<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
[X] Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of
1934 [Fee Required] for the Fiscal Year ended December 31, 1996
[_] Transition Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934 [No Fee Required]
Commission File Number 0-13741
INDUSTRIAL TRAINING CORPORATION
-------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1078263
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
13515 Dulles Technology Drive, Herndon, Virginia 20171
------------------------------------------------------
(Address of principal executive offices and zip code)
Issuer's telephone number (including area code) (703)713-3335
Securities registered pursuant to Section 12(b) of the Act:
None None
---- ----
(Title of each Class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value per share
---------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]
Issuer's revenues for the year ended December 31, 1996 were $22,143,570.
Aggregate market value of voting stock held by non-affiliates and outstanding at
February 14, 1997 was $13,356,054. Amount was computed using the average bid and
ask price as of February 14, 1997, which was $4.50. As of February 14, 1997,
3,897,034 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the proxy statement for the annual shareholders meeting to be held
May 6, 1997 are incorporated by reference into Part III.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I Page
- ------ ----
<S> <C>
Item 1 Description of Business 1
Item 2 Description of Properties 2
Item 3 Legal Proceedings 3
Item 4 Submission of Matters to a Vote of Security Holders 3
Part II
- -------
Item 5 Market for Common Equity and Related Stockholder Matters 4
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations 4
Item 7 Financial Statements 7
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
Part III
- --------
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 23
Item 10 Executive Compensation 25
Item 11 Security Ownership of Certain Beneficial Owners and Management 25
Item 12 Certain Relationships and Related Transactions 26
Item 13 Exhibits and Reports on Form 8-K 26
</TABLE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
-------------------------------
Industrial Training Corporation (the "Company" or "ITC") was incorporated under
the laws of the State of Maryland on January 28, 1977. ITC develops, markets and
sells training materials in many media; however, the overwhelming majority of
the Company's products are delivered in multimedia platforms. ITC's multimedia
training courseware combines full-motion video, audio, animation, graphics and
text into a single training presentation.
During 1996, the Company concentrated its efforts on product development and
increasing distribution capabilities. The majority of the Company's product
development efforts focused on improving ITC's core multimedia training
products, including converting its existing analog laserdisc training programs
into the digital CD-ROM format. The conversion provides ITC's customers with a
wide range of products in digital formats.
During 1996, Activ Training, Ltd. ("Activ"), a wholly-owned subsidiary of the
Company incorporated in November 1995 as a private limited company of England
and Wales, became fully operational. Activ Training was created in order to
expand the Company's sales, marketing and distribution activities within the
international marketplace. Activ Training is headquartered in London, England.
The Company has further expanded its international distribution capabilities
with the September 1996 acquisition of certain assets and assumption of certain
liabilities of Acumen People and Productivity Pty. Ltd. ("Acumen"), an
Australian distributor of ITC products since 1991. The Company formed a wholly-
owned subsidiary, ITC Australasia Pty. Ltd. ("ITCA"), to acquire Acumen, and to
implement the expansion of the Company's sales efforts into the Pacific Rim.
On December 31, 1996, the Company acquired Anderson Soft-Teach, Inc. ("AST"),
located in Los Gatos, California for $4,500,000 and 300,000 shares of ITC stock.
AST is a leading developer, producer and distributor of computer skills training
software. The acquisition of AST significantly expands the distribution
resources of ITC in the services market and the ability of the Company to
provide networkable products and just-in-time training solutions. AST will
continue to operate under its own name as a wholly-owned subsidiary of ITC.
In October 1996, the Company announced a distribution alliance with Vallen
Corporation, a leading provider of safety solutions. Furthermore, in January
1997, a joint marketing agreement with IBM was announced. These alliances
combine ITC's extensive products with the industry experience and distribution
networks of these two significant partners, and are considered important steps
in expanding the Company's distribution capabilities.
(b) Narrative Description of Business
---------------------------------
ITC is a full-service training company specializing in the development,
production, marketing and sale of off-the-shelf training courseware for
corporate, educational and governmental organizations. ITC courseware uses the
power of full-motion video as a learning tool on a PC platform. These courses
combine high quality video and sound with the PC's capability for graphics and
automatic recordkeeping. Standard multimedia platforms for ITC products include
both AVI and MPEG CD-ROM digital video format. The majority of the Company's
multimedia products are sold under the Company's registered trademark Activ(R).
These products are focused in five primary areas, as represented by the five
Activ(R) Learning Libraries: the "Activ(R) PC Skills Learning Library," the
"Activ(R) Regulatory Training Learning Library," the "Activ(R) Basic Skills
Learning Library," the "Activ(R) Technical
1
<PAGE>
Skills Learning Library," and the "Activ(R) INVOLVE(R) Instrumentation Learning
Library." With the addition of AST, the Company has expanded its offerings of
networkable multimedia training solutions for computer skills training and added
on-line electronic performance support systems (EPSS).
Distribution of the Company's products is managed through a number of channels.
Primarily, the Company employs a direct salesforce which is responsible for
sales of the Company's multimedia training products throughout North America,
Australia and the United Kingdom, with the exception of those territories which
have been sold to certain resellers as exclusive territories for distribution of
the "Activ(R) PC Skills Learning Library." These resellers in turn employ sales
persons to market and sell ITC's "PC Skills" products throughout their protected
territories. In certain other U.S. markets, the Company also uses dealers to
distribute its courseware products. In foreign markets other than Canada,
Australia and the United Kingdom, the Company markets its products primarily
through dealers and distributors.
All of the Company's training programs are proprietary and, as a result, they
are all protected by copyright. The Company's libraries of marketable
off-the-shelf products include in excess of 200 training programs, all of which
were produced by the Company. 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 participates
as a limited partner.
In addition to selling multimedia training courseware, the Company sells related
hardware products. The Company uses many IBM compatible hardware systems for the
delivery of its products. In addition to being an authorized IBM Industry
Remarketer and a Value Added Reseller, the Company utilizes the products of
Compaq, Hewlett Packard, Gateway 2000 and other computer hardware manufacturers.
Such hardware is integrated with ITC's 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.
There are many companies engaged in the business of providing training and
instructional materials using various media. These companies include providers
of traditional instructor-led training, multimedia developers and sellers,
textbook publishers, and others, all of which compete for available training
funds. At present, there are several providers of interactive multimedia
training products and management believes that the number of companies providing
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. Considering the diversity of the
Company's "Learning Libraries" and the related multiple platforms, management
believes that ITC offers the most broad array of multimedia training products
and services available.
At December 31, 1996, the Company and its subsidiaries employed a total of 120
people, all of whom are full-time. This represents an increase of 37 employees
since December 31, 1995, due primarily to the acquisition of AST. 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.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company currently occupies 26,225 square feet of office, warehouse and
production space in a commercial building located at 13515 Dulles Technology
Drive, Herndon, Virginia. This lease will expire in June of 1999. As a result of
the AST acquisition, the Company occupies 15,515 square feet of office and
warehouse space in Los Gatos, California. This lease expires on July 31, 2000.
The
2
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Company also occupies 3,405 square feet of office space in a commercial building
located at 2000 RiverEdge Parkway, Atlanta, Georgia. This lease will expire in
January of 2001. The Company also leases 950 square feet of office space in a
commercial building located at 2 Milliston Road, Suite 1C, Millis,
Massachusetts. This lease expires in March of 1997. Additionally, the Company
has various leased space for its international operations in Australia, Canada,
and the United Kingdom. All facilities are in good condition and are adequate
for the Company's use.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matters to a vote of security holders since
the May 1996 Annual Meeting of Stockholders.
3
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
------------------
The Company's Common Stock is traded on the National Association of Security
Dealers Automated Quotation System (NASDAQ), National Market System (NMS).
The following table states the high and low quotation information by quarter for
the Company's Common Stock based on actual trading, as reported by NASDAQ/NMS.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1st Quarter, 1995 10 1/2 6 1/4
2nd Quarter, 1995 10 1/2 8
3rd Quarter, 1995 11 1/4 9 5/8
4th Quarter, 1995 11 8 3/4
1st Quarter, 1996 9 1/2 6 1/4
2nd Quarter, 1996 9 6
3rd Quarter, 1996 8 1/4 5 5/16
4th Quarter, 1996 6 5/16 4
</TABLE>
(b) Holders
-------
As of December 31, 1996, there were 1,039 holders of record of the Company's
Common Stock, the Company's only class of stock.
(c) Dividends
---------
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. There has been no declaration of dividends since 1984.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
- --------
During 1996, revenues for ITC totaled $22,144,000 as compared to $22,769,000 for
fiscal 1995, a decrease of $625,000 or 3%. Courseware revenues, which include
sales of off-the-shelf courseware, custom courseware and consulting services,
fees and royalties and linear training products, totaled $18,003,000, compared
to $18,496,000 for 1995. Sales of hardware systems remained consistent with the
previous year, totaling $4,141,000 in 1996 and $4,273,000 in 1995.
While the Company was successful in achieving substantial revenue growth in its
three new target markets of education, government, and international, sales in
ITC's traditional customer base in the process and manufacturing markets slowed
substantially. This is primarily attributable to the Company's inability to
rapidly convert the traditional customer base from laser videodisc products to
digital CD-ROM courseware. Sales for the three target markets noted above more
than doubled from 1995 to 1996, but the increase was completely offset by the
decline in sales to the traditional domestic customer.
4
<PAGE>
Revenues from international operations totaled $2,972,000 for 1996 compared to
$1,542,000 in 1995, an increase of 93%. This significant growth is due to the
Company's expansion of direct sales efforts in the international marketplace,
through Activ Training, based in London, and ITCA, located in Australia. Activ
Training was established in the fourth quarter of 1995, and ITCA began
operations on September 1, 1996.
In the second quarter of 1996, the Company entered into a contract with the
DeKalb County (GA) Board of Education for the sale of a district-wide multicopy
courseware license. Approximately $3,200,000 in courseware revenues were
recognized during 1996, as part of a $5,060,000 contract including courseware,
hardware systems and services. As a result of the DeKalb contract, courseware
sales in the education market totaled $4,607,000, an increase of $2,507,000 or
119% over 1995.
Costs and Expenses
- ------------------
Gross margins on courseware sales declined from 53% to 39% as courseware cost of
sales increased to $10,999,000 from $8,773,000 in 1995. This increase of
$2,226,000 or 25% is principally attributable to an increase in the amortization
of capitalized program development costs and an increase in dealer fees
associated with sales in the education and government markets.
During 1996, sales of product in laser videodisc format declined dramatically as
a result of the conversion of all the Company's multimedia products to digital
formats. As a result, the Company recorded an additional $3,300,000 charge,
principally consisting of the unamortized cost of laser videodisc product, to
reduce capitalized program development costs to net realizable value.
Additionally, in connection with the acquisition of AST effective December 31,
1996, the Company recorded a charge of $2,500,000, representing the value
assigned to acquired in-process research and development.
Selling, general and administrative expenses totaled $9,316,000 in 1996 compared
to $7,531,000 in 1995, an increase of $1,785,000 or 24%. This increase is
principally attributable to expanded sales and marketing efforts in the target
markets mentioned above, particularly the increase in direct sales efforts
internationally resulting from the start up of Activ Training and the
September 1, 1996 acquisition of ITCA.
Interest income, net of interest expense, was $467,000 in 1996 compared to
$42,000 in 1995, an increase of $425,000, resulting from interest on the cash
balances from the remaining proceeds of the Company's 1995 public offering.
Interest income is expected to decline dramatically as average cash balances are
expected to be substantially lower in 1997.
Taxes
- -----
As a result of the Company's significant operating loss during 1996, a
substantial tax benefit has been recorded, a portion of which is expected to
result in a refund of previously paid taxes.
Net Loss
- --------
Including the above mentioned write-offs of capitalized program development
costs of $3,300,000 and acquired research and development of $2,500,000, both on
a pre-tax basis, the net loss for 1996 totaled $5,659,000 or $1.59 per share
compared to net income of $1,507,000 or $.54 per share in 1995.
5
<PAGE>
Cash Flow, Liquidity and Capital Resources
- ------------------------------------------
Working capital at December 31, 1996 was $6,056,000 as compared to $13,274,000
at December 31, 1995, a decrease of $7,218,000. The substantial reduction in
working capital resulted from program development costs incurred and capitalized
during 1996 of approximately $4,000,000, as well as the acquisition of AST,
which utilized cash of approximately $4,300,000, net of cash acquired. These
investments were funded by the Company's 1995 public offering.
Cash flow from operations totaled $983,000 for the year ended December 31, 1996
compared to $6,132,000 for the previous year. This decrease is primarily due to
reduced earnings and the effect of increases in current and long-term accounts
receivable, resulting principally from the second quarter sale to DeKalb County
(GA). These decreases in operating cash flow were offset by corresponding
increases in accrued liabilities and the impact of significant non-cash charges
of amortization and the write-offs mentioned above.
Management believes that cash generated from operations combined with the
Company's existing resources and available line of credit are adequate to meet
ITC's working capital requirements for 1997.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Index Page
- ------------------------------------------------------------------------------------------------------
<S> <C>
Report of Independent Auditors 8
Consolidated Statements of Operations for the Years Ended
December 31, 1996 and 1995 9
Consolidated Balance Sheets as of December 31, 1996 and 1995 10-11
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996 and 1995 12
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 13
Notes to Consolidated Financial Statements 14-22
</TABLE>
7
<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, 1996 and 1995, and the related
consolidated statements of operations, 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Washington, D.C. Ernst & Young LLP
February 18, 1997
8
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues, net:
Courseware $ 18,002,803 $ 18,495,997
Hardware 4,140,767 4,272,667
------------ ------------
Total revenues, net (note 3) 22,143,570 22,768,664
Costs and expenses:
Courseware cost of sales 10,999,376 8,772,664
Hardware cost of sales 4,031,627 4,098,232
Reduction in capitalized program development costs 3,300,000 --
Acquired research and development 2,500,000 --
Selling, general and administrative expenses 9,316,163 7,530,771
Equity in earnings of affiliates (216,832) (145,768)
------------ ------------
Total costs and expenses 29,930,334 20,255,899
------------ ------------
Income (loss) before interest and provision for
income taxes (7,786,764) 2,512,765
Interest income, net 467,454 42,343
------------ ------------
Income (loss) before provision for income taxes (7,319,310) 2,555,108
Income tax expense (benefit) (note 8) (1,660,000) 1,048,000
------------ ------------
Net income (loss) $ (5,659,310) $ 1,507,108
============ ============
Net income (loss) per common share (note 1) $ (1.59) $ .54
============ ============
Weighted average number of shares outstanding 3,566,000 2,794,000
============ ============
</TABLE>
See accompanying notes.
9
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,697,566 $ 10,348,762
Accounts receivable, net (notes 2, 5 and 6) 7,641,066 4,802,054
Due from affiliates (note 3) 36,768 18,842
Inventories, net of reserve of $142,267 and
$93,400 at December 31, 1996 and 1995,
respectively (notes 5 and 6) 1,018,383 871,072
Prepaid expenses 190,402 253,061
Income taxes receivable (note 8) 689,104 --
------------ ------------
Total current assets 12,273,289 16,293,791
Long-term receivable (notes 2, 5 and 6) 1,589,916 --
Property and equipment (note 6):
Video and computer equipment 3,361,923 3,221,982
Furniture and fixtures 747,146 1,037,404
Leasehold improvements 95,422 93,106
------------ ------------
4,204,491 4,352,492
Less accumulated depreciation and amortization (2,963,197) (3,036,918)
------------ ------------
Net property and equipment 1,241,294 1,315,574
Capitalized program development costs, net
of accumulated amortization of $977,775 and
$5,203,491 at December 31, 1996 and 1995,
respectively 4,226,525 5,941,079
Intangible assets, net of accumulated amortization of
$511,111 and $346,111 at December 31, 1996
and 1995, respectively (note 9) 3,975,840 1,961,299
Investments in affiliates (note 3) -- 231,315
Other 67,461 31,089
------------ ------------
Total assets $ 23,374,325 $ 25,774,147
============ ============
</TABLE>
See accompanying notes.
10
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Line of credit (note 5) $ 515,000 $ --
Current installments of long-term debt (note 6) 130,745 117,175
Accounts payable 1,331,079 1,621,543
Due to affiliates (note 3) 335,797 261,230
Accrued compensation and benefits 826,764 594,796
Deferred revenues 1,458,945 100,769
Other accrued expenses 1,619,326 219,029
Income taxes payable -- 105,000
--------------- --------------
Total current liabilities 6,217,656 3,019,542
Deferred lease obligations 113,020 102,964
Deferred income taxes (note 8) 353,522 1,608,522
Long-term debt (note 6) -- 130,745
--------------- --------------
Total liabilities 6,684,198 4,861,773
Commitments (note 10)
Stockholders' equity (notes 6, 7, 9 and 11):
Common stock, $.10 par value, 12,000,000 shares
authorized; 3,896,924 and 3,556,424 shares
issued and outstanding in 1996 and
1995, respectively 389,693 355,643
Additional paid-in capital 16,067,366 14,770,853
Note receivable from ESOP (143,677) (250,177)
Retained earnings 376,745 6,036,055
--------------- --------------
Total stockholders' equity 16,690,127 20,912,374
--------------- --------------
Total liabilities and stockholders' equity $ 23,374,325 $ 25,774,147
=============== ==============
</TABLE>
See accompanying notes.
