Company retains
control over all actions regarding a registration statement. The holders
of Conversion Shares bear a proportionate amount of any underwriting
discounts for their participation in the "piggyback" offering, and any
expenses incurred by legal counsel retained by holders of Conversion
Shares. The "piggyback" rights of holders of Conversion Shares expire on
September 30, 1996.
Demand Registration Rights
Under the terms of the Merger Agreement, the Company granted to the
holders of Conversion Shares a one-time demand registration right to
register the Conversion Shares for sale. This one-time demand
registration right may only be exercised upon request by a "Forty Percent
Holder," defined as any holder of forty percent of the Conversion Shares,
or a group of persons acting together to hold forty percent of the
Conversion Shares. Given the distribution of stock in the Conversion, the
registration rights may be exercised only if TDH elects to make such a
demand. The demand rights expire in October 1997. TDH has agreed not to
exercise the demand registration right for a period of 360 days after the
Offering and will not offer, sell or otherwise dispose of the Company's
Common Stock for 180 days after the Offering. See "Underwriting."
- 47 -
<PAGE>
PRINCIPAL SHAREHOLDERS
Stock Ownership of Certain Beneficial Owners
The following table sets forth information as to the beneficial ownership
of each person known to the Company to own more than 5% of the outstanding
Common Stock, directors, named executive officers, and directors and
officers as a group, as of August 10, 1995.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially Owned
Owned Prior to the After the
Offering Offering(1)
Name of Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Thomas M. Balderston(2) 442,911 16.8% 290,843(3) 8.3%
One Rosemont Business
Campus, Suite 301
919 Conestoga Road
Rosemont, PA 19010
Gruber & McBaine Capital 175,450 6.7% 175,450 5.0%
Management, Inc.(4)
50 Osgood Place
San Francisco, CA 94133
James H. Walton(5) 243,299 9.2% 243,299 6.9%
5213 N. 23rd Road
Arlington, VA 22207
Gerald H. Kaiz(6) 175,714 6.7% 175,714 5.0%
14406 Nadine Drive
Rockville, MD 20853
Steven L. Roden(7) 86,062 3.3% 73,300(8) 2.1%
305 Glenn Lake Drive
Atlanta, GA 30327
John D. Sanders 30,550 1.2% 30,550 0.9%
4600 N. 26th Street
Arlington, VA 22207
Richard E. Thomas 18,870 0.7% 18,870 0.5%
8207 Light Horse Court
Annandale, VA 22003
- 48 -
<PAGE>
Shares Beneficially Shares Beneficially Owned
Owned Prior to the After the
Offering Offering(1)
Name of Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Daniel R. Bannister 9,000 0.3% 9,000 0.3%
8414 Brookwood Court
McLean, VA 22102-1749
Elaine H. Babcock(9) 17,977 0.7% 17,977 0.5%
16 Bogastow Circle
Millis, MA 02054
Philip J. Facchina(10) 37,489 1.4% 37,489 1.1%
8428 Boss Street
Vienna, VA 22182
Robert VanStry(11) 16,644 0.6% 16,644 0.5%
3157 Kirkwell Place
Herndon, VA 22071
Directors and Executive 1,178,516 44.7% 1,013,686 28.9%
Officers as a group
(11 persons)
</TABLE>
(1) Assumes all 875,000 shares of Common Stock offered by the Company
are sold and 3,330,624 shares outstanding after the Offering.
Unless otherwise indicated, each person has sole voting and
investment rights with respect to the shares specified opposite his
name.
(2) Mr. Balderston's shares are held by TDH II Limited, with which Mr.
Balderston is affiliated. Mr. Balderston does not have sole voting
power for the shares.
(3) Assumes the sale of 152,068 shares in the Offering. See "Selling
Shareholders."
(4) Includes 23,600 shares held by Jon D. Gruber and 13,300 shares held
by J. Patterson McBaine, the sole directors and executive officers
of Gruber & McBaine Capital Management ("GMCM"). Also includes
71,000 shares held by Laquintas Partners, L.P., a California limited
partnership in which GMCM and Messrs. Gruber and McBaine are general
partners, and 1,500 shares held by CMJ Investments, L.P., a
California limited partnership in which GMCM and Messrs. Gruber and
McBaine are general partners. GMCM and Messrs. Gruber and McBaine
disclaim beneficial ownership of the shares held by Laquintas
Partners, L.P. and CMJ Investments, L.P. Does not include 54,100
shares held by Laquintas Partners, L.P., a California limited
partnership in which Messrs. Gruber and McBaine are general partners
and for which they disclaim beneficial ownership.
- 49 -
<PAGE>
(5) Includes 1,500 shares owned by spouse and 5,799 shares held by the
Company's Employee Stock Ownership Plan. Includes 72,000 shares
which Mr. Walton is entitled to acquire pursuant to stock options.
(6) Includes 1,000 shares owned by spouse and 5,214 shares held by the
Company's Employee Stock Ownership Plan. Includes 6,000 shares
which Mr. Kaiz is entitled to acquire pursuant to stock options.
(7) Includes 2,251 shares held by Employee Stock Ownership Plan.
Includes 20,000 shares which Mr. Roden is entitled to acquire
pursuant to stock options.
(8) Assumes the sale of 12,762 shares in the Offering. See "Selling
Shareholders."
(9) Includes 3,777 shares held by Employee Stock Ownership Plan.
(10) Includes 2,489 shares held by Employee Stock Ownership Plan.
(11) Includes 3,524 shares held by Employee Stock Ownership Plan.
- 50 -
<PAGE>
SELLING SHAREHOLDERS
The following shareholders are selling Common Stock in the Offering.
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Beneficially
Owned Prior to the Shares Owned After the
Offering Offered Offering
Name of Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
TDH II Limited 442,911 16.8% 152,068 290,843 8.3%
Steven L. Roden 86,062 3.3% 12,762 73,300 2.1%
Harvey Shuster 29,734 1.1% 5,947 23,787 0.7%
Glenn Crews 12,849 0.5% 2,510 10,339 0.3%
Phyllis Fobes 8,567 0.3% 1,713 6,854 0.2%
________ ______ ________ ________ _____
TOTAL 580,123 22.0% 175,000 405,123 11.6%
</TABLE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 4,000,000 shares
of Common Stock, $.10 par value, of which 2,455,624 shares are issued and
outstanding as of June 30, 1995. Upon completion of the Offering, the
issued and outstanding capital stock of the Company will consist of
3,330,624 shares of Common Stock (3,440,192 shares if the over-allotment
option is exercised).
The Common Stock has voting rights and is entitled to dividends from
sources available therefor when, as and if declared by the Board of
Directors. See "Price Range of Common Stock and Dividend Policy."
Shareholders have no preemptive rights and no rights to convert their
Common Stock into any other securities. The holders of Common Stock are
entitled to one vote for each share held of record on all matters
submitted to a vote of the shareholders. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are
entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding
preferred stock. There are no redemption or sinking fund provisions
- 51 -
<PAGE>
applicable to the Common Stock. All outstanding shares are, and all
shares to be sold and issued as contemplated hereby will be, fully paid
and nonassessable and legally issued.
The Company has three classes of Directors, which may tend to delay,
defer, or prevent a change of control of the Company. In addition, the
following statutes may have a similar effect.
Business Combination Statute. The Maryland General Corporation Law
establishes special requirements with respect to "business combinations"
between Maryland corporations and "interested stockholders" unless
exemptions are applicable. Among other things, the law prohibits, for a
period of five years, a merger and other specific or similar transactions
between a company and an interested stockholder and requires a
supermajority vote for such transactions after the end of such five year
period.
"Interested stockholders" are all persons owning beneficially, directly or
indirectly, more than 10% of the outstanding voting stock of a Maryland
corporation. "Business combinations" include any merger or similar
transaction subject to a statutory vote and additional transactions
involving transfers of assets or securities in specified amounts to
interested stockholders or their affiliates. Unless an exemption is
available, transactions of these types may not be consummated between a
Maryland corporation and an interested stockholder or its affiliates for a
period of five years after the date on which the stockholder first became
an interested stockholder and, thereafter, may not be consummated unless
recommended by the board of directors of the Maryland corporation and
approved by the affirmative vote of at least 80% of the votes entitled to
be cast by all holders of outstanding shares of voting stock and 66 % of
the votes entitled to be cast by all holders of outstanding shares of
voting stock other than the interested stockholder. A business
combination with an interested stockholder which is approved by the board
of directors of a Maryland corporation at any time before an interested
stockholder first becomes an interested stockholder is not subject to the
special voting requirements.
An amendment to a Maryland corporation's charter electing not to be
subject to the foregoing requirements must be approved by the affirmative
vote of at least 80% of the votes entitled to be cast by all holders of
outstanding shares of voting stock and 66 % of the votes entitled to be
cast by holders of outstanding shares of voting stock who are not
interested stockholders. Any such amendment is not effective until 18
months after the vote of stockholders and does not apply to any business
combination of a corporation with a stockholder who was an interested
stockholder on the date of the stockholder vote. The Company has not
adopted any such amendment to its Charter.
Control Share Acquisition Statute. The Maryland General Corporation Law
imposes limitations on the voting rights of shares of capital stock
- 52 -
<PAGE>
acquired in a "control share acquisition." The Maryland statute defines a
"control share acquisition" at the 20%, 33 % and 50% acquisition levels
and requires a two-thirds stockholder vote (excluding shares owned by the
acquiring person and certain members of management) to accord voting
rights to stock acquired in a control share acquisition. The statute also
requires Maryland corporations to hold a special meeting at the request of
an actual or proposed control share acquiror, generally, within 50 days
after a request is made with the submission of an "acquiring person
statement," but only if the acquiring person (a) posts a bond for the cost
of the meeting and (b) submits a definitive financing agreement to the
extent that financing is not provided by the acquiring person. In
addition, unless the charter or bylaws provide otherwise, the statute
gives the Maryland corporation, within certain time limitations, various
redemption rights if there is a stockholder vote on the issue and the
grant of voting rights is not approved, or if an "acquiring person
statement" is not delivered to the target within 10 days following a
control share acquisition. Moreover, unless the charter or bylaws provide
otherwise, the statute provides that if, before a control share
acquisition occurs, voting rights are accorded to control shares which
results in the acquiring person having majority voting power, then
minority stockholders have appraisal rights. An acquisition of shares may
be exempted from the control share statute, provided that a charter or
bylaw provision is adopted for such purpose prior to the control share
acquisition. There are no such provisions in the charter or bylaws of the
Company.
Reference is made to the full text of the foregoing statutes for their
entire terms, and the summary contained in this Prospectus is not intended
to be complete. The summary is qualified in its entirety by the statutes,
copies of which have been filed as exhibits to the Registration Statement
of which this Prospectus is a part.
- 53 -
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholders have agreed to sell to
each of the Underwriters named below, and each of the Underwriters, for
whom Ferris, Baker Watts, Incorporated is acting as Representative, has
severally agreed to purchase the number of shares of Common Stock set
forth opposite its name below.
Number of Shares
Underwriters to be Purchased
------------ ----------------
Ferris, Baker Watts,
Incorporated
____________
Total 1,050,000
============
The nature of the Underwriters' obligations under the Underwriting
Agreement is such that all shares of Common Stock offered, excluding
shares covered by the over-allotment option granted to the Underwriters,
must be purchased if any are purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters thereunder are
subject to the approval of certain legal matters by legal counsel and to
certain other conditions.
The Company and the Selling Shareholders have been advised by the
Representative that the several Underwriters propose to offer the shares
of Common Stock to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per
share to other dealers. The public offering price and concessions and
reallowances to dealers may be changed by the Representative.
The Company and TDH, one of the Selling Shareholders, have granted the
Underwriters an option, exercisable within 45 days after the date of this
Prospectus, to purchase up to an additional 157,500 shares of Common Stock
to cover over-allotments, at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters
purchase any such additional shares pursuant to this option, each of the
Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments, if
any, in connection with the Offering made hereby. If the over-allotment
option is exercised in full, TDH may elect to sell up to 47,932
additional shares in the over-allotment. If the over-allotment is
- 54 -
<PAGE>
partially exercised, and TDH elects, then the Company and TDH will
participate on a pro-rata basis as provided in the Underwriting Agreement.
In connection with the Offering, certain Underwriters and/or their
affiliates may engage in passive market making transactions in the Common
Stock of the Company on the NASDAQ National Market System in accordance
with Rule 10b-6A under the Exchange Act during the period before
commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits
and be identifiable as such.
The Company and its executive officers and directors and certain
shareholders have agreed that for a period of 180 days after the date of
this Prospectus, they will not offer, sell or otherwise dispose of any
shares of the Company's Common Stock, in the open market or otherwise,
without the prior written consent of the Representative, except to effect
exercises of options.
The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including certain
liabilities under the Securities Act.
The Company has agreed to reimburse the Representative for expenses
incurred by the Representative in an amount not to exceed $27,500.
The Representative has informed the Company that it does not expect the
Underwriters to confirm sales of Common Stock offered by this Prospectus
to any accounts over which it exercises discretionary authority.
LEGAL OPINIONS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Kirkpatrick & Lockhart LLP, Washington, D.C. Shapiro and
Olander, Baltimore, Maryland, has acted as counsel to the Underwriters.
EXPERTS
The consolidated financial statements of Industrial Training Corporation
at December 31, 1994 and 1993, and for each of the two years in the period
ended December 31, 1994 appearing in this Prospectus and in the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein
and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
- 55 -
<PAGE>
Index to Consolidated Financial Statements
of
Industrial Training Corporation
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . F-2
Financial Statements
Consolidated Balance Sheets - December 31, 1993 and 1994 and
June 30, 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income - Years Ended December 31, 1993
and 1994 and for the Six Months Ended June 30, 1994 and 1995
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1993 and 1994 and for the Six Months Ended June 30,
1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows - Years Ended December 31,
1993 and 1994 and for the Six Months Ended June 30, 1994 and
1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . F-8
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Industrial Training Corporation
We have audited the accompanying consolidated balance sheets of Industrial
Training Corporation as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Industrial Training Corporation at December 31, 1994 and 1993
and the consolidated results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
Vienna, Virginia
February 24, 1995 ERNST & YOUNG LLP
F-2
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31, June 30,
1993 1994 1995
---- ---- ----
(unaudited)
<S> <C>
<C> <C>
Current assets:
Cash and cash equivalents (note 6) $ $ $
126,136 439,923 1,178,642
Accounts receivable, net (notes 3, 6, and 7) 4,930,087 7,293,477 7,257,710
Due from affiliates (note 4) 159,734 86,111 46,388
Inventories, net of reserve of $83,400 at
December 31, 1993; $93,400 at
December 31, 1994; and $93,400 at
June 30, 1995 1,287,937 1,203,876 1,100,037
Prepaid expenses
182,378 118,446 305,846
----------- ------------ ------------
Total current assets 6,686,272 9,141,833 9,888,623
Property and equipment (notes 5, 6, and 7):
Video and computer equipment 1,977,119
Furniture and fixtures 1,011,482 2,366,661 2,717,431
Leasehold improvements 79,254 1,032,563 1,037,204
Videotape masters 89,106 95,111
144,180 144,180 144,180
------------ ------------ ------------
3,212,035 3,632,510 3,993,926
Less accumulated depreciation
and amortization (2,141,487) (2,507,393) (2,814,069)
------------ ------------ ------------
Net property and equipment 1,070,548 1,125,117 1,179,857
Deferred program development costs,
net of accumulated amortization of
$1,682,017 at December 31, 1993;
$3,006,689 at December 31, 1994; and
$3,900,263 at June 30, 1995 4,139,859 4,358,315 5,618,824
Goodwill, net of accumulated amortization of
$40,299 at December 31, 1993;
$206,284 at December 31, 1994; and
$288,784 at June 30, 1995 2,377,642 2,185,126 2,102,626
Investments in affiliates (note 4) 269,180 245,887 220,976
F-3
<PAGE>
Other
98,615 73,769 73,658
------------ ------------ ------------
Total assets $14,642,116 $17,130,047 $19,084,564
============ ============ ============
See accompanying notes.
F-4
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31, June 30,
1993 1994 1995
---- ---- ----
(unaudited)
Current liabilities:
Line of credit (note 6) $
$ $
650,000 80,000 --
Current installments of
long-term debt (note 7) 770,593 328,637 580,726
Accounts payable 1,555,659 2,112,271 2,247,594
Due to affiliates (note 4) 431,787 419,895 281,529
Accrued expenses:
Compensation and benefits 591,216 942,215 488,259
Royalties 155,518 291,905 20,461
Other 179,757 794,666 637,210
Deferred revenues 212,682 77,648 712,847
Income taxes payable
-- -- 300,000
---------- ----------- ----------
Total current liabilities 4,547,212 5,047,237 5,268,626
Deferred lease obligations 111,730 119,316 111,968
Deferred income taxes (note 9) 463,498 1,136,522 1,239,062
Long-term debt (note 7)
1,101,462 772,826 1,614,198
---------- --------- ----------
Total liabilities 6,223,902 7,075,901 8,233,854
Commitments (notes 4, 5 and 10)
Stockholders' equity (notes 8 and 11):
Common stock, $.10 par value,
4,000,000 shares authorized;
2,361,128 outstanding at December 31, 1993;
2,466,828 outstanding at December 31, 1994; and
2,473,328 outstanding at June 30, 1995 236,113 246,683 247,333
Additional paid-in capital 5,275,685 5,698,147 5,714,402
Note receivable from ESOP (460,827) (358,177) (304,177)
Retained earnings
3,368,890 4,528,947 5,254,461
------------- ------------ -----------
8,419,861 10,115,600 10,912,019
F-5
<PAGE>
Treasury stock, at cost
(3,404 shares in 1993;
18,004 shares in 1994; and (1,647) (61,454) (61,309)
17,704 shares at June 30, 1995) ------------- ------------ -----------
Total stockholders' equity
8,418,214 10,054,146 10,850,710
------------- ------------ -----------
Total liabilities and $14,642,116 $17,130,047 $19,084,564
stockholders' equity ============= ============ ===========
See accompanying notes.
F-6
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
Years Ended December 31, June 30,
1993 1994 1994 1995
---- ---- ---- ----
(unaudited)
Revenues, net:
Courseware $11,662,493 $17,983,796 $7,673,944 $8,855,846
Hardware 2,149,482 4,353,219 1,689,701 2,399,786
---------- ----------- ---------- ----------
Total revenues, net (note 4) 13,811,975 22,337,015 9,363,645 11,255,632
Cost of sales:
Courseware 6,136,043 9,440,595 3,926,673 4,003,156
Hardware 2,078,649 4,187,960 1,655,281 2,449,252
----------- ------------ ----------- ------------
Total cost of sales 8,214,692 13,628,555 5,584,954 6,452,408
----------- ------------ ----------- ------------
Gross margin 5,597,283 8,708,460 3,778,691 4,803,224
Selling, general and administrative expenses 5,553,840 6,693,221 3,090,546 3,596,371
Equity in earnings of affiliates (123,657) (136,012) (70,154) (77,961)
------------ ------------ ----------- -----------
Income before interest and provision 167,100 2,151,251 758,299 1,284,814
for income taxes
Interest expense, net 131,298 186,194 87,826 54,300
----------- -------------- ------------ -------------
Income before provision for income taxes 35,802 1,965,057 670,473 1,230,514
Income tax expense (note 9) 15,000 805,000 268,842 505,000
------------ -------------- ------------ -------------
Net income $ 20,802 $ 1,160,057 $ 401,631 $ 725,514
============ ============== ============ =============
Net income per common share (note 1) $ .01 $ .48 $ .17 $ .28
============ ============= ============ =============
Weighted average number of 1,959,206 2,427,707 2,377,875 2,588,176
shares outstanding ============= ============= ============ =============
See accompanying notes.
F-7
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Note
------------ Paid-in Receivable Retained Treasury
Shares Par Value Capital From ESOP Earnings Stock Total
--------------------------------------------------------------------------------------------------------------------------
Balance at 1,720,928 $172,093 $2,036,180 $(553,084) $3,348,088 $(1,791) $5,001,486
January 1, 1993
Treasury stock issued -- -- 3,236 -- -- 264 3,500
Treasury stock -- -- (1,692) -- -- (120) (1,812)
acquired
Note payments -- -- -- 92,257 -- -- 92,257
New shares issued:
Stock options 20,200 2,020 44,961 -- -- -- 46,981
exercised 620,000 62,000 3,193,000 -- -- -- 3,255,000
Comsell acquisition
Net income -- -- -- -- 20,802 -- 20,802
----------------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1993 2,361,128 236,113 5,275,685 (460,827) 3,368,890 (1,647) 8,418,214
Treasury stock issued -- -- 2,007 -- -- 193 2,200
Treasury stock -- -- -- -- -- (60,000) (60,000)
acquired
Note payments -- -- -- 102,650 -- -- 102,650
New shares issued:
Stock issuance 100,000 10,000 402,500 -- -- -- 412,500
Stock options 5,700 570 17,955 -- -- -- 18,525
exercised
Net income -- -- -- -- 1,160,057 -- 1,160,057
---------------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1994 2,466,828 246,683 5,698,147 (358,177) 4,528,947 (61,454) 10,054,146
Treasury stock issued -- -- 1,505 -- -- 145 1,650
Note payments -- -- -- 54,000 -- -- 54,000
New shares issued:
Stock options 6,500 650 14,750 -- -- -- 15,400
exercised
Net income -- -- -- -- 725,514 -- 725,514
---------------------------------------------------------------------------------------------------------------------------
Balance at
June 30, 1995 2,473,328 $247,333 $5,714,402 $(304,177) $5,254,461 $(61,309) $10,850,710
(unaudited) ========== ========= ========== ========== ========== ========== ===========
See accompanying notes.
F-8
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended Six Months Ended
December 31, June 30,
1993 1994 1994 1995
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 20,802 $ 1,160,057 $401,631 $ 725,514
Reconciling items:
Provision for deferred taxes 15,000 765,000 263,028 102,540
Depreciation and amortization 1,041,091 1,918,123 839,695 1,307,661
Salespeople awards of treasury shares 1,688 2,200 -- 1,650
Increase in reserve for doubtful accounts 50,963 78,000 -- 45,000
Increase in reserve for inventory obsolescence 20,000 10,000 -- --
Loss on sale of property and equipment 36,021 -- -- --
Changes in operating assets and liabilities:
Increase in accounts receivable (71,327) (2,441,390) (256,315) (9,233)
(Increase) decrease in inventory (85,993) 74,061 (123,525) 103,839
(Increase) decrease in prepaid expenses (47,044) 63,932 (55,519) (187,400)
Decrease in due from affiliates, net 69,324 61,731 (14,613) (98,643)
Decrease in other assets 910 24,846 (49,462) 111
Increase in accounts payable 381,772 556,612 442,490 135,323
(Decrease) increase in accrued expenses (336,083) (1,094,320) (872) (882,856)
Increase (decrease) in deferred revenues 212,682 (135,034) (60,024) 635,199
Increase in income taxes payable -- -- -- 300,000
Increase (decrease) in deferred lease obligation 45,403 7,586 (11,971) (7,348)
--------- ---------- ----------- ----------
Net cash provided by operating activities 1,355,209 3,240,044 1,374,543 2,171,357
Cash flows from investing activities:
Deferred program development costs (969,870) (1,543,128) (712,935) (2,154,083)
Capital expenditures (457,915) (420,475) (47,679) (361,416)
Acquisition of Comsell (85,072) (57,469) -- --
Investment in affiliates (28,007) (38,268) (34,593) --
----------- ----------- ---------- -----------
Net cash used in investing activities (1,540,864) (2,059,340) (795,207) (2,515,499)
Cash flows from financing activities:
Borrowings (repayments) under line of credit 550,000 (570,000) (240,000) (80,000)
Principal payments under long-term debt (521,474) (742,204) (379,390) (212,152)
Payments under capital lease obligations (23,682) (28,388) (14,195) (14,387)
Proceeds from long-term debt -- -- -- 1,320,000
Issuance of common stock 46,981 431,025 18,464 15,400
Acquisition of treasury stock -- (60,000) (60,072) --
Employee stock option note collection 92,257 102,650 56,250 54,000
---------- --------- ---------- ---------
Net cash provided by (used in) financing activities 144,082 (866,917) (618,943) 1,082,861
---------- --------- ---------- ---------
Net (decrease) increase in cash (41,573) 313,787 (39,607) 738,719
F-9
<PAGE>
Years Ended Six Months Ended
December 31, June 30,
1993 1994 1994 1995
---- ---- ---- ----
167,709 126,136 126,136 439,923
Cash and cash equivalents at beginning of period ---------- -------- ---------- -----------
Cash and cash equivalents at end of period $126,136 $439,923 $ 86,529 $1,178,642
======== ======== ========== ==========
See accompanying notes.
</TABLE>
1) Summary of Significant Accounting Policies
------------------------------------------
a) Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, CI Acquisition Corporation ("CI") (see
Note 13). Significant intercompany accounts and transactions have been
eliminated in consolidation. The accompanying interim unaudited
consolidated financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. In the opinion
of the Company, all adjustments, consisting of only normally recurring
adjustments, necessary for a fair presentation of the financial statements
for these interim periods have been made. The results for the interim
period ended June 30, 1995, are not necessarily indicative of the results
to be obtained for a full fiscal year.
b) Revenues and Cost
-----------------
Revenues from courseware include both off-the-shelf and custom courseware
sales and consulting service revenues. The Company recognizes revenues on
off-the-shelf product and hardware sales as units are shipped. The
Company permits the customer the right to return the courseware within 30
days of purchase. In the event that sales returns are material, the
Company adjusts revenue accordingly. Revenues from sales of custom
training programs that are developed and produced under specific contracts
with customers, including contracts with affiliated joint ventures and
limited partnerships, are recognized on the percentage of completion basis
as related costs are incurred during the production period. Gross
revenues from sales of affiliated joint venture and limited partnership
copyrighted courseware are included in the Company's financial statements,
as are related production, selling and distribution costs. Amounts due to
co-owners of the affiliated venture/partnerships related to such
courseware sales are reflected as royalties and included in cost of sales
in the financial statements.
The Company recognizes revenues from initial franchise fees when franchise
agreements have been fully executed, the Company has substantially
fulfilled all of its obligations to the franchisee under the agreement,
and the non-refundable franchise fee has been paid. During 1993 and 1994,
the Company recognized $90,000 and $450,000 of revenue from initial
franchise fees. Additionally, during the six month periods ended June 30,
1994 and 1995, the Company recognized $40,000 and $190,000, respectively,
of revenues from initial franchise fees. These amounts have been included
in courseware revenues in the accompanying consolidated statements of
operations.
F-10
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
Although the Company conducts certain of its business in foreign markets,
the Company mitigates its exposure to foreign currency risk by requiring
payments in U.S. dollars.
c) Deferred Program Development Costs
----------------------------------
Costs of developing and producing off-the-shelf courseware have been
capitalized as deferred program development costs. Capitalized costs
include direct labor, materials, product masters, subcontractors,
consultants, and applicable overhead. These capitalized costs are
amortized on a straight-line basis over the estimated useful lives of the
related programs which range from 3 to 7 years. The net book value of the
Company's deferred program development costs at December 31, 1994 amounted
to $1,881,000, $904,000, $210,000, and $1,363,000 for the Activ(REGISTERED
TRADEMARK) "PC Skills Learning Library," the Activ(REGISTERED TRADEMARK)
"Regulatory Training Learning Library," the Activ(REGISTERED TRADEMARK)
"Basic Skills Learning Library" and the Activ(REGISTERED TRADEMARK)
"Technical Skills Learning Library," respectively. The net book value of
the Company's deferred program development costs at June 30, 1995 amounted
to $1,741,000, $1,097,000, $192,000, $1,294,000 and $1,294,000 for the
Activ(REGISTERED TRADEMARK) "PC Skills Learning Library," the
Activ(REGISTERED TRADEMARK) "Regulatory Training Learning Library," the
Activ(REGISTERED TRADEMARK) "Basic Skills Learning Library," the
Activ(REGISTERED TRADEMARK) "Technical Skills Learning Library," and the
Activ(REGISTERED TRADEMARK) "INVOLVE(REGISTERED TRADEMARK) Instrumentation
Learning Library," respectively. Periodically, the Company assesses the
net realizable value of program development costs by reviewing past sales
performances, current and planned future marketing activity, specific
sales promotions and strategic distribution arrangements. Based on this
assessment, the Company determines each product's prospects for future
sales, and, if necessary, adjusts asset values to net realizable value.
The related amortization expense and write downs to net realizable value
are included in the cost of sales and amount to approximately $617,000 and
$1,325,000 in 1993 and 1994, respectively, and $894,000 for the six months
ended June 30, 1995.
d) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents includes cash and other highly liquid
investments having original maturities of less than three months.
e) Inventories
-----------
Inventories consist of videodiscs, videotapes, related hardware and
instructional materials. Inventories are stated at the lower of cost or
market. Cost is determined using the average cost method.
F-11
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
f) Property and Equipment
----------------------
Property, equipment and leasehold improvements are stated at cost.
Depreciation on property and equipment is computed on a straight-line
basis over estimated useful lives of five to seven years. Leasehold
improvements are amortized on a straight-line basis over the shorter of
the lease term or estimated useful lives of the related assets.
Depreciation and amortization expense amounted to approximately $305,000
and $366,000 for the years ended 1993 and 1994, respectively.
g) Investments in Affiliates
-------------------------
Investments in affiliated joint ventures and limited partnerships are
accounted for using the equity method and, accordingly, the initial cost
of the investments are adjusted for the Company's proportionate share of
joint venture and partnership undistributed earnings or losses.
h) Income Taxes
------------
The Company provides for income taxes using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred
income taxes result primarily from differences between financial statement
and income tax treatment of program development costs and net operating
loss carryforwards.
i) Net Income Per Common Share
---------------------------
Net income per common share is based on the weighted average number of
common shares actually outstanding plus the shares that would be
outstanding assuming the exercise of dilutive stock options and warrants,
all of which are considered to be common stock equivalents.
j) Goodwill
--------
The excess of purchase price over the fair value of net assets acquired
related to the acquisition of CI (note 2) has been recorded as goodwill.
Goodwill is being amortized using the straight-line method over an
estimated useful life of fifteen years. Amortization expense for the
years ended 1993 and 1994 amounted to approximately $40,000 and $166,000,
respectively. During 1994, the Company adjusted goodwill to reflect
adjustments to the value of net assets acquired from CI and to reflect
utilization of acquired tax benefits of CI (see Note 9). The net effect
of these two adjustments was to decrease the amount of goodwill originally
recorded by approximately $27,000. As part of its ongoing review,
management takes into consideration any events and circumstances which
might indicate an impairment to the carrying amount of goodwill. Factors
that management uses, among other things, to evaluate the continuing value
of goodwill include sales from the PC Skills product line, development of
the ComSkill franchise network and the value of contracts and agreements
that were in place at the date CI was acquired.