11
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-In
Shares Par Value Capital
------ --------- -------
<S> <C> <C> <C>
Balance at January 1, 1995 2,448,824 $ 244,883 $ 5,638,493
Note payments - - -
New shares issued:
Stock issuance 1,032,500 103,250 8,945,353
Stock options exercised 74,500 7,450 182,192
Common stock issued to employees 600 60 4,815
Net income - - -
----------- ----------- -------------
Balance at December 31, 1995 3,556,424 355,643 14,770,853
Note payments - - -
New shares issued:
Stock issuance 300,000 30,000 1,170,000
Stock options exercised 40,000 4,000 123,113
Common stock issued to employees 500 50 3,400
Net loss - - -
----------- ----------- -------------
Balance at December 31, 1996 3,896,924 $ 389,693 $ 16,067,366
=========== =========== =============
<CAPTION>
Total
Note Receivable Retained Stockholders'
From ESOP Earnings Equity
--------- -------- ------
<S> <C> <C> <C>
Balance at January 1, 1995 $ (358,177) $ 4,528,947 $ 10,054,146
Note payments 108,000 - 108,000
New shares issued:
Stock issuance - - 9,048,603
Stock options exercised - - 189,642
Common stock issued to employees - - 4,875
Net income - 1,507,108 1,507,108
------------ ------------- --------------
Balance at December 31, 1995 (250,177) 6,036,055 20,912,374
Note payments 106,500 - 106,500
New shares issued:
Stock issuance - - 1,200,000
Stock options exercised - - 127,113
Common stock issued to employees - - 3,450
Net loss - (5,659,310) (5,659,310)
------------ ------------- --------------
Balance at December 31, 1996 $ (143,677) $ 376,745 $ 16,690,127
============ ============= ==============
</TABLE>
See accompanying notes.
12
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,659,310) $ 1,507,108
Reconciling items:
Reduction in capitalized program development costs 3,300,000 --
Acquired research and development 2,500,000 --
Provision (benefit) for deferred taxes (1,255,000) 556,000
Depreciation and amortization 4,091,483 2,987,304
Salespeople awards of common shares 3,450 4,875
Loss on sale of property and equipment -- 29,772
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (4,428,928) 2,491,423
Decrease (increase) in inventories (147,311) 332,804
Decrease (increase) in prepaid expenses 62,659 (134,615)
Increase (decrease) in due to affiliates, net 56,641 (91,396)
Decrease (increase) in other assets (36,372) 42,680
Decrease in accounts payable (290,464) (490,728)
Increase (decrease) in accrued expenses 2,990,441 (1,086,840)
Increase (decrease) in deferred lease obligation 10,056 (16,352)
Increase in income taxes receivable (794,104) --
Net effect of acquired operating assets and liabilities 579,454 --
------------ -----------
Net cash provided by operating activities 982,695 6,132,035
Cash flows from investing activities:
Capitalized program development costs (3,997,925) (3,779,566)
Capital expenditures (326,007) (755,707)
Investment in affiliates -- (100,625)
Acquisitions, net of cash acquired (4,426,397) --
------------ ------------
Net cash used in investing activities (8,750,329) (4,635,898)
Cash flows from financing activities:
Repayments under line of credit -- (80,000)
Proceeds from long-term debt -- 1,320,000
Principal payments under term loans (117,175) (2,135,257)
Payments under capital lease
obligations, net of deferred interest -- (38,286)
Issuance of common stock 127,113 9,238,245
Employee stock ownership plan note collections 106,500 108,000
------------ ------------
Net cash provided by financing activities 116,438 8,412,702
------------ ------------
Net increase (decrease) in cash (7,651,196) 9,908,839
Cash and cash equivalents at beginning of year 10,348,762 439,923
------------ ------------
Cash and cash equivalents at end of year $ 2,697,566 $ 10,348,762
============ ============
</TABLE>
See accompanying notes.
13
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
1) Summary of Significant Accounting Policies
------------------------------------------
a) Basis of Presentation
---------------------
The consolidated financial statements of Industrial Training Corporation (the
"Company") include the accounts of its wholly owned subsidiaries, Anderson
Soft-Teach, Inc. ("AST"), ITC Australasia Pty. Ltd. ("ITCA"), Activ Training,
Ltd., and ComSkill Learning Centers, Inc. Significant intercompany accounts and
transactions have been eliminated in consolidation. The Company is a
full-service training company specializing in the development, production,
marketing and sale of both off-the-shelf and custom multimedia training
courseware for corporate, educational and governmental organizations. ITC's
multimedia training courseware combines full-motion video, audio, animation,
graphics and text into a single training presentation.
b) Revenues and Costs
------------------
Revenues from courseware include both off-the-shelf and custom courseware sales,
courseware licenses 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 joint venture and
partnerships related to such courseware sales are reflected as royalties and
included in cost of sales in the financial statements. Revenues from courseware
licenses are recognized upon delivery of the initial copy of each product
licensed, less any duplication costs which are accrued based on estimates.
Revenues from consulting services are recognized as services are performed.
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 1995, the Company recognized revenue from
initial franchise fees of $210,000. Such amounts have been included in
courseware revenues in the accompanying consolidated statements of operations.
During 1996, the Company recognized no revenue from initial franchise fees.
Although the Company conducts certain of its business in foreign markets, the
Company's exposure to foreign currency risk is not considered material.
c) Capitalized Program Development Costs
-------------------------------------
Certain costs of developing and producing off-the-shelf courseware have been
capitalized. 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 three to six years. The related amortization
expense is included in the cost of sales and amounts to approximately $3,202,000
and $2,197,000 in 1996 and
14
<PAGE>
1995, respectively. Periodically, the Company assesses the net realizable value
of program development costs by reviewing past sales performances, current and
planned future marketing activities, 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.
During 1996, sales of product in laser videodisc format declined dramatically as
a result of the conversion of all the Company's multimedia products to digital
format, and the Company has determined that potential future sales in the laser
videodisc format are limited. As a result, the Company recorded an additional
$3,300,000 pre-tax charge, principally consisting of the unamortized cost of
laser videodisc product, to reduce all capitalized program development costs in
excess of net realizable value.
d) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash and other highly liquid investments
having original maturities of less than three months.
e) Inventories
-----------
Inventories primarily consist of multimedia courseware and related computer
hardware, and are stated at the lower of cost or market. Cost is determined
using the average cost method.
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 three 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 leasehold amortization expense amounted
to approximately $736,000 and $535,000 in 1996 and 1995, 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 Statement of Financial Accounting Standards (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,
revenue recognition and net operating loss carryforwards.
i) Net Income (Loss) Per Common Share
----------------------------------
Earnings per common share are 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) Intangible Assets
-----------------
Intangible assets include allocations of the purchase price of acquisitions to
work-force investments, customer base and goodwill. These assets are being
amortized using the straight-line method over
15
<PAGE>
estimated useful lives of five to fifteen years. Amortization expense for 1996
and 1995 amounted to approximately $165,000 and $140,000, respectively. During
1995, the Company adjusted goodwill to reflect the utilization of the acquired
tax benefits (see Note 8). The net effect of this adjustment was to decrease the
amount of goodwill originally recorded by approximately $84,000. As part of its
ongoing review, management takes into consideration any events and circumstances
which might indicate an impairment to the carrying amount of intangible assets.
Factors that management uses to evaluate continuing value include sales from
acquired product lines, employee turnover, and development of related customer
and distribution networks that were in place at the date of the acquisition.
k) Research and Development
------------------------
Research and development costs consist of software-related expenditures incurred
during the course of planned search and investigation aimed at developing new
products or processes. The Company expenses all research and development costs
as they are incurred.
l) Stock Option Plans
------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which has been adopted in the current
financial statements. The Company's method of adoption of SFAS No. 123 requires
additional footnote disclosures regarding the Company's stock-based
compensation, but does not impact the financial position or the results of
operations of the Company.
m) Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the associated amounts of revenues and expenses during
the reporting period. Actual results could differ from the estimates.
n) Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2) Accounts Receivable
-------------------
Accounts receivable include the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Trade accounts receivable $ 6,738,762 $ 4,619,145
Current portion of long-term receivable, net 1,012,287 --
Unbilled contract receivables 182,025 291,311
Less allowance for doubtful accounts (296,148) (190,047)
------------- -------------
Trade accounts receivable, net 7,636,926 4,720,409
Other receivables 4,140 81,645
------------- -------------
$ 7,641,066 $ 4,802,054
============= =============
</TABLE>
During the second quarter of 1996, the Company entered into a contract with the
DeKalb County (GA) Board of Education ("DeKalb") for the sale of a district-wide
multicopy courseware license, hardware and certain future services. The total
contract amount of $5,060,000 is payable in four installments, $1,535,000 upon
contract execution, and the remaining $3,525,000 in three equal annual
installments beginning in June 1997. Total revenues recognized under the
contract during the second quarter for the courseware license and hardware were
$3,218,000 and $620,000, respectively. Dealer fees
16
<PAGE>
relating to this sale have been charged against the related revenues, and are
payable only when proceeds are received by the Company. The long-term portion of
the net receivable has been discounted assuming a 6% interest rate.
Components of long-term receivable include the following:
<TABLE>
<CAPTION>
December 31,
1996
----
<S> <C>
Receivable from DeKalb County (GA) Board of Education $ 3,525,000
Related dealer fees payable (737,083)
Less amounts classified as current, net of related dealer fees (1,012,287)
Less amount representing interest (185,714)
-------------
$ 1,589,916
=============
</TABLE>
3) Investments in and Due to Affiliates
------------------------------------
The Company is a participant in five separate limited partnerships with
Industrial Training Partners, Ltd. (the ITP partnerships) and a joint venture
with DynCorp. In all of the ITP partnerships, the Company is a 5% general
partner and in certain partnerships the Company has acquired limited partnership
interest as well. In the joint venture with DynCorp, the Company has a 50%
ownership interest. The ITP partnerships and the DynCorp joint venture were
formed to develop and produce various series of training programs. Under the
contracts to market the programs for the partnerships and joint venture, ITC
receives 50%-70% of the sales price for the costs of reproducing and marketing
the training materials. In the case of the joint venture agreement, the Company
also receives an additional 25% for its share of the joint venture profits.
Sales of programs related to these affiliates were approximately $2,493,000 and
$2,103,000 in 1996 and 1995, respectively. Additionally, in connection with the
development of new off-the-shelf partnership programs, the Company billed
certain of the ITP partnerships approximately $532,000 and $52,000 in 1996 and
1995, respectively. Amounts earned but not billed to the ITC partnerships
totaling $21,000 are included in unbilled receivables at December 31, 1996. In
connection with the financing of product development activities for these
partnerships, the Company has guaranteed two bank loans for two of the
partnerships. At December 31, 1996, the outstanding balance of these loans
totaled $467,000.
4) Leases
------
The Company has several noncancelable operating leases, primarily for office
space and transportation equipment, that expire over the next four years,
certain of which 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, 1996 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
-----------------------
1997 $ 769,000
1998 744,000
1999 549,000
2000 252,000
-------------
Total future minimum lease payments $ 2,314,000
=============
</TABLE>
Rental expenses for operating leases for the years ended December 31, 1996 and
1995 were approximately $533,000 and $532,000, respectively.
17
<PAGE>
5) Line of Credit
--------------
At December 31, 1996, the Company had no amounts outstanding relating to its
$3,000,000 revolving bank line of credit, which bears interest at prime (8 1/4%
at December 31, 1996). Borrowings under the line are collateralized by the
Company's accounts receivable and inventory.
The loan agreement includes certain covenants which limit borrowings and the
ability to merge or dispose of assets, and requires the maintenance of minimum
working capital and tangible net worth ratios.
In connection with the acquisition of AST, the Company assumed a line of credit
with an outstanding balance of $515,000 at December 31, 1996. In January 1997,
this amount was repaid and the related line of credit was terminated.
6) Long-term Debt
--------------
<TABLE>
<CAPTION>
Long-term debt consists of the following at December 31: 1996 1995
---- ----
<S> <C> <C>
8.0% note payable to financial institution due in monthly $ 130,745 $ 247,920
principal and interest installments of $11,278 through December
1997, collateralized by the assignment of interest in the
shares of the Company's common stock held by the ESOP, accounts
receivable, inventory and property and equipment.
Less current installments (130,745) (117,175)
--------------- -------------
Long-term debt, excluding current installments $ -- $ 130,745
=============== =============
</TABLE>
Interest paid on all debt amounted to approximately $34,000 and $154,000 in 1996
and 1995, respectively.
7) Stock Options and Stock Warrants
--------------------------------
At December 31, 1996, the Company had outstanding options to purchase common
stock under three separate incentive stock option plans. Two of these plans, the
1992 Director Incentive Stock Option Plan and the 1992 Key Employee Incentive
Stock Option Plan have effectively replaced the Company's 1982 Incentive Stock
Option Plan. Options granted under the 1992 Director Incentive Stock Option Plan
may be qualified or non-qualified. From time to time, the Company also has
granted other non-qualified options to certain individuals. The Company also has
outstanding 14,572 warrants to purchase common stock. These warrants are
exercisable at $3.50 and expire in 1998.
18
<PAGE>
The following table summarizes option activity:
<TABLE>
<CAPTION>
Non-qualified Options Qualified Options
--------------------- -----------------
No. of Exercise No. of Exercise
Options Price Options Price
------- ----- ------- -----
<S> <C> <C> <C> <C>
Outstanding at January 1, 1995 51,000 $2.125-7.50 174,500 $1.994-6.75
Granted 75,000 20,000
Canceled or expired -- (2,000)
Exercised (9,000) (65,500)
----------- ----------
Outstanding at December 31, 1995 117,000 $2.875-7.50 127,000 $2.875-10.05
Granted -- 95,000
Canceled or expired -- (41,000)
Exercised (6,000) (34,000)
----------- ----------
Outstanding at December 31, 1996 111,000 $5.00-7.50 147,000 $4.75-6.50
=========== ==========
Exercisable at December 31, 1996 91,000 $5.00-7.50 52,000 $5.00-6.50
=========== ==========
</TABLE>
Qualified options outstanding under the Company's stock option plans expire as
follows: 3,000 in 1997, and 144,000 in 1998 through 2002. There are 146,000
options available for additional grants. Outstanding non-qualified options
expire as follows: 111,000 between 1999 and 2001. There are 29,000 options
available for additional grants.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its stock
option plans because stock options are granted with an exercise price equal to
the fair value of the stock on the grant date. Had compensation cost for the
Company's stock option plans been determined based upon the fair value of the
options at the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, the Company's 1996 net income and
earnings per share would not have been materially affected. The fair value of
the options granted was determined using the Black-Scholes option pricing model
with the following assumptions: dividend yield of 0%, volatility of 69%,
risk-free interest rate of 6.25% and an expected life of five years.
8) Income Taxes
------------
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current:
Federal $ (320,000) $ 438,500
State (85,000) 53,500
-------------- ------------
(405,000) 492,000
Deferred:
Federal (1,148,000) 477,500
State (107,000) 78,500
-------------- ------------
(1,255,000) 556,000
-------------- ------------
$ (1,660,000) $ 1,048,000
============== ============
</TABLE>
19
<PAGE>
The difference between income tax expense (benefit) and the amount determined by
applying the federal statutory rate is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Federal statutory rate $ (2,488,000) $ 869,000
State income taxes, net of federal benefit (192,000) 87,000
Amortization of intangibles 60,000 52,000
Acquired research and development 925,000 -
Other 35,000 40,000
-------------- ------------
$ (1,660,000) $ 1,048,000
============== ============
</TABLE>
The following temporary differences give rise to the provision for deferred
taxes (benefit) at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Capitalized program development costs $ (419,000) $ 286,000
Deferred revenues (583,000) -
Depreciation (80,000) (19,000)
Allowance for doubtful accounts (30,000) 34,000
Inventory reserves 14,000 -
Net operating loss and tax credit carryforwards (107,000) 222,000
Accrued compensation (50,000) 4,000
Other - 29,000
-------------- ------------
$ (1,255,000) $ 556,000
============== ============
</TABLE>
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>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Deferred revenues $ 583,000 $ -
Allowance for doubtful accounts 101,000 71,000
Inventory reserves 27,000 41,000
Accrued compensation 78,000 28,000
Net operating loss carryforwards 580,000 473,000
Deferred lease obligation 26,000 39,000
Difference in depreciation 97,000 17,000
Other 478 16,478
-------------- --------------
Total deferred tax assets 1,492,478 685,478
Less valuation allowance (421,000) (421,000)
-------------- --------------
Net deferred tax assets 1,071,478 264,478
-------------- --------------
Deferred tax liabilities:
Capitalized product development costs (1,425,000) (1,873,000)
-------------- --------------
Total gross deferred tax liabilities (1,425,000) (1,873,000)
-------------- --------------
Net deferred tax liabilities $ (353,522) $ (1,608,522)
============== ==============
</TABLE>
For the year ended December 31, 1995, the Company utilized $370,000 of available
net operating loss carryforwards. At December 31, 1996, the Company had $300,000
in net operating loss carryforwards available for income tax purposes, other
than the prior net operating losses acquired, which are discussed below.
As a result of an acquisition, the Company has available approximately
$1,260,000 of additional net operating loss carryforwards that expire at varying
dates through 2007. Pursuant to Section 382 of the Internal Revenue Code (the
"Code"), the utilization of the net operating loss is limited to approximately
20
<PAGE>
$245,000 per year. During 1995, the Company utilized an aggregate of $225,000 of
the acquired net operating loss carryforwards to offset taxable income. As a
result, deferred taxes have been reduced by approximately $84,000. Due to the
limitation 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.
The Company paid federal and state income taxes of $103,000 and $466,000 in 1996
and 1995 respectively.
9) Acquisitions
------------
Effective December 31, 1996, the Company purchased the common stock of Anderson
Soft-Teach, Inc. (AST), a California corporation, for $4,500,000 in cash and
300,000 shares of the Company's common stock valued at $4.00 per share. AST is a
developer, producer and distributor of networkable multimedia training solutions
for computer skills training and on-line electronic performance support systems.
As a result of the acquisition, the Company recorded intangible assets of
approximately $2,180,000, consisting of workforce investment, customer base, and
goodwill. Additionally, the Company recorded a charge of $2,500,000 of the
$5,800,000 purchase price, representing the value of acquired in-process
research and development. On September 1, 1996, ITC Australasia Pty. Ltd.
(ITCA), a newly-formed and wholly-owned subsidiary of the Company, purchased
substantially all of the assets of Acumen People and Productivity Pty. Ltd.
(Acumen) for approximately $80,000. Acumen had been a distributor of ITC
products in Australia and Asia since 1991. ITCA was created in order to continue
the expansion of the Company's presence in the international marketplace,
particularly throughout Australia and the Pacific Rim.
The following table sets forth proforma unaudited results of operations of the
Company for the years ended December 31, 1996 and 1995, as if AST had been
acquired as of January 1,1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net revenues $ 26,860,000 $ 28,380,000
============== ==============
Net income (loss) $ (6,306,000) $ 1,222,000
============== ==============
Net income (loss) per common share $ (1.63) $ 0.34
============== ==============
</TABLE>
10) Commitments
-----------
The Company has entered into separate employment agreements with each of its
corporate officers which are subject to termination upon death or disability or
upon notice by the Company providing up to 34 months of severance pay. 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.
11) Stockholders' Equity
--------------------
During 1995, the Company completed a public offering of 1,207,500 shares of its
common stock including 175,000 shares being sold by certain Company
shareholders. The net proceeds to the Company from the offering amounted to
$9,048,000 (net of underwriters' commissions and approximately $314,000 of
expenses paid directly by the Company). The Company used $1,763,000 of the net
proceeds to reduce its long-term borrowing under two separate term loans.
21
<PAGE>
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 Company recognized contribution expense
of approximately $102,000 and $106,000 for 1996 and 1995, respectively, based on
the cost of shares allocated for the period and any interest expense incurred.
Contributions to the ESOP amounted to approximately $135,000 in both 1996 and
1995, including approximately $16,000 and $25,000 of interest in 1996 and 1995,
respectively. The fair market value of the 33,333 unallocated shares at December
31, 1996 amounted to approximately $187,000.
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. During 1995, the Company made a $30,000 contribution to the 401(k) Plan.
No contribution was made by the Company prior to 1995 or in 1996.
13) Quarterly Financial Data (Unaudited)
------------------------------------
Financial data for the interim periods of 1996 and 1995 were as follows (amounts
in thousands except per share amounts):
<TABLE>
<CAPTION>
Net Income
Net Net Income (Loss)
Revenue (Loss) Per Share
------- ---------- ----------
<S> <C> <C> <C>
1995 Quarters
First $ 4,970 $ 265 $ .10
Second 6,286 461 .18
Third 6,038 464 .18
Fourth 5,475 317 .08
----------- ----------- ----------
Total $ 22,769 $ 1,507 $ .54
=========== =========== ==========
1996 Quarters
First $ 3,716 $ (397) $ (0.11)
Second 7,605 349 0.10
Third 5,537 (498) (0.14)
Fourth (a) 5,286 (5,113) (1.44)
----------- ----------- ----------
Total $ 22,144 $ (5,659) $ (1.59)
=========== =========== ==========
</TABLE>
(a) Includes pre-tax write-offs of $3,300,000 for capitalized program
development costs and $2,500,000 for acquired research and development (see
notes 1 and 9).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
- ----
22
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) Identification of Directors
---------------------------
<TABLE>
<CAPTION>
Name Age Year First Elected Year of Expiration
---- --- ------------------ ------------------
<S> <C> <C> <C>
Daniel R. Bannister 66 1988 1999
Philip J. Facchina 35 1995 1999
Steven L. Roden 46 1993 1997
John D. Sanders 58 1977 1998
Richard E. Thomas 70 1982 1998
James H. Walton 63 1977 1997
Chairman of the Board
</TABLE>
(b) Identification of Executive Officers
------------------------------------
<TABLE>
<CAPTION>
Year First
Name Age Served As Officer
---- --- -----------------
<S> <C> <C>
Warren E. Anderson, Executive Vice President 45 1997
and Chief Technology Officer
Elaine H. Babcock, Senior Vice President 40 1984
Frank A. Carchedi, Vice President, 39 1995
Treasurer and Chief Financial Officer
Anne J. Fletcher, Secretary 34 1995
Christopher E. Mack, Vice President 31 1996
and Chief Operating Officer
Steven L. Roden, President 46 1993
Carl D. Stevens, Senior Vice President 50 1997
Robert F. VanStry, Vice President 46 1983
James H. Walton, Chief Executive Officer 63 1977
</TABLE>
23
<PAGE>
(c) Business Experience
Warren E. Anderson is Executive Vice President of ITC and President of Anderson
Soft-Teach, a wholly-owned subsidiary of ITC. He also serves as the Company's
Chief Technology Officer. Mr. Anderson is the Founder of Anderson Soft-Teach,
established in 1983, and has served as its President since that time. Mr.
Anderson is a charter member of the CEO Forum and serves on the Advisory Board
for the Santa Clara University Leavey School of Business and Administration.
Prior to founding Anderson Soft-Teach, he worked at Intel Corporation, Capital
Preservation Fund, and MITRE Corporation. He received his MBA from Santa Clara
University and holds a B.S. in Mechanical Engineering from the University of
Cincinnati.
Elaine H. Babcock is Senior Vice President of ITC. Ms. Babcock is currently
responsible for managing the Domestic Sales Force, Information Technology
Division. During 1995, Ms. Babcock was 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. She has a Communications degree from the University of
Maryland.
Daniel R. Bannister, a Director since 1988, has been President and Chief
Executive Officer of DynCorp, a leading professional and technical services
firm, since 1985. He was Executive Vice President and Senior Vice President of
its Technical Services Group from 1983 to 1984.
Frank A. Carchedi is Vice President, Treasurer and Chief Financial Officer of
ITC. Prior to joining ITC in November of 1995, Mr. Carchedi was a consultant in
the Merger and Acquisition group of Ernst & Young LLP. Mr. Carchedi was with
Ernst & Young LLP for over 10 years, prior to which he held several other
positions in private industry and public accounting. Mr. Carchedi holds a B.S.
in Accounting from Wake Forest University and is a C.P.A.
Philip J. Facchina, a Director since 1995, is Executive Vice President and Chief
Operating Officer of View Call America, Inc. Mr. Facchina served as ITC's
President and Chief Operating Officer from October 1995 to November 1996. Prior
to being named President and COO in October 1995, Mr. Facchina served as Vice
President, Treasurer and Chief Financial Officer of ITC from October 1992 to
October 1995. Before joining ITC in October 1992, Mr. Facchina served as
Treasurer and Chief Financial Officer of Facchina Construction Company, Inc. and
its affiliates. Prior to then, Mr. Facchina served as Vice President of Finance
and Administration for E. C. Ernst, Inc. and Assistant Treasurer and Secretary
for The Philadelphia Bourse, Inc. Mr. Facchina holds an M.B.A. from the
University of Pennsylvania's Wharton Business School and a B.S. in Accounting
from the University of Maryland.
Anne J. Fletcher is Secretary of ITC. Ms. Fletcher is an attorney with the law
firm of De Martino, Finkelstein, Rosen & Virga. Ms. Fletcher served as in-house
general counsel to ITC from 1994-1996. Prior to joining ITC, she was engaged in
the private practice of law for six years in Fairfax, Virginia. Ms. Fletcher
received her J.D. from George Mason University School of Law and a B.A. from the
State University of New York, College at Oswego.
Christopher E. Mack is Vice President and Chief Operating Officer of ITC. Prior
to being named COO in November 1996, Mr. Mack served as the Company's Controller
from December 1993 to November 1996. Prior to joining ITC in December 1993, Mr.
Mack served as Assistant Controller of Bardon, Inc., an international
construction materials firm. Mr. Mack holds a B.S. in Accounting from Shepherd
College and is a C.P.A.
Steven L. Roden is President of ITC and Chief Executive Officer of ComSkill. 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
24
<PAGE>
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.
John D. Sanders, a Director since 1977, served as Chairman of Tech News Inc.,
publishers of Washington Technology newspaper, from 1987 to 1996, and currently
serves as a consultant to Tech News. He is also a registered representative
(inactive) with Wachtel & Co., Inc., an investment banking firm, a position held
since 1968. Mr. Sanders is a member of the Boards of Directors of: Daedalus
Enterprises, Inc., an electronics specialty consultant; and Information
Analysis, Inc., a supplier of computer software services. 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.
Carl D. Stevens, age 50, is Senior Vice President of Marketing and Strategic
Business Development for ITC. Mr. Stevens was Program Director for Public Sector
for the IBM Personal Computer Company. In that capacity, he was responsible for
the U.S. sales of IBM Personal Computers into higher education, K-12, federal,
state and local governments. During his 26 year career with IBM he held numerous
field and headquarters marketing and management positions. He was Branch Manager
for the Southeastern U.S., managed IBM's New Manager School for experienced
managers, held various management positions involving IBM's Personal Computer
Remarketer Channels, and was the Business Alliance Executive for IBM's Education
and Training Division. Mr. Stevens received his education from the Indiana
University, where he majored in Marketing and Business Education.
Richard E. Thomas, a Director since 1982, is semi-retired and serves as a member
of the executive team of COMSAT RSI. Mr. Thomas served as President of COMSAT
RSI from 1994-1996. Prior to that, he was Chairman of the Board, President and
Chief Executive Officer of Radiation Systems, Inc. (RSI), a communications
systems manufacturer, from 1978 until 1994, at which time RSI was merged into
COMSAT Corporation. Mr. Thomas was originally employed by RSI as Vice President,
Operations in 1966.
Robert F. VanStry is a Vice President of ITC. Mr. VanStry manages the Domestic
Sales Force for the Process and Manufacturing division. Mr. VanStry was
previously in charge of ITC's product and technology development. 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.
James H. Walton is Chairman of the Board 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.
ITEM 10. EXECUTIVE COMPENSATION
The information contained on pages 6, 7 and 8 of ITC's Proxy Statement dated
March 13, 1997, with respect to executive compensation and transactions, is
incorporated herein by reference in response to this item.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained on pages 2 and 3 of ITC's Proxy Statement dated March
13, 1997, with respect to security ownership of certain beneficial owners and
management, is incorporated herein by reference in response to this item.
25
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 10 of ITC's Proxy Statement dated March 13,
1997, with respect to certain relationships and related transactions, is
incorporated herein by reference in response to this item.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following are filed as part of this Form 10-KSB:
----------------------------------------------------
1. Financial Statements: See Part II, Item 7.
2. Exhibits: See exhibit index, which index is incorporated herein by
reference.
(b) Reports on Form 8-K:
--------------------
The Company did not file any reports on Form 8-K during 1996.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL TRAINING CORPORATION
(Registrant)
<TABLE>
<S> <C>
BY /s/James H. Walton DATE March 13, 1997
---------------------------------------------- -------------------------------------
James H. Walton, Chairman of the Board
and Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
BY /s/Steven L. Roden DATE March 13, 1997
---------------------------------------------- -------------------------------------
Steven L. Roden, President
BY /s/Christopher E. Mack DATE March 13, 1997
---------------------------------------------- -------------------------------------
Christopher E. Mack, Vice President
and Chief Operating Officer
BY /s/Frank A. Carchedi DATE March 13, 1997
---------------------------------------------- -------------------------------------
Frank A. Carchedi, Vice President,
Treasurer and Chief Financial Officer
BY /s/John D. Dobey DATE March 13, 1997
---------------------------------------------- -------------------------------------
John D. Dobey, Controller
BY /s/Daniel R. Bannister DATE March 13, 1997
---------------------------------------------- -------------------------------------
Daniel R. Bannister, Director
BY /s/John D. Sanders DATE March 13, 1997
---------------------------------------------- -------------------------------------
John D. Sanders, Director
BY /s/Richard E. Thomas DATE March 13, 1997
---------------------------------------------- -------------------------------------
Richard E. Thomas, Director
BY /s/Philip J. Facchina DATE March 13, 1997
---------------------------------------------- -------------------------------------
Philip J. Facchina, Director
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Corporate Headquarters International Sales Locations
Industrial Training Corporation London, England
13515 Dulles Technology Drive 44 123 34-0880
Herndon, VA 20171-3413
(800) 638-3757 Melbourne, Australia
(703) 713-3335 613-9593-9955
FAX: (703) 713-0065
Web-site: http://www.itcactiv.com Sydney, Australia
612-9438-2500
Anderson Soft-Teach
983 University Avenue Stock Registrar and Transfer Agent
Los Gatos, CA 95030 American Securities Transfer & Trust, Inc.
(800) 338-4336 938 Quail Street
FAX: (408) 399-0500 Suite 101
Web-site: http://www.teach.com Lakewood, CO 80215
North American Sales Locations Stock Listing
Atlanta, GA National Market System
(770) 984-9881 NASDAQ/NMS Trading Symbol: ITCC
Boston, MA Market-Makers
(508) 376-8118 Koonce Securities, Inc.
Ferris, Baker Watts, Incorporated
Charlotte, NC
(704) 364-1223 Annual Meeting
The Annual Meeting of shareholders will be held on May
Chicago, IL 6, 1997 at 4:00 pm at the Sheraton Reston Hotel, 11810
(630) 585-7688 Sunrise Valley Drive, Reston, Virginia 22091.
Houston, TX Shareholder Inquiries
(713) 852-0601 Communications concerning transfer requirements, lost
certificates, and changes in address should be
Ottawa, Ontario directed to the Stock Registrar and Transfer Agent.
(613) 599-4646 Other inquiries may be directed to Frank A. Carchedi,
CFO.
Plymouth, WI
(414) 893-3900 Principal Bank
Central Fidelity National Bank
Pittsburgh, PA Alexandria, VA
(814) 643-4116
General Counsels
Portland, OR Ginsburg, Feldman and Bress, Chartered
(503) 699-8214 Washington, D.C.
Tampa, FL Kirkpatrick & Lockhart LLP
(813) 855-5201 Washington, D.C.
Washington, D.C. Independent Auditors
(301) 601-8799 Ernst & Young LLP
Washington, D.C.
</TABLE>
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
- -----------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Amended Articles of Incorporation of the Company, incorporated by
reference to the Company's Form 10-QSB for the quarter ended June
30, 1996 filed with the Securities and Exchange Commission ("SEC")
(Commission File No. 33-61393).
3.2 Restated By-Laws of the Company, incorporated by reference to the
Company's Form 10-KSB for the fiscal year ended December 31, 1995
filed March 15, 1996 with the SEC (Commission File No. 0-13741).
4.1 Specimen Certificate for ITC Common Stock, incorporated by
reference to the Company's Registration Statement on Form SB-2
filed July 28, 1995 with the SEC (Commission File No. 33-61393).
4.2 Registration Rights and Shareholders' Agreement, incorporated by
reference to the Company's Form 8-K filed January 13, 1997 with
the SEC (Commission File No. 0-13741).
10.1 Agreement and Plan of Reorganization By and Among Industrial
Training Corporation, ITC Acquisition Corporation and Anderson
Soft-Teach, incorporated by reference to the Company's Form 8-K
filed January 13, 1997 with the SEC (Commission File No.
0-13741).
10.2 Asset Purchase Agreement, Assignment and Bill of Sale, each dated
February 17, 1995 between ITC and the Instrument Society of
America, incorporated by reference to the Company's Registration
Statement on Form SB-2 filed July 28, 1995 with the SEC
(Commission File No. 33-61393).
10.3 1992 Director Incentive Stock Option Plan, as amended.
10.4 1992 Key Employee Incentive Stock Option Plan, as amended.
10.5 Employee Stock Ownership Plan, incorporated by reference to the
Company's Form 10-KSB filed March 19, 1992 with the SEC
(Commission File No. 0-13741).
10.6 Employment Agreements with Management
(a) James H. Walton
(b) Philip J. Facchina (now resigned)
(c) Elaine H. Babcock
(d) Robert F. VanStry
each incorporated by reference to Pre-Effective Amendment No. 1 to
the Registration Statement on Form SB-2 filed August 16, 1995 with
the SEC (Commission File No. 33-61393).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(e) Steven L. Roden
(f) Warren E. Anderson
(g) Christopher E. Mack
(h) Frank A. Carchedi
10.7 Lease dated October 21, 1993 for commercial office space in
Herndon, VA, as amended, incorporated by reference to the
Company's Form 10-KSB for the fiscal year ended December 31, 1995
filed March 15, 1996 with the SEC (Commission File No. 0-13741).
10.8 Lease dated November 30, 1995 for commercial office space in
Atlanta, GA, incorporated by reference to the Company's Form 10-
KSB for the fiscal year ended December 31, 1995 filed March 15,
1996 with the SEC (Commission File No. 0-13741).
10.9 Lease dated February 10, 1995 for commercial office space in
Millis, MA, incorporated by reference to the Company's Form 10-KSB
for the fiscal year ended December 31, 1995 filed March 15, 1996
with the SEC (Commission File No. 0-13741).
10.10 Lease dated February 17, 1995 for the commercial office space in
Los Gatos, California.
23.1 Consent of Ernst and Young LLP, independent auditors.
</TABLE>
<PAGE>
[LOGO OF INDUSTRIAL TRAINING CORPORATION]
Exhibit 10.3
Industrial Training Corporation
1992 Director Incentive Stock Option Plan
as Adopted
April 30, 1992
The proper execution of the duties and responsibilities of the directors of
Industrial Training Corporation is a vital factor in the continued growth and
success of the Company. Toward this end, it is necessary to attract and retain
effective and capable persons who will serve as directors and contribute
materially to the successful operation of the business of the Company. It
benefits the Company to bind the interests of these persons more closely to its
own interest by offering them options to purchase shares of common stock of the
Company and thereby provide them with added incentive to remain directors and to
increase its prosperity and growth.