F-12
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
k) Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2) Acquisition of CI Acquisition Corporation and Subsidiaries
----------------------------------------------------------
On October 8, 1993, Comaq Corporation, a then newly formed and wholly
owned subsidiary of the Company, merged with CI. By virtue of the merger,
all of the issued and outstanding capital stock of CI was converted into
and exchanged for an aggregate of 610,000 shares of the Company's common
stock, $.10 par value per share. The Company issued an additional 10,000
shares of its common stock for fees related to the acquisition.
Additionally, the Company borrowed $971,000 from a bank ($900,000 of which
is in the form of a new five-year term loan) in order to refinance an
obligation of the acquired company.
The transaction, which was valued at approximately $3,500,000 and was
effective as of September 30, 1993, was accounted for as a purchase
transaction. Accordingly, only 3 months results of operations were
included in the accompanying consolidated statement of earnings for 1993.
As a result of the transaction, the Company recorded goodwill of
approximately $2,418,000 which is being amortized over a fifteen year
period beginning October 1, 1993. By virtue of the merger, the Company
acquired all of the assets of CI and its two wholly owned subsidiaries,
Comsell Training, Inc. ("Comsell"), and ComSkill Learning Centers, Inc.
("ComSkill"). Comsell is engaged in the business of producing and
distributing multimedia based training courseware directed towards
personal computer skills development. ComSkill is a newly incorporated
franchisor of Comsell training products (see Note 13).
The following table sets forth proforma unaudited results of operations of
the Company for the year ending December 31, 1993, as if CI had been
acquired prior to January 1, 1993:
1993
----
Revenue $ 17,986,715
Net loss $ (394,888)
Net loss per share $ (.20)
F-13
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
3) Accounts Receivable
-------------------
Accounts receivable include the following:
December 31, December 31, June 30,
1993 1994 1995
------------ ------------ --------
Trade accounts receivable $4,289,610 $7,245,294 $7,453,370
Unbilled contract 749,199 242,279 82,008
receivables
Less allowance for
doubtful accounts (202,714) (280,714) (325,714)
----------- ------------ -----------
Trade accounts 4,836,095 7,206,859 7,209,664
receivable, net
Other receivables 93,992 86,618 48,046
---------- ---------- ---------
$4,930,087 $7,293,477 $7,257,710
============ ========== ==========
4) Investments in and Due from Affiliates
--------------------------------------
Investments in affiliates consist of the following at December 31:
1993 1994
---- ----
Limited partnerships $ 192,392 $ 189,656
Joint venture with ITSC 67,477 56,231
Joint venture with DynCorp 9,311 --
--------- ---------
$ 269,180 $ 245,887
========= =========
The Company is a participant in five separate limited partnerships with
Industrial Training Partners, Ltd. (the ITP Partnerships). In all of the
ITP Partnerships, the Company is a 5% general partner. In certain of the
ITP Partnerships, the Company has acquired limited partnership interests
as well. The ITP Partnerships were formed to develop and produce various
series of training programs.
Under contracts to market the programs for the ITP Partnerships, ITC
receives 50% to 70% of the sales price for the costs of reproducing and
marketing the training materials. Sales of these programs were
approximately $2,289,000 and $2,291,000 in 1993 and 1994, respectively,
and $1,112,000 for the six months ended June 30, 1995. Royalties to the
ITP Partnerships for these sales amounted to $1,057,000 and $1,004,000 in
F-14
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
1993 and 1994, respectively, and $455,000 for the six months ended June
30, 1995. Additionally, in connection with the development of a new off-
the-shelf partnership program, the Company billed certain of these
partnerships approximately $292,000 and $51,000 in 1993 and 1994,
respectively. Amounts earned, but not billed to these partnerships, which
are included in unbilled receivables at December 31, 1993 and 1994, are
$226,000 and none, respectively. Moreover, to finance this development,
the Company has guaranteed a bank loan to one of the limited partnerships.
At December 31, 1994 the outstanding balance of this loan was
approximately $48,000. During the first quarter of 1995, the outstanding
balance on this loan was paid by the partnership.
In prior years, the Company executed a 50-50 joint venture agreement with
DynCorp, and entered into contracts with the joint venture to develop and
produce additional training programs. The Company has contracts with the
joint venture to market the programs. Pursuant to the agreements, the
Company receives 50% of the sales price, the costs of reproducing and
marketing the training materials, and an additional 25% as its share of
the joint ventures' profits. Revenues from these programs in 1993 and
1994 approximated $124,000 and $162,000, respectively.
5) Leases
------
The Company has several noncancelable operating leases, primarily for
office space and transportation equipment, that expire over the next five
years and include purchase or renewal options at fair value at the time of
renewal.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1994 are as follows:
Year ending December
31:
--------------
1995 $ 509,000
1996 356,000
1997 316,000
1998 318,000
1999 162,000
----------
$1,661,000
==========
Rental expenses for operating leases for the years ended December 31, 1993
and 1994 were approximately $432,000 and $489,000, respectively.
F-15
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
6) Line of Credit
--------------
At December 31, 1994 and June 30, 1995, the Company had available a
revolving bank line of credit bearing interest at prime plus 1/2% in the
amount of $2,000,000 and $2,500,000, respectively. The line is
collateralized by all the Company's business assets. The interest rate on
these borrowings at December 31, 1994 was 9%. At June 30, 1995, the
Company had no outstanding balance under the terms of the line of credit.
The loan agreement places certain restrictions on the Company including
limitations on borrowings and on the ability to merge or dispose of
assets, and requires the maintenance of minimum working capital and
tangible net worth ratios. Also, the Company is required to maintain an
average compensating balance of $50,000 with the bank, but may apply
balances of the five limited partnerships (see Note 4) to the requirement.
<TABLE>
<CAPTION>
7) Long-term Debt
--------------
<S> <C> <C>
Long-term debt consists of the following at December 31: 1993 1994
---- ----
Prime plus 1% (9.5% at December 31, 1994) note payable to financial $ 900,000 $ 705,000
institution due in monthly installments of $15,000 plus interest through
November 1998, collateralized by accounts receivable, contract rights,
inventory, property and equipment and a $500,000 life insurance policy on
the Company's President.
8.0% note payable to financial institution due in monthly principal and 460,827 358,177
interest installments of $11,278 through December 1997, collateralized by
the assignment of interest in 200,000 shares of the Company's common
stock held by the ESOP, all of the Company's assets and a $500,000 life
insurance policy on the Company's President.
8.25% capital lease obligation (Note 5) 66,674 38,286
Prime plus 1% note payable to financial institution due in monthly 300,000 --
principal and interest installments through December 1994.
10.56% note payable to financial institution due in monthly principal and
interest installments of $12,816 through December 1994.
144,554 --
------------- -----------
Total long-term debt 1,872,055 1,101,463
Less current installments (770,593) (328,637)
------------- ------------
Long-term debt, excluding current installments $ 1,101,462 $ 772,826
============== ===========
F-16
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
</TABLE>
Interest paid on all debt amounted to approximately $133,000 and $191,000
in 1993 and 1994, respectively.
Maturities of long-term debt at December 31, 1994, are as follows:
1996 $299,587
1997 308,239
1998 165,000
---------
$772,826
=========
8) Stock Options and Stock Warrants
--------------------------------
At December 31, 1994, the Company had outstanding options to purchase
common stock under three separate incentive stock option plans. Two
plans, the 1992 Director Incentive Stock Option Plan and the 1992 Key
Employee Incentive Stock Option Plan, were adopted by the Board of
Directors and approved by the shareholders during 1992. These plans have
effectively replaced the Company's 1982 Incentive Stock Option Plan which
expired in 1992.
Pursuant to the 1982 Incentive Stock Option Plan, at December 31, 1994,
there were 78,000 options outstanding at exercise prices ranging from
$2.00 to $3.16. This plan has no additional options available for grant.
Options exercisable at December 31, 1994 expire as follows: 54,000 in
1995 and 24,000 in 1996.
Pursuant to the 1992 Key Employee Incentive Stock Option Plan at
December 31, 1994, there were 98,500 options outstanding at exercise
prices ranging from $4.13 to $6.75, and 16,500 options were available for
additional grants. Options outstanding at December 31, 1994 expire as
follows: 500 in 1995, 3,000 in 1996 and 95,000 in 1997 through 2002.
Options for 25,500 shares were exercisable at December 31, 1994.
Pursuant to the 1992 Director Incentive Stock Option Plan, at December 31,
1994, there were 4,000 options outstanding at an exercise price of $5.00,
and 31,000 options are available for additional grants. Options
exercisable at December 31, 1993 expire in 1999. All options granted
pursuant to this plan are nonqualified.
From time to time, the Company has granted other nonqualified options to
certain individuals. At December 31, 1994, there were 45,000 of these
options outstanding at exercise prices ranging from $2.125 to $7.50.
Options outstanding at December 31, 1994 expire as follows: 9,000 in 1995
F-17
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
and 6,000 in 1996, and 30,000 in 1999 through 2001. Options for 15,000
shares were exercisable at December 31, 1994.
<TABLE>
<CAPTION>
The following table summarizes option activity:
Nonqualified Options Qualified Options
-------------------- -----------------
1993 1994 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 36,400 29,400 114,200 152,500
Granted -- 30,000 55,500 30,000
Canceled or expired (2,000) (10,400) (2,000) (300)
Exercised (5,000) -- (15,200) (5,700)
---------- ------------- ----------- ----------
Outstanding at end of year 29,400 49,000 152,500 176,500
========= ------------ =========== ==========
</TABLE>
The Company also has outstanding 14,572 warrants to purchase common stock.
These warrants are exercisable at $3.50 and expire in 1998.
F-18
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
9) Income Taxes
------------
The components of income tax expense are as follows:
December 31, December 31,
1993 1994
------------ ------------
Current:
Federal $ -- $ 30,000
State -- 10,000
--------- -----------
-- 40,000
Deferred:
Federal 12,000 659,300
State 3,000 105,700
---------- ----------
15,000 765,000
---------- ----------
$ 15,000 $ 805,000
======== =========
The deferred tax provision relates primarily to differences between
financial statement and income tax treatment of program development cost
and net operating loss carryforwards. The Company paid federal and state
income taxes of $23,000 and $8,000 in 1993 and 1994, respectively, and
$142,000 during the six months ended June 30, 1995.
F-19
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
The difference between income tax expense and the amount determined by
applying the federal statutory rate is as follows:
1993 1994
---- ----
Federal statutory rate $ 12,000 $ 668,000
State income taxes, net of federal benefit 1,000 75,500
Amortization of goodwill 15,000 62,000
Benefit of graduated tax rates (12,000) (12,000)
Other (1,000) 11,500
---------- -----------
$ 15,000 $ 805,000
========== ===========
For the years ended December 31, 1993 and 1994, the Company utilized zero
and $1,550,000, respectively, of available net operating loss
carryforwards. At December 31, 1994, the Company had net operating loss
carryforwards for income tax purposes of approximately $100,000 (not
including the prior net operating losses acquired from CI, which are
discussed below) which expire at varying dates through 2008. No valuation
allowance has been recognized to offset the deferred tax assets related
to these carryforwards.
The following temporary differences give rise to the provision for
deferred taxes at December 31:
1993 1994
---- ----
Deferred program $ 70,000 $ 74,500
development costs
Depreciation 10,400 16,000
Allowance for doubtful (12,100) (29,000)
accounts
Inventory reserves (6,800) (9,000)
Net operating loss and (73,200) 630,500
tax credits carryforwards
Accrued compensation 30,400 67,500
Other (3,700) 14,500
----------
$ 15,000 $ 765,000
========== ============
F-20
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, are presented below.
<TABLE>
<CAPTION>
1993 1994
---- ----
<S>
Deferred tax assets: <C> <C>
Allowance for doubtful accounts $ 75,500 $ 104,500
Inventory reserves 50,500 41,500
Accrued compensation 95,600 31,500
Net operating loss carryforwards 1,223,500 563,000
Alternative minimum tax and investment 35,000 65,000
tax credit carryforwards
Deferred lease obligation 41,500 44,500
Difference in depreciation 84,150 68,000
Other -- 16,478
------------- -----------
Total deferred tax assets 1,605,750 934,478
Less valuation allowance (577,864) (505,000)
------------- ------------
Net deferred tax assets 1,027,886 429,478
------------- ------------
Deferred tax liabilities:
Product development costs, capitalized (1,491,384) (1,566,000)
------------- -------------
Total gross deferred tax liabilities (1,491,384) (1,566,000)
------------- -------------
Net deferred tax liabilities $ (463,498) $ (1,136,522)
============= =============
</TABLE>
As a result of the Company's acquisition of CI (see Note 2), the Company
has available approximately $1,400,000 of additional net operating loss
carryforwards that expire at varying dates through 2007. Pursuant to
F-21
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
Section 382 of the Internal Revenue Code (the "Code"), the utilization of
the net operating loss is limited to approximately $245,000 per year.
Additionally, the net operating loss is also subject to the separate
return limitation year (SRLY) rules as prescribed in the Code, which limit
its utilization to the extent CI generates income each year. During 1994,
the Company utilized an aggregate of $226,000 of the acquired net
operating loss carryforwards of CI to offset taxable income. As a result,
deferred taxes have been reduced by approximately $84,000. Due to the
limitations on uses and other uncertainties relating to the utilization of
the remaining tax benefit of these deductions, a valuation allowance has
been recorded to substantially offset the net deferred tax asset related
to the acquisition of CI.
10) Commitments
-----------
The Company has entered into separate employment agreements with Messrs.
Walton and Kaiz which are subject to termination upon death (with $15,000
death benefit) or disability (as defined) or upon sixty days notice by
the Company (with 34 months of severance pay except where the Company is
liquidating). In addition to basic salary, each of these officers is
eligible to receive salary increases, bonuses, stock option grants,
pension and profit-sharing arrangements, and other employee benefits which
may from time to time be awarded or made available. If these officers
resign, they must give the Company 12 months notice during which they
continue to receive salary. The contracts also provide certain payments
for other benefits.
11) Stockholders' Equity
--------------------
The Company instituted an Employee Stock Ownership Plan (ESOP) and Trust
for the benefit of substantially all employees effective January 1, 1992.
To establish the plan, ITC entered into a loan agreement with a bank and
borrowed $637,500 for the purchase of 200,000 shares of ITC common stock
from DynCorp. ITC pledged this stock to the bank to collateralize the
loan. The provisions of the ESOP require that, on an annual basis, the
greater of 33,334 shares or the amount of shares equal to five percent of
total compensation of eligible employees be allocated to employee
accounts. Each participant then receives shares based on their relative
annual compensation. The loan has a six-year amortization period at an
interest rate of 8.0%. In 1994, the Company entered into an agreement
with the bank whereby the ESOP note was modified and extended. Based upon
this modification, the Company will make monthly installments of principal
and interest through the extension date of December 1997. The Company
F-22
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
recognizes contribution expense which was $106,000 and $108,000 for 1993
and 1994, respectively, based on the cost of shares allocated for the
period and any interest expense incurred. Contributions to the ESOP
amounted to approximately $151,000 and $135,000 in 1993 and 1994,
respectively, including approximately $45,000 and $32,000 of interest in
1993 and 1994, respectively. The fair market value of the 100,000
unearned shares at December 31, 1994 amounted to $750,000.
During 1994, the Company hired a new President of the ComSkill franchise
operation. At the date of hire, this executive executed a subscription
agreement to purchase 100,000 shares of the Company's common stock at
$4.125 per share, the fair market value of the Company's common stock on
the effective date of the subscription agreement. As a result, during
1994, the Company issued 100,000 shares of common stock to the executive
for an aggregate purchase price of $412,500. Additionally, the President
was granted 30,000 stock options under the 1992 Key Employee Stock Option
Plan and received a commitment for up to an additional 60,000 stock
options based on performance.
12) Employee 401(k) Plan
--------------------
On January 1, 1991, the Company established a 401(k) Plan for the benefit
of substantially all of its employees. Employees can contribute from 1%
to 15% of their salary to the Plan, subject to statutory limitations. At
the discretion of the Board of Directors, the Company can elect to make a
contribution to the Plan. No contribution was made by the Company during
1993 or 1994.
13) Subsequent Events
-----------------
On January 2, 1995, CI and Comsell were merged with and liquidated into
the Company. The merger and liquidation will have no effect on the
Company's financial reporting.
On February 17, 1995, ITC purchased all right, title and interest in the
51 videodiscs in the INVOLVE(REGISTERED TRADEMARK) Series
(INVOLVE(REGISTERED TRADEMARK)). INVOLVE(REGISTERED TRADEMARK) had
originally been produced by ITC for the ISA and the Company had acted as
the exclusive third party distributor for INVOLVE(REGISTERED TRADEMARK) in
the United States. The aggregate purchase price for this transaction was
approximately $1,590,000. The purchase price includes the forgiveness of a
receivable from ISA of approximately $90,000 and approximately $180,000 of
INVOLVE(REGISTERED TRADEMARK) inventory. In order to complete the
F-23
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1995 and for the
six months ended June 30, 1994 and 1995 is unaudited)
purchase, ITC borrowed $1,000,000 under its available line of credit and
paid the balance of $500,000 in cash. Management refinanced the line of
credit borrowings to a five-year term loan.
14) Quarterly Financial Data (Unaudited)
------------------------------------
Financial data for the interim periods of 1993, 1994 and 1995 were as
follows (amounts in thousands except per-share amounts):
<TABLE>
<CAPTION>
Net Income
Net Gross Income (Loss)
Revenue Margin (Loss) Per Share
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
1993 Quarters
First $ 2,734 $ 1,226 $ 45 $ .03
Second 2,498 1,145 (32) (.02)
Third 3,335 1,211 21 .01
Fourth 5,245 2,015 ( 13) (.01)
Total --------- -------- --------- -------
$ 13,812 $ 5,597 $ 21 $.01
========= ======== ========= =======
1994 Quarters
First $ 4,168 $ 1,759 $ 111 $ .05
Second 5,266 2,090 290 .12
Third 5,497 2,009 262 .11
Fourth 7,406 2,850 497 .20
Total --------- -------- -------- ----------
$ 22,337 $ 8,708 $ 1,160 $ .48
========= ======== ======== ==========
1995 Quarters
First $ 4,970 $ 2,177 $ 265 $ .10
Second 6,286 2,626 461 .18
Total --------- -------- -------- ---------
$ 11,256 $ 4,803 $ 726 $ .28
========= ======== ======== =========
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION
<S> <C>
No dealer, salesperson or other individual has
been authorized to give any information or to make any
representations other than those contained or
incorporated by reference in this Prospectus and, if
given or made, such information or representations
must not be relied upon as having been authorized by
the Company, the Selling Shareholders or any of the
Underwriters. This Prospectus does not constitute any 1,050,000 Shares
offer to sell or a solicitation of an offer to buy
such securities other than the securities to which it
relates or an offer to sell or the solicitation of an Industrial Training Corporation
offer to buy the Common Stock in any circumstances in
which such offer or solicitation is unlawful. Neither
the delivery or this Prospectus nor any sale made Common Stock
hereunder shall, under any circumstances, create an
implication that there has been no change in the facts
set forth in the Prospectus or in the affairs of the
Company since the date hereof or that the information
herein is correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS PROSPECTUS
Page
Additional Information . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . 9
Price Range of Common Stock
and Dividend Policy . . . . . . . . . . . . . . . 10
Capitalization . . . . . . . . . . . . . . . . . . 11
Selected Consolidated Financial Data . . . . . . . 12
Management's Discussion and Analysis
of Financial Condition and
Results of Operations . . . . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . . 19 Ferris, Baker Watts
Management . . . . . . . . . . . . . . . . . . . . 26 Incorporated
<PAGE>
Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 32
Principal Shareholders . . . . . . . . . . . . . . 33
Selling Shareholders . . . . . . . . . . . . . . . 35
Description of Securities . . . . . . . . . . . . . 35
Underwriting . . . . . . . . . . . . . . . . . . . 37
Legal Opinions . . . . . . . . . . . . . . . . . . 38
Experts . . . . . . . . . . . . . . . . . . . . . . 38
Index to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . F-1
, 1995
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Company's Restated Bylaws provide that in the absence of fraud or
bad faith the Company will indemnify its officers and directors to the
full extent authorized by Maryland law, against all liability and expenses
actually and reasonably incurred in connection with or resulting from any
action, suit or proceeding in which such person may become involved as a
party or otherwise by reason of having been an officer or director of the
Company. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers and controlling person of
the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act, and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the offering contemplated by this Registration Statement:
SEC Registration Fee . . . . . . . $ 4,320
NASD Filing Fee . . . . . . . . . . $ 1,753
NASDAQ, National Market System Fee $ 17,500
Blue Sky Fees and Expenses . . . . $ 10,000
Printing and Engraving Costs . . . $ 50,000
Accounting Fees and Expenses . . . $ 50,000
Legal Fees and Expenses . . . . . . $ 75,000
Transfer Agent and Registrar's Fees $ 750
Underwriter's Expenses . . . . . . $27,000
Total . . . . . . . . . $236,323
II-1
<PAGE>
II-2
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
Not Applicable.
Item 27. Exhibits.
<TABLE>
<CAPTION>
<S> <C>
Exhibit Description
No.
1.1 Form of Underwriting Agreement.*
3.1 Amended Articles of Incorporation of
Industrial Training Corporation ("ITC").**
3.2 Restated Bylaws of ITC.**
4.1 Specimen Certificate for ITC Common Stock.**
5.1 Opinion on Legality.*
10.1 Agreement and Plan of Merger, each dated
September 30, 1993, among ITC and CI
Acquisition Corporation ("CI").(1)
10.2 Asset Purchase Agreement, Assignment, and
Bill of Sale, each dated February 17, 1995,
between ITC and the Instrument Society of
America.**
10.3 1992 Director Incentive Stock Option Plan.(2)
10.4 1992 Key Employee Incentive Stock Option
Plan.(2)
II-3
<PAGE>
10.5 Employee Stock Ownership Plan.(2)
10.6 Employment Agreements With Management:
(a) James H. Walton*
(b) Gerald H. Kaiz*
(c) Elaine H. Babcock*
(d) Steven L. Roden*
(e) Philip J. Facchina*
(f) Robert F. VanStry*
21.1 Subsidiaries of the Registrant.**
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Kirkpatrick & Lockhart LLP
(included in Exhibit 5.1).*
24.1 Power of Attorney.**
99.1 Maryland Business Combination Statute.*
99.2 Maryland Control Share Acquisition Statute.*
</TABLE>
_________________________
* Filed herewith
** Filed previously.
(1) This exhibit is incorporated herein by this reference to the
corresponding exhibit in the Company's Form 8-K (Commission
File No. 0-13741) filed with the Securities and Exchange
Commission on October 21, 1993.
(2) This exhibit is incorporated herein by this reference to the
corresponding exhibit in the Company's Form 10-KSB (Commission
File No. 0-13741) filed with the Securities and Exchange
Commission on March 19, 1992.
II-4
<PAGE>
Item 28. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement; and include any additional
or changed material information on the plan of distribution;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement of the securities offered,
and the offering of securities at that time shall be deemed to be the
initial bona fide offering; and
(3) To file a post-effective amendment to remove from
registration any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1), or (4), or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time the Commission declared it effective; and
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
II-5
<PAGE>
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
INDUSTRIAL TRAINING CORPORATION
(Registrant)
<TABLE>
<CAPTION>
<S> <C>
BY /s/ James H. Walton DATE August , 1995
__________________________________ ______________________________
James H. Walton, Chairman of the
Board President and Chief
Executive Officer
</TABLE>
Pursuant to the requirements of Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
BY /s/ James H. Walton DATE August 16, 1995
________________________________ ___________________________
James H. Walton, Chairman of the Board
President and Chief Executive Officer
II-7
<PAGE>
BY /s/ Gerald H. Kaiz* DATE August 16, 1995
________________________________ ___________________________
Gerald H. Kaiz, Vice Chairman of the
Board, Executive Vice President and
Secretary
BY /s/ Steven L. Roden* DATE August 16, 1995
________________________________ ___________________________
Steven L. Roden, Executive Vice
President and Director
BY /s/ Philip J. Facchina* DATE August 16, 1995
________________________________ ___________________________
Philip J. Facchina, Vice President,
Treasurer and Chief Financial Officer
BY /s/ Christopher E. Mack* DATE August 16, 1995
____________________________________ ___________________________
Christopher E. Mack, Controller
BY /s/ Thomas M. Balderston* DATE August 16, 1995
________________________________ ___________________________
Thomas M. Balderston, Director
BY /s/ Dan R. Bannister* DATE August 16, 1995
________________________________ ___________________________
Dan R. Bannister, Director
II-8
<PAGE>
BY /s/ John D. Sanders* DATE August 16, 1995
________________________________ ___________________________
John D. Sanders, Director
BY /s/ Richard E. Thomas* DATE August 16, 1995
________________________________ ___________________________
Richard E. Thomas, Director
</TABLE>
________________________
* BY /s/ James H. Walton pursuant to a power of attorney (filed
______________________
previously
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<C>
<S> Consecutively
Exhibit <C> Numbered
No. Description Page
1.1 Form of Underwriting Agreement.*
3.1 Amended Articles of Incorporation of
Industrial Training Corporation
("ITC").**
3.2 Restated Bylaws of ITC.**
4.1 Specimen Certificate for ITC Common
Shares.**
5.1 Opinion on Legality.*
10.1 Agreement and Plan of Merger, dated
September 30, 1993, among ITC and CI
Acquisition Corporation ("CI").(1)
II-10
<PAGE>
10.2 Asset Purchase Agreement, Assignment,
and Bill of Sale, each dated February
17, 1995, between ITC and the
Instrument Society of America.**
10.3 1992 Director Incentive Stock Option
Plan.(2)
10.4 1992 Key Employee Incentive Stock
Option Plan.(2)
10.5 Employee Stock Ownership Plan.(2)
10.6 Employment Agreements With
Management:
(a) James H. Walton*
(b) Gerald H. Kaiz*
(c) Elaine H. Babcock*
(d) Steven L. Roden*
(e) Philip J. Facchina*
(f) Robert F. VanStry*
21.1 Subsidiaries of the Registrant.**
23.1 Consent of Ernst & Young LLP.*
II-11
<PAGE>
23.2 Consent of Kirkpatrick & Lockhart
LLP (included in Exhibit 5.1).*
24.1 Power of Attorney.**
99.1 Maryland Business Combination
Statute.*
99.2 Maryland Control Share Acquisition
Statute.*
</TABLE>
_________________________
* Filed herewith.
** Filed previously.
(1) This exhibit is incorporated herein by this reference to the
corresponding exhibit in the Company's Form 8-K (Commission
File No. 0-13741) filed with the Securities and Exchange
Commission on October 21, 1993.
(2) This exhibit is incorporated herein by this reference to the
corresponding exhibit in the Company's Form 10-KSB (Commission
File No. 0-13741) filed with the Securities and Exchange
Commission on March 19, 1992.
II-12
<PAGE>
UNDERWRITING AGREEMENT
----------------------
Ferris, Baker Watts, Incorporated ______________, 1995
As Representative of the
Several Underwriters Identified
In Schedule B Annexed Hereto
100 Light Street
Baltimore, Maryland 21202
Gentlemen:
SECTION 1. Introduction. Industrial Training Corporation, a
Maryland corporation (the "Company"), has authorized capital stock
consisting of 4,000,000 shares of Common Stock, $0.10 par value per share
(the "Common Stock"), of which [2,455,624] shares are issued and
outstanding. The Company and the several stockholders of the Company
identified in Schedule A annexed hereto (the "Selling Stockholders")
propose to sell an aggregate of 1,050,000 shares of Common Stock (the
"Firm Common Shares") to the several underwriters identified in Schedule B
annexed hereto (the "Underwriters"), who are acting severally and not
jointly. In addition, the Company and one (1) of the Selling Stockholders
have agreed to grant to the Underwriters an option to purchase up to an
aggregate of 157,500 additional shares of Common Stock (the "Optional
Common Shares") as provided in Section 5 hereof. The Firm Common Shares
and, to the extent such option is exercised, the Optional Common Shares,
are hereinafter collectively referred to as the "Common Shares".
You as representative of the Underwriters (the "Representative"),
have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective
portions of the Common Shares on the effective date of the Registration
Statement, as defined in Section 2(f) hereof, or as soon thereafter as in
the Representative's judgment is advisable, and that the purchase price of
the Common Shares will be the public offering price of $____ per share
less underwriting discounts and commissions of ____% or $___ per share.
The Company and the Selling Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company.
The Company represents and warrants to each Underwriter that:
(a) The Company and each subsidiary ("Subsidiary")
identified in Exhibit 21 of the Registration Statement
(hereinafter defined) is duly incorporated and validly existing
as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and
authority to own and/or lease its properties and conduct its
business as described in the Prospectus (as defined in Section
2(f) hereof); each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in, each
<PAGE>
jurisdiction in which it owns or leases properties, has an
office, or conducts business and in which such qualification is
required, and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or
qualification.
(b) The Company does not own or control any
subsidiary and does not own any material interest in any other
corporation, joint venture, proprietorship or other commercial
entity or organization except as described in the Prospectus.
(c) The issued and outstanding shares of Common Stock
as set forth in the Prospectus have been duly and validly
authorized and validly issued and are fully paid and
nonassessable. There are no pre-emptive, preferential or other
rights to subscribe for or purchase any of the Common Shares to
be sold by the Company hereunder, and no shares of Common Stock
have been issued in violation of such rights of stockholders.
Except as disclosed in the Prospectus, there are no outstanding
rights, warrants or options to acquire or instruments convertible
into or exchangeable for, any shares of Common Stock or other
equity interest in the Company. Except as described in the
Prospectus, no holders of securities of the Company have any
rights to the registration of such securities under the
Registration Statement. The statements made in the Prospectus
under the caption "Description of Securities" are accurate in all
material respects. The outstanding shares held by the Company of
capital stock of the Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable and are all
owned beneficially by the Company free and clear of all liens,
encumbrances, equities and claims.
(d) The Common Shares to be sold by the Company have
been duly authorized, and when issued, delivered and paid for
pursuant to this Agreement, together with the Common Shares to be
sold by the Selling Stockholders when delivered and paid for
pursuant to this Agreement, will be validly issued, fully paid
and nonassessable, and will conform to the description thereof
contained in the Prospectus. Upon consummation of the purchase
of the Common Shares by the Underwriters under this Agreement,
the Underwriters will acquire good and marketable title thereto,
free and clear of any claim, security interest, community
property right, or other encumbrance or restriction on transfer.