Options granted under this plan may be either incentive stock options within the
meaning of Section 422 (b) of the Internal Revenue Code, as amended, or non-
statutory options which are not intended to meet the requirements of Section 422
(b).
Article 1
Definitions
The following words and terms, unless the context clearly indicates otherwise,
have the following meanings. Where appropriate in the context of this Stock
Option Plan, the singular shall include the plural, the masculine gender shall
include the feminine, and vice versa:
1:01 Board means the Board of Directors of Industrial Training Corporation.
1:02 Committee means the stock option committee consisting of two (2) or more
disinterested directors as more specifically described in Section 3:01.
1:03 Common Stock means the common stock of Industrial Training Corporation.
1:04 Company means Industrial Training Corporation and any parent or
subsidiary thereof.
1:05 Option means the options granted pursuant to this Plan.
1:06 Option Agreement means an agreement provided for in Section 6:01.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 2
- --------------------------------------------------------------------------------
1:07 Participant means an individual designated pursuant to Section 3:03 who has
executed an Option Agreement.
1:08 Plan means this Industrial Training Corporation 1992 Stock Option Plan.
1:09 SEC means the United States Securities and Exchange Commission.
Article 2
Effective Date of the Plan
2:01 On March 6, 1992 the Board adopted this Plan subject to approval by the
Shareholders. The plan shall become effective at the next Annual Meeting
of Shareholders, provided it is approved by the majority of the
Shareholders of the Company at that time. No options granted prior to
Shareholder approval of the Plan shall be exercisable unless and until the
Shareholders of the Company approve this Plan and the Options granted prior
to such approval.
Article 3
Administration
3:01 The Plan shall be administered by the stock option committee of the Board
(the Committee) consisting of two (2) or more directors who shall each be
"disinterested persons" as no member of the Committee shall be (i) eligible
to receive Option awards under this Plan, or (ii) been awarded or granted
equity securities under the Plan or any other plan of the Company during
the period of one year prior to serving on the Committee except as
permitted in the SEC's Rule 16b-3 (c) (2) (i). The Board may, from time to
time remove members from or add members to the Committee. Vacancies in the
Committee, however caused, shall be filled by the Board of Directors. The
Committee shall select one of its members chairman and shall hold meetings
at such times and places as it may determine. The Committee may appoint a
secretary and, subject to the provisions of the Plan and to policies
determined by the Board of Directors, may make such rules and regulations
for the conduct of its business as it shall deem available.
3:02 The Committee shall establish, from time to time, subject to the
limitations of the Plan as hereinafter set forth, such rules and
regulations, and amendments thereof, as it deems necessary to comply with
applicable law and regulation and for the proper administration of the
Plan. Every decision and action of the Committee shall be valid if a
majority of the members then in office concur either at a meeting or in
writing.
3:03 The Committee shall make all determinations as to the directors who in the
opinion of the Board should receive Options. The Committee shall also
designate the time or times at which Options are granted, the number of
shares for which Options are to be granted to each person, and the term and
price of each option. No member of the Board shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 3
- --------------------------------------------------------------------------------
3:04 Options shall be granted only after prior designation by the Committee and
the execution of an Option Agreement. The Committee shall report to the
Board the names of persons granted Options, the number of Options granted,
and the terms and conditions of each Option.
Article 4
Participation in the Plan
4:01 Participation in the Plan shall be limited to directors of the Company
who, from time to time, shall be designated by the Committee in accordance
with Section 3:03.
Article 5
Stock Subject to Plan
5:01 There are reserved for the granting of Options under the Plan, and for
subsequent issuance and sale pursuant to granted Options, 35,000 shares of
unissued but authorized Common Stock or of Common Stock held in treasury.
If for any reason, shares for which an Option has been granted cease to be
subject to purchase thereunder, those shares shall be available for the
granting of Options.
5:02 Proceeds of the purchase of optioned shares shall be used for the general
business purposes of the Company.
5:03 In the event of reorganization, recapitalization, stock split, stock
dividend, stock combination, merger, consolidation, acquisition of property
or stock, any changes in the capital structure of the Company, or similar
changes in the Company's Common Stock, the Committee shall make such
adjustments as may be appropriate in the number and kind of shares reserved
for purchase and in the number, kind and price of shares covered by Options
granted but not then exercised.
5:04 If the Company shall at any time merge or consolidate with or into another
corporation and (i) the Company is not the surviving entity, or (ii) the
Company is the surviving entity and the shareholders of the Company are
required to exchange their shares of Common Stock for property and/or
securities, the holder of each Option will thereafter receive, upon the
exercise thereof, the securities and/or property to which a holder of the
number of shares of Common Stock then deliverable upon the exercise of such
Option would have been entitled upon such merger or consolidation, and the
Company shall take such steps in connection with such merger or
consolidation as may be necessary to assure that the provisions of this
Plan shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property thereafter deliverable upon the
exercise of such Option, provided, however, that under no circumstance
shall any Option exercise date be accelerated in contemplation of such
action. A sale of all or substantially all the assets of the Company for
consideration (apart from the assumption of obligations)
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 4
- --------------------------------------------------------------------------------
consisting primarily of securities shall be deemed a merger or
consolidation for the foregoing purposes. Notwithstanding the foregoing,
the provisions of this Section 5:04 shall be subject to Section 6:06.
The surviving entity following any reorganization may at any time, in its
sole discretion, tender substitute options as it may deem appropriate.
However, in no event may the substitute options entitle the Participant to
any fewer shares (or any greater aggregate price) or any less other
property that the Participant would be entitled to under the immediately
preceding paragraph upon an exercise of the Options held prior to the
substitution of the new Option.
5:05 In the event of the proposed dissolution or liquidation of the Company, the
Options granted hereunder shall terminate as of a date to be fixed by the
Board, provided that not less than thirty (30) days' prior written notice
of the date so fixed shall be given to the Participant, and the Participant
shall have the right, during the period of thirty (30) days preceding such
termination, to exercise his Options. Not withstanding the foregoing, the
provisions of this Section shall be subject to Section 6:06.
Article 6
Terms and Conditions of Options
6:01 Each Option shall be evidenced by an Option Agreement specifying the number
of shares of Common Stock covered thereby in such form as the Committee
from time to time may determine, provided that no provision of the Option
Agreement shall be inconsistent with this Plan and such Option Agreement
may incorporate all or any of the terms of this Plan by reference.
6:02 The Option price per share shall not be less than 100% of the fair market
value of a share of the Common Stock on the date on which the Option is
granted. The fair market value of a share of Common Stock for this purpose
shall be the mean of the closing high bid and low asked prices per share in
the over-the-counter market, or the closing price if the Company's Common
Stock is listed in the NASDAQ National Market System, on the day of the
grant (or if that date falls on a non-business day, then the next business
day on which the stock is quoted).
If any director to whom an Incentive Stock Option is to be granted under
the Plan is at the time of the grant of such option the owner of stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of any Parent Corporation or any Subsidiary
(after taking into account the attribution of stock ownership rules of
Section 424 (d) of the Code, and any successor provisions thereto), then
the following special Stock Option granted to such individual:
(A) The purchase price per share of the Common Stock subject to such
incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant.
6:03 No Option may be granted under this Plan after April 30, 2002.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 5
- --------------------------------------------------------------------------------
6:04 No director may receive Incentive Stock Options (under all stock option
plans of the Company and any of its parents and subsidiaries) in any
calendar year for stock with an aggregate fair market value (determined as
of the time of the option is granted) in excess of $100,000, plus any
unused limit carryover from prior years computed in accordance with
subsection (c) (4) of Section 422 (b) of the Internal Revenue Code.
6:05 No portion of any Incentive Stock Option granted shall be exercisable while
there is outstanding (within the meaning of subsection (c) (7) of Section
422 (b) of the Internal Revenue Code) any Incentive Stock Option granted to
optionee prior to such option.
6:06 The term of any Option granted under this Plan shall be up to five (5)
years from the date on which it was granted. The Committee shall have the
right to set the time or times within which an Option shall be exercised,
and to accelerate the time or time of exercise provided however, that no
Option shall be exercisable until (i) after the Shareholders of the Company
approve the Plan; and (ii) at least six (6) months from the date of grant.
6:07 Each Option by its terms shall be non-transferrable and non-assignable
except that valid Option rights may be transferred by testamentary
instrument (will), by the laws of descent and distribution, or pursuant to
a qualified domestic relations order as defined in the Internal Revenue
Code or Title I of the Employee Retirement Income Security Act or the rules
thereunder. Otherwise, an Option is exercisable only by such Participant.
6:08 Each Option granted under the Plan shall terminate and may no longer be
exercised if the Participant ceases to be a director of the Company, except
that (i) if the Participant dies while a director of the Company, or within
three (3) months after the termination of such service, such Option may be
exercised on his behalf as set forth in 6:09 below; and (ii) if the
Participant's term as director shall have been terminated for any reason
other than his death, he may at any time within a period of three (3)
months after such termination exercise such Option to the extent that the
Option was exercisable pursuant to Section 6:06 above by him on the date of
the termination of his directorship; provided, however that in the case of
removal then the Participant's Option shall terminate and expire
concurrently with his removal and shall not thereafter be exerciseable to
any extent. The definition of "cause" shall be as set forth in the Option
Agreement with each Participant.
6:09 If the Participant dies during the term of his Option while in the employ
of the Company, or within the three (3) month period after the termination
of services as a director, without having fully exercised his Option, the
executor or administrator of his estate or the person who inherits the
right to exercise the Option by bequest or inheritance shall have the right
within twelve (12) months after the Participant's death to purchase the
number of shares which the deceased Participant was entitled to purchase at
the date of his death, after which time the Option shall lapse.
6:10 A Participant may, at any time, elect in writing to abandon an Option or
any part thereof.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 6
- --------------------------------------------------------------------------------
Article 7
Methods of Exercise of Option
7:01 The Participant (or other person acting under Section 6:09) desiring to
exercise an Option as to all or part of the shares of Common Stock subject
to that option shall notify the Secretary of the Company in writing at its
principal office to that effect, specifying the number of shares to be
purchased.
7:02 The notice shall be accompanied by payment to the Company of the full
purchase price. With the prior consent of the Company the Option may be
exercised as to the number of shares specified in the notice by tendering
to the Company shares of Common Stock already owned by the Participant
which, together with any cash tendered therewith, shall equal in value the
full purchase price. The value of the tendered shares for this purpose
shall be the fair market value (as determined in accordance with the
procedures set forth in Section 6:02) of such shares (valued as if
unlegended and freely transferrable) on the date the Participant executed
and dates the notice provided in Section 7:01, and the Participant shall
deliver only the number of shares of Common Stock which, together with any
cash delivered, has an aggregate value of not less than the full purchase
price for the Option.
7:03 A Participant shall have none of the rights of a Stockholder until the
shares of Common Stock covered by the Option are issued to him. If the
shares of Common Stock issuable pursuant to the exercise of an Option are
not registered under the Securities Act of 1933, as amended, the Company
may require that the Participant deliver an investment representation
letter at the time of exercise in form acceptable to the Company and its
counsel, and the Company may place appropriate legends restricting transfer
under applicable securities laws on the certificates for the shares of
Common Stock to be issued.
Article 8
Amendments and Discontinuance of the Plan
8:01 The Committee shall have the right at any time and from time to time to
amend, suspend, or terminate the Plan, provided that, except as provided in
Section 5:03, no such amendment, suspension, or termination shall (i)
revoke or alter the terms of any valid Option previously granted in
accordance with this Plan; (ii) increase the number of shares to be
reserved for issuance of Options; (iii) change the price determined
pursuant to the provisions of Section 6:02; (iv) change the class of
eligible employees to whom Options may be granted under this Plan; (v)
extend the term of the Plan beyond ten (10) years or provide for options
exercisable more than five (5) years after the date granted; (vi) permit
any member of the Committee to be eligible as a Participant; or (vii)
otherwise materially modify the Plan, except as provided herein or as
necessary to comply with applicable law, without Shareholder approval.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 7
- --------------------------------------------------------------------------------
8:02 This Plan shall terminate at midnight on April 30, 2002. Options
outstanding at the termination of the Plan shall not be affected by such
termination.
Article 9
Miscellaneous Provisions
9:01 The Plan shall be construed, whenever possible, to be in conformity with
the requirement of all applicable federal law, including without limitation
the SEC's Rule 16b-3. To the extent not in conflict with the preceding
sentence, the Plan shall be construed, administered and governed in all
respects under and by the laws of the State of Virginia, exempt where
preempted by federal law.
9:02 If any provision of the plan is held invalid or unenforceable, the
invalidity or unenforceability shall not affect any other provisions and
the Plan shall be construed and enforced as if those provisions had not
been included.
9:03 This Plan shall be binding upon heirs, executors, administrators,
successors and assigns of all parties hereto, present and future.
9:04 This Plan shall not be deemed to construe a contract between any director
and the Company. Nothing in the Plan shall give any right to be retained
as a director of the Company, and all director Participants shall remain
subject to non-election or removal to the same extent as if the Plan had
not been put into effect.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 8
- --------------------------------------------------------------------------------
First Amendment
to the
Industrial Training Corporation
1992 Director Incentive Stock Option Plan
THIS AMENDMENT is made to the Industrial Training Corporation 1992 Director
Incentive Stock Option Plan (the "Plan"), effective the 20th day of February,
1996.
1. Section 5:01 of Article 5 of the Plan shall be amended by deleting the
numeral "35,000" and substituting "135,000" therefore, so that said section
shall read as follows:
5.01 There are reserved for the granting of Options under the Plan, and
for subsequent issuance and sale pursuant to granted Options, 135,000
shares of unissued but authorized Common Stock or of Common Stock held
in treasury. If for any reason, shares for which an Option has been
granted cease to be subject to purchase thereunder, those shares shall
be available for the granting of Options.
<PAGE>
Industrial Training Corporation 1992 Director Incentive Stock Option Plan 9
- --------------------------------------------------------------------------------
Second Amendment
to the
Industrial Training Corporation
1992 Director Incentive Stock Option Plan
THIS SECOND AMENDMENT to the 1992 Director Incentive Stock Option Plan
(the "Plan") is effective the 3rd day of January, 1997.
1. Section 6:04 of Article 6 of the Plan shall be amended by deleting the
section in its entirety and replacing it with a new section 6.04, which reads as
follows:
No director may receive Incentive Stock Options which are exercisable
for the first time during any calendar year (under all stock option
plans of the Company and any of its parents and subsidiaries) for
stock with an aggregate fair market value (determined as of the time
that the option is granted) in excess of $100,000, computed in
accordance with subsection (d) of Section 422 of the Internal Revenue
Code.
<PAGE>
[LOGO OF INDUSTRIAL TRAINING CORPORATION]
Exhibit 10.4
Industrial Training Corporation
1992 Key Employee Incentive Stock Option Plan
as Adopted
April 30, 1992
The proper execution of the duties and responsibilities of the executives and
other key employees of Industrial Training Corporation (the "Company") and its
subsidiaries is a vital factor in the continued growth and success of the
Company. Toward this end, it is necessary to attract, develop, and retain
effective and capable individuals at all levels of the Company to assume
positions which contribute materially to the successful operation of the
business of the Company. It benefits the Company to bind the interests of these
persons more closely to its own interest by offering them options to purchase
shares of common stock of the Company and thereby provide them with added
incentive to remain in its employ and to increase its prosperity and growth.
Options granted under this plan may be either incentive stock options within the
meaning of Section 422 (b) of the Internal Revenue Code, as amended, or non-
statutory options which are not intended to meet the requirements of Section 422
(b).
Article 1
Definitions
The following words and terms, unless the context clearly indicates otherwise,
have the following meanings. Where appropriate in the context of this Stock
Option Plan, the singular shall include the plural, the masculine gender shall
include the feminine, and vice versa:
1:01 Board means the Board of Directors of Industrial Training Corporation.
1:02 Common Stock means the common stock of Industrial Training Corporation.
1:03 Company means Industrial Training Corporation and any parent or
subsidiary thereof.
1:04 Option means the options granted pursuant to this Plan.
1:05 Option Agreement means an agreement provided for in Section 6:01.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 2
- --------------------------------------------------------------------------------
1:06 Participant means an individual designated pursuant to Section 3:03 who has
executed an Option Agreement.
1:07 Plan means this Industrial Training Corporation 1992 Stock Option Plan.
1:08 SEC means the United States Securities and Exchange Commission.
Article 2
Effective Date of the Plan
2:01 On March 6, 1992 the Board adopted this Plan subject to approval by the
Shareholders. The plan shall become effective at the next Annual Meeting
of Shareholders, provided it is approved by the majority of the
Shareholders of the Company at that time. No options granted prior to
Shareholder approval of the Plan shall be exercisable unless and until the
Shareholders of the Company approve this Plan and the Options granted prior
to such approval.
Article 3
Administration
3:01 The Plan shall be administered by the Board, whose construction and
interpretation of the terms and provisions of the Plan shall be final and
conclusive. No member of the Board (including directors who are employees)
shall be eligible to participate in the Plan.
3:02 The Board shall establish, from time to time, subject to the limitations of
the Plan as hereinafter set forth, such rules and regulations, and
amendments thereof, as it deems necessary to comply with applicable law and
regulation and for the proper administration of the Plan. Every decision
and action of the Board shall be valid if a majority of the members then in
office concur either at a meeting or in writing.