(e) The Company has full corporate power and
authority to enter into and perform this Agreement, and the
execution and delivery hereof, and the performance of the
Company's obligations hereunder have been duly authorized by all
necessary corporate action. This Agreement has been duly
executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with
- 2 -
<PAGE>
its terms, except that rights to indemnity or contributions may
be limited by applicable law and enforceability of the Agreement
may be limited by bankruptcy, insolvency or similar laws
generally affecting the rights of creditors and by equitable
principles limiting the right to specific performance or other
equitable relief. The execution and performance by the Company
of this Agreement, including application of the net proceeds of
the offering, if and when received, as described in the
Prospectus under "Prospectus Summary," "Capitalization" and "Use
of Proceeds," will not violate any provisions of the Company's
Articles of Incorporation or By-Laws or any law, rule or
regulation applicable to the Company or Subsidiary of any
government, court, regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or
Subsidiary or any of their respective businesses or properties,
and will not result in the breach, or be in contravention, of any
provision of any loan agreement, lease, franchise, license, note,
bond, other evidence of indebtedness, indenture, mortgage, deed
of trust, other instrument, permit or other contractual
obligation to which the Company or Subsidiary is a party or by
which the Company or Subsidiary or their respective properties
may be bound or affected, or any order of any court or
governmental agency or authority entered in any proceeding to
which the Company or Subsidiary was or is now a party or by which
it is bound except those, if any, described in the Prospectus or
which are not material to the Company and do not materially
affect its business. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency,
or other governmental body is required for the execution and
delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement,
except for compliance with the Securities Act of 1933, as amended
(the "Act") and the state securities laws (the "Blue Sky Laws")
applicable to the public offering of the Common Shares by the
Underwriters, and the clearance of such offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(f) A registration statement with respect to the
Common Shares, prepared by the Company in conformity with the
requirements of the Act and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, has been filed with the Commission, and
the Company has prepared and has filed prior to the effective
date of such registration statement an amendment or amendments to
such registration statement as may be required. There have been
delivered to the Representative and its counsel two signed copies
of such registration statement, as initially filed with the
Commission and for each of the Underwriters conformed copies of
such registration statement, as initially filed with the
Commission and each amendment thereto (but without exhibits) and
of each related form of prospectus included in the registration
statement prior to the time it becomes effective or filed with
- 3 -
<PAGE>
the Commission pursuant to Rule 424(a) under the Act (each, a
"Preliminary Prospectus").
Such registration statement, as finally amended and
revised at the time such registration statement becomes
effective, which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A under the Act and
contained in the Prospectus, is herein referred to as the
"Registration Statement." The related form of prospectus and any
term sheet that may be provided pursuant to Rule 434 of the Act,
including information incorporated by reference therein, filed by
the Company with the Commission pursuant to Rules 424(b) and 430A
under the Act is herein referred to as the "Prospectus."
(g) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus,
and each Preliminary Prospectus as of its date has conformed
fully in all material respects with the requirements of the Act
and the Rules and Regulations, and each Preliminary Prospectus as
of its date has not included any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading. The
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contain all statements that are required to
be stated therein in accordance with the Act and the Rules and
Regulations and in all material respects conform to the
requirements of the Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, includes any untrue statement of
a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not
misleading; provided, however, that the Company and such Selling
Stockholder make no representation or warranty as to information
contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any
Underwriter through the Representative specifically for use in
the preparation thereof. There are no legal or governmental
actions, suits or legal proceedings, and there are no contracts
or other documents, transactions or relationships of or by the
Company required to be described in the Registration Statement or
to be filed as exhibits to the Registration Statement by the Act
or by the Rules and Regulations which have not been described or
filed as required.
(h) Ernst & Young LLP, which has expressed its
opinion with respect to certain of the consolidated financial
statements filed with the Commission as a part of the
Registration Statement and included in the Prospectus, are
- 4 -
<PAGE>
independent certified public accountants as required by the Act
and the Rules and Regulations.
(i) The consolidated financial statements of the
Company for the respective periods covered thereby, and the
related notes and schedules thereto included in the Registration
Statement and the Prospectus, present fairly the financial
position of the Company for the periods covered thereby as of the
respective dates of such financial statements, all in conformity
with generally accepted accounting principles consistently
applied throughout the periods involved and all adjustments
necessary for a fair presentation of results for such periods
have been made. The selected financial data included in the
Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the
financial statements presented therein. No other financial
statements are required by Form SB-2 or otherwise to be included
in the Registration Statement.
(j) Neither the Company nor the Subsidiary is in
violation of its Articles of Incorporation or By-Laws, or in
default under any court or administrative order or decree, or in
default with respect to any provision of any material loan
agreement, lease, franchise, license, note, bond, other evidence
of indebtedness, indenture, mortgage, deed of trust, other
instrument, permit or other contractual obligation to which the
Company or Subsidiary is a party or by which the Company or
Subsidiary or any of their respective properties or businesses
are bound, and, to the knowledge of the Company, there does not
exist any state of facts which constitutes an event of default as
defined in such documents or which, upon notice or lapse of time
or both, would constitute such an event of default, except those,
if any, described in the Prospectus or which are not material to
the Company taken as a whole and do not materially affect its
business taken as a whole.
(k) There are no governmental actions, suits or legal
proceedings pending or, to the Company's knowledge, threatened to
which the Company or Subsidiary is a party or to which the
Company's or the Subsidiary's business or any material property
owned or leased by the Company or the Subsidiary is subject, or
related to product liability, environmental or discrimination
matters which are not disclosed in the Registration Statement and
the Prospectus, or which question the validity of this Agreement
or any action taken or to be taken pursuant hereto except those,
if any, described in the Prospectus or which are not material to
the Company taken as a whole and do not materially affect its
business taken as a whole.
(l) The Company or the Subsidiary has good and
marketable title to all the properties and assets reflected as
owned in the financial statements hereinabove described (or
- 5 -
<PAGE>
elsewhere in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind or nature whatsoever
except those, if any, reflected in such financial statements (or
elsewhere in the Prospectus) or which, in the aggregate, are not
material to the Company and its business and do not materially
affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property; all
material properties held or used by the Company or the Subsidiary
under leases, licenses or other agreements are held under valid,
subsisting and enforceable leases, franchises, or other
agreements with respect to which it is not in default, except to
the extent that the enforceability of the rights and remedies of
the Company or the Subsidiary under any such lease, franchise,
license or other agreement may be limited by bankruptcy,
insolvency or similar laws generally affecting the rights of
creditors and by equitable principles limiting the right to
specific performance or other equitable relief.
(m) The Company will not take and has not taken,
directly or indirectly, any action (and does not know of any
action by its directors, officers or stockholders, or others)
designed to or which has constituted or which might reasonably be
expected to cause or result, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise, in
stabilization or manipulation of the price of the Common Shares
to facilitate the sale or resale of the Common Shares.
(n) Except as reflected in or contemplated by the
Registration Statement or any amendment thereto, since the
respective dates as of which information is given in the
Registration Statement:
(i) the Company has not incurred any material
liabilities or obligations, direct or contingent, nor
entered into any material transactions not in the
ordinary course of business;
(ii) the Company has not paid or declared any
dividends or other distributions with respect to its
capital stock and the Company is not in default in the
payment of principal or interest on any material
outstanding debt obligations; and
(iii) there has not been any change in the
capital stock or long-term debt of the Company, or any
material adverse change in the business (resulting from
litigation or otherwise), business prospects, properties,
condition (financial or otherwise), net worth or results
of operations of the Company.
(o) The Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid
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all taxes shown as due thereon; and the Company has no knowledge
of any tax deficiency which has been asserted or threatened
against the Company which would materially adversely affect the
business or operations or properties of the Company taken as a
whole.
(p) The Company has an outstanding capitalization as
set forth under "Capitalization" in the Prospectus as of the date
indicated therein and there has been no material change therein
except as disclosed in the Prospectus. The financial and
numerical information and data in the Prospectus under
"Prospectus Summary," "Use of Proceeds," "Price Range of Common
Stock and Dividend Policy," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management,"
"Principal Shareholders," "Selling Shareholders," "Certain
Relationships and Related Transactions" and "Description of
Securities" are fairly presented and prepared on a basis
consistent with the audited consolidated financial statements of
the Company.
(q) The Company and the Subsidiary have obtained all
material licenses, permits, approvals and other governmental
authorizations required for the present and proposed conduct of
its business as described in the Prospectus. Such licenses,
permits and other governmental authorizations are in full force
and effect, the Company and the Subsidiary are in all material
respects complying therewith, and neither the Company nor the
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such license, permit, approval
or authorization. The Company and Subsidiary are complying in
all material respects with all material laws, ordinances and
regulations applicable to the Company, the Subsidiary and their
respective properties and businesses.
(r) The Company has maintained its books of account
in accordance with generally accepted accounting principles
consistently applied in all material respects, and such books and
records are, and during periods covered by the financial
statements included in the Registration Statement and the
Prospectus are, correct and complete in all material respects,
and fairly and accurately reflect or reflected the income,
expenses, assets and liabilities of the Company and provide or
provided a fair and materially accurate basis for the preparation
of such financial statements.
(s) The minute books of the Company are current and
contain a materially correct and substantially complete record of
all corporate action taken by the Board of Directors and the
stockholders of the Company, and all signatures contained therein
are true signatures of the persons whose signatures they purport
to be.
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(t) The Company and Subsidiary own or possess all
patents, patent rights, licenses, inventions, copyrights, know-
how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names used by
them or reasonably believed by management necessary in connection
with the present conduct of their business as described in the
Prospectus, and neither the Company nor the Subsidiary has
received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse
change in the condition, financial or otherwise, or in the
earnings, affairs or business prospects of the Company taken as a
whole.
(u) The Company and the Subsidiary are in substantial
compliance with all federal, state or local laws or ordinances,
including orders, rules and regulations thereunder, regulating or
otherwise affecting employee health and safety or the
environment, non-compliance with which could have a material
adverse effect on the Company. To the Company's knowledge, it
and the Subsidiary have disposed of all wastes in substantial
compliance with applicable laws, and the Company is not aware of
any existing condition that may form the basis for any present or
future claim, demand or action seeking clean-up of any site,
location, or body of water, surface or subsurface.
(v) The provisions of any qualified retirement plans
sponsored by the Company are in compliance with the Employee
Retirement Income Security Act of 1974 ("ERISA"), and the Company
is in material compliance with ERISA, including, without
limitation, ERISA's fiduciary and prohibited transaction rules,
or the funding requirements with respect to any such plan. The
Company has timely filed the reports required to be filed by
ERISA in connection with the maintenance of plans sponsored by
the Company, and no fact, including, without limitation, any
"reportable event" as defined by ERISA and the regulations
thereunder, exists in connection with any plan sponsored by the
Company which might constitute grounds for the termination of
such plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United Stated District Court of a
trustee to administer any such plan. With respect to
multiemployer plans in which the Company participates on behalf
of its employees who are members of collective bargaining units,
the Company has no withdrawal liability. The provisions of any
employee benefit welfare plan, as defined in ERISA's Section
3(l), sponsored by the Company, is in material compliance with
ERISA's fiduciary and prohibited transaction rules and reporting
and disclosure requirements with respect to any such plan.
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(w) No labor dispute with the employees of the
Company exists or, to the knowledge of the Company, is imminent,
and the Company is not aware of any existing or imminent labor
disputes by the employees of any of its principal suppliers,
manufacturers or contractors which might be expected to result in
any material adverse change in the condition, financial or
otherwise, or in the earnings, affairs or business prospects of
the Company.
(x) The Subsidiary has registered, and maintains in
full force and effect registration for, its franchises in each
state or other jurisdiction where such registration is required.
The Subsidiary's franchise offering circular, franchise agreement
and related documents comply with applicable federal, state and
Canadian laws and regulations.
A certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be
deemed a representation and warranty of the Company to you as to
the matters covered thereby.
SECTION 3. Additional Representations and Warranties of the
Selling Stockholders. Each Selling Stockholder represents and warrants to
each Underwriter that:
(a) All consents, approvals, authorizations, and
orders necessary for the execution and delivery by each Selling
Stockholder of this Agreement and the Power of Attorney and
Custodian Agreement executed and delivered herewith (the
"Custodian Agreement") and for the sale and delivery of the
Common Shares to be sold by such Selling Stockholder have been
obtained. Such Selling Stockholder has full right, power and
authority to enter into this Agreement, the Custodian Agreement
and to sell, assign, transfer and deliver Common Shares
hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, security interests, equities, claims and
community property rights, other than any created by the
Underwriters; such Selling Stockholder has valid and marketable
title to the Common Shares proposed to be sold by such Selling
Stockholder hereunder as set forth in Schedule A hereto.
(b) Except as disclosed in the Prospectus, such
Selling Stockholder is not a party to any formal or informal
voting agreements, understandings or arrangements with respect to
the voting of the Common Stock.
(c) Such Selling Stockholder has not taken, directly
or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Common
Shares.
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(d) This Agreement and the Custodian Agreement have
each been duly executed and delivered by or on behalf of such
Selling Stockholder and are the legal, valid and binding
agreements of such Selling Stockholder enforceable in accordance
with their terms, except that rights to indemnity or contribution
hereunder or thereunder may be limited by applicable law, and the
enforceability of such agreements may be limited by bankruptcy,
insolvency or similar laws generally affecting rights of
creditors and by equitable principles limiting the right to
specific performance or other equitable relief. The execution,
delivery and performance by such Selling Stockholder of this
Agreement and the Custodian Agreement will not violate any law,
rule or regulation applicable to such Selling Stockholder of any
government, court, regulatory body, administrative agency or
other governmental body having jurisdiction over such Selling
Stockholder, or any of his or its properties, or result in the
breach, or be in contravention, of any provision of any loan
agreement, lease, franchise, license, note, bond, other evidence
of indebtedness, indenture, mortgage, deed of trust, other
instrument, permit or other contractual obligation to which such
Selling Stockholder is a party or by which such Selling
Stockholder or his or its property may be bound or affected, or
any order of any court of governmental agency or authority
entered in any proceeding to which such Selling Stockholder was
or is now a party or by which he or it is bound. No consent,
approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement by such
Selling Stockholder or the consummation by such Selling
Stockholder of the transactions contemplated by this Agreement,
except for compliance with the Act and the Blue Sky Laws
applicable to the public offering of the Common Shares by the
Underwriters and clearance of such offering with the NASD. Such
Selling Stockholder has executed and delivered a Custodian
Agreement, naming the individuals specified therein as such
Selling Stockholder's attorney(s)-in-fact (the "Attorneys-in-
Fact"), and the Selling Stockholder represents and warrants that
such Attorney-in-Fact has been duly appointed as Attorney-in-Fact
by the Selling Stockholder pursuant to the Custodian Agreement,
for the purpose of entering into and carrying out this Agreement,
and the Custodian Agreement has been duly executed by such
Selling Stockholder and a copy thereof has been delivered to you.
(e) Such Selling Stockholder has deposited in
custody, under the Custodian Agreement, with the Custodian (as
defined therein), certificates in negotiable form for the Common
Shares to be sold hereunder by such Selling Stockholder as
specified on Schedule A hereto for the purpose of further
delivery pursuant to this Agreement. Such Selling Stockholder
agrees that the Common Shares on deposit with the Custodian are
subject to the interests of the Company, the Underwriters and the
other Selling Stockholders, that the arrangements made for such
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custody, and the appointment of the Attorney-in-Fact pursuant to
the Custodian Agreement, are to that extent irrevocable, and that
the obligations of such Selling Stockholder hereunder and under
the Custodian Agreement shall not be terminated, except as
provided in this Agreement and the Custodian Agreement, by any
act of such Selling Stockholder, by operation of law, or the
death or incapacity of such Selling Stockholder. If any Selling
Stockholder should die or become incapacitated or if any other
event should occur before the delivery of the Common Shares
hereunder, the certificates for Common Shares, then on deposit
with the Custodian shall, to the extent the Common Shares
represented thereby are purchased by the Underwriters, be
delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity or to
other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof.
(f) All representations and warranties of such
Selling Stockholder in the Custodian Agreement are true and
correct in all material respects.
SECTION 3.A. Representation of Attorney-in-Fact. Each
Attorney-in-Fact represents that he has been authorized by such Selling
Stockholder to execute and deliver this Agreement and the Custodian has
been authorized to receive and acknowledge receipt of the proceeds of sale
of the Common Shares sold by such Selling Stockholder against delivery
thereof and otherwise to act on behalf of such Selling Stockholder.
SECTION 4. Representation of Underwriters. You have been
duly authorized to act and will act as the Representative for the
Underwriters in connection with this financing, and any action under or in
respect of this Agreement taken by you, as such Representative, will be
binding upon all Underwriters.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On
the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell 875,000 Firm Common Shares to the Underwriters, and
the Underwriters agree, severally and not jointly, to purchase from the
Company the number of Firm Common Shares as hereinafter set forth at the
price per share set forth in Section 1 hereof.
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, each Selling Stockholder agrees, severally and not jointly, to sell
to the Underwriters that number of full Firm Common Shares set forth in
Schedule A to this Agreement, and the Underwriters agree, severally and
not jointly, to purchase from each Selling Stockholder the number of Firm
Common Shares as hereinafter set forth at the same purchase price per
share stated in the preceding paragraph. The obligation of each
Underwriter to each Selling Stockholder shall be to purchase from that
Selling Stockholder that number of full Firm Common Shares which (as
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nearly as practicable in full shares as determined by the Representative)
bears to the number of Firm Common Shares to be sold by such Selling
Stockholder the same proportion as the number of shares set forth opposite
the name of such Underwriter in Schedule B hereto bears to the total
number of Firm Common Shares to be purchased from the Company by all the
Underwriters under this Agreement.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company hereby grants an option to the Underwriters,
severally and not jointly, to purchase from the Company up to 109,568
Optional Common Shares, and TDH II Limited, a Selling Stockholder ("TDH"),
hereby grants an option to the Underwriters, severally and not jointly, to
purchase from TDH up to 47,932 Optional Common Shares, at the same
purchase price per share to be paid for the Firm Common Shares, for use
solely in covering any overallotment made by the Underwriters in the sale
and distribution of the Firm Common Shares. The obligation of each
Underwriter to the Company shall be to purchase from the Company that
number of full Optional Common Shares which (as nearly as practicable in
full shares as determined by the Representative) bears to 109,568 the same
proportion as the number of shares set forth opposite the name of such
Underwriter in Schedule B hereto bears to 875,000. The obligation of each
Underwriter to TDH shall be to purchase from TDH that number of full
Optional Common Shares which (as nearly as practicable in full shares as
determined by the Representative) bears to 47,932 the same proportion as
the number of shares set forth opposite the name of such Underwriter in
Schedule B hereto bears to 152,068.
At 9:00 A.M., Baltimore time, on the third full business day
after the public offering, or at such other time not later than one week
after such third full business day as may be agreed upon by the
Representative, the Company and the Attorneys-in-Fact (or any one of
them), the Company and the Custodian will deliver to the Representative,
at the offices of Ferris, Baker Watts, Incorporated, 1720 Eye Street,
N.W., Washington, D.C., for the accounts of the Underwriters, certificates
representing the Firm Common Shares to be sold by them, respectively,
against payment in Baltimore, Maryland of the purchase price therefor in
next day funds payable, as appropriate, to the order of the Company in
respect of the Firm Common Shares being sold by the Company and the
Custodian in respect of the Firm Common Shares being sold by the Selling
Stockholders. Such time of delivery and payment is referred to throughout
this Agreement as the "First Closing Date." The certificates for the Firm
Common Shares to be so delivered will be in denominations and registered
in such names as the Representative requests by notice delivered to the
Company and the Attorneys-in-Fact on behalf of the Selling Stockholders
prior to 9:00 A.M., Baltimore time, no later than two full business days
prior to the First Closing Date, and will be made available for checking
and packaging at such time and at such location to be designated by the
Representative.
The overallotment option granted hereunder may be exercised at
any time (but not more than once) within forty-five (45) days after the
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date the Registration Statement becomes effective upon written notice by
the Representative to the Company and TDH setting forth the aggregate
number of Optional Common Shares as to which the Underwriters are
exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place
at which such certificates will be delivered. Such time of delivery
(which may not be earlier than the First Closing Date, as hereinafter
defined), being herein referred to as the "Second Closing Date," shall be
determined by the Representative, but if at any time other than the First
Closing Date, shall not be earlier than three (3) nor later than five (5)
full business days after delivery of such notice of exercise to the
Company and TDH. Certificates for the Optional Common Shares will be made
available for checking and packaging at such time and at such location to
be designated by the Representative. The manner of payment for and
delivery of (including the denominations of and the names in which
certificates are to be registered) the Optional Common Shares shall be the
same as for the Firm Common Shares purchased from the Company and TDH. As
Representative of the several Underwriters you may cancel the option at
any time prior to its expiration by giving written notice of such
cancellation to the Company and TDH.
The Representative has advised the Company and the Attorneys-in-
Fact on behalf of the Selling Stockholders that each Underwriter has
authorized the Representative to accept delivery of its Common Shares and
to make payment therefor. You, individually and not as the Representative
of the Underwriters, may make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by
you by the First Closing Date or the Second Closing Date, as the case may
be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any obligation hereunder.
SECTION 6. Covenants of the Company. The Company covenants
and agrees with the several Underwriters and the Selling Stockholders as
follows:
(a) The Company will use its best efforts to cause
the Registration Statement to become effective at the earliest
possible time and upon notification from the Commission that the
Registration Statement has become effective, will so advise the
Representative and its counsel promptly. Thereafter, the Company
will prepare and timely file with the Commission pursuant to Rule
424(b) under the Act the Prospectus containing information
previously omitted in reliance upon Rule 430A under the Act. The
Company will advise the Representative, its counsel and the
Attorneys-in-Fact on behalf of the Selling Stockholders promptly
of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, or of any
notification of the initiation or threatening of any proceedings
for that purpose, and will also advise the Representative, its
counsel and the Attorneys-in-Fact on behalf of the Selling
Stockholders promptly of any request of the Commission for
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amendment or supplement of the Registration Statement (either
before or after it becomes effective), of any Preliminary
Prospectus or of the Prospectus, or for additional information,
and will not file or make any amendment or supplement to the
Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus or to the Prospectus of
which the Representative has not been furnished with a copy prior
to such filing or to which you object; and the Company will file
promptly and will furnish to the Representative at or prior to
the filing thereof copies of all reports and any definitive proxy
or information statements required to be filed by the Company
with the Commission pursuant to Sections 13, 14 and 15 of the
Exchange Act subsequent to the date of the Prospectus, and for so
long as the delivery of a prospectus is required in connection
with the offering or sale of the Common Shares.
(b) If, at any time when a prospectus relating to the
Common Shares is required to be delivered under the Act, any
event occurs as a result of which the Prospectus, including any
subsequent amendment or supplement, would include an untrue
statement of a material fact, or would omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time
to amend the Prospectus, including any amendment or supplement
thereto, to comply with the Act or the Rules and Regulations, the
Company promptly will advise the Representative, its counsel and
the Attorneys-in-Fact on behalf of the Selling Stockholders
thereof and will promptly prepare and file with the Commission an
amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance; and,
in case any Underwriter is required to deliver a prospectus nine
(9) months or more after the effective date of the Registration
Statement, the Company upon request, but at the expense of such
Underwriter, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act.
(c) Except as described in the Prospectus or with the
consent of the Representative which consent shall not be
unreasonably withheld, the Company will not, prior to the Second
Closing Date, incur any material liability or obligation, direct
or contingent, or enter into any material transaction, other than
in the ordinary course of business.
(d) The Company will not acquire any of the Company's
capital stock prior to the Second Closing Date nor will the
Company declare or pay any dividend or make any other
distribution upon its capital stock payable to its holders of
record on a date prior to the Second Closing Date or, if there is
no Second Closing Date, then prior to the First Closing Date.
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(e) Until the Underwriters have completed the
offering referred to in Section 1 above, the Company will not
take, directly or indirectly, any action designed to or which
might reasonably be expected to cause or result, under the
Exchange Act, or otherwise, in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale
of the Common Shares.
(f) The Company will make generally available to the
Representative and to the Company's security holders an earnings
statement (which need not be audited) as soon as practicable, but
in no event later than fifteen (15) months after the end of the
Company's current fiscal quarter, covering a period of twelve
(12) consecutive calendar months beginning after the effective
date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act and
Rule 158 promulgated thereunder.
(g) During such period as a prospectus is required by
law to be delivered in connection with sales by an Underwriter or
dealer, the Company will furnish the Representative, at the
Company's expense, with copies of the Registration Statement, the
Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as
available and in such quantities as the Representative may
reasonably request, for the purposes contemplated by the Act or
Exchange Act.
(h) The Company will cooperate with the
Representative, its counsel and the Underwriters in qualifying or
registering the Common Shares for sale, or obtaining an exemption
therefrom, under the Blue Sky Laws of such jurisdictions as the
Representative shall designate, and will continue such
qualifications or registrations or exemptions in effect so long
as reasonably requested by the Representative to effect the
distribution of the Common Shares. The Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in any such jurisdiction where it
is not presently qualified.
(i) During the period of three (3) years after the
date hereof, as soon as practicable after the end of each fiscal
year, the Company will furnish the Representative with two (2)
copies, and to each of the other Underwriters who may so request,
one (1) copy, of the Annual Report of the Company containing the
consolidated balance sheet of the Company as of the close of such
fiscal year and corresponding consolidated statements of income,
stockholders' equity and cash flows the year then ended, such
consolidated financial statements to be under the certificate or
opinion of the Company's independent certified public
accountants. During such period the Company will also furnish
the Representative with one (1) copy:
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(i) promptly after the filing
thereof, of each report filed by the Company with the
Commission; and
(ii) as soon as available, of each
report of the Company mailed to its stockholders.
(j) The Company will comply or cause to be complied
with the conditions to the obligations of the Underwriters set
forth in Section 9 hereof.
(k) The Company shall take all necessary and
appropriate action such that the Common Shares are authorized for
trading on the NASDAQ National Market System as soon as
practicable after the effectiveness of the Registration Statement
and the Common Shares shall remain so authorized for at least
thirty-six (36) months thereafter; provided, however, that during
such thirty-six (36) month period, the Company may list its
shares on any other registered stock exchange.
(l) The Company shall promptly prepare and file with
the Commission, from time to time, such reports as may be
required to be filed by the Rules and Regulations.
(m) The Company shall comply in all respects with the
undertakings given by the Company in connection with the
qualification or registration of the Common Shares for offering
and sale or exemption therefrom under the Blue Sky Laws of one or
more jurisdictions.
(n) The Company shall apply the net proceeds from the
sale of the Common Shares to be sold by it hereunder for the
purposes set forth in the Prospectus.
(o) Except for the sale of Common Shares pursuant to
this Agreement or pursuant to an effective Registration Statement
on Form S-8, the Company shall not make any offering, sale or
other disposition of any of its Common Stock on the open market,
within 180 days after the effective date of the Registration
Statement without the Representative's prior written consent.
The Company has obtained for the benefit of the Underwriters, the
agreement of all present officers and directors of the Company,
and each of the Named Stockholders (hereinafter defined) that for
the period indicated in the foregoing sentence, they will not
offer, sell or otherwise dispose of any Common Stock on the open
market without the Representative's prior written consent except
that officers and directors who have options that will expire
during the 180-day period may, upon the exercise of such options,
sell the shares underlying the options; provided, however, that
the number of shares that each such option holder may sell will
be limited to those shares necessary for the option holder to
effect a cashless exercise of those options. The "Named
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Stockholders" are TDH, Walt Hopkins, Harvey Shuster, Glenn Crews,
Phyllis Fobes and Ben Dyer. The Company also has obtained for
the benefit of the Underwriters the agreement of TDH to refrain
from exercising, for a period of 360 days after the effective
date of the Registration Statement the demand registration rights
granted by the Company to TDH.
SECTION 7. Covenants of the Selling Stockholders. Each
Selling Stockholder agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the
extent necessary to cause the Registration Statement to become
effective at the earliest possible time, and will do and perform
all things to be done and performed by such Selling Stockholder,
pursuant to this Agreement or his or its Custodian Agreement.
(b) Such Selling Stockholder will pay all federal and
other taxes, if any, on the transfer or sale of the Firm Common
Shares and Optional Common Shares being sold by such Selling
Stockholder to the Underwriters.
(c) Such Selling Stockholder will do and perform all
things to be done or performed by such Selling Stockholder prior
to the First Closing Date or Second Closing Date, as the case may
be, pursuant to this Agreement or his or its Custodian Agreement.
(d) Such Selling Stockholder will deliver to the
Custodian on or prior to the First Closing Date a properly
completed and executed United States Treasury Department Form W9
(or other applicable substitute form or statement specified by
Treasury Department Regulations in lieu thereof).
(e) Until the Underwriters have completed the
offering referred to in Section 1 above, such Selling Stockholder
will not, directly or indirectly, take any action designed to or
which might be reasonably expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale
of the Common Shares.
SECTION 8. Payment of Expenses. Whether or not the
transactions contemplated hereunder are consummated or this Agreement
becomes effective or is terminated for any reason, except as otherwise set
forth below, the Company will pay the costs and expenses incurred in
connection with the public offering. Costs, fees and expenses to be paid
by the Company are:
(a) All costs, fees and expenses incurred in
connection with the performance of the Company's and the Selling
Stockholders's obligations hereunder, except as provided below
with respect to Selling Stockholders, including without limiting
the generality of the foregoing, all costs and expenses incurred
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in connection with the production, printing, filing and
distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and
financial statements) and all agreements and supplements provided
for herein.
(b) All costs, fees and expenses, including legal
fees and disbursements of counsel for the Underwriters not to
exceed $10,000, incurred by the Underwriters in connection with
qualifying or registering all or any part of the Common Shares
for offer and sale under the Blue Sky Laws, or obtaining
exemptions from registration, including the preparation of the
Preliminary and any Supplemental Blue Sky Memoranda relating to
the Common Shares; provided, however, that a Selling Stockholder
seeking to distribute Common Shares in a jurisdiction other than
those in which the Company and the Underwriters determine the
Common Shares shall be sold shall be responsible for payment of
all costs, fees and expenses of qualifying or registering such
Common Shares or obtaining an exemption therefrom under the Blue
Sky Laws of such jurisdiction.
(c) All fees and expenses of the Company's transfer
agent, printing of the certificates for the Common Shares, and
all transfer taxes, if any, with respect to the transfer, sale
and delivery of the Common Shares to the several Underwriters and
all fees of the NASD.
(d) Expenses incurred by the Representative, as
follows:
(i) $20,000 if this Agreement is terminated
after the date on which the Registration Statement is filed with
the Commission but prior to the date of closing of the Offering;
or
(ii) $27,500 upon the closing of the
Offering;
provided, however, that the Representative shall not be entitled
to such payment if the Representative terminates this Agreement
except as provided in Section 15(b) hereof or the Company
terminates this Agreement because of the negligence or material
breach on the part of the Representative which was the cause of
the failure of the Offering to be completed.