3:03 The Board shall make all determinations as to the persons (including
officers and key employees) who in the opinion of the Board should receive
Options. The Board shall also designate the time or times at which Options
are granted to each person, the number of shares for which Options are to
be granted to each person and the term and price of each option. The Board
shall designate a quantity of option-granting approval to the Chief
Executive Officer/President for use in situations where the grant of
options is appropriate but a determination of the Board is not timely
available. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Option.
3:04 Options shall be granted only after prior designation by the Board and the
execution of an Option Agreement. The Board shall report to the Secretary
of the Company the names of persons granted Options, the number of Options
granted, and the terms and conditions of each Option.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 3
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Article 4
Participation in the Plan
4:01 Participation in the Plan shall be limited to full-time officers and
employees of the Company who, from time to time, shall be designated by the
Board in accordance with Section 3:03.
Article 5
Stock Subject to Plan
5:01 There are reserved for the granting of Options under the Plan, and for
subsequent issuance and sale pursuant to granted Options, 115,000 shares of
unissued but authorized Common Stock or of Common Stock held in treasury.
If for any reason, shares for which an Option has been granted cease to be
subject to purchase thereunder, those shares shall be available for the
granting of Options.
5:02 Proceeds of the purchase of optioned shares shall be used for the general
business purposes of the Company.
5:03 In the event of reorganization, recapitalization, stock split, stock
dividend, stock combination, merger, consolidation, acquisition of property
or stock, any changes in the capital structure of the Company, or similar
changes in the Company's Common Stock, the Board shall make such
adjustments as may be appropriate in the number and kind of shares reserved
for purchase and in the number, kind and price of shares covered by Options
granted but not then exercised.
5:04 If the Company shall at any time merge or consolidate with or into another
corporation and (i) the Company is not the surviving entity, or (ii) the
Company is the surviving entity and the shareholders of the Company are
required to exchange their shares of Common Stock for property and/or
securities, the holder of each Option will thereafter receive, upon the
exercise thereof, the securities and/or property to which a holder of the
number of shares of Common Stock then deliverable upon the exercise of such
Option would have been entitled upon such merger or consolidation, and the
Company shall take such steps in connection with such merger or
consolidation as may be necessary to assure that the provisions of this
Plan shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property thereafter deliverable upon the
exercise of such Option, provided, however, that under no circumstance
shall any Option exercise date be accelerated in contemplation of such
action. A sale of all or substantially all the assets of the Company for
consideration (apart from the assumption of obligations) consisting
primarily of securities shall be deemed a merger or consolidation for the
foregoing purposes. Notwithstanding the foregoing, the provisions of this
Section 5:04 shall be subject to Section 6:06.
The surviving entity following any reorganization may at any time, in its
sole discretion, tender substitute options as it may deem appropriate.
However, in no event may the
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 4
- --------------------------------------------------------------------------------
substitute options entitle the Participant to any fewer shares (or any
greater aggregate price) or any less other property that the Participant
would be entitled to under the immediately preceding paragraph upon an
exercise of the Options held prior to the substitution of the new Option.
5:05 In the event of the proposed dissolution or liquidation of the Company, the
Options granted hereunder shall terminate as of a date to be fixed by the
Board, provided that not less than thirty (30) days' prior written notice
of the date so fixed shall be given to the Participant, and the Participant
shall have the right, during the period of thirty (30) days preceding such
termination, to exercise his Options. Not withstanding the foregoing, the
provisions of this Section shall be subject to Section 6:06.
Article 6
Terms and Conditions of Options
6:01 Each Option shall be evidenced by an Option Agreement specifying the number
of shares of Common Stock covered thereby in such form as the Board from
time to time may determine, provided that no provision of the Option
Agreement shall be inconsistent with this Plan and such Option Agreement
may incorporate all or any of the terms of this Plan by reference.
6:02 The Option price per share shall not be less than 100% of the fair market
value of a share of the Common Stock on the date on which the Option is
granted. The fair market value of a share of Common Stock for this purpose
shall be the mean of the closing high bid and low asked prices per share in
the over-the-counter market, or the closing price if the Company's Common
Stock is listed in the NASDAQ National Market System, on the day of the
grant (or if that date falls on a non-business day, then the next business
day on which the stock is quoted).
If any employee to whom an Incentive Stock Option is to be granted under
the Plan is at the time of the grant of such option the owner of stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of any Parent Corporation or any Subsidiary
(after taking into account the attribution of stock ownership rules of
Section 424 (d) of the Code, and any successor provisions thereto), then
the following special Stock Option granted to such individual:
(A) The purchase price per share of the Common Stock subject to such
incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant.
6:03 No Option may be granted under this Plan after April 30, 2002.
6:04 No employee may receive Incentive Stock Options (under all stock option
plans of the Company and any of its parents and subsidiaries) in any
calendar year for stock with an aggregate fair market value (determined as
of the time of the option is granted) in excess of $100,000, plus any
unused limit carryover from prior years computed in accordance with
subsection (c) (4) of Section 422 (b) of the Internal Revenue Code.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 5
- --------------------------------------------------------------------------------
6:05 No portion of any Incentive Stock Option granted shall be exercisable while
there is outstanding (within the meaning of subsection (c) (7) of Section
422 (b) of the Internal Revenue Code) any Incentive Stock Option granted to
optionee prior to such option.
6:06 The term of any Option granted under this Plan shall be up to five (5)
years from the date on which it was granted. The Board shall have the
right to set the time or times within which an Option shall be exercised,
and to accelerate the time or time of exercise provided however, that no
Option shall be exercisable until (i) after the Shareholders of the Company
approve the Plan; and (ii) at least six (6) months from the date of grant.
6:07 Each Option by its terms shall be non-transferrable and non-assignable
except that valid Option rights may be transferred by testamentary
instrument (will), by the laws of descent and distribution, or pursuant to
a qualified domestic relations order as defined in the Internal Revenue
Code or Title I of the Employee Retirement Income Security Act or the rules
thereunder. Otherwise, an Option is exercisable only by such Participant.
6:08 Each Option granted under the Plan shall terminate and may no longer be
exercised if the Participant ceases to be an employee of the Company,
except that (i) if the Participant dies while in the employ of the Company,
or within three (3) months after the termination of such employment, such
Option may be exercised on his behalf as set forth in 6:09 below; and (ii)
if the Participant's employment shall have been terminated for any reason
other than his death, he may at any time within a period of three (3)
months after such termination exercise such Option to the extent that the
Option was exercisable pursuant to Section 6:06 above by him on the date of
the termination of his employment; provided, however that in the case of
termination for cause by the Company of the employment of the Participant
of if a Participant shall terminate his employment in violation of any
employment agreement with the Company, then his Option shall terminate and
expire concurrently with the termination of his employment and shall not
thereafter be exercisable to any extent. The definition of "cause" shall
be as set forth in the Option Agreement with each Participant.
6:09 If the Participant dies during the term of his Option while in the employ
of the Company, or within the three (3) month period after the termination
of employment, without having fully exercised his Option, the executor or
administrator of his estate or the person who inherits the right to
exercise the Option by bequest or inheritance shall have the right within
twelve (12) months after the Participant's death to purchase the number of
shares which the deceased Participant was entitled to purchase at the date
of his death, after which time the Option shall lapse.
6:10 A Participant may, at any time, elect in writing to abandon an Option or
any part thereof.
Article 7
Methods of Exercise of Option
7:01 The Participant (or other person acting under Section 6:09) desiring to
exercise an Option as to all or part of the shares of Common Stock subject
to that option shall notify the
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 6
- --------------------------------------------------------------------------------
Secretary of the Company in writing at its principal office to that effect,
specifying the number of shares to be purchased.
7:02 The notice shall be accompanied by payment to the Company of the full
purchase price. With the prior consent of the Company the Option may be
exercised as to the number of shares specified in the notice by tendering
to the Company shares of Common Stock already owned by the Participant
which, together with any cash tendered therewith, shall equal in value the
full purchase price. The value of the tendered shares for this purpose
shall be the fair market value (as determined in accordance with the
procedures set forth in Section 6:02) of such shares (valued as if
unlegended and freely transferrable) on the date the Participant executed
and dates the notice provided in Section 7:01, and the Participant shall
deliver only the number of shares of Common Stock which, together with any
cash delivered, has an aggregate value of not less than the full purchase
price for the Option.
7:03 A Participant shall have none of the rights of a Stockholder until the
shares of Common Stock covered by the Option are issued to him. If the
shares of Common Stock issuable pursuant to the exercise of an Option are
not registered under the Securities Act of 1933, as amended, the Company
may require that the Participant deliver an investment representation
letter at the time of exercise in form acceptable to the Company and its
counsel, and the Company may place appropriate legends restricting transfer
under applicable securities laws on the certificates for the shares of
Common Stock to be issued.
Article 8
Amendments and Discontinuance of the Plan
8:01 The Board shall have the right at any time and from time to time to amend,
suspend, or terminate the Plan, provided that, except as provided in
Section 5:03, no such amendment, suspension, or termination shall (i)
revoke or alter the terms of any valid Option previously granted in
accordance with this Plan; (ii) increase the number of shares to be
reserved for issuance of Options; (iii) change the price determined
pursuant to the provisions of Section 6:02; (iv) change the class of
eligible employees to whom Options may be granted under this Plan; (v)
extend the term of the Plan beyond ten (10) years or provide for options
exercisable more than five (5) years after the date granted; (vi) permit
any member of the Board to be eligible as a Participant; or (vii) otherwise
materially modify the Plan, except as provided herein or as necessary to
comply with applicable law, without Shareholder approval.
8:02 This Plan shall terminate at midnight on April 30, 2002. Options
outstanding at the termination of the Plan shall not be affected by such
termination.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 7
- --------------------------------------------------------------------------------
Article 9
Miscellaneous Provisions
9:01 The Plan shall be construed, whenever possible, to be in conformity with
the requirement of all applicable federal law, including without limitation
the SEC's Rule 16b-3. To the extent not in conflict with the preceding
sentence, the Plan shall be construed, administered and governed in all
respects under and by the laws of the State of Virginia, exempt where
preempted by federal law.
9:02 If any provision of the plan is held invalid or unenforceable, the
invalidity or unenforceability shall not affect any other provisions and
the Plan shall be construed and enforced as if those provisions had not
been included.
9:03 This Plan shall be binding upon heirs, executors, administrators,
successors and assigns of all parties hereto, present and future.
9:04 This Plan shall not be deemed to construe a contract between any employee
and the Company. Nothing in the Plan shall give any right to be retained
in the employ of the Company, and all employees shall remain subject to
discharge, discipline or layoff to the same extent as if the Plan had not
been put into effect.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 8
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First Amendment
to the
Industrial Training Corporation
1992 Key Employee Incentive Stock Option Plan
THIS AMENDMENT is made to the Industrial Training Corporation 1992 Key
Employee Incentive Stock Option Plan (the "Plan"), effective the 4th day of
January, 1996.
1. Section 5:01 of Article 5 of the Plan shall be amended by deleting the
numeral "115,000" and substituting "315,000" therefore, so that said section
shall read as follows:
5.01 There are reserved for the granting of Options under the Plan, and
for subsequent issuance and sale pursuant to granted Options, 315,000
shares of unissued but authorized Common Stock or of Common Stock held
in treasury. If for any reason, shares for which an Option has been
granted cease to be subject to purchase thereunder, those shares shall
be available for the granting of Options.
<PAGE>
Industrial Training Corporation 1992 Stock Option Plan 9
- --------------------------------------------------------------------------------
Second Amendment
to the
Industrial Training Corporation
1992 Key Employee Incentive Stock Option Plan
THIS SECOND AMENDMENT to the 1992 Key Employee Incentive Stock Option Plan
(the "Plan") is effective the 3rd day of January, 1997.
1. Section 6:04 of Article 6 of the Plan shall be amended by deleting the
section in its entirety and replacing it with a new section 6.04, which reads as
follows:
No employee may receive Incentive Stock Options which are exercisable
for the first time during any calendar year (under all stock option
plans of the Company and any of its parents and subsidiaries) for
stock with an aggregate fair market value (determined as of the time
that the option is granted) in excess of $100,000, computed in
accordance with subsection (d) of Section 422 of the Internal Revenue
Code.
<PAGE>
Exhibit 10.6
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
effective as of the 30th day of November, 1996 (the "Effective Date") by and
between Industrial Training Corporation (the "Company") and Steven L. Roden (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 as Executive
Vice President, and also serves as Chief Executive Officer and President of
ComSkill Learning Centers, Inc., a wholly-owned subsidiary of the Company.
C. The Company has offered to continue to employ the Executive in the
capacity of President of the Company and Chief Executive Officer of ComSkill
Learning Centers, Inc. The Executive has indicated his willingness to accept
said offer for continued employment in these capacities.
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 President of
----------
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 him from time to time by the Board of Directors of the Company or
the Chief Executive Officer then in office, or their designee.
2. Acceptance and Standards. 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 his full
business time and services and his best efforts to the faithful performance of
the duties which may be
1
<PAGE>
reasonably assigned to him and which are consistent with his position under
Section 1 of this Agreement.
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 $130,000
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 reasonable 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 his 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 his position and adequate for the
performance of his duties.
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 agreements, 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 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, 1996 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.
2
<PAGE>
4. Term. The initial term of this Agreement shall begin on the Effective
----
Date and shall continue thereafter for a period of one (1) year, and thereafter
shall, without further action on the part of Executive or the Company, be
extended for additional one (1) year terms, provided that neither Executive or
the Company have given notice of termination, or otherwise terminated this
Agreement 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 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 his
-----
employment hereunder, this Agreement shall terminate as of the date of death,
and the Executive's spouse, or other such 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, if any.
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 are 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 his 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 his duties hereunder, (ii) act in a manner inimical to the
Company, (iii) negligently perform the duties of the Executive's position, or
(iv) not be in compliance with the Company employee handbook.
3
<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 60 days written notice to the Executive, and in addition, the Company shall
pay to the Executive a termination allowance (the "Termination Allowance") equal
to ten (10) months' salary, based upon his 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 lesser period as the Company
may determine.
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 through the date of termination. 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 he 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 1% stockholder.
b. The Executive further agrees that during the term of this Agreement he
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 the reasons for such
termination, he 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 his employment he will not, other than in the
normal and valid course of his employment with the Company, directly or
indirectly, take with him 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
4
<PAGE>
peculiar to ITC's products, research or development or other activities, nor
disclose to any others information of a privileged nature.
e. The Executive further agrees that during the term of this Agreement and
during a period of two (2) 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 proposals which were the subject of outstanding bids or solicitations of
ITC or of bids or solicitations in preparation by ITC during his employment by
the Company.
f. The Executive further agrees that in the event his employment is
terminated, and without regard for the reason for said termination, for a period
of one (1) 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 ITC, as constituted
during his employment and on the date of 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
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 the 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 benefits shall be
governed by the then prevailing operating and personnel policies of the Company.
Executive hereby waives any past, present or future entitlement, if any, to
termination pay offered by the Company to its non-contract employees.
9. Vacations. The Executive shall be entitled to a reasonable vacation
---------
during each year of his term of employment, as approved by the Chief Executive
Officer of the Company.
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
5
<PAGE>
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 on
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 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 incapacity, 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. 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), if any, 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 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.
6
<PAGE>
(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 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, the Company shall pay the Executive, the unpaid portion, if
any, of his 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 his 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 lesser 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, located in the metropolitan Washington, D.C.
area, 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 arbitration
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 he or it
may sustain in connection with an arbitration under this Agreement.
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.
7
<PAGE>
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 is now 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
/s/ Anne J. Fletcher By: /s/ James H. Walton
- --------------------- --------------------------
Name: James H. Walton
Title: Chairman and Chief Executive Officer
EXECUTIVE:
/s/ Anne J. Fletcher /s/ Steven L. Roden
- --------------------- ------------------------------
STEVEN L. RODEN
8
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
effective as of the 3rd day of January, 1997 (the "Effective Date") by and
between Industrial Training Corporation (the "Company") and Warren E. Anderson
(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 Company owns all of the issued and outstanding stock of
Anderson Soft-Teach, Inc., which is engaged in the business of developing,
marketing and selling training materials on videotape and multimedia platforms.
C. The Executive is presently in the employ of Anderson Soft-Teach,
Inc. as its President.
D. The Company has offered to employ the Executive in the capacity of
Executive Vice President of the Company, and as President of Anderson Soft-
Teach, Inc., a wholly owned subsidiary of ITC, and Executive wishes to be so
employed.
E. 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
-----------
Executive Vice President of the Company and President of Anderson Soft-Teach,
Inc. 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
him from time to time by the Board of Directors of the Company or the Chief
Executive Officer then in office, or their designee.
2. Acceptance and Standards. 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
9
<PAGE>
5 and 6 of this Agreement, the Executive agrees to devote his full business time
and services and his best efforts to the faithful performance of the duties
which may be reasonably assigned to him and which are consistent with his
position under Section 1 of this Agreement.
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
$125,000 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 reasonable discretion. Alternatively, the
Executive shall receive a motor vehicle allowance of $500 per month.
d. Reimbursements of Expenses. The Company agrees to reimburse the
--------------------------
Executive for all reasonable expenses (determined in the sole discretion of the
Company, and in accordance with corporate policies which may be promulgated in
the Employee Handbook or other published corporate policies) incurred by the
Executive in the course of the pursuance of his 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 his position and adequate for the
performance of his duties.
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 agreements, 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 Compensation Committee of the Board of
Directors, upon the recommendation of the CEO of the Company, to a salary
increase for 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
10
<PAGE>
Compensation Plan commencing with the Company's fiscal year to end December 31,
1997 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. Options. The Company shall grant to Executive in accordance with
-------
the terms and conditions of the Company's 1992 Key Employee Incentive Stock
Option Plan, the option to acquire 25,000 shares of the common stock of the
Company. The specific terms of the option grant shall be set forth in a separate
Stock Option Agreement to be executed by the Company and Executive. The options
granted herein shall be treated as incentive stock options to the extent they
qualify as such under section 422(d) of the Internal Revenue Code, as amended.
The granting of the foregoing option is contingent upon the qualification in the
State of California of the Company's 1992 Key Employee Incentive Stock Option
Plan, as amended (the "Plan"), if such qualification is needed, and the time for
such granting shall be on the later of the date of execution of this Agreement
or the date the Plan has been qualified in the State of California.
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,
provided that neither Executive or the Company have given notice of termination,
or otherwise terminated this Agreement 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 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
-----
his employment hereunder, this Agreement shall terminate as of the date of
death, and the Executive's spouse, or other such 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 at its own expense will provide life insurance
with benefits consistent with the Company's then current normal policies, if
any.
11
<PAGE>
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 are 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 his then prevailing
salary prorated to the date of termination.
d. Termination by the Company for Cause. The Company may
------------------------------------
immediately terminate the Executive's employment for Cause (as hereinafter
defined) by giving the Executive notice in writing of such termination. For all
purposes under this Agreement, the term "Cause" shall mean (i) a breach by
Executive of any of his material obligations under this Agreement, including
without limitation Executive's obligations under Sections 5(f) and 6 hereof,
(ii) any act by the Executive which constitutes gross misconduct, (iii) a
violation of a federal or state law, rule or regulation applicable to the
business of the Company of a type that is materially adverse to the Company, or
(iv) the conviction of the Executive of, or entry by the Executive of a guilty
or no contest plea to, a felony. No compensation or benefits shall be paid or
provided to the Executive under this Agreement on account of a termination for
Cause, or for periods following the date when such a termination of employment
is effective.
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 60 days written notice to the Executive, in which event
the Company shall pay to the Executive a termination allowance (the "Termination
Allowance") equal to ten (10) months' salary, based upon his then-prevailing
annual salary rate. The Termination Allowance may be paid, at the sole option of
the Company, in periodic installments over the first 10 months following
termination in accordance with the Company's regular payroll periods or over
such lesser period as the Company may determine.
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 through the date of
termination. 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.
12
<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 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 1%
stockholder.
b. The Executive further agrees that during the term of this
Agreement he 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 the reasons for such
termination, he 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 his employment he will not, other
than in the normal and valid course of his employment with the Company, directly
or indirectly, take with him 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.
e. The Executive further agrees that during the term of this
Agreement and during a period of two (2) 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 proposals which were the subject of outstanding
bids or solicitations of ITC or of bids or solicitations in preparation by ITC
during his employment by the Company.
f. The Executive further agrees that in the event his employment is
terminated, and without regard for the reason for said termination, for a period
of one (1) 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 principal businesses of ITC, as
constituted during his employment and on the date of 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 lesser scope as may be determined by the court to be reasonable and
enforceable.
13
<PAGE>
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 the 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 benefits
shall be governed by the then prevailing operating and personnel policies of the
Company. Executive hereby waives any past, present or future entitlement, if
any, to termination pay offered by the Company to its non-contract employees.
9. Vacations. The Executive shall be entitled to a reasonable
---------
vacation of not less than three (3) weeks per year, during each year of his term
of employment, as approved by the Chief Executive Officer of the Company.
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 on 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 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 incapacity, 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.
14
<PAGE>
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 breach by the Executive of any of the covenants
set forth in paragraphs 5(f) or 6, or in the event the Executive is terminated
for Cause pursuant to paragraph 5(d) of 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 earned but unpaid wages and any vested rights the Executive may have
under a Company Profit Sharing Retirement Plan), if any, shall terminate, as
will the Executive's right to exercise any unexercised stock options.
14. 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, and located
in Santa Clara County, California. 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
arbitration 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 he or it may sustain in connection with an arbitration under this
Agreement.
15. 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.
16. 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.
15
<PAGE>
17. 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 is now or may become a resident of a different
state.
18. 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 by Executive.
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
/s/ Alan J. Berkeley By: /s/ Frank A Carchedi
- -------------------- --------------------------
Name: Frank A. Carchedi
Title: Vice President & Chief Financial Officer
EXECUTIVE:
/s/ David Ferguson By: /s/ Warren E. Anderson
- -------------------- --------------------------
Warren E. Anderson
16
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
effective as of the 30th day of November, 1996 (the "Effective Date") by and
between Industrial Training Corporation (the "Company") and Christopher E. Mack
(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 as
Corporate Controller.
C. The Company has offered to continue to employ the Executive in
the capacity of Vice President of the Company. The Executive has indicated his
willingness to accept said offer for continued employment in these capacities.
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 Vice
----------
President of 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 him from time to time by the Board of Directors of the
Company or Chief Executive Officer, 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 his full business time
and services and his best efforts to the faithful performance of the duties
which may be reasonably assigned to him and which are consistent with his
position under Section 1 of this Agreement.
17
<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 reasonable 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 his 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 his position and adequate for the
performance of his duties.
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 agreements, 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 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, 1996 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.
4. Term. The initial term of this Agreement shall begin on the
----
Effective Date and shall continue thereafter for a period of one (1) year. At
the end of the initial term of this Agreement, this Agreement may be renewed at
the option of the Company for an additional one (1) year term unless terminated
in accordance with the provisions of
18
<PAGE>
Section 5 of this Agreement. In the event the Company elects not to renew the
Agreement for the additional one year term, notice of such non-renewal shall be
given by Company to Executive not less than 60 days prior to the scheduled
termination date. The initial 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 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 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
-----
his employment hereunder, this Agreement shall terminate as of the date of
death, and the Executive's spouse, or other such 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, if any.
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 are 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 his 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 his duties hereunder, (ii) act in a manner inimical
to the Company, (iii) negligently perform the duties of the Executive's
position, or (iv) not be in compliance with the Company employee handbook.
19
<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 60 days written notice to the Executive. In the event the
Executive is terminated for any reason other than those set forth in Sections
5.a., 5.c., or 5.d., the Company shall pay to the Executive the unpaid portion,
if any, of his 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 4 months' salary, based upon, his then
prevailing annual salary rate. The Termination Allowance may, at the option of
the Company, be paid in periodic installments over the first 4 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.
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 through the date of
termination. 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 he 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 1%
stockholder.
b. The Executive further agrees that during the term of this
Agreement he 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 the reasons for such
termination, he 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 his employment he will not, other
than in the normal and valid course of his employment with the Company, directly
or indirectly, take
20
<PAGE>
with him 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.
e. The Executive further agrees that during the term of this
Agreement and during a period of two (2) 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 proposals which were the subject of outstanding
bids or solicitations of ITC or of bids or solicitations in preparation by ITC
during his employment by the Company.
f. The Executive further agrees that in the event his employment is
terminated, and without regard for the reason for said termination, for a period
of one (1) 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 ITC, as constituted
during his employment and on the date of 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
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 the 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 benefits
shall be governed by the then prevailing operating and personnel policies of the
Company. Executive hereby waives any entitlement to termination pay offered by
the Company to its non-contract employees.
9. Vacations. The Executive shall be entitled to a reasonable
---------
vacation during each year of his term of employment, as approved by the Chief
Executive Officer or the President of the Company.
21
<PAGE>
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 on 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 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 incapacity, 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. 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 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.
22
<PAGE>
(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.
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, located in the metropolitan D.C.
area, 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 arbitration
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 he or it
may sustain in connection with an arbitration under this Agreement.
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.
23
<PAGE>
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 is now 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
/s/ Anne J. Fletcher /s/ James H. Walton
- --------------------- By: --------------------------
Name: James H. Walton
Title: Chairman and CEO
EXECUTIVE:
/s/ Anne J. Fletcher /s/ Christopher E. Mack
- --------------------- ------------------------------
CHRISTOPHER E. MACK
24
<PAGE>
INDUSTRIAL TRAINING CORPORATION
-------------------------------
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
effective as of the 1/st/ day of May, 1996 (the "Effective Date") by and between
Industrial Training Corporation (the "Company") and Frank A. Carchedi (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 as Vice
President, Chief Financial Officer and Treasurer.
C. The Company has offered to continue to employ the Executive as
Vice President, Chief Financial Officer and Treasurer for the Company. The
Executive has indicated his 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 Chief
----------
Financial Officer and Treasurer 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 him from time to time
by the Board of Directors of the Company, Chief Executive Officer, 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 his full business time
and services and his best efforts to the faithful performance of the duties
which may be reasonably assigned to him and which are consistent with his
position under Section 1 of this Agreement.
25
<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 reasonable 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 his 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 his position and adequate for the
performance of his duties.
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 agreements, 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 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, 1996 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.
4. Term. The initial term of this Agreement shall begin on the
----
Effective Date and shall continue thereafter for a period of one (1) year. At
the end of the initial term of this Agreement, this Agreement may be renewed at
the option of the Company for an additional one (1) year term unless terminated
in accordance with the provisions of
26
<PAGE>
Section 5 of this Agreement. The initial 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 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 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
-----
his employment hereunder, this Agreement shall terminate as of the date of
death, and the Executive's spouse, or other such 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, if any.
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 are 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 his 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 his duties hereunder, (ii) act in a manner inimical
to the Company, (iii) negligently perform the duties of the Executive's
position, or (iv) not be in compliance with the Company employee handbook.
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 60 days written notice to the Executive. In the event the
Executive is terminated for
27
<PAGE>
any reason other than those set forth in Sections 5.a., 5.c., or 5.d., the
Company shall pay to the Executive the unpaid portion, if any, of his 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 4 months' salary, based upon, his then prevailing annual
salary rate. The Termination Allowance may, at the option of the Company, be
paid in periodic installments over the first 4 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.
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 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 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 he will not be
affiliated with any competitor, supplier, or customer of the Company, as an
officer, director, partner, employee, agent, consultant (or similar capacity) of
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 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 the reasons for
such termination, he 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 his employment he will not, other
than in the normal and valid course of his employment with the Company, directly
or indirectly, take
28
<PAGE>
with him 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.
e. The Executive further agrees that during the
term of this Agreement and during a period of two (2) 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 proposals which were the subject of
outstanding bids or solicitations of ITC or of bids or solicitations in
preparation by ITC during his employment by the Company.
f. The Executive further agrees that in the
event his employment is terminated, and without regard for the reason for said
termination, for a period of one (1) 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 ITC, as constituted during his employment and on the date of
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 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 the 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 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 his 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 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
29
<PAGE>
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 on
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 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 incapacity, 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. 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 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.
30
<PAGE>
(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.
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, located in the metropolitan D.C.
area, 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 arbitration
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 he or it
may sustain in connection with an arbitration under this Agreement.
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.
31
<PAGE>
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 is now 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.
32
<PAGE>
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
/s/ Anne J. Fletcher By: /s/ Philip J. Facchina
- --------------------- --------------------------
Name: Philip J. Facchina
Title: President and COO
EXECUTIVE:
/s/ Anne J. Fletcher /s/ Frank A. Carchedi
- --------------------- ------------------------------
FRANK A CARCHEDI
33
<PAGE>
Exhibit 10.10
OFFICE BUILDING LEASE
BETWEEN
ANDERSON SOFT TEACH INC.
AND
GENERAL DEVELOPMENT COMPANY
DATED
FEBRUARY 17, 1995
<PAGE>
TABLE OF CONTENTS
1. PARTIES...........................................................4
2. PREMISES..........................................................4
3. TERM..............................................................4
4. POSSESSION........................................................4
5. RENT..............................................................4
6. SECURITY DEPOSIT..................................................4
7. OPERATING EXPENSE ADJUSTMENTS.....................................5
8. USE...............................................................6
9. COMPLIANCE WITH THE LAW...........................................6
10. ALTERATIONS AND ADDITIONS.........................................6
11. REPAIRS...........................................................7
12. LIENS.............................................................7
13. ASSIGNMENT AND SUBLETTING.........................................7
14. HOLD HARMLESS.....................................................8
15. SUBROGATION.......................................................8
16. LIABILITY INSURANCE...............................................8
17. SERVICES AND UTILITIES............................................9
18. PROPERTY TAXES....................................................9
19. CONSUMER PRICE INDEX..............................................9
20. RULES AND REGULATIONS.............................................10
21. HOLDING OVER......................................................10
22. ENTRY BY LANDLORD.................................................10
23. RECONSTRUCTION....................................................10
24. DEFAULT...........................................................11
25. REMEDIES IN DEFAULT...............................................12
26. EMINENT DOMAIN....................................................12
27. ESTOPPEL CERTIFICATE..............................................12
28. PARKING...........................................................13
29. AUTHORITY OF PARTIES..............................................13
30. GENERAL PROVISIONS................................................13
(i) Plats and Riders.............................................13
(ii) Waiver......................................................13
(iii) Notices....................................................13
(iv) Joint Obligation............................................13
(v) Marginal Headings............................................13
(vi) Time........................................................13
(vii) Successors and Assigns.....................................13
(viii) Recordation...............................................13
(ix) Quiet Possession............................................13
(x) Late Charges.................................................14
(Page -2- Office Building Lease)
<PAGE>
(xi) Incorporation of Prior Agreements; Amendments...............14
(xii) Credits to Tenant's Account................................14
(xiii) Inability to Perform......................................14
(xiv) Attorney's Fees............................................14
(xv) Sale of Premises by Landlord................................14
(xvi) Subordination, Attornment..................................15
(xvii) Name......................................................15
(xviii) Separability.............................................15
(xix) Cumulative Remedies........................................15
(xx) Choice of Law...............................................15
(xxi) Signs and Auctions.........................................15
(xxii) Additional Rent...........................................15
(xxiii) Jury Trial Waiver........................................15
31. BROKERS...........................................................15
32. RENTAL AGREEMENT..................................................15
33. PAYMENTS DUE UPON POSSESSION......................................16
34. ACCOUNTABILITY FOR SECURITY DEPOSIT...............................16
35. HAZARDOUS WASTE...................................................16
36. TENANT IMPROVEMENTS...............................................16
37. RENT SCHEDULE.....................................................16
38. RIGHT OF FIRST NOTICE.............................................17
39. OPTION TO EXTEND..................................................17
40. SIGNAGE...........................................................17
41. HEATING, VENTILATING, AIR CONDITIONING HOURS OF
OPERATION AND AFTER HOURS USE.........................................17
RULES & REGULATIONS...................................................19
(Page -3- Office Building Lease)
<PAGE>
OFFICE BUILDING LEASE
1. PARTIES. The Lease, dated, for reference purposes only, February 17, 1995
-----------------
is made by and between VASONA DEVELOPMENT COMPANY, a California Limited
------------------------------------------------
Partnership (herein called "Landlord") and ANDERSON SOFT TEACH, INC., a
- ----------- ----------------------------
California Corporation (herein called "Tenant").
- ----------------------
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases
from Landlord that certain office space (herein called "Premises") indicated on
Exhibit "A" attached hereto and hereby referenced thereto and made a part
hereof, said Premises being agreed, for the purpose of this Lease, to have an
area of approximately 15,515 gross square feet and being situated at that
------
certain Building known as 983 University Avenue, Building B, Los Gatos,
---------------------------------------------
California 95030.
- ------------------
Said Lease is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
said performance.
3. TERM. The term of this Lease shall be for five (5) years two (2) months
-----------------------------
and 17 days commencing on the 15th. day of May, 1995, and ending on the 31st.
- ----------- ---------------------- -----
day of July, 2000.
- ------------------
4. POSSESSION.
4.a. If the Landlord, for any reason whatsoever, cannot deliver
possession of the said Premises to the Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom, nor shall the expiration
date of the above term be in any way extended, but in that event, all rent shall
be abated during the period between the commencement of said term and the time
when Landlord delivers possession.
4.b. If the Landlord for any reason shall permit Tenant to occupy the
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of this Lease. Said early possession shall not
advance the termination date hereinabove provided.
5. RENT. Tenant agrees to pay to Landlord as rental, without prior notice or
demand, for the Premises the sum of : SEE PARAGRAPH 37. RENT SCHEDULE, on or
--------------------------------
before the first day of the first full calendar month of the term hereof and a
like sum on or before the first day of each and every successive calendar month
thereafter during the term hereof. Rent for any period during the term hereof
which is for less than one (1) month shall be a prorated portion of the monthly
installment herein, based upon a thirty (30) day month. Said rental shall be
paid to Landlord, without deduction or offset in lawful money of the United
States of America, which shall be legal tender at the time of payment at 985
University Avenue, Suite 12, Los Gatos, CA, or to such other person or at such
other place as Landlord may from time to time designate in writing.
6. SECURITY DEPOSIT. Tenant will deposit with Landlord upon taking
possession of the premises the sum of twenty five thousand seventy-two dollars
----------------------------------------
and 24/100 ($25,072.24). Said sum shall be held by Landlord as security for the
- -----------------------
faithful performance by Tenant of all the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to the provisions relating to the payment of rent, Landlord may (but shall not
be required to) use, apply or retain all or any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the security deposit
(Page -4- Office Building Lease)
<PAGE>
to its original amount and Tenant's failure to do so shall be a material breach
of this Lease. Landlord shall not be required to keep this security deposit
separate from its general funds, and Tenant shall not be entitled to interest on
such deposit. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the security deposit or any balance thereof
shall be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of the Lease term. In the event
of termination of Landlord's interest in this Lease, Landlord shall transfer
said deposit to Landlord's successor in interest. Tenant understands and agrees
that the security deposit is not prepaid rent and, specifically, that such
security deposit may not be applied by Tenant as rent for the last month of the
term of this Lease.