Notwithstanding the foregoing, each Selling Stockholder
shall be solely responsible for (a) all expenses related to
underwriting discounts or commissions applicable to the sale of
Common Shares by such Selling Stockholder, (b) expenses incurred
by any legal counsel retained by such Selling Stockholder, (c)
any transfer or sales tax imposed upon the transfer and sale of
his or its Common Shares to the Underwriters and (d) for such
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Selling Stockholder's respective pro rata share of all fees and
expenses of the Attorneys-in-Fact and the Custodian. All costs
and expenses incident to the performance of any Selling
Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section will be borne and paid
solely by each such Selling Stockholder.
SECTION 9. Conditions of the Obligations of the
Underwriters. The obligations of the Underwriters to purchase and pay for
the Firm Common Shares on the First Closing Date and the Optional Common
Shares on the Second Closing Date shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders herein set forth as of the date hereof and as of the First
Closing Date or the Second Closing Date, as the case may be, to the
accuracy of the statements of Company officers, the Selling Stockholders
and the Attorneys-in-Fact on behalf of the Selling Stockholders made
pursuant to the provisions hereof, to the performance by the Company and
the Selling Stockholders of their respective obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 1:00 P.M., Baltimore time, on the date
of this Agreement, or such later time as shall have been
consented to by the Representative but in no event later than
1:00 P.M., Baltimore time, on the third full business day
following the date hereof; prior to each Closing Date, no stop
order suspending the effectiveness of the Registration Statement
shall have been instituted or shall be pending or, to the
knowledge of the Company, or the Representative, shall be
contemplated by the Commission, and any request of the Commission
for additional information shall have been complied with to the
Representative's reasonable satisfaction.
(b) The Common Shares shall have been qualified or
registered for sale or exempted therefrom under the Blue Sky Laws
of such states as shall have been specified by the Representative
prior to the date hereof.
(c) The legality and sufficiency of the
authorization, issuance and sale of the Common Shares hereunder,
the validity and form of the certificates representing the Common
Shares, the transfer and sale of the Common Shares being sold by
the Selling Stockholders, the execution and delivery of this
Underwriting Agreement, and all corporate proceedings and other
legal matters incident thereto, and the form of the Registration
Statement and the Prospectus (except financial statements and
other financial data included therein) shall have been approved
by Shapiro and Olander, Baltimore, Maryland, counsel for the
Representative and the Underwriters.
(d) The Representative shall not have advised the
Company that the Registration Statement or Prospectus, or any
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amendment or supplement thereto, contains an untrue statement of
fact, which, in the opinion of Shapiro and Olander, counsel for
the Representative and the Underwriters, is material or omits to
state a fact which, in the written opinion of such counsel, is
material and is required to be stated therein or necessary to
make the statements therein not misleading.
(e) Since the specific dates as of which information
is given in the Registration Statement:
(i) the Company shall not have sustained any
material loss or interference with its business from any
labor dispute, strike, fire, explosion, flood or other
calamity (whether or not insured), or from any court or
governmental action, order or decree; and
(ii) there shall not have been any change in
the capital stock, short-term debt or long-term debt of
the Company or a material change or a development
involving a prospective change in or affecting the
ability of the Company to conduct its business (whether
by reason of any court, legislative, other governmental
action, order, decree, or otherwise), or in the general
affairs, management, financial position, stockholders'
equity or results of the operations of the Company,
whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth
in or contemplated by the Registration Statement and
Prospectus, the effect of which on the Company, in any
such case described in clause (i) or (ii), above, is in
the Representative's opinion sufficiently material and
adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the
Common Shares on the terms and in the manner contemplated
in the Registration Statement and the Prospectus.
(f) All formal and informal voting agreements,
understandings and arrangements with respect to the voting of
Common Stock shall have been terminated and shall be of no
further force or effect except as disclosed in the Prospectus.
(g) There shall have been furnished to you, as
Representative of the Underwriters, on each Closing Date:
(i) (A) An opinion of Kirkpatrick & Lockhart LLP,
counsel for the Company and the Selling Stockholders,
addressed to the Representative as such and dated the
First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) each of the Company and the
Subsidiary is duly incorporated, validly existing
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and in good standing under the laws of its
jurisdiction of incorporation with full corporate
power and authority to own and/or lease its
properties and conduct its business as described
in the Prospectus; and each of the Company and
the Subsidiary is duly qualified to do business
as a foreign corporation under the corporation
law of, and is in good standing as such in each
state where such qualification is required and
does not own or lease any property or have any
employees situated in any other state.
(2) the Company does not, to such
counsel's knowledge after due investigation, own
any material interest in any other corporation,
joint venture, proprietorship or other commercial
entity or organization except as described in the
Prospectus.
(3) the authorized capital stock of
the Company consists of 4,000,000 shares of
Common Stock, $0.10 par value, and all such
capital stock conforms as to legal matters to the
description thereof in the Registration Statement
and Prospectus; the issued and outstanding shares
of Common Stock, to their knowledge, have been
duly authorized and validly issued and are fully
paid and nonassessable and were issued in
compliance with exemptions from the registration
provisions of Section 5 of the Act and comparable
provisions of applicable Blue Sky Laws; to their
knowledge, there are not preemptive, preferential
or other rights to subscribe for or purchase any
of the Common Shares to be sold by the Company
and the Selling Stockholders hereunder and no
shares of Common Stock have been issued in
violation of such rights of stockholders; and, to
such counsel's knowledge, after due
investigation, there are no, except as described
in the Prospectus, outstanding rights, warrants
or options to acquire, or instruments convertible
into or exchangeable for, any shares of Common
Stock or other equity interest in the Company.
Except as otherwise stated in the Registration
Statement, to such counsel's knowledge, after due
investigation, no holders of securities of the
Company have rights to the registration of such
securities in the Registration Statement. The
statements made in the Prospectus under the
section entitled "Description of Capital Stock"
are accurate in all material respects.
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(4) the certificates for Common
Shares to be delivered hereunder are in due and
proper form and, when duly countersigned by the
Company's transfer agent and, where appropriate,
duly endorsed by the Selling Stockholders, and
delivered to you or upon your order against
payment of the agreed consideration therefor in
accordance with the provisions of this Agreement,
the Common Shares represented thereby will be
duly authorized and validly issued, fully paid
and nonassessable and, upon consummation of the
purchase by the Underwriters, and assuming they
have no knowledge of any liens, claims or
encumbrances affecting the Common Shares, the
Underwriters will acquire good and marketable
title thereto, free and clear of any claim,
security interest, community property right, or
other encumbrance or restriction on transfer
(except for restrictions under the Act and under
the Blue Sky Laws).
(5) the Company has full corporate
power and authority to enter into and perform
this Agreement, and this Agreement, the execution
and delivery hereof, and the performance of the
Company's obligations hereunder have been duly
authorized by all necessary corporate action.
This Agreement has been duly executed and
delivered by and on behalf of the Company, and is
a legal, valid, and binding agreement of the
Company, enforceable in accordance with its
terms, except that rights to indemnity or
contribution may be limited by applicable law and
enforceability of the Agreement may be limited by
bankruptcy, insolvency or similar laws affecting
the rights of creditors and by equitable
principles limiting the right to specific
performance or other equitable relief.
(6) the execution and performance by
the Company of this Agreement, including
application of the net proceeds of the offering,
if and when received, as described in the
Prospectus under "Prospectus Summary,"
"Capitalization" and "Use of Proceeds," will not
violate any provisions of the Company's Articles
of Incorporation or By-Laws or, to such counsel's
knowledge after due investigation, any law, rule
or regulation applicable to the Company or the
Subsidiary of any government, court, regulatory
body, administrative agency or other governmental
body having jurisdiction over the Company or the
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Subsidiary or any of their respective properties
or businesses, and will not, to such counsel's
knowledge after due investigation, result in the
breach, or be in contravention, of any provision
of any loan agreement, lease, franchise, license,
note, bond, other evidence of indebtedness,
indenture, mortgage, deed of trust, other
instrument, permit or other contractual
obligation to which the Company or the Subsidiary
is a party or by which the Company or the
Subsidiary or their respective property is bound,
or any order of any court or governmental agency
or authority entered in any proceeding to which
the Company or the Subsidiary was or is now a
party or by which it is bound.
(7) to the knowledge of such
counsel, after due investigation, no consent,
approval, authorization or other order of any
court, regulatory body, administrative agency or
other governmental body is required for the
execution and delivery of this Agreement by the
Company and/or the Selling Stockholders or the
consummation by the Company and/or the Selling
Stockholders of the transactions contemplated by
this Agreement, except for compliance with the
Act and Blue Sky Laws applicable to the public
offering of the Common Shares by the
Underwriters, and the clearance of such offering
with the NASD.
(8) the Registration Statement has
become effective under the Act, and, to the
knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement has been issued and no proceedings for
that purpose have been instituted or are pending
or contemplated under the Act, and the
Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form
in all material respects with the requirements of
the Act and the Rules and Regulations (except
that such counsel need express no opinion as to
the financial statements and other financial data
included therein); such counsel has no reason to
believe that either the Registration Statement or
the Prospectus or any such amendment or
supplement thereto, or any document incorporated
by reference therein, contains any untrue
statement of a material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein, in
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light of the circumstances in which they are
made, not misleading (except that such counsel
need express no opinion as to the financial
statements and other financial data included
therein); such counsel, after due investigation,
does not know of any legal or governmental
proceedings or of any contracts or other
documents, transactions or relationships of or by
the Company or the Subsidiary required to be
described in the Registration Statement or to be
filed as exhibits to the Registration Statement
by the Act or the Rules and Regulations which are
not described or filed, as required.
(9) to such counsel's knowledge
after due inquiry, except as described in the
Prospectus, there are no legal or governmental
actions, suits or legal proceedings pending or
threatened to which the Company or the Subsidiary
is a party or to which the Company's or the
Subsidiary's business or material property owned
or leased by the Company or the Subsidiary is
subject, or which question the validity of this
Agreement or any action taken or to be taken
pursuant hereto.
(10) to the knowledge of such counsel
after due investigation: (i) the Company and the
Subsidiary possess all licenses, permits,
approvals and other governmental authorizations
required for the conduct of their businesses, as
described in the Prospectus; (ii) such licenses,
permits and other governmental authorizations are
in full force and effect and the Company and the
Subsidiary are in all material respects complying
therewith; (iii) the Company and the Subsidiary
are complying in all respects with all laws,
ordinances and regulations applicable to them,
and their respective properties and businesses,
the noncompliance or violation of which would
have a material adverse effect on the Company.
(B) An opinion of Spencer, Frank &
Schneider, counsel for the Company, addressed to the
Representative as such and dated the First Closing Date
or the Second Closing Date, as the case may be, to the
effect that, to the knowledge of such counsel after due
investigation, the Company and the Subsidiary own or
possess all patents, patent rights, licenses, inventions,
copyrights, trademarks, service marks, and trade names
used by them or reasonably believed by management to be
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<PAGE>
necessary in connection with the conduct of their
respective businesses as described in the Prospectus.
(C) An opinion of Anne J. Fletcher, Esquire,
the Company's general counsel, addressed to the
Representative as such and dated the First Closing Date
or the Second Closing Date, as the case may be, to the
effect that:
(1) the authorized capital stock of
the Company consists of 4,000,000 shares of
Common Stock, $0.10 par value, and all such
capital stock conforms as to legal matters to the
description thereof in the Registration Statement
and Prospectus; the issued and outstanding shares
of Common Stock have been duly authorized and
validly issued and are fully paid and
nonassessable and were issued in compliance with
exemptions from the registration provisions of
Section 5 of the Act and comparable provisions of
applicable Blue Sky Laws; there are not
preemptive, preferential or other rights to
subscribe for or purchase any of the Common
Shares to be sold by the Company and the Selling
Stockholders hereunder and no shares of Common
Stock have been issued in violation of such
rights of stockholders; and, to such counsel's
knowledge, after due investigation, there are no,
except as described in the Prospectus,
outstanding rights, warrants or options to
acquire, or instruments convertible into or
exchangeable for, any shares of Common Stock or
other equity interest in the Company. Except as
otherwise stated in the Registration Statement,
to such counsel's knowledge, after due
investigation, no holders of securities of the
Company have rights to the registration of such
securities in the Registration Statement. The
statements made in the Prospectus under the
section entitled "Description of Capital Stock"
are accurate in all material respects.
(2) each Selling Stockholder (other
than TDH) has full right, power and authority to
enter into this Agreement and the Custodian
Agreement and to sell, assign, transfer and
deliver the Common Shares to be delivered by such
Selling Stockholder hereunder; to such counsel's
knowledge after due investigation, each Selling
Stockholder (other than TDH) has obtained all
consents, approvals, authorizations, and orders
necessary for the execution and delivery by such
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Selling Stockholder of this Agreement and the
Custodian Agreement and for the sale and delivery
of the Common Shares to be sold by such Selling
Stockholder; each Selling Stockholder (other than
TDH) has valid and marketable title to the Common
Shares proposed to be sold by such Selling
Stockholder hereunder; this Agreement and the
Custodian Agreement have each been duly executed
and delivered by or on behalf of each Selling
Stockholder (other than TDH) and are the legal,
valid and binding agreements of such Selling
Stockholder enforceable in accordance with their
terms, except that rights to indemnity or
contribution hereunder or thereunder may be
limited by applicable law and the enforceability
of such agreements may be limited by bankruptcy,
insolvency or similar laws generally affecting
rights of creditors and by equitable principles
limiting the right to specific performance or
other equitable relief.
(3) to the knowledge of such
counsel, the real properties held or used by the
Company or the Subsidiary under leases or other
agreements as set forth in the Prospectus are
held by it under valid, subsisting and
enforceable leases or other agreements with
respect to which, to such counsel's knowledge
after due investigation, neither the Company nor
the Subsidiary is in default, except to the
extent that the enforceability of the rights and
remedies of the Company or the Subsidiary under
any such lease or other agreement may be limited
by bankruptcy, insolvency, or similar laws
generally affecting the rights of creditors and
by equitable principles limiting the right to
specific performance or other equitable relief.
(4) the Subsidiary has registered,
and maintains in full force and effect
registration for, its franchises in each state or
other jurisdiction where such registration is
required. The Subsidiary's franchise offering
circular, franchise agreement and related
documents substantially complied at such
documents' dates, with applicable federal, state
and Canadian laws and regulations.
(5) to the knowledge of such counsel
after due investigation, the Company and the
Subsidiary own or possess all trade secrets and
other unpatented or unpatentable proprietary or
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confidential information, systems or procedures
used by them or reasonably believed by management
to be necessary in connection with the conduct of
their respective businesses as described in the
Prospectus.
(D) An opinion of Pepper, Hamilton &
Scheetz, counsel for TDH, addressed to the Representative
as such and dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that TDH
has full right, power and authority to enter into this
Agreement and the Custodian Agreement and to sell,
assign, transfer and deliver the Common Shares to be
delivered by TDH hereunder; to such counsel's knowledge
after due investigation, TDH has obtained all consents,
approvals, authorizations, and orders necessary for the
execution and delivery by TDH of this Agreement and the
Custodian Agreement and for the sale and delivery of the
Common Shares to be sold by TDH; TDH has valid and
marketable title to the Common Shares proposed to be sold
by TDH hereunder; this Agreement and the Custodian
Agreement have each been duly executed and delivered by
or on behalf of TDH and are the legal, valid and binding
agreements of TDH enforceable in accordance with its
terms, except that rights to indemnity or contribution
hereunder or thereunder may be limited by applicable law
and the enforceability of such agreements may be limited
by bankruptcy, insolvency or similar laws generally
affecting rights of creditors and by equitable principles
limiting the right to specific performance or other
equitable relief.
It is understood that the opinion of each such counsel may state
that such counsel is relying as to factual matters on certificates of
officers of the Company and of state officials and, as to legal matters in
jurisdictions other than in which they are domiciled, on opinions of local
counsel or of other counsel retained or having rendered legal services
with respect to specific matters, in which case their opinion is to state
that they are so doing and they believe such reliance is reasonable, and
copies of said certificates and/or opinions are to be attached to the
opinion. The opinion of such counsel shall state that Shapiro and
Olander, Counsel for the Representative and the Underwriters, shall be
entitled to rely on such opinions with respect to the due incorporation,
existence, and good standing of the Company and the Subsidiary, and the
capital stock of the Company, including the Common Shares, and matters
relating to the Selling Stockholders.
(ii) An opinion of Shapiro and Olander, counsel for the
Representative and the Underwriters, addressed to the
Representative in such capacity and dated the First Closing Date
or the Second Closing Date, as the case may be, with respect to
the validity of the Common Shares, the Registration Statement and
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the Prospectus and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel
such documents and shall have exhibited to them such papers and
records as they request for the purpose of enabling them to pass
upon such matters.
(iii) A certificate of the chief executive officer and
the principal financial officer of the Company, dated the First
Closing Date or the Second Closing Date, as the case may be, to
the effect that:
(1) to the knowledge of the respective
signatories, the representations and warranties of the
Company set forth in Section 2 of this Agreement are true
and correct as of the date of this Agreement and as of
the First Closing Date or the Second Closing Date, as the
case may be, as if again made on and as of such Closing
Date, and the Company has complied with all the
agreements and satisfied all the conditions to be
performed or satisfied by it at or prior to such Closing
Date.
(2) to the knowledge of the respective
signatories, the Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus or the Prospectus filed as a part of the
Registration Statement or any amendment thereto; no stop
order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or
contemplated under the Act.
(3) each of the respective signatories of the
certificate has carefully examined the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, and, in the opinion of such signatory
and to his knowledge, the Registration Statement and the
Prospectus and any amendment or supplement thereto
contain all statements that are required to be stated
therein, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto,
includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein
or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading,
and, since the date on which the Registration Statement
was first filed with the Commission, there has occurred
no event required to be set forth in an amended or
supplemented prospectus or in an amendment to the
Registration Statement which has not been so set forth.
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<PAGE>
(4) to the knowledge of the respective
signatories, after due inquiry, since the date on which
said Registration Statement was initially filed, there
has not been any material adverse change or a development
involving a prospective material adverse change in the
business, properties, financial condition or earnings of
the Company, whether or not arising from transactions in
the ordinary course of business, except as disclosed in
said Registration Statement as heretofore amended
including the proposed amendment thereto delivered to the
Representative prior to or contemporaneously with the
execution of this Agreement or (but only if the
Representative expressly consents thereto in writing)
delivered to the Representative thereafter; since such
date and except as so disclosed or in the ordinary course
of business, the Company has not incurred any liability
or obligation, direct or indirect, or entered into any
material transaction; since such date and except as so
disclosed there has not been any material change in the
capital stock, short-term debt or long-term debt of the
Company and the Company has not acquired any of the
Common Shares nor has the Company declared or paid any
dividend, or made any other distribution, upon its
outstanding shares of Common Stock payable to
stockholders of record on a date prior to the First
Closing Date or Second Closing Date, as the case may be;
since such date and except as so disclosed, the Company
has not incurred any material contingent obligations, and
no material litigation is pending or threatened against
the Company; and, since such date and except as so
disclosed the Company has not sustained a material loss
or interference by strike, labor dispute, fire,
explosion, flood, windstorm, accident or other calamity
(whether or not insured) or from any court or
governmental action, order or decree.
The delivery of the certificate provided for in this subparagraph
(iii) shall be and constitute a representation and warranty of the Company
as to the facts required in the immediately foregoing clauses (1), (2),
(3) and (4) of this subparagraph (iii) to be set forth in said
certificate.
(iv) A certificate from each Selling
Stockholder (which may be signed by such Selling
Stockholder's Attorneys-in-Fact), dated the First Closing
Date or the Second Closing Date, as the case may be, to
the effect that the representations and warranties of
such Selling Stockholder in Section 3 of this Agreement
are true and correct as of the date of this Agreement and
as of the First Closing Date or the Second Closing Date,
as the case may be, as if again made on and as of such
Closing Date, and such Selling Stockholder has complied
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with all applicable covenants herein and satisfied all
the conditions to be performed or satisfied by such
Selling Stockholder at or prior to such Closing Date.
(v) A written agreement or agreements signed
by each director and officer of the Company and by each
Named Stockholder as provided in Section 6(o) of this
Agreement.
(vi) At the time this Agreement is executed
and also on the First Closing Date and the Second Closing
Date, there shall be delivered to the Representative a
letter addressed to the Representative, as Representative
of the Underwriters, from Ernst & Young, LLP independent
certified public accountants, the first letter to be
dated the date of this Agreement, the second letter to be
dated the First Closing Date and the third letter (in the
event of a Second Closing) to be dated the Second Closing
Date, to the effect set forth in Schedule C annexed
hereto and containing the information set forth therein
and such other information as may be requested by the
Representative as of a date within five days of the date
of such letter. There shall not have been any change or
decrease specified in any of the letters referred to in
this subparagraph (vi) which makes it impractical or
inadvisable in the Representative's judgment to proceed
with the public offering or the purchase of the Common
Shares as contemplated hereby.
(vii) Such further certificates and documents as
the Representative may reasonably request.
All such opinions, certificates, letters and documents
shall be in compliance with the provisions hereof only if they
are satisfactory to the Representative and to Shapiro and
Olander, counsel for the Representative and the Underwriters.
The Company and the Selling Stockholders shall furnish the
Representative with such manually signed or conformed copies of
such opinions, certificates, letters and documents as the
Representative may reasonably request.
If any condition to the Underwriters' obligations
hereunder to be satisfied prior to or at either Closing Date is
not so satisfied, this Agreement at the Representative's election
will terminate upon notification to the Company and the
Attorneys-in-Fact for the Selling Stockholders without liability
on the part of any Underwriter (including the Representative),
the Company or the Selling Stockholders, except for the expenses
to be paid by the Company and the Selling Stockholders pursuant
to Section 8 hereof or reimbursed by the Company pursuant to
Section 10 hereof and except to the extent provided in Section 12
hereof.
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SECTION 10. Reimbursement of Underwriters' Expenses. If the
sale to the Underwriters of the Common Shares at the First Closing Date is
not consummated because any condition to the Underwriters' obligations
hereunder is not satisfied, because the Company terminates this Agreement
pursuant to Section 15 or because of any refusal, inability or failure on
the part of the Company or the Selling Stockholders to perform any
agreement herein or comply with any provision hereof, the Company shall
pay the Representative $20,000 as provided in Section 8 hereof. Any such
termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 8 and Section 12 shall
at all times be effective and shall apply.
SECTION 11. Effectiveness of Registration Statement. The
Company and the Selling Stockholders will each use their respective best
efforts to cause the Registration Statement to become effective, to
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement, and, if such stop order is issued, to obtain as
soon as possible the lifting thereof.
SECTION 12. Indemnification.
(a) The Company and each Selling Stockholder agrees
to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the
Act or the Exchange Act against any losses, claims, damages, or
liabilities, joint or several, to which such Underwriter or each
such controlling person may become subject under the Act, the
Exchange Act, Blue Sky Laws or other federal or state securities
laws or regulations, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any
application filed under any Blue Sky Law or other document
executed by the Company specifically for that purpose or filed in
any state or other jurisdiction in order to qualify any or all of
the Common Shares under the securities laws thereof (any such
application or document being hereinafter referred to as a "Blue
Sky Application") or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not
misleading; the Company agrees to reimburse each Underwriter and
each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or any such controlling
person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent
that:
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(i) any such loss, claim, damage or
liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto or in any Blue Sky Application in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of any
Underwriter through the Representative specifically for
use therein; or
(ii) if such statement or omission was
contained or made in any Preliminary Prospectus and
corrected in the Prospectus and (1) any such loss, claim,
damage or liability suffered or incurred by any
Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who
purchased Common Shares which are the subject thereof
from such Underwriter in the offering, and (2) such
Underwriter failed to deliver or provide a copy of the
Prospectus to such person at or prior to the confirmation
of the sale of such Common Shares in any case where such
delivery is required by the Act unless such failure was
due to failure by the Company to provide copies of the
Prospectus to the Underwriters as required by this
Agreement.
The indemnification obligations of the Company and Selling
Stockholders as provided above are in addition to any liabilities
the Company and Selling Stockholders may otherwise have under
other agreements, under common law or otherwise.
(b) Each Underwriter will severally and not jointly
indemnify and hold harmless each Selling Stockholder and the
Company, each of its directors and each of its officers who sign
the Registration Statement, and each person, if any, who controls
the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities to which the
Company, any Selling Stockholder or any such director, officer or
controlling person may become subject under the Act, the Exchange
Act, Blue Sky Laws or other federal or state statutory laws or
regulations, at common law or otherwise (including in settlement
of any litigation, if such settlement is effected with the
written consent of such Underwriter and the Representative, which
shall not be unreasonably withheld), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application,
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
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<PAGE>
therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application,
in reliance upon and in conformity with any written information
furnished to the Company by such Underwriter through the
Representative specifically for use in the preparation thereof;
each Underwriter will severally reimburse any legal or other
expenses reasonably incurred by the Company, any Selling
Stockholder or any such director, officer, or controlling person
in connection with investigating or defending any such loss,
claim, damage, liability or action. The indemnification
obligations of each Underwriter as provided above are in addition
to any liabilities any such Underwriter may otherwise have under
other agreements, under common law or otherwise. Notwithstanding
the provisions of this Section, no Underwriter shall be required
to indemnify the Company, any Selling Stockholder or any officer,
director or controlling person of the Company in any amount in
excess of the total price at which the Common Shares purchased by
any such Underwriter hereunder were offered to the public, plus
reimbursement for reasonable legal fees and other reasonable
expenses incurred. For all purposes of this Agreement, the
legend required by Item 502(d)(2) of Regulation S-B promulgated
under the Act, the name of each Underwriter and the amounts of
the selling concession and reallowance set forth in the
Prospectus constitute the only information furnished in writing
by or on behalf of any Underwriter expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, the
Prospectus (as from time to time amended or supplemented) or Blue
Sky Application.
(c) Each Selling Stockholder agrees to indemnify and
hold harmless the Company, each of its directors and each of its
officers who signs the Registration Statement, and each person,
if any, controlling the Company with the meaning of the Act or
the Exchange Act to the same extent as the foregoing indemnity
from the Company and the Selling Stockholders to each Underwriter
set forth in paragraph (a) hereof of this Section, but only with
respect to information relating to such Selling Stockholder
furnished in writing by such Selling Stockholder expressly for
use in connection with the Registration Statement or the
Prospectus. In case any action or claim shall be brought or
asserted against the Company, its directors, such officers or any
such controlling person, in respect of which indemnity may be
sought against any Selling Stockholder, such Selling Stockholder
shall have the rights and duties given the Company, and the
Company, such directors or officers and any such controlling
person shall have the rights and duties given to the Underwriters
by paragraph (a) of this Section.
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<PAGE>
(d) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party under this Section, notify
the indemnifying party in writing of the commencement thereof,
but the omission to so notify the indemnifying party will not
relieve any indemnifying party from any liability which it or he
may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any
indemnified party and such indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that
it or he may wish, jointly with all other indemnifying parties,
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, provided,
however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal
defenses available to it or he and/or other indemnified parties
which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified
party of its election to assume the defense of such action and
upon approval by the indemnified party of counsel to the
indemnifying party, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless:
(i) the indemnified party shall have
employed such counsel in connection with the assumption
of legal defenses in accordance with the proviso to the
next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the
expenses of more than one separate counsel, approved by
the Representative in the event that one or more of the
Underwriters, their directors, officers or controlling
persons, are the indemnified parties);
(ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of
the action; or
(iii) the indemnifying party has authorized
the employment of counsel at the expense of the
indemnifying party.
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<PAGE>
(e) If the indemnification provided for in this
Section is unavailable to an indemnified party under
subparagraphs (a), (b) or (c) hereof in respect of any losses,
claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified
party, shall, subject to the limitations hereinafter set forth,
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the Company,
each Selling Stockholder and the Underwriters from the
offering of the Common Shares; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but
also the relative fault of the Company, each Selling
Stockholder and the Underwriters in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other
relevant equitable considerations.
The respective relative benefits received by the Company,
each Selling Stockholder and the Underwriters shall be deemed to
be in such proportion so that the Underwriters are responsible
for the portion of the losses, claims, damages or liabilities
represented by the percentage that the underwriting discount per
share appearing on the cover page of the Prospectus bears to the
public offering price per share appearing thereon, the Selling
Stockholders are responsible for the portion represented by the
percentage that the total net proceeds received by the Selling
Stockholders bears to the total public offering price appearing
on the cover page of the Prospectus, provided that no Selling
Stockholder shall in any case be required to contribute or make
other payments under this Agreement which, in the aggregate,
exceeds the proceeds of the offering received by such Selling
Stockholder, and the Company is responsible for the remaining
portion. The relative fault of the Company, each Selling
Stockholder and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to the information supplied by
the Company, by each Selling Stockholder or by the Underwriters
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above
shall be deemed to include, subject to the limitations set forth
in paragraph (d) of this Section, any legal or other fees or
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<PAGE>
expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
or per capita allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method or
allocation which does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Common Shares
underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section
are several in proportion to their respective underwriting
commitments and not joint.
SECTION 13. Default of Underwriters. It shall be a condition
to this Agreement and the obligation of the Company and each of the
Selling Stockholders to sell and deliver the Common Shares hereunder, and
of each Underwriter to purchase the Common Shares hereunder in the manner
as described herein, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all of the
Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representative of all such Common Shares in accordance with
the terms hereof. If any Underwriter or Underwriters default in their
obligations to purchase Common Shares hereunder on either the First or
Second Closing Date and the aggregate number of Common Shares which such
defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of Common Shares which
the Underwriters are obligated to purchase on such Closing Date, the
Representative in the case of a default on the First Closing Date may make
arrangements satisfactory to the Company and the Selling Stockholders and
in the case of a default on the Second Closing Date, may make arrangements
satisfactory to the Company and TDH for the purchase of such Common Shares
by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the nondefaulting Underwriters
shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Common Shares which such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default or defaults occur is greater
than the above percentage and arrangements satisfactory to the
Representative, the Company and the Selling Stockholders in the case of a
default on the First Closing Date or arrangements satisfactory to the
- 36 -
<PAGE>
Representative and the Company and TDH in the case of a default on the
Second Closing Date, for the purchase of such Common Shares by other
persons are not made with 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter,
the Company or any Selling Stockholder, except for the expenses to be paid
by the Company and the Selling Stockholders pursuant to Section 8 hereof
and except to the extent provided in Section 12 hereof.
In the event that Common Shares to which a default relates are to
be purchased by the non-defaulting Underwriters or by another party or
parties, the Representative or the Company shall have the right to
postpone the First or Second Closing Date, as the case may be, for not
more than seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any
other arrangements, may be effected. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section.
SECTION 14. Effective Date. If the date of execution of this
Agreement is subsequent to the date upon which the Registration Statement
becomes effective, this Agreement shall become effective immediately in
all respects. If the date of execution of this Agreement precedes the
date upon which the Registration Statement becomes effective, this
Agreement shall become effective immediately as to Sections 8, 10, 12 and
15 and, as to all other provisions, at 9:00 A.M., Baltimore time, on the
day following the date upon which the Registration Statement becomes
effective, unless such a day is a Saturday, Sunday or holiday (in which
event this Agreement shall become effective at such hour on the business
day next succeeding such Saturday, Sunday or holiday); notwithstanding the
foregoing, this Agreement shall nevertheless become effective (a) at such
earlier time after the Registration Statement becomes effective as the
Representative may determine on and by notice to the Company and to the
Attorneys-in-Fact for the Selling Stockholders or (b) by release of any of
the Common Shares for sale to the public. For the purposes of this
Section, the Common Shares shall be deemed to have been released upon the
release for publication of any newspaper advertisement relating to the
Common Shares or upon the release by the Representative of telegrams:
(a) advising the Underwriters that the Common Shares
are released for public offering; or
(b) offering the Common Shares for sale to securities
dealers, whichever may occur first.
SECTION 15. Termination. Without limiting the right to
terminate this Agreement pursuant to any other provisions hereof:
(a) This Agreement may be terminated by the Company
by notice to the Representative and to the Attorneys-in-Fact for
the Selling Stockholders or by the Representative by notice to
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<PAGE>
the Company and to the Attorneys-in-Fact for the Selling
Stockholders at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company
or any Selling Stockholder to any Underwriter (except for the
expenses to be paid by the Company and the Selling Stockholders
pursuant to Section 8 hereof and except to the extent provided in
Section 12 hereof) or of any Underwriter to the Company or any
Selling Stockholder.
(b) This Agreement may also be terminated by the
Representative prior to the First Closing Date, and the option
from the Company and TDH referred to in Section 5 hereof, if
exercised, may be canceled at any time prior to the Second
Closing Date, if in the Representative's reasonable judgment
payment for and delivery of the Common Shares is rendered
impracticable or inadvisable because:
(i) additional material governmental
restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been
generally established on the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market
System or over-the-counter market, or trading in
securities generally shall have been suspended on either
such exchange or over-the-counter market or a general
banking moratorium shall have been established by
federal, or New York authorities; or
(ii) any event shall have occurred or shall
exist which makes untrue or incorrect in any material
respect any statement or information contained in the
Registration Statement or which is not reflected in the
Registration Statement but should be reflected therein in
order to make the statements or information contained
therein, in light of the circumstances in which they are
made, not misleading in any material respect; or
(iii) an outbreak or escalation of major
hostilities or other national or international emergency
or calamity or any substantial change in political,
financial or economic conditions shall have occurred or
shall have accelerated to such extent, as in your
reasonable judgment, as will have a material adverse
effect on the general United States securities market or
make it impractical or inadvisable under such
circumstances to proceed with completion of the sale of
and payment for the Common Shares; or
(iv) since the respective dates as of which
information is given in the Registration Statement and
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<PAGE>
the Prospectus, a material adverse change has occurred in
the business, financial condition, results of operations,
properties or business prospects of the Company, whether
or not in the ordinary course of business; or
(v) trading in any of the securities of the
Company shall have been suspended by the Securities and
Exchange Commission, the NASDAQ National Market System.
Any termination pursuant to this subsection (b) shall be
without liability on the part of any Underwriter to the Company
or any Selling Stockholder or on the part of the Company or any
Selling Stockholders to any Underwriter (except for expenses to
be paid by the Company and the Selling Stockholders pursuant to
Section 8 hereof and except as to indemnification to the extent
provided in Section 12 hereof).
SECTION 16. Representations and Indemnities to Survive
Delivery. The respective indemnities, agreements, representations,
warranties, and other statements of the Company, of its officers or
directors, of the Selling Stockholders and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter, Selling Stockholder or the Company or any of its or their
partners, officers, directors or any controlling person, as the case may
be, and will survive delivery of and payment for the Common Shares sold
hereunder.
SECTION 17. Notices. All communications hereunder will be in
writing and, if sent to the Underwriters or the Representative will be
mailed, delivered or telegraphed and confirmed to you c/o Ferris, Baker
Watts, Incorporated, 100 Light Street, 8th Floor, Baltimore, Maryland
21202, Attention: Todd L. Parchman, Senior Vice President,
With a copy to:
Shapiro and Olander
20th Floor
36 S. Charles Street
Baltimore, Maryland 21201
Attention: Melissa Allison Warren
If sent to the Company, will be mailed, delivered or telegraphed
and confirmed to the Company at:
Industrial Training Corporation
13515 Dulles Technology Drive
Herndon, Virginia 22071
Attention: Philip J. Facchina
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<PAGE>
With a copy to:
Kirkpatrick & Lockhart
1800 M Street, N.W.
South Lobby, 9th Floor
Washington, D.C. 20036
Attention: Alan J. Berkeley
and, if sent to any of the Selling Stockholders, will be mailed,
delivered or telegraphed and confirmed to the Attorneys-in-Fact at such
address as they have previously furnished to the Company and the
Representative (or, in the event of the failure so to furnish, to the
Selling Stockholders at their respective addresses set forth in the
Custodian Agreement).
SECTION 18. Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, personal representatives and assigns, and to the benefit of
the officers and directors and controlling persons referred to in Section
12, and no other person will have any right or obligations hereunder. The
term "successors" shall not include any purchaser of the Common Shares as
such from any of the Underwriters merely by reason of such purchase.
SECTION 19. Partial Unenforceability. If any section,
paragraph or provision of this Agreement is for any reason determined to
be invalid or unenforceable, such determination shall not affect the
validity or enforceability of any other section, paragraph or provision
hereof.
SECTION 20. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Maryland.
SECTION 21. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon this Agreement will become a binding agreement among the
Company, the Selling Stockholders and the several Underwriters, including
you, all in accordance with its terms.
Very truly yours,
INDUSTRIAL TRAINING CORPORATION
By: ______________________________
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<PAGE>
Name: ____________________________
Title: ____________________________
Each of the Selling Stockholders named
in Schedule A hereto.
By:_________________________________
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
FERRIS, BAKER WATTS, INCORPORATED
By:
Acting as Representative of the several
Underwriters (including itself) named in
Schedule B hereto.
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<PAGE>
SCHEDULE A
----------
Number of Shares
to be Sold
----------------
Industrial Training Corporation . . . . . . 875,000
Selling Stockholders:
TDH II Limited . . . . . . . . . . . . 152,068
Steven L. Roden . . . . . . . . . . . 12,762
Harvey Shuster . . . . . . . . . . . . 5,947
Glen Crews . . . . . . . . . . . . . . 2,510
Phyllis Fobes . . . . . . . . . . . . 1,713
TOTAL . . . . . . . . . . . . . 1,050,000
=========
<PAGE>
SCHEDULE B
----------
Number of
Name of Underwriter Shares
------------------ ---------
Ferris, Baker Watts, Incorporated
_________
Total . . . . . . . . . . . . . . . . . . 1,050,000
=========
<PAGE>
SCHEDULE C
----------
Comfort Letter Ernst & Young LLP
--------------------------------
(1) They are independent public accountants with respect to
the Company within the meaning of the Act and the applicable rules and
regulations thereunder, and the answer to Item 10 of the Form SB-2
Registration Statement, insofar as it relates to them, is correct.
(2) In their opinion, the consolidated financial statements
of the Company included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Act and the rules and regulations thereunder.
(3) They have not examined any financial statements of the
Company as of any date or for any period subsequent to December 31, 1994;
although they have made an examination for the year ended December 31,
1994, the purpose (and therefore the scope) of the examination was to
enable them to express their opinion on the consolidated financial
statements as of December 31, 1994, and for the year then ended, but not
on the financial statements for any interim period within that period.
Therefore, they are unable to and do not express any opinion on the
unaudited consolidated balance sheet as of June 30, 1995 or the unaudited
consolidated statements of income, stockholder's equity and cash flows for
the six months ended June 30, 1995 and June 30, 1994 included in the
Registration Statement.
(4) For purposes of their letter, they have read the 1995
minutes of meetings of the stockholders and Board of Directors as set
forth in the minute books at September___, 1995, officials of the Company
having advised them that the minutes of all such meetings through that
date were set forth therein, and have carried out other procedures to
September ___, 1995 as follows:
(a) With respect to the six-month periods ended June
30, 1995 and June 30, 1994, they have:
(i) Read the unaudited consolidated balance
sheets of the Company as of June 30 1995 and June 30,
1994 and the unaudited consolidated statements of income,
stockholders' equity and cash flows for the six-month
periods ended June 30, 1995 and June 30, 1994 included in
the Registration Statement; and
(ii) Made inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters regarding (1) whether the unaudited
financial statements referred to under (4)(a)(i) comply
in form in all material aspects with the applicable
accounting requirements of the Act and the rules and
regulations thereunder and (2) whether those financial
statements are in conformity with generally accepted
accounting principles applied on a basis substantially
<PAGE>
consistent with that of the audited financial statements
included in the Registration Statement.
(b) With respect to the period from July 1, 1995 to
August 31, 1995, they have:
(i) Read the unaudited consolidated
financial statements of the Company for July and August
of both 1994 and 1995 furnished to them by the Company,
officials of the Company having advised them that no
financial statements as of any date or for any period
subsequent to August 31, 1995 were available; and
(ii) Made inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters as to whether the unaudited financial
statements referred to in (4)(b)(i) are in conformity
with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited
financial statements included in the Registration
Statement.
(5) On the basis of the specified procedures detailed above
(which did not include an examination in accordance with generally
accepted auditing standards), nothing came to their attention as a result
of the foregoing procedures, however, that caused them to believe that:
(a) The financial statements described in (4)(a)(i),
included in the Registration Statement, do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the rules and regulations thereunder
or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that
of the audited financial statements; or
(b) At August 31, 1995 there was any change in the
capital stock or long-term debt of the Company as compared with
amounts shown in the June 30, 1995 unaudited consolidated balance
sheet included in the Registration Statement.
(6) Company officials have advised them that no statements as
of any date or for any period subsequent to August 31, 1995 are available;
accordingly, the procedures carried out by them after August 31, 1995
have, of necessity, been even more limited than those with respect to the
periods referred to in 4 above. They have made inquiries of certain
Company officials who have responsibility for financial and accounting
matters regarding whether (a) there was any change at September ___, 1991
in the capital stock or long-term debt of the Company or any decreases in
net current assets or stockholders' equity as compared with amounts shown
on the June 30, 1995 unaudited consolidated balance sheet included in the
Registration Statement or (b) for the period from July 1, 1995 to
September ____, 1995 there were any decreases, as compared with the
corresponding period in the preceding year, in net sales or in the total
or per share amounts of net earnings. On the basis of these inquiries and
<PAGE>
their reading of the minutes as described in 4 above, nothing came to
their attention that caused them to believe that there was any such change
or decrease except in all instances for changes or decreases that the
Registration Statement discloses have occurred or may occur.
(7) In addition to the procedures referred to in 4, 5 and 6
above, they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Registration
Statement, which have previously been specified by the Representative and
which are specified in their letter, and have compared certain of such
items with, and have found such amounts, percentages, numerical data and
financial information to be in agreement with, the accounting, financial
and other records of the Company.
<PAGE>
August 16, 1996
Industrial Training Corporation
13515 Dulles Technology Drive
Herndon, Virginia 22071
Ladies and Gentlemen:
You have requested our opinion as counsel to Industrial Training
Corporation, a corporation organized under the laws of Maryland with its
headquarters located in Herndon, Virginia ("Company"), in connection with
the offering by the Company to the public of 1,207,500 shares of the
Company's common stock, $0.10 par value ("Shares").
We have participated in the preparation of a registration statement
on Form SB-2 ("Registration Statement") and the prospectus included therein
("Prospectus") relating to the Company's issuance of shares, and in
connection therewith, have examined and relied upon the originals or copies
of such records, agreements, documents and other instruments, the Articles
of Incorporation of the Company, as amended ("Articles"), the Bylaws of the
Company, the minutes of the meetings of the board of directors of the
Company to date relating to the authorization and issuance of the Shares and
have made such inquiries of such officers and representatives as we have
deemed relevant and necessary as the basis for the opinion hereinafter set
forth. In such examination, we have assumed, without independent
verification, the genuineness of all signatures (whether original or
photostatic), the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, and the conformity to authentic
original documents of all documents submitted to us as certified or
photostatic copies. We have assumed, without independent verification, the
accuracy of the relevant facts stated therein.
As to any other facts material to the opinion expressed herein that
were not independently established or verified, we have relied upon
statements and representations of officers and employees of the Company.
Based upon the foregoing and subject to the qualifications set
forth below, we are of the opinion that, on the basis of such examination,
the Company has been duly organized and is validly existing under the laws
of Virginia and that the Company has authority to issue up to 4,000,000
Shares, each having $0.10 par value. It also is our opinion that the Shares
referred to in the Registration Statement, when issued and sold as
contemplated in the Registration Statement, will be legally issued, fully
paid and non-assessable and no personal liability will attach to the
ownership of such Shares.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and we consent to the reference to our firm under
the caption "Legal Opinions" in the Prospectus.
The foregoing opinion is being furnished to, and is solely for the
benefit of, the addressee named above and except with our prior consent, is
not to be used, circulated, quoted, published or otherwise referred to or
disseminated for any other purpose or relied upon by any person or entity
other than said addressee.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By:_______________________
Thomas F. Cooney, III
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement made by and between Industrial Training
Corporation (hereinafter called the "Company") and James H. Walton
(hereinafter called the "Executive").
1. Employment. The Company agrees to employ the Executive
as President, with such duties as may be reasonably assigned to him/her
from time to time by the Board of Directors of the company then in office,
or its designee.
2. Acceptance. The Executive hereby accepts employment upon
the terms and conditions set forth in this Agreement. During the Term of
this Agreement, and subject to the provisions of Section 6(a) of this
Agreement, the Executive agrees to devote his/her full business time and
services to the faithful performance of the duties which may be reasonably
assigned to him/her and which are consistent with his/her Executive office
under Section 1 of this Agreement.
3. Compensation. For all services rendered by the Executive
under this Agreement, the Company shall pay the Executive a basic salary
of $78,750 per year, payable in periodic installments in accordance with
the Company's normal payroll practices for salaried employees. Nothing
herein shall affect the eligibility of the Executive to receive salary
increases, bonus awards, stock option grants, pension, profit-sharing
arrangement, employee benefits and the like which the Company may from
time to time grant or make available to the Executive. Once each year,
consideration shall be given by the Board of Directors of the Company to a
salary increase for the Executive and whether to award a bonus to the
Executive, and if so, in what amount.
4. Term. The initial Term of this Agreement shall begin on
January 1, 1987 (the initial "commencement date") and shall continue
thereafter for three years through December 31, 1989. The second Term of
this Agreement shall, without further action on the part of the Company or
the Executive, automatically begin on January 2, 1987, and shall continue
thereafter for three years through January 1, 1990. Each subsequent and
successive Term of this Agreement shall automatically begin on the
calendar day next following the commencement date of the immediately
preceding Term (i.e., on January 3, 1987, on January 4, 1987, etc.) and
shall continue thereafter for three years (i.e., through January 2, 1990,
through January 3, 1990, etc.), unless terminated in accordance with the
provisions of Section 5 of this Agreement.
5. Termination. Unless the parties otherwise agree in
writing, termination of this Agreement in accordance with the provisions
of this Section shall also constitute termination of the Executive's
employment with the Company without the need for further notice or action
by either party.
(a) Incapacity. In the event the Executive shall be unable
to perform his/her duties owing to illness or other incapacity for a
period of more than 120 consecutive days or an aggregate of 180 days in
any 12 month period, the Company may, at its option, by written notice
1G
<PAGE>
addressed to the Executive, and sent subsequent to such 120 days or 180
days, terminate this Agreement as of a date to be specified in such
notice, but not less than 30 days after the date of the sending of such
notice; provided, however, that if prior to the date specified in such
notice the Executive's illness or other incapacity shall have terminated
and he/she shall have satisfactorily taken up and performed his/her duties
under this Agreement, the notice of termination shall be disregarded, and
this Agreement shall continue in full force and effect. (See Sections 11
and 12 of this Agreement for medical, sick leave and disability benefits).
(b) Death. In the event of the Executive's death during the
term of his/her employment hereunder, this Agreement shall terminate as of
the date of death, and the Executive's spouse, or such other person whom
the Executive shall have designated in writing to the Company, shall be
paid the Executive's then prevailing salary prorated to the date of the
Executive's death. The Company shall also pay to such spouse, or such
other designated person, a death benefit of $5,000.
(c) Withdrawal from Business. The Company shall terminate
this Agreement upon 60 days written notice to the Executive of a bona fide
decision by the Company to wind up its business and liquidate its assets
(other than in connection with a merger, consolidation, or other event
specified in Section 7), and all rights and obligations of both parties
hereto (except those under Section 6(d) hereof) shall cease upon such
termination. In this event, the Executive shall be paid his/her then
prevailing salary prorated to the date of termination.
(d) Termination by the Company With Notice. The Company may
terminate this Agreement for a reason not set forth in Section 5(a) or
5(c) at any time upon 60 days written notice to the Executive. In this
event the Executive shall be paid his/her then prevailing salary prorated
to the date of termination, and, in addition a termination allowance equal
to 34 months' salary, based upon the highest annual salary rate paid the
Executive during the Term of this Agreement. The termination allowance
may, at the option of the Company, be paid in periodic installments over
the first 10 months following termination in accordance with the Company's
regular payroll periods or over such lessor period as the Company may
determine with the concurrence of the Executive.
(e) Termination by the Executive with Notice. The Executive
may terminate this Agreement at any time upon 12 months written notice to
the Company, in which event the Executive shall be paid his/her then
prevailing salary prorated to the date of termination. In the event the
parties cannot agree as to whether the termination was, in effect, a
termination by the Company or by the Executive, the parties shall submit
such dispute for arbitration, as provided for in Section 16 of this
Agreement. During a period of 6 months following any such termination by
the Executive, the Executive agrees to provide such consulting services to
the Company as it may reasonably request, at such time or times within
such period as may be mutually agreed upon between the Company and the
Executive. The Executive shall be compensated for any such consulting
services at 120% of the daily rate when last employed by the Company plus
reimbursement for any reasonable out-of-pocket expenses incurred by the
Executive in rendering such consulting services.
2G
<PAGE>
6. Outside Business Interests, Employee Solicitation and
Company Property.
(a) Without the written consent of the Board of Directors of
the Company, which consent shall not be unreasonably withheld, the
Executive agrees that during the Term of this Agreement he/she will not be
affiliated with any competitor, supplier or customer of the Company, as an
officer, director, partner, employee, agent, consultant (or similar
capacity) or more than a 1% stockholder.
(b) The Executive further agrees that during the Term of this
Agreement he/she will not, directly or indirectly, encourage employees of
the Industrial Training Corporation (hereinafter meaning the Company
and/or any of its subsidiary companies now existing or hereafter formed)
to leave the employ of the Industrial Training Corporation for the purpose
of seeking or obtaining employment in any other activity with which the
Executive intends to become affiliated.
(c) The Executive further agrees that during a period of two
years following the termination of employment, regardless of the reasons
for such termination, he/she will not, directly or indirectly, hire,
attempt to hire or encourage employees of the Industrial Training
Corporation to leave the employ of the Industrial Training Corporation.
(d) The Executive further agrees that following the
termination of his/her employment he/she will not, directly or indirectly,
take with him/her or use any Industrial Training Corporation property,
such as drawings, reports, data or proposals, design or manufacturing
information, wage and salary information, records or the like relating or
peculiar to the Industrial Training Corporation's products, research or
development or other activities, nor disclose to any others information of
a privileged nature, without prior written consent of the Chairman of the
Board of the Company.
(e) The Executive further agrees that during a period of two
years following the termination of his/her employment he/she will not,
directly or indirectly, participate (on his/her own behalf or on behalf of
any other corporation, venture or enterprise engaged in commercial
activities) in any matters which were the subject of outstanding bids or
solicitations of the Industrial Training Corporation or of bids or
solicitations in preparation by the Industrial Training Corporation during
his/her employ by the Company.
(f) The Executive further agrees that in the event he/she
terminates without giving notice as required by Section 5(e) for a period
of one year following such termination of employment, he/she will not
engage, directly or indirectly, as proprietor, partner, shareholder,
director, officer, employee, agent, consultant, or in any other capacity
or manner whatsoever, in any business activity competitive with the
business of the Industrial Training Corporation, as constituted during
his/her employment and on the date of termination of his/her employment.
If any court of competent jurisdiction shall determine this covenant to be
unenforceable as to either the term or scope imposed above, then this
covenant nevertheless shall be enforceable by such court as to such
shorter term or such lesser scope as may be determined by the court to be
reasonable and enforceable.
(g) The Executive further agrees that the provisions of this
Section 6 are of vital importance to the Company and incorporate crucial
3G
<PAGE>
Company policies and a means of safeguarding valuable proprietary rights
and interests of the Industrial Training Corporation. Accordingly, the
Executive agrees that the Company shall be entitled to injunctive relief,
in addition to all other remedies permitted by law, to enforce the
provisions of this Section 6.
7. Merger or Acquisition. In the event the Company should
consolidate with, or merge into another corporation, or transfer all or
substantially all of its assets to another entity, this Agreement shall
continue in full force and effect.
8. Personnel Policies. To the extent not otherwise set
forth herein, the conditions of employment shall be governed by the
operating and personnel policies of the Company.
9. Vacations. The Executive shall be entitled to a
reasonable vacation each year of his/her term of employment.
10. Legal and Accounting Fees. Recognizing that it is in its
interest that persons holding executive positions not be unduly burdened
or involved in legal proceedings or matter which would necessarily
interfere with the efficient performance of their duties for the Company,
the Company agrees to reimburse the Executive for legal and accounting
fees and expenses (up to $1,000 during each calendar year of the Term of
the Agreement) incurred in connection with tax matters, estate planning
matters, employment contract matters, and other matters related to his/her
employment or position with the Company, other than for matters in which
the Executive takes a position contrary to the interests of the Company.
Fees for ordinary tax planning and tax shelter reviews are excluded. The
unused reimbursement in one calendar year will be carried forward up to a
maximum of $5,000; fees and expenses not reimbursed in one calendar year
can be submitted for reimbursement in subsequent years. It is expected
that the Executive will not seek reimbursement for such fees that are
clearly related to the outside business interests of himself/herself or
his/her family.
11. Medical Expenses. Recognizing that the continued good
health of the Executive and his/her family is of vital concern to the
Company, since such good health is directly related to the services which
the Executive will be expected to render to the affairs of the Company,
the Executive agrees to undergo a thorough and complete medical
examination at least once during each year of his/her term of employment.
The Executive further agrees to have the examining physician report the
findings of each examination to the Company, if so requested. Moreover,
in keeping with the Company's objectives in this regard, the Company
agrees to reimburse the Executive up to $3,000 during each calendar year
of this Agreement for those reasonable medical (including the
aforementioned annual medical examination), dental and optical expenses
incurred by the Executive during each such year in behalf of
himself/herself and his/her immediate family if such expenses are not
otherwise reimbursed to the Executive through insurance. The unused
reimbursement in one calendar year will be carried forward up to a maximum
of $9,000; expenses not reimbursed in one calendar year can be submitted
for reimbursement in subsequent years. The Company, at its own expense,
shall also provide the Executive with medical insurance coverage under its
group medical insurance plan.
4G
<PAGE>
12. Sick Leave Benefits and Disability Insurance. During
his/her absence owing to illness or other capacity, the Executive shall be
paid sick leave benefits at his/her then prevailing salary rate, reduced
by the amount, if any, of Worker's Compensation or disability benefits
under the Company's group disability insurance plan. The Company, at its
own expense, shall provide the Executive with disability benefits under
its group disability insurance plan.
13. Life Insurance. The Company, at its own expense, shall
provide the Executive with life insurance benefits under its group life
insurance plan.
14. Breach of Agreement. In addition to any other remedy
available to the Company in the event of a material breach by the
Executive of any of the covenants set forth in this Agreement, the
Company's obligation to pay the Executive any incentive payouts, deferred
compensation, termination allowance or other benefits accrued but unpaid
as of the date of such breach (except any vested rights the Executive may
have under a Company Profit Sharing Retirement Plan) shall terminate, as
will the Executive's right to exercise any unexercised stock options.
15. Waivers of Breach. Any waiver by either party of a
breach of any provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach.
16. Disputes and Arbitration. Any dispute arising out of or
concerning this Agreement, which is not disposed of by agreement between
the two parties, shall be decided by an Arbitrator chosen by the parties.
Either party may initiate an arbitration action by a written notification
to the other. The parties agree to choose the Arbitrator within 15 days
thereafter. The Arbitrator will follow the rules for arbitrations of the
American Arbitration Association to the extent that said rules are not
inconsistent with the terms and conditions of this Section. The decision
of the Arbitrator shall be final and conclusive in the absence of
statutory grounds for setting it aside. If the Executive prevails in the
arbitration proceedings, the Company shall immediately reimburse the
Executive for the out-of-pocket costs of such proceedings, including
reasonable attorney's fees, and pay to him/her the amount of the
arbitration award, whether or not the Company seeks to have the award set
aside. The Executive shall not be reimbursed for the costs that he/she
may sustain on an appeal by him/her of the Arbitrator's decision.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on January 7, 1987.
EXECUTIVE INDUSTRIAL TRAINING CORP.
/s/ James H. Walton /s/ Gerald H. Kaiz
James H. Walton Gerald H. Kaiz
5G
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
---------------------
This Agreement made by and between Industrial Training
Corporation (hereinafter called the "Company") and Gerald H. Kaiz
(hereinafter called the "Executive").
1. Employment. The Company agrees to employ the Executive
as Executive Vice President, with such duties as may be reasonably
assigned to him/her from time to time by the Board of Directors of the
company then in office, or its designee.
2. Acceptance. The Executive hereby accepts employment upon
the terms and conditions set forth in this Agreement. During the Term of
this Agreement, and subject to the provisions of Section 6(a) of this
Agreement, the Executive agrees to devote his/her full business time and
services to the faithful performance of the duties which may be reasonably
assigned to him/her and which are consistent with his/her Executive office
under Section 1 of this Agreement.
3. Compensation. For all services rendered by the Executive
under this Agreement, the Company shall pay the Executive a basic salary
of $78,750 per year, payable in periodic installments in accordance with
the Company's normal payroll practices for salaried employees. Nothing
herein shall affect the eligibility of the Executive to receive salary
increases, bonus awards, stock option grants, pension, profit-sharing
arrangement, employee benefits and the like which the Company may from
time to time grant or make available to the Executive. Once each year,
consideration shall be given by the Board of Directors of the Company to a
salary increase for the Executive and whether to award a bonus to the
Executive, and if so, in what amount.
4. Term. The initial Term of this Agreement shall begin on
January 1, 1987 (the initial "commencement date") and shall continue
thereafter for three years through December 31, 1989. The second Term of
this Agreement shall, without further action on the part of the Company or
the Executive, automatically begin on January 2, 1987, and shall continue
thereafter for three years through January 1, 1990. Each subsequent and
successive Term of this Agreement shall automatically begin on the
calendar day next following the commencement date of the immediately
preceding Term (i.e., on January 3, 1987, on January 4, 1987, etc.) and
shall continue thereafter for three years (i.e., through January 2, 1990,
through January 3, 1990, etc.), unless terminated in accordance with the
provisions of Section 5 of this Agreement.
5. Termination. Unless the parties otherwise agree in
writing, termination of this Agreement in accordance with the provisions
of this Section shall also constitute termination of the Executive's
employment with the Company without the need for further notice or action
by either party.
(a) Incapacity. In the event the Executive shall be unable
to perform his/her duties owing to illness or other incapacity for a
period of more than 120 consecutive days or an aggregate of 180 days in
any 12 month period, the Company may, at its option, by written notice
1G
<PAGE>
addressed to the Executive, and sent subsequent to such 120 days or 180
days, terminate this Agreement as of a date to be specified in such
notice, but not less than 30 days after the date of the sending of such
notice; provided, however, that if prior to the date specified in such
notice the Executive's illness or other incapacity shall have terminated
and he/she shall have satisfactorily taken up and performed his/her duties
under this Agreement, the notice of termination shall be disregarded, and
this Agreement shall continue in full force and effect. (See Sections 11
and 12 of this Agreement for medical, sick leave and disability benefits).
(b) Death. In the event of the Executive's death during the
term of his/her employment hereunder, this Agreement shall terminate as of
the date of death, and the Executive's spouse, or such other person whom
the Executive shall have designated in writing to the Company, shall be
paid the Executive's then prevailing salary prorated to the date of the
Executive's death. The Company shall also pay to such spouse, or such
other designated person, a death benefit of $5,000.
(c) Withdrawal from Business. The Company shall terminate
this Agreement upon 60 days written notice to the Executive of a bona fide
decision by the Company to wind up its business and liquidate its assets
(other than in connection with a merger, consolidation, or other event
specified in Section 7), and all rights and obligations of both parties
hereto (except those under Section 6(d) hereof) shall cease upon such
termination. In this event, the Executive shall be paid his/her then
prevailing salary prorated to the date of termination.
(d) Termination by the Company With Notice. The Company may
terminate this Agreement for a reason not set forth in Section 5(a) or
5(c) at any time upon 60 days written notice to the Executive. In this
event the Executive shall be paid his/her then prevailing salary prorated
to the date of termination, and, in addition a termination allowance equal
to 34 months' salary, based upon the highest annual salary rate paid the
Executive during the Term of this Agreement. The termination allowance
may, at the option of the Company, be paid in periodic installments over
the first 10 months following termination in accordance with the Company's
regular payroll periods or over such lessor period as the Company may
determine with the concurrence of the Executive.
(e) Termination by the Executive with Notice. The Executive
may terminate this Agreement at any time upon 12 months written notice to
the Company, in which event the Executive shall be paid his/her then
prevailing salary prorated to the date of termination. In the event the
parties cannot agree as to whether the termination was, in effect, a
termination by the Company or by the Executive, the parties shall submit
such dispute for arbitration, as provided for in Section 16 of this
Agreement. During a period of 6 months following any such termination by
the Executive, the Executive agrees to provide such consulting services to
the Company as it may reasonably request, at such time or times within
such period as may be mutually agreed upon between the Company and the
Executive. The Executive shall be compensated for any such consulting
services at 120% of the daily rate when last employed by the Company plus
reimbursement for any reasonable out-of-pocket expenses incurred by the
Executive in rendering such consulting services.