7. OPERATING EXPENSE ADJUSTMENTS. For the purposes of this Article, the
following terms are defined as follows:
Base Year: The calendar year in which this lease term commences (provided,
---------
however, that the Base Year shall in no event be earlier than the first full
calendar year following the date of initial occupancy by the first occupant of
said Building).
Comparison Year: Each calendar year of the term after the Base Year.
---------------
Direct Expenses: All direct costs of operation and maintenance, as determined
---------------
by standard accounting practices, and shall include the following costs by way
of illustration, but not be limited to: real property taxes and assessments;
rent taxes, gross receipt taxes (whether assessed against the Landlord or
assessed against the Tenant and collected by the Landlord, or both); water and
sewer charges; insurance premiums; utilities; janitorial services; labor;
costs incurred in the management of the Building, if any; air-conditioning &
heating; elevator maintenance; supplies; materials; equipment; and tools;
including maintenance, costs, and upkeep of all parking and common areas;
expenses incurred in an amount necessary to amortize the cost of improvements
installed to reduce direct expenses; fire detection systems including
sprinkler system maintenance and repair; security systems. ("Direct Expenses"
shall not include depreciation on the Building of which the Premises are a
part or equipment therein, loan payments, executive salaries or real estate
brokers' commissions.)
If the Direct Expenses paid or incurred by the Landlord for the Comparison
Year on account of the operation or maintenance of the Building of which the
Premises are a part are in excess of the Direct Expenses paid or incurred for
the Base Year, then the Tenant shall pay 24.3% of the increase. This
-----
percentage is that portion of the total rentable area of the Building occupied
by the Tenant hereunder. Landlord shall endeavor to give to Tenant on or
before the first day of March of each year following the respective Comparison
Year a statement of the increase in rent payable by Tenant hereunder, but
failure by Landlord to give such statement by said date shall not constitute a
waiver by Landlord of its right to require an increase in rent. Upon receipt
of the statement for the first Comparison Year, Tenant shall pay in full the
total amount of the increase due for the first Comparison Year which commences
twelve (12) months from the lease commencement date, and in addition for the
then current year, the amount of any such increase shall be used as an
estimate for said current year and this amount shall be divided into twelve
(12) equal monthly installments and Tenant shall pay to Landlord, concurrently
with the regular monthly rent payment next due following the receipt of such
statement, an amount equal to one (1) monthly installment multiplied by the
number of months from January in the calendar year in which said statement is
submitted to the month of such payment, both months inclusive. Subsequent
installments shall be payable concurrently with the regular monthly rent
payments for the balance of that calendar year and shall continue until the
next Comparison Year's statement is rendered. If the next or any succeeding
Comparison Year results in a greater increase in Direct Expenses, then upon
receipt of a statement from Landlord, Tenant shall pay a lump sum equal to
such total increase in Direct Expenses over the Base Year, less the total of
the monthly installments of estimated increases paid in the previous calendar
year for which comparison is then being made to the Base Year; and the
estimated monthly installments to be paid for the next year, following said
Comparison Year, shall be adjusted to reflect such increase. If in any
Comparison Year the Tenant's share of
(Page -5- Office Building Lease)
<PAGE>
Direct Expenses be less than the preceding year, then upon receipt of
Landlord's statement, any overpayment made by Tenant on the month installment
basis provided above shall be credited towards the next monthly rent falling
due and the estimated monthly installments of Direct Expenses to be paid shall
be adjusted to reflect such lower Direct Expenses for the most recent
Comparison Year.
Even though the term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's share of Direct Expenses for the
year in which this Lease terminates, Tenant shall immediately pay any increase
due over the estimated expenses paid and conversely any overpayment made in
the event said expenses decrease shall be immediately rebated by Landlord to
Tenant.
Notwithstanding anything contained in this Article, the rental payable by
Tenant shall in no event be less than the rent specified in Article 5
hereinabove.
8. USE. Tenant shall use the Premises for general office purposes and
shipping and receiving with "inside" delivery, and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
the Landlord.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance upon the Building or any of its
contents, or cause cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or
injure or annoy them or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH THE LAW. Tenant shall not use the Premises or permit
anything to be done in or about the premises which will in any way conflict with
any law, statute, ordinance or governmental rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvements or acts.
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action against Tenant, whether Landlord be a part thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of that fact as between the Landlord and
Tenant.
10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without the written consent of Landlord first had and obtained and any
alterations, additions or improvements to or of said Premises, including, but
not limited to, wall covering, paneling and built-in cabinet work, but excepting
movable furniture and trade fixtures, shall on the expiration of the term become
a part of the realty and belong to the Landlord and shall be surrendered with
the Premises. In the event Landlord consents to making of an alterations,
additions or improvements to the Premises by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense, and any contractor or person selected
by Tenant to make the same must first be approved of in writing by the Landlord.
Upon the expiration or sooner termination of the term hereof, Tenant shall, upon
written demand by Landlord, given at least thirty (30) days prior to the end of
the term, at Tenant's sole cost and expense, forthwith and with all due
diligence remove any alterations, additions, or improvements made by Tenant,
designated by Landlord to be removed, and Tenant shall, forthwith and with all
due diligence at its sole cost and expense, repair any damage to the Premises
caused by such removal.
11. REPAIRS.
(Page -6- Office Building Lease)
<PAGE>
11.a. By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary wear and tear excepted.
Tenant shall upon the expiration or sooner termination of this Lease hereof
surrender the Premises to the Landlord in good condition, ordinary wear and tear
and damage from causes beyond the reasonable control of Tenant excepted. Except
as specifically provided in an addendum, if any, to this Lease, Landlord shall
have no obligation whatsoever to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.
11.b. Notwithstanding the provisions of Article 11.a. hereinabove,
Landlord shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating, and electrical systems,
installed or furnished by Landlord, unless such maintenance and repairs are
caused in part or in whole by the act, neglect, fault or omission of any duty by
the Tenant, its agents, servants, employees or invitees, in which case Tenant
shall pay to Landlord the reasonable cost of such maintenance and repairs.
Landlord shall not be liable for any failure to make any such repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of such repairs or maintenance is given to
Landlord by Tenant. Except as provided in Article 23 hereof, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect.
12. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, at Tenant's sole
cost and expense, a lien and completion bond in an amount equal to one and one-
half (1-1/2) times any and all estimated cost of any improvements, additions, or
alterations in the Premises, to insure Landlord against any liability for
mechanics' and material men's liens and to insure completion of the work.
13. ASSIGNMENT AND SUBLETTING.
13.a. Landlord's Consent Required. Tenant shall not assign, transfer,
---------------------------
mortgage, pledge, hypothecate or encumber this Lease or any interest therein,
and shall not sublet the Premises or any part thereof, without the prior written
consent of Landlord and any attempt to do so without such consent being first
had and obtained shall be wholly void and shall constitute a breach of this
Lease.
13.b. Reasonable Consent. If Tenant complies with the following
------------------
condition, Landlord shall not unreasonably withhold its consent to the
subletting of the Premises or any portion thereof. Tenant shall submit in
writing to Landlord: (a) the name and legal composition of the proposed
subtenant; (b) the nature of the proposed subtenant's business to be carried on
in the Premises; (c) the terms and provision of the proposed sublease; (d) such
reasonable financial information as Landlord may request concerning the proposed
subtenant.
13.c. Excess Rental. As part of the consideration for Landlord's
-------------
consent, Landlord shall have the right to require the Tenant to pay to Landlord,
as additional rental hereunder, any rentals to be paid by such sublessee or
assignee in excess of the rental paid to Landlord hereunder (herein called
"excess rental").
13.d. No Release of Tenant. No consent by Landlord to any assignment or
--------------------
subletting by Tenant shall relieve Tenant of any obligation to be performed by
the Tenant under this Lease, whether occurring before or after such Landlord's
express written consent to any other assignment or subletting. The acceptance
of rent by Landlord from any other person shall not be deemed to transfer.
(Page -7- Office Building Lease)
<PAGE>
14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against
and from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all cost, attorney's fees, expenses and
liabilities incurred in or about an such claim or any action or proceeding
brought thereon, and in any case, action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant as a material part of the consideration to Landlord hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises, from any cause other than landlord's negligence, and Tenant hereby
waives all claims in respect thereof against Landlord.
Landlord or its agents shall not be liable for any damage to property
entrusted to employees of the Building, nor for loss or damage to any property
by theft or otherwise, nor for any injury to or damage to persons or property
resulting from fire, explosion, falling plaster, steam gas, electricity, water
or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever,
unless caused by or due to the negligence of Landlord, its agents, servants, or
employees. Landlord or its agents shall not be liable for interference with the
light or other incorporeal hereditaments, loss of business by Tenant, nor shall
Landlord be liable for any latent defect in the Premises or in the Building.
Tenant shall give prompt notice to Landlord in case of fire or accidents in the
Premises or in the Building or of defects therein or in the fixtures or
equipment.
15. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer to
evidence compliance with the aforementioned waiver.
16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep
in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Landlord and Tenant against any liability arising
out of the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Minimum limits of liability shall not be less than
$1,000,000 each occurrence. The limit of said insurance shall not, however,
limit the liability of the Tenant hereunder. Tenant may carry said insurance
under a blanket policy, providing, however, said insurance by Tenant shall have
a Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant. Insurance
required hereunder, shall be in companies rated A+, AAA or better in "Best's
Insurance Guide." Tenant shall deliver to Landlord prior to occupancy of the
Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord. No policy shall be cancelable or
subject to reduction of coverage except after ten (10) days' prior written
notice to Landlord.
17. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at his sole discretion,
and subject to the rules and regulations of the Building of which the Premises
are a part, gas, electricity for normal lighting and fractional horsepower
office machines, heat and air conditioning required in Landlord's judgment for
the comfortable use and occupation
(Page -8- Office Building Lease)
<PAGE>
of the Premises, and janitorial service. Landlord shall also maintain and keep
lighted the common stairs, common entries and toilet rooms in the Building of
which the Premises are a part. Landlord shall not be liable for, and Tenant
shall not be entitled to, any reduction of rental by reason of Landlord's
failure to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord. Landlord shall not be liable under any
circumstances for a loss of or injury to property, however occurring, through or
in connection with or incidental to failure to furnish any of the foregoing.
Wherever heat generating machines or equipment are used in the Premises which
affect the temperature otherwise maintained by the air conditioning system
Landlord reserves the right to install supplementary air conditioning units in
the Premises and the cost thereof, including the cost of installation, and the
cost of operation and maintenance thereof shall be paid by Tenant to Landlord
upon demand by Landlord.
Tenant will not, without written consent of Landlord, use any apparatus or
device in the Premises, including, but without limitation thereto, electronic
data processing machines, punch card machines, and machines using in excess of
120 volts, which will in any way increase the amount of electricity usually
furnished or supplied for the use of the Premises as general office space; nor
connect with electric current except through existing electrical outlets in the
Premises, any apparatus or device, for the purpose of using electric current.
If Tenant shall require water or electric current in excess of that usually
furnished or supplied for the use of the Premises as general office space,
Tenant shall first procure the written consent of Landlord, which Landlord may
refuse, to the use thereof and Landlord may cause a water meter or electrical
current meter to be installed in Premises, so as to measure the amount of water
and electric current consumed for any such use. The cost of any such meters and
of installation, maintenance and repair thereof shall be paid for by the Tenant
and Tenant agrees to pay to Landlord promptly upon demand therefor by Landlord
for all such water and electric current consumed as shown by said meters, at the
rates charged for such services by the local public utility furnishing the same,
plus, any additional. expense insured in keeping account of the water and
electric current will be established by an estimate made by a utility company or
electrical engineer.
18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises; except that
which has been paid for by Landlord, and is the standard of the Building. In
the event any or all of the Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property shall be assessed and taxed with the
Building, Tenant shall pay to Landlord its share of such taxes within ten (10)
days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant's property.
19. CONSUMER PRICE INDEX.
19.a. The net rent shall be adjusted upward only as of the first day of
the month of every lease year (the adjustment date) beginning in the year
19_____ according to the following computation.
19.b. The base figure for computing the adjustment is the index figure
for the month of ____________________________, 19_____ (the index date) as shown
in the Consumer Price Index (CPI) For All Urban Consumers, to be published by
the United States Department of Labor, Bureau of Labor Statistics, for the San
Francisco-Oakland Metropolitan Area, State of California. If the Bureau of
labor Statistics shall fail to publish the Index throughout the term hereof but
shall publish a comparable index in place of the index, or if any other agency
of the United States publishes a comparable index, then the parties shall use
such comparable index to calculate the adjustment in rent.
19.c. The index for the adjustment date shall be computed as a percentage
of the base figure. For example, assuming the base figure on the index date is
110 and the index figure on the adjustment date is 121, the percentage to be
applied is 121/110=100
(Page -9- Office Building Lease)
<PAGE>
percent. That percentage shall be applied to the initial net rent for the period
beginning on the adjustment date and continuing until the next adjustment date.
19.d. The index for the adjustment date shall be the one reported in the
U. S. Department of Labor's most comprehensive official index then in use and
most nearly answering the foregoing description of the index to be used. If it
is calculated from a base different from the base period used for the base
figure above, the base figure used for calculating the adjustment percentage
shall first be converted under a formula supplied by the Bureau.
20. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the rules and regulations that Landlord shall from time to time promulgate.
Landlord reserves the right from time to time to make all reasonable
modifications to said rules. The additions and modifications to those rules
shall be binding upon Tenant upon delivery of a copy of them to Tenant.
Landlord shall not be responsible to Tenant for the nonperformance of any said
rules by any other tenants or occupants.
21. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express consent of
Landlord, such occupancy shall be a tenancy from month to month at a rental in
the amount of $31,030.00 per month, plus all other charges payable hereunder,
and upon all the terms hereof applicable to a month to month tenancy.
22. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have
the right to enter the Premises, inspect the same, supply janitorial service and
any other service to be provided by Landlord to Tenant hereunder, to submit said
Premises to prospective purchasers or tenants, to post notices of non-
responsibility, and to alter, improve or repair the Premises and any portion of
the Building of which the Premises are a part that Landlord may deem necessary
or desirable, without abatement of rent and may for that purpose erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, always providing that the business of the
Tenant shall not be interfered with unreasonably. Tenant hereby waives any
claim for damages or for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency, in order to obtain entry to the
Premises without liability to Tenant except for any failure to exercise due care
for Tenant's property. Any entry to the Premises obtained by Landlord by any of
said means, or otherwise shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or detainer of, the Premises, or
an eviction of Tenant from the Premises or any portion thereof.
23. RECONSTRUCTION. In the event the Premises or the Building of which the
Premises are a part are damaged by a fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same, and this Lease
shall remain in full force and effect, except that Tenant shall be entitled to a
proportionate reduction of the rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall materially interfere with the business carried on by the Tenant in
the Premises. If the damage is due to the fault or neglect of Tenant or its
employees, there shall be no abatement of rent.
In the event the Premises or the Building of which the Premises are a part
are damaged as a result of any cause other than the perils covered by fire and
extended coverage insurance, then Landlord shall forthwith repair the same,
provided the extent of the destruction be less than ten percent (10%) of the
then full replacement cost of the Premises or the Building of which the Premises
are a part. In the event the destruction of the Premises or the Building is to
an extent greater than ten percent (10%) of the full replacement cost, then
Landlord shall have the option; (1) to repair or restore such damage, this Lease
continuing in full force and effect, but the rent to be proportionately
(Page -10- Office Building Lease)
<PAGE>
reduced as hereinabove in this Article provided; or (2) give notice to Tenant at
any time within sixty (60) days after such damage terminating this Lease as of
the date specified in such notice, which date shall be no less than thirty (30)
and no more than sixty (60) days after the giving of such notice. In the event
of giving such notice, this Lease shall expire and all interest of the Tenant in
the Premises shall terminate on the date so specified in such notice and the
Rent reduced by a proportionate amount, based upon the extent, if any, to which
such damage materially interfered with the business carried on by the Tenant in
the Premises, shall be paid up to date of said termination.
Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof.
Landlord shall not be required to repair any injury or damage by fire or
other cause, or make any repairs or replacements of any panels, decoration,
office fixtures, railings, floor covering, partitions, or any other property
installed in the Premises by Tenant.
The Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises, Tenant's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction, or restoration.
24. DEFAULT. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant.
24.a. The vacating or abandonment of the Premises by Tenant.
24.b. The failure by Tenant to make any payment of rent or late charge or
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of three (3) days after written
notice thereof by Landlord to Tenant.
24.c. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of Lease to be observed or performed by the Tenant,
other than described in Article 24.b. above, where such failure shall continue
for a period of three (3) days after written notice thereof by Landlord to
Tenant; provided, however, if the nature of Tenant's default is such that more
than three (3) days are reasonably required for its cure, then Tenant shall not
be deemed to be in default if Tenant commences such cure within said three (3)
day period and thereafter diligently prosecutes such cure to completion.
24.d. The making by Tenant of any general assignment of general
arrangement for the benefit of creditors, or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a petition or representation
or arrangement under any law relating to bankruptcy (unless in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days) or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days, or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
24.e. The discovery by Landlord that any financial statement given to
Landlord by Tenant, or its successor in interest or by any guarantor of Tenant's
obligation hereunder, was materially false.