2G
<PAGE>
6. Outside Business Interests, Employee Solicitation and
Company Property.
(a) Without the written consent of the Board of Directors of
the Company, which consent shall not be unreasonably withheld, the
Executive agrees that during the Term of this Agreement he/she will not be
affiliated with any competitor, supplier or customer of the Company, as an
officer, director, partner, employee, agent, consultant (or similar
capacity) or more than a 1% stockholder.
(b) The Executive further agrees that during the Term of this
Agreement he/she will not, directly or indirectly, encourage employees of
the Industrial Training Corporation (hereinafter meaning the Company
and/or any of its subsidiary companies now existing or hereafter formed)
to leave the employ of the Industrial Training Corporation for the purpose
of seeking or obtaining employment in any other activity with which the
Executive intends to become affiliated.
(c) The Executive further agrees that during a period of two
years following the termination of employment, regardless of the reasons
for such termination, he/she will not, directly or indirectly, hire,
attempt to hire or encourage employees of the Industrial Training
Corporation to leave the employ of the Industrial Training Corporation.
(d) The Executive further agrees that following the
termination of his/her employment he/she will not, directly or indirectly,
take with him/her or use any Industrial Training Corporation property,
such as drawings, reports, data or proposals, design or manufacturing
information, wage and salary information, records or the like relating or
peculiar to the Industrial Training Corporation's products, research or
development or other activities, nor disclose to any others information of
a privileged nature, without prior written consent of the President of the
Company.
(e) The Executive further agrees that during a period of two
years following the termination of his/her employment he/she will not,
directly or indirectly, participate (on his/her own behalf or on behalf of
any other corporation, venture or enterprise engaged in commercial
activities) in any matters which were the subject of outstanding bids or
solicitations of the Industrial Training Corporation or of bids or
solicitations in preparation by the Industrial Training Corporation during
his/her employ by the Company.
(f) The Executive further agrees that in the event he/she
terminates without giving notice as required by Section 5(e) for a period
of one year following such termination of employment, he/she will not
engage, directly or indirectly, as proprietor, partner, shareholder,
director, officer, employee, agent, consultant, or in any other capacity
or manner whatsoever, in any business activity competitive with the
business of the Industrial Training Corporation, as constituted during
his/her employment and on the date of termination of his/her employment.
If any court of competent jurisdiction shall determine this covenant to be
unenforceable as to either the term or scope imposed above, then this
covenant nevertheless shall be enforceable by such court as to such
shorter term or such lesser scope as may be determined by the court to be
reasonable and enforceable.
(g) The Executive further agrees that the provisions of this
Section 6 are of vital importance to the Company and incorporate crucial
3G
<PAGE>
Company policies and a means of safeguarding valuable proprietary rights
and interests of the Industrial Training Corporation. Accordingly, the
Executive agrees that the Company shall be entitled to injunctive relief,
in addition to all other remedies permitted by law, to enforce the
provisions of this Section 6.
7. Merger or Acquisition. In the event the Company should
consolidate with, or merge into another corporation, or transfer all or
substantially all of its assets to another entity, this Agreement shall
continue in full force and effect.
8. Personnel Policies. To the extent not otherwise set
forth herein, the conditions of employment shall be governed by the
operating and personnel policies of the Company.
9. Vacations. The Executive shall be entitled to a
reasonable vacation each year of his/her term of employment.
10. Legal and Accounting Fees. Recognizing that it is in its
interest that persons holding executive positions not be unduly burdened
or involved in legal proceedings or matter which would necessarily
interfere with the efficient performance of their duties for the Company,
the Company agrees to reimburse the Executive for legal and accounting
fees and expenses (up to $1,000 during each calendar year of the Term of
the Agreement) incurred in connection with tax matters, estate planning
matters, employment contract matters, and other matters related to his/her
employment or position with the Company, other than for matters in which
the Executive takes a position contrary to the interests of the Company.
Fees for ordinary tax planning and tax shelter reviews are excluded. The
unused reimbursement in one calendar year will be carried forward up to a
maximum of $5,000; fees and expenses not reimbursed in one calendar year
can be submitted for reimbursement in subsequent years. It is expected
that the Executive will not seek reimbursement for such fees that are
clearly related to the outside business interests of himself/herself or
his/her family.
11. Medical Expenses. Recognizing that the continued good
health of the Executive and his/her family is of vital concern to the
Company, since such good health is directly related to the services which
the Executive will be expected to render to the affairs of the Company,
the Executive agrees to undergo a thorough and complete medical
examination at least once during each year of his/her term of employment.
The Executive further agrees to have the examining physician report the
findings of each examination to the Company, if so requested. Moreover,
in keeping with the Company's objectives in this regard, the Company
agrees to reimburse the Executive up to $3,000 during each calendar year
of this Agreement for those reasonable medical (including the
aforementioned annual medical examination), dental and optical expenses
incurred by the Executive during each such year in behalf of
himself/herself and his/her immediate family if such expenses are not
otherwise reimbursed to the Executive through insurance. The unused
reimbursement in one calendar year will be carried forward up to a maximum
of $9,000; expenses not reimbursed in one calendar year can be submitted
for reimbursement in subsequent years. The Company, at its own expense,
shall also provide the Executive with medical insurance coverage under its
group medical insurance plan.
4G
<PAGE>
12. Sick Leave Benefits and Disability Insurance. During
his/her absence owing to illness or other capacity, the Executive shall be
paid sick leave benefits at his/her then prevailing salary rate, reduced
by the amount, if any, of Worker's Compensation or disability benefits
under the Company's group disability insurance plan. The Company, at its
own expense, shall provide the Executive with disability benefits under
its group disability insurance plan.
13. Life Insurance. The Company, at its own expense, shall
provide the Executive with life insurance benefits under its group life
insurance plan.
14. Breach of Agreement. In addition to any other remedy
available to the Company in the event of a material breach by the
Executive of any of the covenants set forth in this Agreement, the
Company's obligation to pay the Executive any incentive payouts, deferred
compensation, termination allowance or other benefits accrued but unpaid
as of the date of such breach (except any vested rights the Executive may
have under a Company Profit Sharing Retirement Plan) shall terminate, as
will the Executive's right to exercise any unexercised stock options.
15. Waivers of Breach. Any waiver by either party of a
breach of any provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach.
16. Disputes and Arbitration. Any dispute arising out of or
concerning this Agreement, which is not disposed of by agreement between
the two parties, shall be decided by an Arbitrator chosen by the parties.
Either party may initiate an arbitration action by a written notification
to the other. The parties agree to choose the Arbitrator within 15 days
thereafter. The Arbitrator will follow the rules for arbitrations of the
American Arbitration Association to the extent that said rules are not
inconsistent with the terms and conditions of this Section. The decision
of the Arbitrator shall be final and conclusive in the absence of
statutory grounds for setting it aside. If the Executive prevails in the
arbitration proceedings, the Company shall immediately reimburse the
Executive for the out-of-pocket costs of such proceedings, including
reasonable attorney's fees, and pay to him/her the amount of the
arbitration award, whether or not the Company seeks to have the award set
aside. The Executive shall not be reimbursed for the costs that he/she
may sustain on an appeal by him/her of the Arbitrator's decision.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on January 7, 1987.
EXECUTIVE INDUSTRIAL TRAINING CORP.
/s/ Gerald H. Kaiz /s/ James H. Walton
Gerald H. Kaiz James H. Walton
5G
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered
into effective as of the 18th day of October, 1994 (the "Effective Date")
by and between Industrial Training Corporation (the "Company") and Elaine
H. Babcock (the "Executive").
RECITALS
--------
A. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Maryland. The
Company is engaged in the business of developing, marketing and selling
training materials, primarily in multimedia platforms.
B. The Executive is presently in the employ of the Company
in the area of sales and marketing and has substantial experience in
connection with sales and marketing for companies selling training
materials.
C. The Company has offered to continue to employ the
Executive as a Senior Vice President of Sales for the Company. The
Executive has indicated her willingness to accept said offer for continued
employment.
D. The parties hereto believe that it is in their best
interests to provide for the specific terms and conditions of employment
and to impose restrictions upon the parties in the event of the
termination of the employment relationship.
NOW, THEREFORE, in consideration of the mutual promises and
covenants as hereinafter set forth, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company agrees to employ the Executive
as a Senior Vice President of Sales for the Company in accordance with the
terms and conditions set forth in this Agreement. The Executive shall
have such specific duties as may be reasonably assigned to her from time
to time by the Board of Directors of the Company or the President of the
Company then in office, or their designee.
2. Acceptance. The Executive hereby accepts employment with
the Company in accordance with the terms and conditions set forth in this
Agreement. During the term of this Agreement, and subject to the
provisions of Sections 5 and 6 of this Agreement, the Executive agrees to
devote her full business time and services and her best efforts to the
faithful performance of the duties which may be reasonably assigned to her
and which are consistent with her position under Section 1 of this
Agreement.
<PAGE>
3. Compensation.
------------
a. In General. For all services rendered by the
Executive under this Agreement, the Company shall provide the Executive
with the various forms of compensation and benefits set forth in this
Section 3.
b. Basic Compensation. The Company shall, subject
to the approval of the Board of Directors of the Company, pay the
Executive a basic salary of $110,000 per year, payable in periodic
installments in accordance with the Company's normal payroll practices for
salaried employees.
c. Vehicle. The Executive shall receive the use of
a Company vehicle selected by the Company, in its sole discretion.
d. Reimbursements of Expenses. The Company agrees
to reimburse the Executive for all reasonable expenses (determined in the
sole discretion of the Company) incurred by the Executive in the course of
the pursuance of her duties hereunder in accordance with the Company's
then current reimbursement policy.
e. Working Facilities. The Company, at its own
cost, shall furnish the Executive with an office together with supplies,
equipment and such other facilities and services suitable to her position
and adequate for the performance of her duties hereunder.
f. Fringe Benefits. Nothing herein shall affect the
eligibility of the Executive to receive salary increases, bonus awards,
stock option grants, pension or profit-sharing arrangements, employee
benefits and the like which the Company may, in its sole discretion, from
time to time grant or make available to the Executive. The Executive may
participate in the Company's health and medical plan, dental plan, 401(k)
plan and Employee Stock Ownership Plan ("ESOP") if the Executive complies
with the eligibility requirements thereunder and otherwise in a manner
consistent with the Company's then current normal policies and procedures.
g. Discretionary Salary Increase and/or Bonus. Once
each year, consideration shall be given by the Board of Directors of the
Company, within its sole discretion, to a salary increase for the
Executive and whether to award a bonus to the Executive, and if so, in
what amount. The Executive shall, to the extent permitted by the Board of
Directors of the Company, also participate in the Company's Incentive
Compensation Plan commencing with the Company's fiscal year to end
December 31, 1995 if the Executive complies with the eligibility
requirements thereunder and otherwise in a manner consistent with the
Company's then current normal policies and procedures.
h. Non-Performance Based Stock Options. The Company
hereby grants (the "Non-Performance Grant") to the Executive the option to
acquire 30,000 shares of the common stock of the Company (the "Non-
Performance Shares") in accordance with the terms and conditions set forth
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<PAGE>
below. The terms of the Non-Performance Grant shall not be in accordance
with the terms and conditions of the Company's 1992 Key Employee Incentive
Stock Option Plan (the "ISO Plan"). The Non-Performance Grant shall be
subject to the following terms and conditions:
(i) The Non-Performance Shares are
subject to the following vesting schedule, such that the Executive must be
employed by the Company on the applicable vesting date (the "Vesting
Date") in order to be vested in and therefore fully entitled to acquire
the applicable Non-Performance Shares:
Number of Vested
Vesting Date Non-Performance Shares
------------ ----------------------
December 31, 1995 10,000
December 31, 1996 10,000
December 31, 1997 10,000
------
30,000
(ii) The purchase price for the Non-
Performance Shares shall be $7.50 per share (i.e., the fair market value
of a share of the common stock of the Company on October 18, 1994, the
date the Non-Performance Grant was approved by the Board of Directors of
the Company, which fair market value is the closing price of the Company's
common stock on the National Association of Securities Dealers, Inc.
("NASD") NASDAQ National Market System on such October 18, 1994 date).
None of the Non-Performance Shares will be issued to the Executive until
the purchase price for such Non-Performance Shares to be acquired by the
Executive are fully paid by the Executive to the Company.
(iii) The Executive's option to
acquire the Non-Performance Shares shall terminate five (5) years from the
Vesting Date set forth in Section 3.h.(i) of this Agreement (the "Non-
Performance Grant Termination Date").
(iv) The Executive must be employed
by the Company on the applicable Non-Performance Grant Vesting Date in
order to be fully entitled to acquire the applicable Non-Performance
Shares.
(v) The Non-Performance Shares shall
be issued from the unregistered and authorized but unissued common stock
of the Company and shall be "restricted securities" in accordance with
Rule 144 of the Securities Act of 1933.
4. Term. The initial term of this Agreement shall begin on
the Effective Date and shall continue thereafter for a period of two (2)
years. Either party may cause the initial term of this Agreement to
extend for a second term for a period of one (1) year by the giving of
written notice to the other party within 90 days of the end of the initial
term of this Agreement. At the end of the initial or second term of this
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<PAGE>
Agreement, as the case may be, the term of this Agreement shall
automatically renew on a month to month basis, until terminated in
accordance with the provisions of Section 5 of this Agreement. The
initial, second and renewal terms of this Agreement shall be subject to
termination in accordance with the provisions of Section 5 of this
Agreement.
5. Termination. Unless the parties otherwise agree in
writing, termination of this Agreement in accordance with the provisions
of this Section shall also constitute termination of the Executive's
employment with the Company without the need for further notice or action
by either party.
a. Incapacity. In the event the Executive shall be
unable to perform her duties owing to illness or other incapacity for a
period of more than 90 consecutive days or an aggregate of 120 days in any
12 month period, the Company may, at its option, by written notice
addressed to the Executive, and sent subsequent to such 90 days or 120
days, terminate this Agreement as of a date to be specified in such
notice, but not less than 30 days after the date of the sending of such
notice; provided, however, that if prior to the date specified in such
notice the Executive's illness or other incapacity shall have terminated
and she shall have satisfactorily taken up and performed her duties under
this Agreement, the notice of termination shall be disregarded, and this
Agreement shall continue in full force and effect. (See Sections 10 and
11 of this Agreement for medical, sick leave and disability benefits).
b. Death. In the event of the Executive's death
during the term of her employment hereunder, this Agreement shall
terminate as of the date of death, and the Executive's spouse, or such
other person whom the Executive shall have designated in writing to the
Company, shall be paid the unpaid portion, if any, of the Executive's then
prevailing salary prorated to the date of the Executive's death. The
Company shall also pay to such spouse, or such other designated person, a
death benefit consistent with the Company's then current normal policies.
c. Withdrawal from Business. The Company shall
terminate this Agreement upon 60 days written notice to the Executive of a
bona fide decision by the Company to wind up its business and liquidate
its assets (other than in connection with a merger, consolidation, or
other event specified in Section 7), and all rights and obligations of
both parties hereto (except those under Section 6.d. hereof) shall cease
upon such termination. In this event, the Executive shall be paid the
unpaid portion, if any, of her then prevailing salary prorated to the date
of termination.
d. Termination by the Company For Cause. The
Company may terminate this Agreement if, within the reasonable judgment of
the Company the Executive shall (i) fail to carry out her duties
hereunder, (ii) act in a manner inimical to the Company, (iii)
unsatisfactorily perform her duties hereunder or (iv) not be in compliance
with the Company employee handbook.
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<PAGE>
e. Termination by the Company With Notice. The
Company may terminate this Agreement for a reason not set forth in Section
5.a., 5.c. or 5.d. at any time upon 90 days written notice to the
Executive. In the event the Executive is terminated for any reason other
than that set forth in Section 5.d., the Company shall pay to the
Executive, the unpaid portion, if any, of her then prevailing salary
prorated to the date of termination, and, in addition the Company shall
pay to the Executive a termination allowance (the "Termination Allowance")
equal to 10 months' salary, based upon, her then prevailing annual salary
rate. The Termination Allowance may, at the option of the Company, be
paid in periodic installments over the first 10 months following
termination in accordance with the Company's regular payroll periods or
over such lessor period as the Company may determine with the concurrence
of the Executive.
f. Termination by the Executive with Notice. The
Executive may terminate this Agreement at any time upon 120 days written
notice to the Company, in which event the Executive shall be paid the
unpaid portion, if any, of her then prevailing salary prorated to the date
of termination. In the event the parties cannot agree as to whether the
termination was, in effect, a termination by the Company or by the
Executive, the parties shall submit such dispute for arbitration, as
provided for in Section 15 of this Agreement. During a period of 180 days
following any such termination by the Executive, the Executive agrees to
provide such consulting services to the Company as it may reasonably
request, at such time or times within such period as may be mutually
agreed upon between the Company and the Executive. The Executive shall be
compensated for any such consulting services at 120% of the daily rate
when last employed by the Company plus reimbursement for any reasonable
out-of-pocket expenses incurred by the Executive in rendering such
consulting services.
6. Outside Business Interests, Employee Solicitation and
Company Property.
a. Without the written consent of the Board of
Directors of the Company, which consent shall not be unreasonably
withheld, the Executive agrees that during the term of this Agreement she
will not be affiliated with any competitor, supplier or customer of the
Company, as an officer, director, partner, employee, agent, consultant (or
similar capacity) or more than a 1% stockholder.
b. The Executive further agrees that during the term
of this Agreement she will not, directly or indirectly, encourage
employees of ITC (hereinafter meaning the Company and/or any of its
subsidiary companies or divisions now existing or hereafter formed) to
leave the employ of ITC for the purpose of seeking or obtaining employment
in any other activity with which the Executive intends to become
affiliated.
c. The Executive further agrees that during a period
of two (2) years following the termination of employment, regardless of
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<PAGE>
the reasons for such termination, she will not, directly or indirectly,
solicit, attempt to hire or encourage employees of ITC to leave the employ
of ITC.
d. The Executive further agrees that during the term
of this Agreement and following the termination of her employment she will
not, other than in the normal and valid course of her employment with the
Company, directly or indirectly, take with her or use any ITC property,
such as drawings, reports, data or proposals, design or manufacturing
information, wage and salary information, records or the like relating or
peculiar to ITC's products, research or development or other activities,
nor disclose to any others information of a privileged nature, without
prior written consent of the President of the Company.
e. The Executive further agrees that during the term
of this Agreement and during a period of two (2) years following the
termination of her employment, she will not, directly or indirectly,
participate (on her own behalf or on behalf or any other corporation,
venture or enterprise engaged in commercial activities) in any proposals
which were the subject of outstanding bids or solicitations of ITC or of
bids or solicitations in preparation by ITC during her employment by the
Company.
f. The Executive further agrees that in the event
she terminates without giving notice as required by Section 5.f., for a
period of one (1) year following such termination of employment, she will
not engage, directly or indirectly, as proprietor, partner, shareholder,
director, officer, employee, agent, consultant, or in any other capacity
or manner whatsoever, in any business activity competitive with the
business of ITC, as constituted during her employment and on the date of
termination of her employment. If any court of competent jurisdiction
shall determine this covenant to be unenforceable as to either the term or
scope imposed above, then this covenant nevertheless shall be enforceable
by such court as to such shorter term or such lesser scope as may be
determined by the court to be reasonable and enforceable.
g. The Executive further agrees that the provisions
of this Section 6 are of vital importance to the Company and incorporate
crucial Company policies and a means of safeguarding valuable proprietary
rights and interests of ITC. Accordingly, the Executive agrees that the
Company shall be entitled to injunctive relief, in addition to all other
remedies permitted by law, to enforce the provisions of this Section 6.
7. Merger or Acquisition. In the event the Company should
consolidate with, or merge into another corporation, or transfer all or
substantially all of its assets to another entity, this Agreement shall
continue in full force and effect and be binding upon the Company's
successor or transferee.
8. Personnel Policies. To the extent not otherwise set
forth herein, the terms and conditions of the Executive's employment and
- 6 -
<PAGE>
benefits shall be governed by the then prevailing operating and personnel
policies of the Company.
9. Vacations. The Executive shall be entitled to a
reasonable vacation during each year of her term of employment, as
approved by the Chief Executive Officer or the President of the Company.
10. Medical Expenses. Recognizing that the continued good
health of the Executive and her family is of vital concern to the Company,
since such good health is directly related to the services which the
Executive will be expected to render to the affairs of the Company, the
Executive agrees to undergo a thorough and complete medical examination at
least once during each year of her term of employment. The Executive
further agrees to have the examining physician report the findings of each
examination to the Company, if so requested. Moreover, in keeping with
the Company's objectives in this regard, the Company agrees to reimburse
the Executive up to $1,000 during each calendar year of this Agreement for
those reasonable medical (including the aforementioned annual medical
examination), dental and optical expenses incurred by the Executive during
each such year on behalf of herself and her immediate family if such
expenses are not otherwise reimbursed to the Executive through insurance.
The unused reimbursement in one calendar year will be carried forward up
to a maximum of $3,000; expenses not reimbursed in one calendar year can
be submitted for reimbursement in subsequent years. The Company, at its
own expense, shall also provide the Executive with medical insurance
coverage under its group medical insurance plan.
11. Sick Leave Benefits and Disability Insurance. During her
absence owing to illness or other capacity, the Executive shall be paid
sick leave benefits at her then prevailing salary rate, reduced by the
amount, if any, of Worker's Compensation or disability benefits under the
Company's group disability insurance plan. The Company, at its own
expense, shall provide the Executive with disability benefits under its
group disability insurance plan.
12. Life Insurance. The Company, at its own expense, shall
provide the Executive with life insurance benefits under its group life
insurance plan.
13. Breach of Agreement. In addition to any other remedy
available to the Company in the event of a material breach by the
Executive of any of the covenants set forth in this Agreement, the
Company's obligation to pay the Executive any incentive payouts, deferred
compensation, termination allowance or other benefits accrued but unpaid
as of the date of such breach (except any vested rights the Executive may
have under a Company Profit Sharing Retirement Plan) shall terminate, as
will the Executive's right to exercise any unexercised stock options.
14. Change of Control.
-----------------
a. In General. For purposes of this Agreement, a
"Change Of Control" shall be the occurrence of any one or more of the
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<PAGE>
following events, and the effective date of a Change Of Control shall be
the effective date on which such event occurs:
(i) A merger of the Company into another
corporation in which the Company is not the surviving corporation, other
than a merger that manifestly does not affect control such as a merger to
change the state of incorporation.
(ii) A sale of substantially all of the
assets of the Company.
(iii) Any arrangement that gives to an entity
or person (or group of entities or persons acting in concert) the power to
name a majority of the Board of Directors of the Company.
(iv) Any other circumstance constituting an
effective change of ownership or control within the meaning of Section
280G of the Internal Revenue Code and Regulations promulgated thereunder.
b. Consequences of a Change Of Control. In the
event of a Change Of Control, the Executive shall be entitled to remain in
the employ of the Company, in a manner consistent with the terms of this
Agreement. If within one (1) year of the effective date of a Change Of
Control (i) the Executive's employment with the Company is terminated by
the Company for any reason other than that set forth in Section 5.d. above
or (ii) the Executive voluntarily terminates her employment with the
Company, the Company shall pay to the Executive, the unpaid portion, if
any, of her then prevailing salary prorated to the date of termination,
and in addition the Company shall pay to the Executive a Termination
Allowance equal to 12 months' salary, based upon, her then prevailing
annual salary rate, less such number of months salary that the Executive
actually received from the effective date of the Change Of Control through
the date of termination. The Termination Allowance may, at the option of
the Company, be paid in periodic installments over the number of months'
salary to be paid, in accordance with the Company's regular payroll
periods or over such lessor period as the Company may determine with the
concurrence of the Executive.
15. Disputes and Arbitration. Any dispute arising out of or
concerning this Agreement, which is not disposed of by agreement between
the two parties, shall be decided by an Arbitrator chosen by the parties.
Either party may initiate an arbitration action by a written notification
to the other. The parties agree to choose the Arbitrator within 15 days
thereafter. The Arbitrator will follow the rules for arbitrations of the
American Arbitration Association to the extent that said rules are not
inconsistent with the terms and conditions of this Section. The decision
of the Arbitrator shall be final and conclusive in the absence of
statutory grounds for setting it aside. Neither party shall be reimbursed
for the costs that she or it may sustain in connection with an arbitration
under this Agreement.
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<PAGE>
16. Alteration, Amendment, or Termination. No change or
modification of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any provision of
this Agreement shall be valid unless in writing and signed by the person
against whom it is sought to be enforced. The failure of any party at any
time to insist upon strict performance of any condition, promise,
agreement or understanding set forth herein shall not be construed as a
waiver or relinquishment of the right to insist upon strict performance of
the same condition, promise, agreement, or understanding at a future time.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
17. Integration. This Agreement sets forth (and is intended
to be an integration of) all of the promises, agreements, conditions,
understandings, warranties and representations, oral or written, express
or implied, among them with respect to the terms of the employment
relationship and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, among them with respect to the terms of the employment
relationship other than as set forth herein.
18. Conflicts of Law. This Agreement shall be subject to and
governed by the laws of the Commonwealth of Virginia irrespective of the
fact that one or more of the parties now is or may become a resident of a
different state.
19. Benefits and Burden. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties hereto and their
respective successors, heirs, and personal representatives. This
Agreement shall not be assignable.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date and year first above written.
WITNESS/ATTEST: COMPANY:
INDUSTRIAL TRAINING CORPORATION
________________________ By: _____________________________
Name:
Title:
EXECUTIVE:
________________________ ___________________________________
ELAINE H. BABCOCK
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<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of October __, 1993 by and between
Industrial Training Corporation, a Maryland Corporation ("ITC") and Steven
L. Roden of Atlanta, Georgia ("Roden").
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions of the employment relationship between ITC
and Roden;
WHEREAS, Roden is currently serving as President of Comsell,
Inc.;
WHEREAS, the Board of Directors of ITC believes it is in the best
interests of ITC to enter into this Agreement with Roden in order to
assure continuity with respect to the operations of Comsell, Inc. which is
being acquired by ITC contemporaneous with the execution of this
Agreement; and
WHEREAS, the Board of Directors of ITC has approved and
authorized the execution of this Agreement with Roden to take effect as of
the date first written above;
NOW THEREFORE, it is agreed as follows:
1. Employment. Roden is employed by ITC and shall have such
powers and duties as may from time to time be prescribed by the President,
Chief Executive Officer and Board of Directors of ITC. Roden shall devote
his best efforts and substantially all his business time and attention to
the business and affairs of ITC's Comsell operations, unless directed
otherwise by the President, Chief Executive Officer and Board of
Directors.
2. Compensation. ITC agrees to pay Roden during the term of
this Agreement an annual salary at the rate of $120,000 per year, payable
in accordance with ITC's regular payroll practices for executive
employees.
3. Bonus/Incentive Compensation. ITC agrees that for 1993
Roden will be considered for incentive compensation on terms consistent
with those for comparable executives as described in the 1993 ITC
Incentive Compensation Plan.
4. Stock Options. Attached to this Agreement is a letter
executed on behalf of the ITC Stock Option Committee pursuant to which
Roden is granted options to purchase 30,000 shares of ITC Common Stock on
the terms and conditions set forth therein.
5. Benefits.
(A) Participation in Retirement and Benefit Plans. Roden
shall be entitled to participate in all ITC plans relating to pension,
<PAGE>
Employment Agreement
Steven L. Roden
Page 2
thrift, bonus, deferred profit-sharing, group life insurance, medical or
disability coverage, education or other retirement or employee benefits
that ITC may adopt or maintain for the benefit of its employees generally.
If and to the extent that any such plans or programs provide for waiting
periods or length of service requirements or vesting requirements or level
of benefits based upon length of service, service by Roden with Comsell,
Inc. shall be deemed to have been service with ITC for purposes of such
plans or programs.
(B) Fringe Benefits. Roden shall be eligible to participate
in any other fringe benefits which may be or become applicable to ITC's
employees generally.
6. Term. The term of employment under this Agreement shall
be a period of one year, commencing as of the date of this Agreement.
Thereafter, this Agreement shall be renewed for an additional period of
one year without further action on the part of either party unless notice
of non-renewal is given not less than 60 days prior to the scheduled
termination date.
7. Standards. Roden shall perform his duties under this
Agreement in accordance with such reasonable standards as are established
from time to time by the President, Chief Executive Officer and Board of
Directors.
8. Vacations. Roden shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his duties under
this Agreement, all such voluntary absences to count as vacation time,
without loss of pay, provided that:
(a) Roden's entitlement to paid vacation time shall be
in accordance with policies established in ITC's employee or
personnel manual or otherwise generally in effect for its
employees; and
(b) the timing and duration of vacations shall be
scheduled in a reasonable manner consistent with Roden's
obligations as an employee of ITC and after consultation with the
President and Chief Executive Officer.
9. Termination.
-----------
(A) Roden's employment under this Agreement may be terminated
at any time by the Board of Directors. Upon termination of Roden by ITC
other than for "cause" Roden shall be entitled to receive in satisfaction
of all obligations under this Agreement and as an ITC employee an amount
equal to one year's compensation in the amount set forth in Section 2 of
this Agreement. Roden shall have no right to receive compensation or
<PAGE>
Employment Agreement
Steven L. Roden
Page 3
other benefits under this Agreement for any period after termination for
"cause." For purposes of this Agreement, termination for "cause" shall
include termination for personal dishonesty, incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than a law, rule or regulation relating to a
traffic violation or similar offense) or final cease-and-desist order, or
material breach of any provision of this Agreement.
(B) This Agreement may be terminated by Roden at any time
upon 60 days written notice to ITC or upon such shorter period as may be
agreed upon between Roden and the Board of Directors. In the event of
such termination, Roden shall be entitled to receive in satisfaction of
all obligations under this Agreement and as an ITC employee an amount
equal to 90 days compensation at the rate set forth in Section 2 of this
Agreement; provided, however, that in the event Roden shall terminate his
employment with ITC during the last 90 days of the term provided for in
this Agreement or any renewal of this Agreement, ITC shall be obligated
only to continue compensate Roden until the scheduled termination date.
(C) In the event of Roden's death during the term of this
Agreement, Roden's estate, or such person as Roden may have previously
designated in writing, shall be entitled to receive the salary due to
Roden through the last day of the calendar month in which his death shall
have occurred.
10. Disability. If Roden shall become disabled or
incapacitated to the extent that he is unable to perform in the capacity
anticipated, he shall be entitled to receive disability benefits of the
type generally provided for employees of ITC. In such event, the rights
of Roden to receive the salary stated in Paragraph 2 hereof shall be
suspended until Roden is able to fully perform his duties.
11. Other Business Interests.
------------------------
(A) Roden shall not, during the term of this Agreement, have
any other employment except with the prior approval of the Board of
Directors and that without the written consent of the Board of Directors,
Roden agrees that during the term of this Agreement he will not be
affiliated with any competitor, supplier or customer of ITC, as an
officer, director, partner, employee, agent, consultant (or similar
capacity) or more than a 1% stockholder.
(B) Roden further agrees that during the term of this
Agreement he will not, directly or indirectly, encourage any ITC employees
(including employees of any ITC subsidiary or affiliate now existing or
hereafter formed) to leave ITC's employ for the purpose of seeking or
<PAGE>
Employment Agreement
Steven L. Roden
Page 4
obtaining employment in any other activity with which Roden intends to
become affiliated.
(C) Roden further agrees that during a period of two years
following the termination of employment with ITC, regardless of the
reasons for such termination, he will not, directly or indirectly, hire,
attempt to hire or encourage ITC employees to leave ITC's employ.
(D) Roden further agrees that following the termination of
his employment with ITC, he will not, directly or indirectly, take with
him or use any ITC property, such as drawings, reports, data or proposals,
design or manufacturing information, research or development of other
activities, wage and salary information, customer lists or prospect lists,
records or the like relating or peculiar to ITC, its business or its
products, nor disclose to any others information of a proprietary or
privileged nature, without prior written consent of the President or Chief
Executive Officer.
(E) Roden further agrees that during a period of two years
following the termination of his employment he will not, directly or
indirectly, participate (on his/her own behalf on or behalf of any other
corporation, venture or enterprise engaged in commercial activities) in
any matters which were the subject of outstanding bids or solicitations by
ITC or of bids or solicitations in preparation by ITC during his employ by
ITC.
(F) Roden further agrees that in the event he voluntarily
terminates employment with ITC whether pursuant to Section 9(B) or
otherwise, for a period of one year following such termination, he will
not engage, directly or indirectly, as proprietor, partner, shareholder,
director, officer, employee, agent, consultant, or in any other capacity
or manner whatsoever, in any business activity competitive with the
business of ITC as constituted during his employment and on the date of
termination of employment. If any court of competent jurisdiction shall
determine this covenant to be unenforceable as to either the term or scope
imposed above, then this covenant nevertheless shall be enforceable by
such court as to such shorter term or such lesser scope as may be
determined by the court to be reasonable and enforceable.
(G) Roden further agrees that the provisions of this Section
11 are of vital importance to ITC and incorporate crucial policies and a
means of safeguarding ITC's valuable proprietary rights and interests.
Accordingly, Roden agrees that ITC shall be entitled to injunctive relief,
in addition to all other remedies permitted by law, to enforce the
provisions of this Section 11.
12. Exclusive Agreement; Successors. This Agreement
supersedes any and all prior employment understandings or arrangements
<PAGE>
Employment Agreement
Steven L. Roden
Page 5
between Roden and ITC or Comsell, Inc. and any of its parent companies or
affiliates. This Agreement shall be binding upon and inure to the benefit
of ITC and its successors and assigns. This Agreement is personal to
Roden and Roden may not assign this Agreement.
13. Amendments. No amendments or additions to this Agreement
shall be binding unless in writing and signed by both parties, except as
herein otherwise provided. Failure to assert a breach or any rights under
this Agreement or waiver of a breach of any provision of this Agreement
shall not be construed as a waiver of any subsequent breach.
14. Headings, Severability, Governing Law. The paragraph
headings used in this Agreement are solely for convenience and shall not
affect its interpretation. The provisions of this Agreement are severable
and the invalidity or unenforceability of any one or more shall not affect
the validity or enforceability of the others. This agreement shall be
governed by the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first hereinabove written.
INDUSTRIAL TRAINING CORPORATION
By: /s/ G. H. Kaiz
-------------------------
G. H. KAIZ
Chairman of the Board
STEVEN L. RODEN
/s/ Steven L. Roden
--------------------------
STEVEN L. RODEN
<PAGE>
INDUSTRIAL TRAINING CORPORATION
Employment Agreement
This Agreement made by and between Industrial Training Corporation
(hereinafter called the "Company") and Philip J. Facchina (hereinafter
called the "Executive"), effective as of January 1, 1995.
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions of the employment relationship between ITC and
Executive;
WHEREAS, Executive has served since October 20, 1992 as Chief Financial
Officer of ITC and Vice President since October 27, 1992;
WHEREAS, the previous employment agreement dated October 27, 1993 by and
between Executive and the Company has expired; and
WHEREAS, the Board of Directors of ITC believes it is in the best
interests of ITC to enter into this Agreement with Executive in order to
recognize a mutual commitment to the growth and development of ITC and
Executive's contribution to ITC.
NOW THEREFORE, it is agreed as follows:
1. Employment. The Company agrees to employ the Executive and shall
have such duties as may be reasonably assigned to him from time
to time by the President, Chief Executive Officer and Board of
Directors.
2. Acceptance and Standards. The Executive hereby accepts employment
upon the terms and conditions set forth in this Agreement. During
the Term of this Agreement, and subject to the provisions of
Section 6(a) of this Agreement, the Executive agrees to devote
his full business time and services to the faithful performance
of the duties which may be reasonably assigned to him and which
are consistent with his Executive office. Executive shall perform
his duties under this Agreement in accordance with such
reasonable standards as are established from time to time by the
President, Chief Executive Officer and Board of Directors.
3. Compensation. For all services rendered by the Executive under
this Agreement, the Company shall pay the Executive a base salary
of $125,000 per year, payable in periodic installments in
accordance with the Company's normal payroll practices for
salaried employees. The Company agrees that, subject to approval
by the Board of Directors, Executive will be included in the
Company's Incentive Compensation Plans on an annual basis and
will participate therein in accordance with the terms of those
Plans. Nothing herein shall affect the eligibility of the
Executive to receive salary increases, bonus awards, stock option
grants, pension, profit-sharing arrangement, employee benefits
and the like which the Company may from time to time grant or
<PAGE>
make available to the Executive. Once each year, consideration
shall be given by the Board of Directors of the Company to a
salary increase for the Executive and whether to award a bonus to
the Executive, and if so, in what amount.
4. Term. The initial Term of this Agreement shall begin on January
1, 1995 (the initial "commencement date") and shall continue
thereafter for one year through December 31, 1995. Subsequent to
December 31, 1995, this Agreement shall, without further action
on the part of Executive or the Company, be extended for
additional one (1) year terms beginning January 1 of each
subsequent year, provided that neither Executive or the Company
have given notice of termination, or otherwise terminated in
accordance with the provisions of Section 5 of this Agreement.
5. Termination. Unless the parties otherwise agree in writing,
termination of this Agreement in accordance with the provisions
of this Section shall also constitute termination of the
Executive's employment with the Company without the need for
further notice or action by either party.
(a) Incapacity. In the event the Executive shall be unable to
perform his duties owing to illness or other incapacity
for a period of more than 90 consecutive days or an
aggregate of 120 days in any 12 month period, the Company
may, at its option, by written notice addressed to the
Executive, and sent subsequent to such 90 days or 120
days, terminate this Agreement as of a date to be
specified in such notice, but not less than 30 days after
the date of the sending of such notice; provided,
however, that if prior to the date specified in such
notice the Executive's illness or other incapacity shall
have terminated and he shall have satisfactorily taken up
and performed his duties under this Agreement, the notice
of termination shall be disregarded, and this Agreement
shall continue in full force and effect. (See Sections 11
and 12 of this Agreement for medical, sick leave and
disability benefits).
(b) Death. In the event of the Executive's death during the
term of his/her employment hereunder, this Agreement
shall terminate as of the date of death, and the
Executive's spouse, or such other person whom the
Executive shall have designated in writing to the
Company, shall be paid the Executive's then prevailing
salary prorated to the date of the Executive's death. The
Company shall also pay to such spouse, or such other
designated person, a death benefit of $5,000.
(c) Withdrawal from Business. The Company shall terminate
this Agreement upon 60 days written notice to the
Executive of a bona fide decision by the Company to wind
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<PAGE>
up its business and liquidate its assets (other than in
connection with a merger, consolidation, or other event
specified in Section 7), and all rights and obligations
of both parties hereto (except those under Section 6(d)
hereof) shall cease upon such termination. In this event,
the Executive shall be paid his then prevailing salary
prorated to the date of termination.
(d) Termination by the Company With Notice. The Company may
terminate this Agreement for a reason not set forth in
Section 5(a) or 5(c) at any time upon 60 days written
notice to the Executive. In this event the Executive
shall be paid his then prevailing salary prorated to the
date of termination, and, in addition a termination
allowance equal to 12 months' salary, based upon the
highest annual salary rate paid the Executive during the
Term of this Agreement. The termination allowance may, at
the option of the Company, be paid in periodic
installments over the first 12 months following
termination in accordance with the Company's regular
payroll periods or over such lesser period as the Company
may determine with the concurrence of the Executive.
(e) Termination by the Executive with Notice. The Executive
may terminate this Agreement at any time upon 4 months
written notice to the Company, in which event the
Executive shall be paid his then prevailing salary
prorated to the date of termination. In the event the
parties cannot agree as to whether the termination was,
in effect, a termination by the Company or by the
Executive, the parties shall submit such dispute for
arbitration, as provided for in Section 16 of this
Agreement. During a period of 6 months following any such
termination by the Executive, the Executive agrees to
provide such consulting services to the Company as it may
reasonably request, at such time or times within such
period as may be mutually agreed upon between the Company
and the Executive. The Executive shall be compensated for
any such consulting services at a rate of $1200 per day,
plus reimbursement for any reasonable out-of-pocket
expenses incurred by the Executive in rendering such
consulting services.
6. Outside Business Interests, Employee Solicitation and Company
Property.
(a) Without the written consent of the Board of Directors of
the Company, which consent shall not be unreasonably
withheld, the Executive agrees that during the Term of
this Agreement he will not be affiliated with any
competitor, supplier or customer of the Company, as an
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<PAGE>
officer, director, partner, employee, agent, consultant
(or similar capacity) or more than a 1% stockholder.
(b) The Executive further agrees that during the Term of this
Agreement he will not, directly or indirectly, encourage
employees of the Industrial Training Corporation
(hereinafter meaning the Company and/or any of its
subsidiary companies now existing or hereafter formed) to
leave the employ of the Industrial Training Corporation
for the purpose of seeking or obtaining employment in any
other activity with which the Executive intends to become
affiliated.
(c) The Executive further agrees that during a period of two
years following the termination of employment, regardless
of the reasons for such termination, he will not,
directly or indirectly, hire, attempt to hire or
encourage employees of the Industrial Training
Corporation to leave the employ of the Industrial
Training Corporation.
(d) The Executive further agrees that following the
termination of his employment he will not, directly or
indirectly, take with him or use any Industrial Training
Corporation property, such as drawings, reports, data or
proposals, design or manufacturing information, wage and
salary information, records or the like relating or
peculiar to the Industrial Training Corporation's
products, research or development or other activities,
nor disclose to any others information of a privileged
nature, without prior written consent of the President of
the Company.
(e) The Executive further agrees that during a period of two
years following the termination of his employment he will
not, directly or indirectly, participate (on his own
behalf or on behalf of any other corporation, venture or
enterprise engaged in commercial activities) in any
matters which were the subject of outstanding bids or
solicitations of the Industrial Training Corporation or
of bids or solicitations in preparation by the Industrial
Training Corporation during his employ by the Company.
(f) The Executive further agrees that in the event he
voluntarily terminates employment with ITC for a period
of one year following such termination of employment, he
will not engage, directly or indirectly, as proprietor,
partner, shareholder, director, officer, employee, agent,
consultant, or in any other capacity or manner
whatsoever, in any business activity competitive with the
business of the Industrial Training Corporation, as
constituted during his employment and on the date of
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<PAGE>
termination of his employment. If any court of competent
jurisdiction shall determine this covenant to be
unenforceable as to either the term or scope imposed
above, then this covenant nevertheless shall be
enforceable by such court as to such shorter term or such
lesser scope as may be determined by the court to be
reasonable and enforceable.
(g) The Executive further agrees that the provisions of this
Section 6 are of vital importance to the Company and
incorporate crucial company policies and a means of
safeguarding valuable proprietary rights and interests of
the Industrial Training Corporation. Accordingly, the
Executive agrees that the Company shall be entitled to
injunctive relief, in addition to all other remedies
permitted by law, to enforce the provisions of this
Section 6.
7. Merger or Acquisition. In the event the Company should
consolidate with, or merge into another corporation, or transfer
all or substantially all of its assets to another entity, this
Agreement shall continue in full force and effect. Additionally,
in the event that any of the foregoing occur and as a result,
there is a change in control of the Company, the Executive shall
be entitled to receive on the date of closing of any such
transaction an amount equal to two years of compensation in the
amount set forth in Section 3 of this Agreement.
8. Personnel Policies. To the extent not otherwise set forth
herein, the conditions of employment shall be governed by the
operating and personnel policies of the Company.
9. Vacations. The Executive shall be entitled to a reasonable
vacation each year of his term of employment.
10. Medical Expenses. Recognizing that the continued good health of
the Executive and his family is of vital concern to the Company,
since such good health is directly related to the services which
the Executive will be expected to render to the affairs of the
Company, the Executive agrees to undergo a thorough and complete
medical examination at least once during each year of his term of
employment. The Executive further agrees to have the examining
physician report the findings of each examination to the Company,
if so requested. Moreover, in keeping with the Company's
objectives in this regard, the Company agrees to reimburse the
Executive up to $1,000 during each calendar year of this
Agreement for those reasonable medical (including the
aforementioned annual medical examination), dental and optical
expenses incurred by the Executive during each such year in
behalf of himself and his immediate family if such expenses are
not otherwise reimbursed to the Executive through insurance. The
unused reimbursement in one calendar year will be carried forward
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<PAGE>
up to a maximum of $3,000; expenses not reimbursed in one
calendar year can be submitted for reimbursement in subsequent
years. The Company, at its own expense, shall also provide the
Executive with medical insurance coverage under its group medical
insurance plan.
11. Sick Leave Benefits and Disability Insurance. During his absence
owing to illness or other capacity, the Executive shall be paid
sick leave benefits at his then prevailing salary rate, reduced
by the amount, if any, of Worker's Compensation or disability
benefits under the Company's group disability insurance plan. The
Company, at its own expense, shall provide the Executive with
disability benefits under its group disability insurance plan.
12. Life Insurance. The Company, at its own expense, shall provide
the Executive with life insurance benefits under its group life
insurance plan.
13. Non-Performance Based Stock Options. The Company hereby grants
(the "Non-Performance Grant") to Executive the option to acquire
25,000 shares of the common stock of ITC (the "Non-Performance
Shares") in accordance with the terms and conditions set forth
below. The terms of the Non-Performance Grant shall not be in
accordance with the terms and conditions of ITC's 1992 Key
Employee Incentive Stock Option Plan (the "ISO Plan"). The Non--
Performance Grant shall be subject to the following terms and
conditions:
(a) The Non-Performance Shares are not subject to a vesting
schedule and as a result, are immediately vested.
Therefore, Executive is immediately fully entitled to
acquire the applicable Non-Performance Shares.
(b) The purchase price for the Non-Performance Shares shall
be $6.50 per share (i.e., the fair market value of a
share of the common stock of ITC on February 8, 1995, the
date the Non-Performance Grant was approved by the Board
of Directors of ITC, which fair market value is the
closing price of ITC's common stock on the National
Association of Securities Dealers, Inc. ("NASD") NASDAQ
National Market System on such date. None of the
Non-Performance Shares will be issued to Executive until
the purchase price for such Non-Performance Shares to be
acquired by Executive are fully paid by Executive to ITC.
(c) Executive's option to acquire the Non-Performance Shares
shall terminate five (5) years from February 8, 1995 (the
"Non-Performance Grant Termination Date"), except that if
the Executive's employment is terminated, for whatever
reason, Executive shall have 90 days from the date of
termination to option for the Non-Performance Shares.
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<PAGE>
(d) The Non-Performance Shares shall be issued from the
unregistered and authorized but unissued common stock of
ITC and shall be "restricted securities" in accordance
with Rule 144 of the Securities Act of 1933.
14. Breach of Agreement. In addition to any other remedy available
to the Company in the event of a material breach by the Executive
of any of the covenants set forth in this Agreement, the
Company's obligation to pay the Executive any incentive payouts,
deferred compensation, termination allowance or other benefits
accrued but unpaid as of the date of such breach (except any
vested rights the Executive may have under a Company Profit
Sharing Retirement Plan) shall terminate.
15. Waivers of Breach. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed
as a waiver of any subsequent breach.
16. Disputes and Arbitration. Any dispute arising out of or
concerning this Agreement, which is not disposed of by agreement
between the two parties, shall be decided by an Arbitrator chosen
by the parties. Either party may initiate an arbitration action
by a written notification to the other. The parties agree to
choose the Arbitrator within 15 days thereafter. The Arbitrator
will follow the rules for arbitrations of the American
Arbitration Association to the extent that said rules are not
inconsistent with the terms and conditions of this Section. The
decision of the Arbitrator shall be final and conclusive in the
absence of statutory grounds for setting it aside. If the
Executive prevails in the arbitration proceedings, the Company
shall immediately reimburse the Executive for the out-of-pocket
costs of such proceedings, including reasonable attorney's fees,
and pay to him/her the amount of the arbitration award, whether
or not the Company seeks to have the award set aside. The
Executive shall not be reimbursed for the costs that he/she may
sustain on an appeal by him/her of the Arbitrator's decision.
17. Exclusive Agreement; Successors. This Agreement supersedes any
and all prior employment understandings or arrangements between
Executive and the Company. This Agreement shall be binding upon
and inure to the benefit of the Company and its successors and
assigns. This Agreement is personal to Executive and Executive
may not assign this Agreement.
18. Amendments. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties, except
as herein otherwise provided. Failure to assert a breach or any
rights under this Agreement or waiver of a breach of any
provision of this Agreement shall not be construed as a waiver of
any subsequent breach.
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<PAGE>
19. Headings, Severability, Governing Law. The paragraph headings
used in this Agreement are solely for convenience and shall not
affect its interpretation. The provisions of this Agreement are
severable and the invalidity or unenforceability of any one or
more shall not affect the validity or enforceability of the
others. This Agreement shall be governed by the laws of the
State of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
Witness: Executive:
____________________________ _______________________________
Philip J. Facchina
Attest: Industrial Training Corporation
___________________________ ________________________________
Gerald H. Kaiz By: James H. Walton
Secretary Title: President
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<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement made by and between Industrial Training
Corporation (hereinafter called the "Company") and Robert F. VanStry
(hereinafter called the "Executive").
1. Employment. The Company agrees to employ the Executive
as Vice President, with such duties as may be reasonably assigned to
him/her from time to time by the Board of Directors of the company then in
office, or its designee.
2. Acceptance. The Executive hereby accepts employment upon
the terms and conditions set forth in this Agreement. During the Term of
this Agreement, and subject to the provisions of Section 6(a) of this
Agreement, the Executive agrees to devote his/her full business time and
services to the faithful performance of the duties which may be reasonably
assigned to him/her and which are consistent with his/her Executive office
under Section 1 of this Agreement.
3. Compensation. For all services rendered by the Executive
under this Agreement, the Company shall pay the Executive a basic salary
of $54,000 per year, payable in periodic installments in accordance with
the Company's normal payroll practices for salaried employees. Nothing
herein shall affect the eligibility of the Executive to receive salary
increases, bonus awards, stock option grants, pension, profit-sharing
arrangement, employee benefits and the like which the Company may from
time to time grant or make available to the Executive. Once each year,
consideration shall be given by the Board of Directors of the Company to a
salary increase for the Executive and whether to award a bonus to the
Executive, and if so, in what amount.
4. Term. The initial Term of this Agreement shall begin on
January 1, 1987 (the initial "commencement date") and shall continue
thereafter for one year through December 31, 1987. The second Term of
this Agreement shall, without further action on the part of the Company or
the Executive, automatically begin on January 2, 1987, and shall continue
thereafter for one year through January 1, 1988. Each subsequent and
successive Term of this Agreement shall automatically begin on the
calendar day next following the commencement date of the immediately
preceding Term (i.e., on January 3, 1987, on January 4, 1987, etc.) and
shall continue thereafter for one year (i.e., through January 2, 1988,
through January 3, 1988, etc.), unless terminated in accordance with the
provisions of Section 5 of this Agreement.
5. Termination. Unless the parties otherwise agree in
writing, termination of this Agreement in accordance with the provisions
of this Section shall also constitute termination of the Executive's
employment with the Company without the need for further notice or action
by either party.
(a) Incapacity. In the event the Executive shall be unable
to perform his/her duties owing to illness or other incapacity for a
period of more than 90 consecutive days or an aggregate of 120 days in any
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<PAGE>
12 month period, the Company may, at its option, by written notice
addressed to the Executive, and sent subsequent to such 90 days or 120
days, terminate this Agreement as of a date to be specified in such
notice, but not less than 30 days after the date of the sending of such
notice; provided, however, that if prior to the date specified in such
notice the Executive's illness or other incapacity shall have terminated
and he/she shall have satisfactorily taken up and performed his/her duties
under this Agreement, the notice of termination shall be disregarded, and
this Agreement shall continue in full force and effect. (See Sections 11
and 12 of this Agreement for medical, sick leave and disability benefits).
(b) Death. In the event of the Executive's death during the
term of his/her employment hereunder, this Agreement shall terminate as of
the date of death, and the Executive's spouse, or such other person whom
the Executive shall have designated in writing to the Company, shall be
paid the Executive's then prevailing salary prorated to the date of the
Executive's death. The Company shall also pay to such spouse, or such
other designated person, a death benefit of $5,000.
(c) Withdrawal from Business. The Company shall terminate
this Agreement upon 60 days written notice to the Executive of a bona fide
decision by the Company to wind up its business and liquidate its assets
(other than in connection with a merger, consolidation, or other event
specified in Section 7), and all rights and obligations of both parties
hereto (except those under Section 6(d) hereof) shall cease upon such
termination. In this event, the Executive shall be paid his/her then
prevailing salary prorated to the date of termination.
(d) Termination by the Company With Notice. The Company may
terminate this Agreement for a reason not set forth in Section 5(a) or
5(c) at any time upon 60 days written notice to the Executive. In this
event the Executive shall be paid his/her then prevailing salary prorated
to the date of termination, and, in addition a termination allowance equal
to 10 months' salary, based upon the highest annual salary rate paid the
Executive during the Term of this Agreement. The termination allowance
may, at the option of the Company, be paid in periodic installments over
the first 10 months following termination in accordance with the Company's
regular payroll periods or over such lessor period as the Company may
determine with the concurrence of the Executive.
(e) Termination by the Executive with Notice. The Executive
may terminate this Agreement at any time upon 4 months written notice to
the Company, in which event the Executive shall be paid his/her then
prevailing salary prorated to the date of termination. In the event the
parties cannot agree as to whether the termination was, in effect, a
termination by the Company or by the Executive, the parties shall submit
such dispute for arbitration, as provided for in Section 16 of this
Agreement. During a period of 6 months following any such termination by
the Executive, the Executive agrees to provide such consulting services to
the Company as it may reasonably request, at such time or times within
such period as may be mutually agreed upon between the Company and the
Executive. The Executive shall be compensated for any such consulting
services at 120% of the daily rate when last employed by the Company plus
reimbursement for any reasonable out-of-pocket expenses incurred by the
Executive in rendering such consulting services.
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<PAGE>
6. Outside Business Interests, Employee Solicitation and
Company Property.
(a) Without the written consent of the Board of Directors of
the Company, which consent shall not be unreasonably withheld, the
Executive agrees that during the Term of this Agreement he/she will not be
affiliated with any competitor, supplier or customer of the Company, as an
officer, director, partner, employee, agent, consultant (or similar
capacity) or more than a 1% stockholder.
(b) The Executive further agrees that during the Term of this
Agreement he/she will not, directly or indirectly, encourage employees of
the Industrial Training Corporation (hereinafter meaning the Company
and/or any of its subsidiary companies now existing or hereafter formed)
to leave the employ of the Industrial Training Corporation for the purpose
of seeking or obtaining employment in any other activity with which the
Executive intends to become affiliated.
(c) The Executive further agrees that during a period of two
years following the termination of employment, regardless of the reasons
for such termination, he/she will not, directly or indirectly, hire,
attempt to hire or encourage employees of the Industrial Training
Corporation to leave the employ of the Industrial Training Corporation.
(d) The Executive further agrees that following the
termination of his/her employment he/she will not, directly or indirectly,
take with him/her or use any Industrial Training Corporation property,
such as drawings, reports, data or proposals, design or manufacturing
information, wage and salary information, records or the like relating or
peculiar to the Industrial Training Corporation's products, research or
development or other activities, nor disclose to any others information of
a privileged nature, without prior written consent of the President of the
Company.
(e) The Executive further agrees that during a period of two
years following the termination of his/her employment he/she will not,
directly or indirectly, participate (on his/her own behalf or on behalf of
any other corporation, venture or enterprise engaged in commercial
activities) in any matters which were the subject of outstanding bids or
solicitations of the Industrial Training Corporation or of bids or
solicitations in preparation by the Industrial Training Corporation during
his/her employ by the Company.
(f) The Executive further agrees that in the event he/she
terminates without giving notice as required by Section 5(e) for a period
of one year following such termination of employment, he/she will not
engage, directly or indirectly, as proprietor, partner, shareholder,
director, officer, employee, agent, consultant, or in any other capacity
or manner whatsoever, in any business activity competitive with the
business of the Industrial Training Corporation, as constituted during
his/her employment and on the date of termination of his/her employment.
If any court of competent jurisdiction shall determine this covenant to be
unenforceable as to either the term or scope imposed above, then this
covenant nevertheless shall be enforceable by such court as to such
shorter term or such lesser scope as may be determined by the court to be
reasonable and enforceable.
(g) The Executive further agrees that the provisions of this
Section 6 are of vital importance to the Company and incorporate crucial
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Company policies and a means of safeguarding valuable proprietary rights
and interests of the Industrial Training Corporation. Accordingly, the
Executive agrees that the Company shall be entitled to injunctive relief,
in addition to all other remedies permitted by law, to enforce the
provisions of this Section 6.
7. Merger or Acquisition. In the event the Company should
consolidate with, or merge into another corporation, or transfer all or
substantially all of its assets to another entity, this Agreement shall
continue in full force and effect.
8. Personnel Policies. To the extent not otherwise set
forth herein, the conditions of employment shall be governed by the
operating and personnel policies of the Company.
9. Vacations. The Executive shall be entitled to a
reasonable vacation each year of his/her term of employment.
10. Medical Expenses. Recognizing that the continued good
health of the Executive and his/her family is of vital concern to the
Company, since such good health is directly related to the services which
the Executive will be expected to render to the affairs of the Company,
the Executive agrees to undergo a thorough and complete medical
examination at least once during each year of his/her term of employment.
The Executive further agrees to have the examining physician report the
findings of each examination to the Company, if so requested. Moreover,
in keeping with the Company's objectives in this regard, the Company
agrees to reimburse the Executive up to $1,000 during each calendar year
of this Agreement for those reasonable medical (including the
aforementioned annual medical examination), dental and optical expenses
incurred by the Executive during each such year in behalf of
himself/herself and his/her immediate family if such expenses are not
otherwise reimbursed to the Executive through insurance. The unused
reimbursement in one calendar year will be carried forward up to a maximum
of $3,000; expenses not reimbursed in one calendar year can be submitted
for reimbursement in subsequent years. The Company, at its own expense,
shall also provide the Executive with medical insurance coverage under its
group medical insurance plan.
11. Sick Leave Benefits and Disability Insurance. During
his/her absence owing to illness or other capacity, the Executive shall be
paid sick leave benefits at his/her then prevailing salary rate, reduced
by the amount, if any, of Worker's Compensation or disability benefits
under the Company's group disability insurance plan. The Company, at its
own expense, shall provide the Executive with disability benefits under
its group disability insurance plan.
12. Life Insurance. The Company, at its own expense, shall
provide the Executive with life insurance benefits under its group life
insurance plan.
13. Breach of Agreement. In addition to any other remedy
available to the Company in the event of a material breach by the
Executive of any of the covenants set forth in this Agreement, the
Company's obligation to pay the Executive any incentive payouts, deferred
compensation, termination allowance or other benefits accrued but unpaid
as of the date of such breach (except any vested rights the Executive may
have under a Company Profit Sharing Retirement Plan) shall terminate, as
will the Executive's right to exercise any unexercised stock options.
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<PAGE>
14. Waivers of Breach. Any waiver by either party of a
breach of any provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach.
15. Disputes and Arbitration. Any dispute arising out of or
concerning this Agreement, which is not disposed of by agreement between
the two parties, shall be decided by an Arbitrator chosen by the parties.
Either party may initiate an arbitration action by a written notification
to the other. The parties agree to choose the Arbitrator within 15 days
thereafter. The Arbitrator will follow the rules for arbitrations of the
American Arbitration Association to the extent that said rules are not
inconsistent with the terms and conditions of this Section. The decision
of the Arbitrator shall be final and conclusive in the absence of
statutory grounds for setting it aside. If the Executive prevails in the
arbitration proceedings, the Company shall immediately reimburse the
Executive for the out-of-pocket costs of such proceedings, including
reasonable attorney's fees, and pay to him/her the amount of the
arbitration award, whether or not the Company seeks to have the award set
aside. The Executive shall not be reimbursed for the costs that he/she
may sustain on an appeal by him/her of the Arbitrator's decision.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on January 7, 1987.
EXECUTIVE INDUSTRIAL TRAINING CORP.
/s/ Robert F. VanStry /s/ James H. Walton
Robert F. VanStry James H. Walton
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<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 24, 1995, in the Pre-Effective
Amendment No. 1 to the Registration Statement (Form SB-2 No. 33-61393) and
related Prospectus of Industrial Training Corporation for the registration
of 1,207,500 shares of its Common Stock.
Vienna, Virginia ERNST & YOUNG LLP
August 15, 1995
DC-212195.3
<PAGE>
Exhibit 99.1:
MARYLAND BUSINESS COMBINATION STATUTE
Subtitle 6. Special Voting Requirements.
Section 3-601. Definitions.
(a) In general. -- In this subtitle, the following words have
the meanings indicated.
(b) Affiliate. -- "Affiliate," including the term "affiliated
person", means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, a specified person.
(c) Associate. -- "Associate," when used to indicate a
relationship with any person, means:
(1) Any corporation or organization (other than the
corporation or a subsidiary of the corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of the corporation or any of its affiliates.