25. REMEDIES IN DEFAULT. In the event of any such material default or breach
by Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:
25.a. Terminate Tenant's right to possession of the Premises by any
lawful means in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises, expenses
(Page -11- Office Building Lease)
<PAGE>
of reletting, including necessary renovation and alteration of the Premises,
reasonable attorney's fees, any real estate commission actually paid; the worth
at the time of award by the court having jurisdiction thereof of the amount by
which the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Tenant proves
could be reasonably avoided; that portion of the leasing commission paid by
Landlord and applicable to the unexpired term of this Lease. Unpaid installments
of rent or other sums shall bear interest from the date due at the rate of ten
percent (10%) per annum. In the event Tenant shall have abandoned the premises,
Landlord shall have the option of (a) taking possession of the Premises and
recovering from Tenant the amount specified in this paragraph, or (b) proceeding
under the provisions of the following Article 25.b.
25.b. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
25.c. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.
26. EMINENT DOMAIN. If more than twenty-five percent (25%) of the Premises
shall be taken or appropriated by any public or quasi-public authority under the
power of eminent domain, either party hereto shall have the right, at its
option, to terminate this Lease, and Landlord shall be entitled to any and all
income, rent, award, or any interest therein whatsoever which may be paid or
made in connection with such public or quasi-public use or purpose, and Tenant
shall have no claim against Landlord for the value of any unexpired term of this
Lease. If either less than or more than twenty-five percent (25%) of the
Premises is taken, and neither party elects to terminate as herein provided, the
rental thereafter to be paid shall be equitably reduced. If any part of the
Building other than the Premises may be so taken or appropriated, Landlord shall
have the right at its option to terminate this Lease and shall be entitled to
the entire award as above provided.
27. ESTOPPEL CERTIFICATE. Tenant shall at any time and from time to time upon
not less than ten (10) days prior written notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing, (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease as so modified,
is in full force and effect), and the date to which the rental and other charges
are paid in advance, if any, and (b) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of the Landlord hereunder,
or specifying such defaults if any are claimed. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part.
28. PARKING. Tenant shall have the right to use in common with other
tenants or occupants of the Building the parking facilities of the Building, if
any, subject to the monthly rates, rules and regulations, and any other charges
of Landlord for such parking facilities which may be established or altered by
Landlord at any time or from time to time during the term hereof.
29. AUTHORITY OF PARTIES.
29.a. Corporate Authority. If Tenant is a corporation, each individual
-------------------
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
29.b. Limited Partnerships. If the Landlord herein is a limited
--------------------
partnership, it is understood and agreed that any claims by Tenant on Landlord
shall be limited to the assets of the limited partnership, and furthermore,
Tenant expressly waives any and all
(Page -12- Office Building Lease)
<PAGE>
rights to proceed against the individual partners or the officers, directors, or
shareholders of any corporate partner, except to the extent of their interest in
said partnership.
30. GENERAL PROVISIONS.
(i) Plats and Riders. Clauses, plats, and riders, if any, signed by
----------------
the Landlord and the Tenant and endorsed on or affixed to this lease are a part
hereof.
(ii) Waiver. The waiver by Landlord of any term, covenant, or condition
------
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant, or condition of this Lease, other than the failure of the
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of the acceptance of such rent.
(iii) Notices. All notices and demands which may or are to be required
-------
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States mail, postage prepaid to the Tenant at the Premises, or to such
other place a Tenant may from time to time designate in a notice to the
Landlord. All notices and demands by the Tenant to the Landlord shall be sent by
United States mail, postage prepaid, addressed to the Landlord at the office of
the Building, or to such other person or place as the Landlord may from time to
time designate in a notice to the Tenant.
(iv) Joint Obligation. If there be more than one Tenant, the
----------------
obligations hereunder imposed upon Tenants shall be joint and several.
(v) Marginal Headings. The marginal headings and Article titles to the
-----------------
Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
(vi) Time. Time is of the essence of this Lease and each and all of its
----
provisions in which performance is a factor.
(vii) Successors and Assigns. The covenants and conditions herein
----------------------
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
(viii) Recordation. Neither Landlord nor Tenant shall record this Lease
-----------
or a short form memorandum hereof without the prior written consent of the other
party.
(ix) Quiet Possession. Upon Tenant paying the rent reserved hereunder
----------------
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
(x) Late Charges. Tenant hereby acknowledges that late payment by
------------
Tenant to Landlord of rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
the Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's designee within ten (10) days after the due
date, then Tenant shall pay to Landlord a late charge equal to ten percent (10%)
of such overdue amount. The parties hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord will incur by
reason of the late payment by Tenant. Acceptance of such late charges by the
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
(xi) Incorporation of Prior Agreements; Amendments. This Lease contains
---------------------------------------------
all agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Lessee hereby acknowledges that neither a real estate
broker nor any cooperating broker on this transaction nor the Landlord or any
employee or agents or any of said persons has made any oral or written
warranties or representations to Tenant relative to the condition or use
(Page -13- Office Building Lease)
<PAGE>
by Tenant of the Premises or the Building and Tenant acknowledges that Tenant
assumes all responsibility regarding the Occupational Safety Health Act, the
legal use and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.
(xii) Credits to Tenant's Account. Landlord shall promptly credit
---------------------------
Tenant's account for all payments received from Tenant. Such payments shall be
first credited to those sums due under this Lease Agreement, including but not
limited to, base rent, operating expenses, late charges, attorney's fees,
returned check fees, which were incurred earliest in time (oldest chargeable
items). Nothing in this paragraph (including Landlord's acceptance of a partial
payment on account balance) shall be construed nor constitute a waiver by
Landlord of any provision hereof or of any subsequent breach by Tenant of the
same or other provision.
(xiii) Inability to Perform. This Lease and the obligations of the
--------------------
Tenant hereunder shall not be affected or impaired because the Landlord is
unable to fulfill any of its obligations hereunder or is delayed in doing so, if
such inability or delay is caused by reason of strike, labor troubles, acts of
God, or any other cause beyond the reasonable control of the Landlord.
(xiv) Attorney's Fees. If either party or the broker(s) named herein
---------------
bring an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in such action, trial or appeal thereon shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court in the same or a separate suit, and whether or not such action is pursued
to decision or judgment. The provisions of this paragraph shall inure to the
benefit of the broker named herein who seeks to enforce a right hereunder. The
attorney's fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorney's reasonably
incurred in good faith. Landlord shall be entitled to reasonable attorney's
fees and all other costs and expenses incurred in the preparation and service of
Notice of Default and consultations in connection therewith whether or not a
legal transaction is subsequently commenced in connection with such default.
(xv) Sale of Premises by Landlord. In the event of any sale of the
----------------------------
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.
(xvi) Subordination, Attornment. Upon request of the Landlord, Tenant
-------------------------
will in writing subordinate its rights hereunder to the lien of any first
mortgage, or first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any building hereafter placed upon the land of
which the Premises are a part, and to all advances made or hereafter to be made
upon the security thereof.
In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made by
Landlord covering the Premises, the Tenant shall attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease.
The provisions of this Article to the contrary notwithstanding, and so
long as Tenant is not in default hereunder, this Lease shall remain in full
force and effect for the full term hereof.
(xvii) Name. Tenant shall not use the name of the Building or of the
----
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.
(xviii) Separability. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
(xix) Cumulative Remedies. No remedy or election hereunder shall be
-------------------
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
(Page -14- Office Building Lease)
<PAGE>
(xx) Choice of Law. This Lease shall be governed by the laws of the
-------------
State of California.
(xxi) Signs and Auctions. Tenant shall not place any sign upon the
------------------
Premises or Building or conduct any auction thereon without Landlord's prior
written consent.
(xxii) Additional Rent. All monetary obligations of Tenant to Landlord
---------------
under the terms of this Lease, including but not limited to, Tenant's share of
operating expense increase and any other expenses payable by Tenant hereunder
shall be deemed to be rent.
(xxiii) Jury Trial Waiver. Landlord and Tenant hereby waive their
-----------------
respective right to trial by jury of any cause of action, claim, counter-claim
or cross-complaint in any action, proceeding and/or hearing brought by either
Landlord against Tenant or Tenant against Landlord on any matter whatsoever
arising out of, or in any way connected with, this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the premises, or any claim of
injury or damage, or the enforcement of any remedy under any law, statute, or
regulation, emergency or otherwise, now or hereafter in effect.
31. BROKERS. Tenant warrants that it has had no dealing with any real estate
broker or agents in connection with the negotiation of this Lease excepting only
NONE and it knows of no other real estate broker or agent who is entitled to a
- ----
commission in connection with this Lease.
32. RENTAL AGREEMENT. Rent to be paid by the first of the month and shall be
considered late by the tenth (10th) day of the month. Check should be made
payable to VASONA DEVELOPMENT COMPANY. Send payment to: General Development
--------------------------
Company, 985 University Avenue, Suite 12, Los Gatos, CA 95030
33. PAYMENTS DUE UPON POSSESSION.
<TABLE>
<S> <C>
Security Deposit $25,072.24
----------
Rent $23,272.50
----------
Sign 0.00
----------
Other 0.00
----------
Total $48,345.00
----------
</TABLE>
34. ACCOUNTABILITY FOR SECURITY DEPOSIT. Tenant hereby agrees not to look to
the mortgagee, as mortgagee, mortgagee in possession, or successor in title to
the property, for accountability for any security deposit required by the
Landlord hereunder, unless said sums have actually been received by said
mortgagee as security for the Tenant's performance of this Lease.
35. HAZARDOUS WASTE. Tenant shall at Tenant's own cost and expense comply
with all statutes, ordinances, regulations and requirements of all governmental
entities, both federal and state and county or municipal, relating to the use,
storage, handling, clean-up, removal and disposal of hazardous wastes or
substances. The term "hazardous wastes or substances" is used in this section
in its very broadest sense and includes, but is not limited to, petroleum base
products, paints and solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonium compounds, asbestos, PCB and other chemical products.
If hazardous wastes or substances have been, or are going to be used,
stored, handled or disposed of on the property, or if the property has or may
have underground storage tanks, Tenant shall at Tenant's own cost and expense,
obtain legal and technical advise to determine what permits and approvals have
been or may be required, the estimated costs, and expense associated with the
use, storage, handling, clean-up, removal or disposal of the hazardous wastes or
substances. Thereupon, Tenant shall be responsible for the cost and expense of
obtaining any and all required permits and approvals, and the cost and expense
associated with the use, storage, handling, clean-up, removal or disposal of the
hazardous wastes or substances.
Should a hazardous waste release occur upon said property or any portion
of said property in violation of any of the aforementioned statutes, ordinances,
regulations or
(Page -15- Office Building Lease)
<PAGE>
requirements, Tenant shall at Tenant's own expense clean-up said property and
restore said property to the same condition it was prior to such release. During
such clean-up and restoration, this Lease shall remain in full force and effect
and the rent payable under this Lease shall not be abated in any way or to any
extent.
36. TENANT IMPROVEMENTS. Landlord shall provide, at Landlord's sole expense,
tenant improvements per the attached Exhibit "A" with minor changes to this plan
to be mutually agreed upon by Landlord and Tenant, final finishes to be Building
Standard. Landlord shall repair or replace all damaged ceiling tiles, re-paint
all painted surfaces as required by Tenant, and clean carpet and interior
partition glass throughout the entire premises. At such time that the use for
the area designated as "A" on Exhibit "A" changes from a shipping and receiving
to general office use, the Landlord will re-carpet and re-paint area "A" and
convert the exterior wooden doors to glass
37. RENT SCHEDULE. The full service monthly rent shall be:
<TABLE>
<S> <C> <C>
Months 1 through 12 $23,272.50 $1.50/s.f.
Months 13 through 24 $24,358.55 $1.57/s.f.
Months 25 through 36 $25,134.30 $1.62/s.f.
Months 37 through 48 $25,910.05 $1.67/s.f.
Months 49 through 60 $26,685.80 $1.72/s.f.
Through end of term $26,685.80 $1.72/s.f.
</TABLE>
38. RIGHT OF FIRST NOTICE. Landlord hereby grants to Tenant a Right of First
Notice on the following terms and conditions:
(a) Landlord shall give Tenant notice in writing in the event Landlord
receives an offer to lease acceptable to Landlord on space within
Buildings A, C, and D. Tenant shall advise Landlord within five
working days of the delivery of notice of its acceptance or rejection
of the space. Absence of a response from Tenant shall be deemed
rejection of the space.
(b) This First Notice is personal to Tenant and may not be assigned either
together with an assignment of the Lease or separate from the Lease,
except as permitted under Paragraph 13 of the Lease.
(c) All terms and conditions, including rent, of the First Notice space
shall be as agreed upon by Tenant and Landlord.
39. OPTION TO EXTEND. Provided that Tenant is not then in default hereunder,
it shall have the option, by written notice to Landlord given not later than six
(6) months prior to the expiration of the lease term, to extend the term of the
lease for five (5) years. The monthly rent payable during such extended term
shall be at the then fair market rental rate for similar properties.
40. SIGNAGE. Landlord shall provide corporate identity signage at the front
of Building B and directional signage between Building's B and C to be mutually
agreed upon by Landlord and Tenant.
41. HEATING, VENTILATING, AIR CONDITIONING HOURS OF OPERATION AND AFTER HOURS
USE. Landlord shall furnish heating, ventilating, and air conditioning (HVAC)
from 5:00 A.M. to 7:00 P.M. Monday through Friday, holidays excepted. In the
event Tenant requires HVAC use during off hours, Landlord shall provide such
services billing Tenant at the rate of $25.00 per hour.
The Parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.
(Page -16- Office Building Lease)
<PAGE>
If this Lease has been filled in, it has been prepared for submission to
your attorney for his approval. No representation or recommendation is made by
the real estate broker or its agents or employees as to the legal sufficiency,
legal effect, or tax consequences of this Lease or the transactions relating
thereto.
Address: 985 University Ave., S. 12 VASONA DEVELOPMENT COMPANY,
Los Gatos, CA 95030 a California Limited Partnership
By:___________________________________
General Development Company,
a California General Partnership,
John E. Austin, General Partner
Date
"LANDLORD"
Address: 983 University Ave.,Bldg. B, ANDERSON SOFT TEACH, INC.,
Los Gatos, CA 95030 a California Corporation
BY:___________________________________
Dave Ferguson, Vice President
Date
"TENANT"
(Page -17- Office Building Lease)
<PAGE>
RULES & REGULATIONS
-------------------
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of the Landlord first had and
obtained and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises; provided, however, that Landlord may furnish and install a
Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the tenants or used by them for any purpose
other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional locks or
any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees shall have
caused it.
5. Tenant shall not overload the floor of the Premises or in any way deface
the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought in the
Building without the prior notice to Landlord and all moving of the same into or
out of the Building shall be done in such manner as Landlord shall designate.
Landlord shall have the right to prescribe the weight, size and position of all
safes and other heavy equipment brought into the Building and also the times and
manner of moving the same in and out of the Building. Safes or other heavy
objects shall, if considered necessary by Landlord, stand on supports of such
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such safe or property from any cause
and all damage done to the Building by moving or maintaining any such safe or
other property shall be repaired at the expense of Tenant.
7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason or noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
8. No cooking shall be done or permitted by any Tenant on the Premises, nor
shall the Premises be used for the storage of merchandise, for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes.
(Page -18- Office Building Lease)
<PAGE>
9. Tenant shall not use or keep in the Premises of the Building any kerosene,
gasoline, or inflammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by the Landlord.
10. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Landlord. The locations of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.
11. On Saturdays, Sundays, and legal holidays, and on other days between the
hours of 6:00 PM and 8:00 AM the following day, access to the Building, or to
the halls, corridors, elevators or stairways in the Building, or to the Premises
may be refused unless the person seeking access is known to the person or
employee of the Building in charge and has a pass or is properly identified.
The Landlord shall in no case be liable for damages for any error with regard to
admission to or exclusion from the Building of any person. In case of invasion,
mob, riot, public excitement, or other commotion, the Landlord reserves the
right to prevent access to the Building during the continuance of the same by
closing of the doors or otherwise, for the safety of the tenants and protection
of property in the Building and the Building.
12. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
14. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant of the Building
and shall cooperate to prevent the same.
16. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
17. Landlord shall have the right to control and operate the public portions
of the Building, and the public facilities, and heating and air conditioning, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
18. All entrance doors in the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the Premises.
(Page -19- Office Building Lease)
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-45036) pertaining to the 1982 Incentive Stock Option Plan, the
Registration Statement (Form S-8 No. 333-18941) pertaining to the 1992 Director
Incentive Stock Option Plan and the Registration Statement (Form S-8 No.
333-18939) pertaining to the 1992 Key Employee Stock Option Plan of Industrial
Training Corporation of our report dated February 18, 1997, with respect to the
consolidated financial statements of Industrial Training Corporation included in
the Annual Report (Form 10-KSB) for the year ended December 31, 1996.
Ernst & Young LLP
Washington, D.C.
March 13, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S 10-KSB AS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRELY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,697,566
<SECURITIES> 0
<RECEIVABLES> 9,527,130
<ALLOWANCES> (296,148)
<INVENTORY> 1,018,383
<CURRENT-ASSETS> 12,273,289
<PP&E> 4,204,491
<DEPRECIATION> (2,963,197)
<TOTAL-ASSETS> 23,374,325
<CURRENT-LIABILITIES> 6,217,656
<BONDS> 0
0
0
<COMMON> 389,693
<OTHER-SE> 16,300,434
<TOTAL-LIABILITY-AND-EQUITY> 23,374,325
<SALES> 22,143,570
<TOTAL-REVENUES> 22,143,570
<CGS> 15,031,003
<TOTAL-COSTS> 15,031,003
<OTHER-EXPENSES> 14,431,877
<LOSS-PROVISION> (195,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,319,310)
<INCOME-TAX> (1,660,000)
<INCOME-CONTINUING> (5,659,310)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,659,310)
<EPS-PRIMARY> (1.59)
<EPS-DILUTED> 0
</TABLE>