(d) Beneficial owner. -- "Beneficial owner," when used with
respect to any voting stock, means a person:
(1) That, individually or with any of its affiliates or
associates, beneficially owns voting stock, directly or indirectly; or
(2) That, individually or with any of its affiliates or
associates, has:
(i) The right to acquire voting stock (whether
such right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; or
(ii) The right to vote voting stock pursuant to
any agreement, arrangement, or understanding; or
(3) That has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting, or disposing
<PAGE>
of voting stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or indirectly, such
shares of voting stock.
(e) Business combination. -- "Business combination" means:
(1) Unless the merger, consolidation, or share exchange
does not alter the contract rights of the stock as expressly set forth in
the charter or change or convert in whole or in part the outstanding
shares of stock of the corporation, any merger, consolidation, or share
exchange of the corporation or any subsidiary with (i) any interested
stockholder or (ii) any other corporation (whether or not itself an
interested stockholder) which is, or after the merger, consolidation, or
share exchange would be, an affiliate of an interested stockholder that
was an interested stockholder prior to the transaction;
(2) Any sale, lease, transfer, or other disposition,
other than in the ordinary course of business or pursuant to a dividend or
any other method affording substantially proportionate treatment to the
holders of voting stock, in one transaction or a series of transactions in
any 12-month period, to any interested stockholder or any affiliate of any
interested stockholder (other than the corporation or any of its
subsidiaries) of any assets of the corporation or any subsidiary having,
measured at the time the transaction or transactions are approved by the
board of directors of the corporation, an aggregate book value as of the
end of the corporation's most recently ended fiscal quarter of 10 percent
or more of the total market value of the outstanding stock of the
corporation or of its net worth as of the end of its most recently ended
fiscal quarter;
(3) The issuance or transfer by the corporation, or any
subsidiary, in one transaction or a series of transactions, of any equity
securities of the corporation or any subsidiary which have an aggregate
market value of 5 percent or more of the total market value of the
outstanding stock of the corporation to any interested stockholder or any
affiliate of any interested stockholder (other than the corporation or any
of its subsidiaries) except pursuant to the exercise of warrants or rights
to purchase securities offered pro rata to all holders of the
corporation's voting stock or any other method affording substantially
proportionate treatment to the holders of voting stock;
(4) The adoption of any plan or proposal for the
liquidation or dissolution of the corporation in which anything other than
cash will be received by an interested stockholder or any affiliate of any
interested stockholder;
(5) Any reclassification of securities (including any
reverse stock split), or recapitalization of the corporation, or any
merger, consolidation, or share exchange of the corporation with any of
its subsidiaries which has the effect, directly or indirectly, in one
transaction or a series of transactions, of increasing by 5 percent or
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more of the total number of outstanding shares, the proportionate amount
of the outstanding shares of any class of equity securities of the
corporation or any subsidiary which is directly or indirectly owned by any
interested stockholder or any affiliate of any interested stockholder; or
(6) The receipt by any interested stockholder or any
affiliate of any interested stockholder (other than the corporation or any
of its subsidiaries) of the benefit, directly or indirectly (except
proportionately as a stockholder), of any loan, advance, guarantee,
pledge, or other financial assistance or any tax credit or other tax
advantage provided by the corporation or any of its subsidiaries.
(f) Common stock. -- "Common stock" means any stock other than
preferred or preference stock.
(g) Control. -- "Control," including the terms "controlling,"
"controlled by," and "under common control with," means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise, and the beneficial ownership
of 10 percent or more of the votes entitled to be cast by a corporation's
voting stock creates a presumption of control.
(h) Corporation. -- "Corporation" includes a real estate
investment trust as defined in Title 8 of this article.
(i) Equity security. -- "Equity security" means:
(1) Any stock or similar security, certificate of
interest, or participation in any profit sharing agreement, voting trust
certificate, or certificate of deposit for an equity security;
(2) Any security convertible, with or without
consideration, into an equity security, or any warrant or other security
carrying any right to subscribe to or purchase an equity security; or
(3) Any put, call, straddle, or other option or
privilege of buying an equity security from or selling an equity security
to another without being bound to do so.
(j) Interested stockholder. -- "Interested stockholder"
means any person (other than the corporation or any subsidiary) that:
(1)(i) Is the beneficial owner, directly or indirectly,
of 10 percent or more of the voting power of the outstanding voting stock
of the corporation after the date on which the corporation had 100 or more
beneficial owners of its stock; or
(ii) Is an affiliate or associate of the corporation
and was the beneficial owner, directly or indirectly, of 10 percent or
more of the voting power of the then outstanding stock of the corporation:
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<PAGE>
1. At any time within the 2-year period
immediately prior to the date in question; and
2. After the date on which the corporation had
100 or more beneficial owners of its stock.
(2) For the purpose of determining whether a person is
an interested stockholder, the number of shares of voting stock deemed to
be outstanding shall include shares deemed owned by the person through
application of subsection (d) of this section but may not include any
other shares of voting stock which may be issuable pursuant to any
agreement, arrangement, or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(k) Market value. -- "Market value" means:
(1) In the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question
of a share of such stock on the composite tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the composite
tape, on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock
is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during
the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. automated quotations system or any
system then in use, or, if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by the board of directors of the corporation in good faith; and
(2) In the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined by the board of directors of the corporation in good faith.
(l) Subsidiary. -- "Subsidiary" means any corporation of
which voting stock having a majority of the votes entitled to be cast is
owned, directly or indirectly, by the corporation.
(m) Voting stock. -- "Voting stock" means shares of capital
stock of a corporation entitled to vote generally in the election of
directors. (1983, Sp. Sess., ch. 1; 1984, ch. 255; 1989, ch. 52.)
(n) Original articles of incorporation. -- "Original articles
of incorporation" means:
(1) Articles of incorporation as originally filed or
as amended in accordance with Section 2-603 of this article; and
(2) Articles of incorporation as amended or restated
by a corporation meeting the requirements of Section 3-603(e)(i), (ii), or
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(iv) of this subtitle, without regard to the voting requirements of
Section 3-603(e)(1)(iii) of this subtitle. (1994, ch. 595.)
Section 3-602. Business combinations - In general.
(a) Prohibited between corporation and interested stockholder
or affiliate. -- Unless an exemption under Section 3-603(c), (d), or (e)
of this subtitle applies, a corporation may not engage in any business
combination with any interested stockholder or any affiliate of the
interested stockholder for a period of 5 years following the most recent
date on which the interested stockholder became an interested stockholder.
(b) Approval of directors and stockholders. -- Unless an
exemption under Section 3-603 of this subtitle applies, in addition to any
vote otherwise required by law or the charter of the corporation, a
business combination that is not prohibited by subsection (a) of this
section shall be recommended by the board of directors and approved by the
affirmative vote of at least:
(1) 80 percent of the votes entitled to be cast by
outstanding shares of voting stock of the corporation, voting together as
a single voting group; and
(2) Two-thirds of the votes entitled to be cast by
holders of voting stock other than voting stock held by the interested
stockholder who will (or whose affiliate will) be a party to the business
combination or by an affiliate or associate of the interested stockholder,
voting together as a single voting group. (1983, Sp. Sess., ch. 1; 1989,
ch. 52.)
Section 3-603. Same -- Exemptions.
(a) Definitions applicable to subsection (b). -- For purposes
of this section:
(1) "Announcement date" means the first general
public announcement of the proposal or intention to make a proposal of the
business combination or its first communication generally to stockholders
of the corporation, whichever is earlier;
(2) "Determination date" means the most recent date
on which the interested stockholder became an interested stockholder; and
(3) "Valuation date" means:
(i) For a business combination voted upon by
stockholders, the latter of the day prior to the date of the stockholders'
vote or the day 20 days prior to the consummation of the business
combination; and
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(ii) For a business combination not voted
upon by stockholders, the date of the consummation of the business
combination.
(b) Exemption from Section 3-602 -- In general. -- The vote
required by Section 3-602 (b) of this subtitle does not apply to a
business combination as defined in Section 3-601(e)(1) of this subtitle if
each of the following conditions is met:
(1) The aggregate amount of cash and the market value
as of the valuation date of consideration other than cash to be received
per share by holders of common stock in such business combination is at
least equal to the highest of the following:
(i) The highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested stockholder for any shares of common stock of the
same class or series acquired by it within the 5-year period immediately
prior to the announcement date of the proposal of the business
combination, plus an amount equal to interest compounded annually from the
earliest date on which the highest per share acquisition price was paid
through the valuation date at the rate for 1-year United States Treasury
obligations from time to time in effect, less the aggregate amount of any
cash dividends paid and the market value of any dividends paid in other
than cash, per share of common stock from the earliest date through the
valuation date, up to the amount of the interest; or
(ii) The highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested stockholder for any shares of common stock of the
same class or series acquired by it on, or within the 5-year period
immediately before, the determination date, plus an amount equal to
interest compounded annually from the earliest date on which the highest
per share acquisition price was paid through the valuation date at the
rate for 1-year United States Treasury obligations from time to time in
effect, less the aggregate amount of any cash dividends paid and the
market value of any dividends paid in other than cash, per share of common
stock from the earliest date through the valuation date, up to the amount
of the interest; or
(iii) The market value per share of common
stock of the same class or series on the announcement date, plus an amount
equal to interest compounded annually from that date through the valuation
date at the rate for 1-year United States Treasury obligations from time
to time in effect, less the aggregate amount of any cash dividends paid
and the market value of any dividends paid in other than cash, per share
of common stock from that date through the valuation date, up to the
amount of the interest; or
(iv) The market value per share of common
stock of the same class or series on the determination date, plus an
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<PAGE>
amount equal to interest compounded annually from that date through the
valuation date at the rate for 1-year United States Treasury obligations
from time to time in effect, less the aggregate amount of any cash
dividends paid and the market value of any dividends paid in other than
cash, per share of common stock from that date through the valuation date,
up to the amount of the interest; or
(v) The price per share equal to the market
value per share of common stock of the same class or series on the
announcement date or on the determination date, whichever is higher,
multiplied by the fraction of:
1. The highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the interested stockholder for any shares of common
stock of the same class or series acquired by it within the 5-year period
immediately prior to the announcement date, over
2. The market value per share of
common stock of the same class or series on the first day in such 5-year
period on which the interested stockholder acquired any shares of common
stock.
(2) The aggregate amount of the cash and the market
value as of the valuation date of consideration other than cash to be
received per share by holders of shares of any class or series of
outstanding stock other than common stock in the business combination is
at least equal to the highest of the following (whether or not the
interested stockholder has previously acquired any shares of the
particular class or series of stock);
(i) The highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested stockholder for any shares of such class or series
of stock acquired by it within the 5-year period immediately prior to the
announcement date of the proposal of the business combination, plus an
amount equal to the interest compounded annually from the earliest date on
which the highest per share acquisition price was paid through the
valuation date at the rate for 1-year United States Treasury obligations
from time to time in effect, less the aggregate amount of any cash
dividends paid and the market value of any dividends paid in other than
cash, per share of the class or series of stock from the earliest date
through the valuation date, up to the amount of the interest; or
(ii) The highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested stockholder for any shares of such class or series
of stock acquired by it on, or within the 5-year period immediately prior
to, the determination date, plus an amount equal to interest compounded
annually from the earliest date on which the highest per share acquisition
price was paid through the valuation date at the rate for 1-year United
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<PAGE>
States Treasury obligations from time to time in effect, less the
aggregate amount of any cash dividends paid and the market value of any
dividends paid in other than cash, per share of the class or series of
stock from the earliest date through the valuation date, up to the amount
of the interest; or
(iii) The highest preferential amount per
share to which the holders of shares of such class or series of stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation; or
(iv) The market value per share of such class
or series of stock on the announcement date, plus an amount equal to
interest compounded annually from that date through the valuation date at
the rate for 1-year United States Treasury obligations from time to time
in effect, less the aggregate amount of any cash dividends paid and the
market value of any dividends paid in other than cash, per share of the
class or series of stock from that date through the valuation date, up to
the amount of the interest; or
(v) The market value per shares of such
class or series of stock on the determination date, plus an amount equal
to interest compounded annually from that date through the valuation date
at the rate for 1-year United States Treasury obligations from time to
time in effect, less the aggregate amount of any cash dividends paid and
the market value of any dividends paid in other than cash, per share of
the class or series of stock from that date through the valuation date, up
to the amount of the interest; or
(vi) The price per share equal to the market
value per share of such class or series of stock on the announcement date
or on the determination date, whichever is higher, multiplied by the
fraction of:
1. The highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the interested stockholder for any shares of any
class of voting stock acquired by it within the 5-year period immediately
prior to the announcement date, over
2. The market value per share of
the same class of voting stock on the first day in such 5-year period on
which the interested stockholder acquired any shares of the same class of
voting stock.
(3) The consideration to be received by holders of
any class or series of outstanding stock is to be in cash or in the same
form as the interested stockholder has previously paid for shares of the
same class or series of stock. If the interested stockholder has paid for
shares of any class or series of stock with varying forms of
consideration, the form of consideration for such class or series of stock
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<PAGE>
shall be either cash or the form used to acquire the largest number of
shares of such class or series of stock previously acquired by it.
(4) (i) After the determination date and prior
to the consummation of such business combination:
1. There shall have been no failure
to declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) on any outstanding preferred stock
of the corporation;
2. There shall have been:
A. No reduction in the
annual rate of dividends paid on any class or series of stock of the
corporation that is not preferred stock (except as necessary to reflect
any subdivision of the stock); and
B. An increase in such
annual rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the number of
outstanding shares of the stock; and
3. The interested stockholder did
not become the beneficial owner of any additional shares of stock of the
corporation except as part of the transaction which resulted in such
interested stockholder becoming an interested stockholder or by virtue of
proportionate stock splits or stock dividends.
(ii) The provisions of sub-paragraphs 1. and
2. of subparagraph (i) do not apply if no interested stockholder or an
affiliate or associate of the interested stockholder voted as a director
of the corporation in a manner inconsistent with such sub-subparagraphs
and the interested stockholder, within 10 days after any act or failure to
act inconsistent with such sub-subparagraphs, notifies the board of
directors of the corporation in writing that the interest stockholder
disapproves thereof and requests in good faith that the board of directors
rectify such act or failure to act.
(c) Same -- Resolution of board of directors. -- (1) Whether
or not such business combinations are authorized or consummated in whole
or in part after July 1, 1983 or after the determination date, the
provisions of Section 3-602 of this subtitle do not apply to business
combinations that specifically, generally, or generally by types, as to
specifically identified or unidentified existing or future interested
stockholders or their affiliates, have been approved or exempted
therefrom, in whole or in part, by resolution of the board of directors of
the corporation:
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<PAGE>
(i) Prior to September 1, 1983 or such
earlier date as may be irrevocably established by resolution of the board
of directors; or
(ii) If involving transactions with a
particular interested stockholder or its existing or future affiliates, at
any time prior to the determination date.
(2) Unless by its terms a resolution adopted under
this subsection is made irrevocable, it may be altered or repealed by the
board of directors, but this shall not affect any business combinations
that have been consummated, or are the subject of an existing agreement
entered into, prior to the alteration or repeal.
(d) Same -- Exception where board of directors elects to be
bound. -- (1) Unless the charter or bylaws of the corporation
specifically provides otherwise, the provisions of Section 3-602 of this
subtitle do not apply to business combinations of a corporation that, on
July 1, 1983, had an existing interested stockholder, whether a business
combination is with the existing stockholder or with any other person that
becomes an interested stockholder after July 1, 1983, or their present or
future affiliates, unless, at any time after July 1, 1983, the board of
directors of the corporation elects by resolution to be subject, in whole
or in part, specifically, generally, or generally by types, as to
specifically identified or unidentified interested stockholders, to the
provisions of Section 3-602 of this subtitle.
(2) The charter or bylaws of the corporation may
provide that if the board of directors adopts a resolution under paragraph
(1) of this subsection the resolution shall be subject to approval of the
stockholders in the manner and by the vote specified in the charter or the
bylaws.
(3) An election under this subsection may be added to
but may not be altered or repealed except by a charter amendment adopted
by a vote of stockholders meeting the requirements of subsection
(e)(1)(iii) of this section.
(4) If a corporation elects under this subsection to
be included within the provisions of this subtitle generally, without
qualification or limitation, it shall file with the Department articles
supplementary including a copy of the resolution making the election and a
statement describing the manner in which the resolution was adopted. The
articles supplementary shall be executed in the manner required by Title 1
of this article. Section 1-101(e)(2) of this article, but do not
constitute an amendment to the charter.
(e) Same - Inapplicability to certain business combinations.
-- (1) Unless the charter of the corporation provides otherwise, the
provisions of Section 3-602 of this subtitle do not apply to any business
combination of:
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(i) A close corporation as defined in Section 4-
101(b) of this article;
(ii) A corporation having fewer than 100 beneficial
owners of its stock;
(iii) A corporation whose original articles of
incorporation have a provision, or whose stockholders adopt a charter
amendment after June 30, 1983 by a vote of at least 80 percent of the
votes entitled to be cast by outstanding shares of voting stock of the
corporation, voting together as a single voting group, and two-thirds of
the votes entitled to be cast by persons (is any) who are not interested
stockholders of the corporation or affiliates or associates of interested
stockholders, voting together as a single voting group, expressly electing
not to be governed by the provisions of Section 3-602 of this subtitle in
whole or in part, or in either case as to business combinations,
specifically, generally, or generally by types, or as to identified or
unidentified existing or future interested stockholders or their
affiliates, provided that, other than in the case of the original articles
of incorporation, an amendment may not be effective until 18 months after
the vote of stockholders and may not apply to any business combination of
the corporation with an interested stockholder (or any affiliate of the
interested stockholder) who became an interested stockholder on or before
the date of the vote;
(iv) An investment company registered under the
Investment Company Act of 1940; or
(v) A corporation with an interested stockholder that
became an interested stockholder inadvertently, if the interested
stockholder:
1. As soon as practicable (but not more
than 10 days after the interested stockholder knew or should have known it
had become an interested stockholder) divests itself of a sufficient
amount of the voting stock of the corporation so that it no longer is the
beneficial owner, directly or indirectly, of 10 percent or more of the
outstanding voting stock of the corporation; and
2. Would not at any time within the 5-year
period preceding the announcement date with respect to the business
combination have been an interested stockholder except by inadvertence.
(2) For purposes of paragraph (1)(ii) of this subsection, all
stockholders of a corporation that have executed an agreement to which the
corporation is an executing party governing the purchase and sale of stock
of the corporation or a voting trust agreement governing stock of the
corporation shall be considered a single beneficial owner of the stock
covered by the agreement.
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<PAGE>
(f) Business combinations of corporation having Section 2-
104(b)(5) charter provision. -- A business combination of a corporation
that has a charter provision permitted by Section 2-104(b)(5) of this
article is subject to the voting requirements of Section 3-602 of this
subtitle unless one of the requirements or exemptions of subsection (b),
(c), (d), or (e) of this section have been met. (1993, ch. 5, Section 1;
1994, ch. 595.)
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Exhibit 99.2:
MARYLAND CONTROL SHARE ACQUISITION STATUTE
Subtitle 7. Voting Rights of Certain Control Shares.
Section 3-701. Definitions.
(a) In general. -- In this subtitle, the following words have
the meanings indicated.
(b) Acquiring person. -- "Acquiring person" means a person
who makes or proposes to make a control share acquisition.
(c) Associate. -- "Associate", when used to indicate a
relationship with any person, means:
(1) An "associate" as defined in Section 3-601(c) of
this title; or
(2) A person that:
(i) Directly or indirectly controls, or is
controlled by, or is under common control with, the person specified; or
(ii) Is acting or intends to act jointly or
in concert with the person specified.
(d) Control shares. -- (1) "Control shares" means shares of
stock that, except for this subtitle, would, if aggregated with all other
shares of stock of the corporation (including shares of the acquisition of
which is excluded from "control share acquisition" in subsection (e)(2) of
this section) owned by a person or in respect of which that person is
entitled to exercise or direct the exercise of voting power, except solely
by virtue of a revocable proxy, entitle that person, directly or
indirectly, to exercise or direct the exercise of the voting power of
shares of stock of the corporation in the election of directors within any
of the following ranges of voting power:
(i) One-fifth or more, but less than one-third of all
voting power;
(ii) One-third or more, but less than a majority of
all voting power; or
(iii) A majority or more of all voting power.
(2) "Control shares" includes shares of stock of a
corporation only to the extent that the acquiring person, following the
acquisition of the shares, is entitled, directly or indirectly, to
exercise or direct the exercise of voting power within any level of voting
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power set forth in this section for which approval has not been obtained
previously under Section 3-702 of this subtitle.
(e) Control share acquisition. -- (1) "Control share
acquisition" means the acquisition, directly or indirectly, by any person,
of ownership of, or the power to direct the exercise of voting power with
respect to, issued and outstanding control shares.
(2) "Control share acquisition" does not include the
acquisition of shares:
(i) Before November 4, 1988;
(ii) Under a contract made before November 4,
1988;
(iii) Under the laws of descent and
distribution;
(iv) Under the satisfaction of a pledge or
other security interest created in good faith and not for the purpose of
circumventing this subtitle; or
(v) Under a merger, consolidation, or share
exchange effected under Subtitle 1 of this title if the corporation is a
party to the merger, consolidation, or share exchange.
(3) Unless the acquisition entitles any person,
directly or indirectly, to exercise or direct the exercise of voting power
in the election of directors in excess of the range of voting power
previously authorized or attained under an acquisition that is exempt
under paragraph (2) of this subsection, "control share acquisition" does
not include the acquisition of shares of a corporation in good faith and
not for the purpose of circumventing this subtitle by or from:
(i) Any person whose voting rights have
previously been authorized by stockholders in compliance with this
subtitle; or
(ii) Any person whose previous acquisition of
shares of stock of the corporation would have constituted a control share
acquisition but for paragraph (2) of this subsection.
(f) Interested shares. -- "Interested shares" means shares of
a corporation in respect of which any of the following persons is entitled
to exercise or direct the exercise of the voting power of shares of stock
of the corporation in the election of directors:
(1) An acquiring person;
(2) An officer of the corporation; or
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(3) An employee of the corporation who is also a
director of the corporation
(g) Corporation. -- "Corporation" includes a real estate
investment trust, as defined in Title 8 of this article.
(h) Person. -- "Person" includes an associate of the person.
(1989, ch. 51.)
Section 3-702. Voting Rights.
(a) Approval by stockholders. -- (1) Control shares of the
corporation acquired in a control share acquisition have no voting rights
except to the extent approved by the stockholders at a meeting held under
3-704 of this subtitle by the affirmative vote of two-thirds of all the
votes entitled to be cast on the matter, excluding all interested shares.
(2) A charter provision permitted by 2-104 (b) (5) of
this article may not apply to the proportion of votes required by
paragraph (1) of this subsection.
(b) Applicability of charter provisions. -- This subtitle
does not apply to the voting rights of shares of stock if the acquisition
of the shares specifically, generally, or generally by types, as to
specifically identified or unidentified existing or future stockholders or
their affiliates or associates, has been approved or exempted by a
provision contained in the charter or bylaws and adopted at any time
before the acquisition of the shares.
(c) Application of subtitle. -- This subtitle does not apply
to:
(1) A close corporation as defined in Section 4-101
(b) of this article;
(2) A corporation having fewer than 100 beneficial
owners of its stock; or
(3) An investment company registered under the
Investment Company Act of 1940.
(d) Beneficial owners. -- For the purposes of subsection (c)
(2) of this section, all stockholders of a corporation that have executed
an agreement to which the corporation is an executing party governing the
purchase and sale of stock of the corporation or a voting trust agreement
governing stock of the corporation shall be considered a single beneficial
owner of the stock covered by the agreement.
(e) Acquisition of shares; voting power. -- For the purposes
of Section 3-701 of this subtitle:
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(1) Shares acquired within 90 days or shares acquired
under a plan to make a control share acquisition are considered to have
been acquired in the same acquisition; and
(2) A person may not be deemed to be entitled to
exercise or direct the exercise of voting power with respect to shares
held for the benefit of others if the person:
(i) Is acting in the ordinary course of
business, in good faith and not for the purpose of circumventing the
provisions of this section; and
(ii) Is not entitled to exercise or to direct
the exercise of the voting power of the shares unless the person first
seeks to obtain the instruction of another person. (1989, ch. 51.)
Section 3-703. Acquiring person statement.
Any person who proposes to make or who has made a control share
acquisition may deliver an acquiring person statement to the corporation
at the corporation's principal office. The acquiring person statement
shall set forth all of the following:
(1) The identity of the acquiring person and each other
member of any group of which the person is a part for purposes of
determining control shares;
(2) A statement that the acquiring person statement is given
under this subtitle;
(3) The number of shares of the corporation owned (directly
or indirectly) by the acquiring person and each other member of any group;
(4) The applicable range of voting power as set forth in
Section 3-701 (d) of this subtitle; and
(5) If the control share acquisition has not occurred:
(i) A description in reasonable detail of the terms
of the proposed control share acquisition; and
(ii) Representations of the acquiring person, together
with a statement in reasonable detail of the facts on which they are
based, that:
1. The proposed control share acquisition,
if consummated, will not be contrary to law; and
2. The acquiring person has the financial
capacity, through financing to be provided by the acquiring person and any
additional specified sources of financing required under Section 3-705 of
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this subtitle, to make the proposed control share acquisition. (1989, ch.
51.)
Section 3-704. Special meeting.
(a) Request by acquiring person. -- Except as provided in
Section 3-705 of this subtitle, if the acquiring person requests, at the
time of delivery of an acquiring person statement, and gives a written
undertaking to pay the corporation's expenses of a special meeting, except
the expenses of opposing approval of the voting rights, within 10 days
after the day on which the corporation receives both the request and
undertaking, the directors of the corporation shall call a special meeting
of stockholders of the corporation for the purpose of considering the
voting rights to be accorded the shares acquired or to be acquired in the
control share acquisition.
(b) Bond. -- The directors may require the acquiring person
to give bond, with sufficient surety, to reasonably assure the corporation
that this undertaking will be satisfied.
(c) Time for meeting. -- Unless the acquiring person agrees
in writing to another date, the special meeting of stockholders shall be
held within 50 days after the day on which the corporation has received
both the request and the undertaking.
(d) Delay at request of acquiring person. -- If the acquiring
person makes a request in writing at the time of delivery of the acquiring
person statement, the special meeting may not be held sooner than 30 days
after the day on which the corporation receives the acquiring person
statement.
(e) In absence of request. -- (1) If no request is made under
subsection (a) of this section, the issue of the voting rights to be
accorded the shares acquired in the control share acquisition may, at the
option of the corporation, be presented for consideration at any meeting
of stockholders.
(2) If no request is made under subsection (a) of
this section and the corporation proposes to present the issue of the
voting rights to be accorded the shares acquired in a control share
acquisition for consideration at any meeting of stockholders, the
corporation shall provide the acquiring person with written notice of the
proposal not less than 20 days before the date on which notice of the
meeting is given. (1989, ch. 51.)
Section 3-705. Calls.
A call of a special meeting of stockholders of the corporation is
not required to be made under Section 3-704 (a) of this subtitle unless,
at the
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time of delivery of an acquiring person statement under Section 3-703 of
this subtitle, the acquiring person has:
(1) Entered into a definitive financing agreement or
agreements with one or more responsible financial institutions or other
entities that have the necessary financial capacity, providing for any
amount of financing of the control share acquisition not to be provided by
the acquiring person; and
(2) Delivered a copy of the agreements to the corporation.
(1989, ch. 51.)
Section 3-706. Notice of meeting.
(a) In general. -- If a special meeting of stockholders is
requested, notice of the special meeting shall be given as promptly as
reasonably practicable by the corporation to all stockholders of record as
of the record date set for the meeting, whether or not the stockholder is
entitled to vote at the meeting.
(b) Contents. -- Notice of the special or annual meeting of
stockholders at which the voting rights are to be considered shall include
or be accompanied by the following:
(1) A copy of the acquiring person statement
delivered to the corporation under Section 3-703 of this subtitle; and
(2) A statement by the board of directors of the
corporation setting forth the position or recommendation of the board, or
stating that the board is taking no position or making no recommendation,
with respect to the issue of voting rights to be accorded the control
shares. (1989, ch. 51.)
Section 3-707. Redemption rights.
(a) Upon delivery of acquiring person statement. -- Unless
the charter or bylaws provide otherwise, if an acquiring person statement
has been delivered on or before the 10th day after the control share
acquisition, the corporation may, at its option, redeem any or all control
shares, except control shares for which voting rights have been previously
approved under Section 3-702 of this subtitle, at any time during a 60-day
period commencing on the day of a meeting at which voting rights are
considered under Section 3-704 of this subtitle and are not approved.
(b) In absence of delivery of acquiring person statement. --
In addition to the redemption rights authorized under subsection (a) of
this section, unless the charter or bylaws provide otherwise, if an
acquiring person statement has not been delivered on or before the 10th
day after the control share acquisition, the corporation may, at its
option, redeem any or all control shares, except control shares for which
voting rights have been previously approved under Section 3-702 of this
subtitle, at any time during a period commencing on the 11th day after the
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control share acquisition and ending 60 days after a statement has been
delivered.
(c) Fair value. -- Any redemption of control shares under
this section shall be at the fair value of the shares. For purposes of
this section, "Fair value" shall be determined:
(1) As of the date of the last acquisition of control
shares by the acquiring person in a control share acquisition or, if a
meeting is held under Section 3-704 of this subtitle, as of the date of
the meeting; and
(2) Without regard to the absence of voting rights
for the control shares. (1989, ch. 51.)
3-708. Status as objecting stockholders.
(a) In general. -- Unless the charter or bylaws provide
otherwise, before a control share acquisition has occurred, if voting
rights for control shares are approved at a meeting held under Section
3-704 of this subtitle and the acquiring person is entitled to exercise or
direct the exercise of a majority or more of all voting power, all
stockholders of the corporation (other than the acquiring person) have the
rights of objecting stockholders as provided in Subtitle 2 of this title.
(b) Corporation deemed successor. -- For purposes of applying
the provisions of Subtitle 2 of this title to stockholders under this
section, the corporation shall be deemed to be a successor in a merger and
the date of the most recent approval of voting rights referred to in
subsection (a) of this section shall be deemed to be the date of filing of
articles of merger for record with the Department.
(c) Status to be contained in notice. -- The notice required
by Section 3-207 of this title shall also state that stockholders (other
than the acquiring person) are entitled to the rights of objecting
stockholders under Subtitle 2 of this title and shall include a copy of
this section and Subtitle 2 of this title.
(d) Application of Subtitle 2. -- For purposes of applying
the provisions of Subtitle 2 of this title to this section:
(1) "Fair value" may not be less than the highest
price per share paid by the acquiring person in the control share
acquisition; and
(2) Sections 3-202 (c) and 3-203 (a) (1) and (2) of
this title do not apply. (1989, ch. 51.)
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