<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
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
of incorporation or organization) Identification Number)
13515 Dulles Technology Drive, Herndon, Virginia 20171
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(Address of principal executive offices)
(703)713-3335
-------------
Issuer's telephone number
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X]; No [_]
As of March 31, 1997, 3,897,074 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes [_]; No [X]
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PART I PAGE
- -------- ----
<S> <C> <C>
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1997 and 1996 1
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II
- -------
Item 1 Legal Proceedings 8
Item 2 Changes in Securities 8
Item 3 Defaults Upon Senior Securities 8
Item 4 Submission of Matters to a Vote of Security Holders 8
Item 5 Other Information 8
Item 6 Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL TRAINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended March 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Net revenues $4,721,977 $3,715,723
Cost of sales 2,382,949 2,642,176
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Gross margin 2,339,028 1,073,547
Selling, general and administrative expense 3,105,439 1,933,680
Equity in earnings of affiliates (25,514) (63,086)
---------- ----------
Loss before interest and income taxes (740,897) (797,047)
Interest income, net (39,159) (134,855)
---------- ----------
Loss before income taxes (701,738) (662,192)
Income tax benefit (246,000) (265,000)
---------- ----------
Net loss $ (455,738) $ (397,192)
========== ==========
Loss per common share $(.12) $(.11)
========== ==========
Weighted average number of
common shares outstanding 3,897,011 3,614,474
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,810,565 $ 2,697,566
Accounts receivable, net 6,412,874 7,641,066
Due from affiliates 51,569 36,768
Inventories 1,059,976 1,018,383
Prepaid expenses 157,291 190,402
Income tax receivable 935,104 689,104
----------- -----------
Total current assets 11,427,379 12,273,289
Long-term receivable 1,527,872 1,589,916
Property and equipment:
Video and computer equipment 3,572,552 3,361,923
Furniture and fixtures 716,730 747,146
Leasehold improvements 98,350 95,422
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4,387,632 4,204,491
Less accumulated depreciation and amortization (3,150,064) (2,963,197)
----------- -----------
Net property and equipment 1,237,568 1,241,294
Capitalized program development costs, net 4,238,026 4,226,525
Intangible assets 3,886,689 3,975,840
Other 67,781 67,461
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$22,385,315 $23,374,325
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Line of credit $ -- $ 515,000
Current installments of long-term debt 99,286 130,745
Accounts payable 1,372,106 1,331,079
Due to affiliates 238,091 335,797
Accrued compensation and benefits 910,022 826,764
Deferred revenues 1,363,207 1,458,945
Other accrued expenses 1,678,759 1,619,326
----------- ------------
Total current liabilities 5,661,471 6,217,656
Deferred lease obligations 110,547 113,020
Deferred income taxes 353,522 353,522
----------- ------------
Total liabilities 6,125,540 6,684,198
Stockholders' equity:
Common stock, $.10 par value, 12,000,000 shares
authorized; 3,897,074 and 3,896,924 issued
and outstanding in 1997 and 1996, respectively 389,708 389,693
Additional paid-in capital 16,068,681 16,067,366
Note receivable from ESOP (119,621) (143,677)
Retained earnings (78,993) 376,745
----------- ------------
Total stockholders' equity 16,259,775 16,690,127
----------- ------------
Total liabilities and stockholders' equity $22,385,315 $23,374,325
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
INDUSTRIAL TRAINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended March 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (455,738) $ (397,192)
Reconciling items:
Provision for deferred taxes -- 176,800
Depreciation and amortization 697,661 876,918
Awards of common shares 938 --
Changes in assets and liabilities:
Decrease in accounts receivable 1,290,236 1,169,415
Decrease (increase) in inventories (41,593) 260,072
Decrease (increase) in prepaid expenses 33,111 (248,519)
Increase in income tax receivable (246,000) (512,000)
Increase (decrease) in due to affiliates, net (112,507) 74,983
Decrease (increase) in other assets (2,078) 6,605
Increase in accounts payable 41,027 23,083
Increase in accrued expenses 46,951 58,133
Decrease in income taxes payable -- (105,000)
Decrease in deferred lease obligations (2,473) (3,078)
---------- -----------
Net cash provided by operating activities 1,249,535 1,380,220
Cash flows from investing activities:
Deferred program development costs (439,356) (1,499,694)
Capital expenditures (175,170) (141,107)
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Net cash used in investing activities (614,526) (1,640,801)
Cash flows from financing activities:
Repayments under line-of-credit (515,000) --
Principal payments under term loans (31,459) (28,995)
Issuance of common stock -- 19,063
Employee stock option note collections 24,449 27,000
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Net cash provided by (used in) financing activities (522,010) 17,068
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Net increase (decrease) in cash 112,999 (243,513)
Cash and cash equivalents at beginning of period 2,697,566 10,348,762
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Cash and cash equivalents at end of period $2,810,565 $10,105,249
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
INDUSTRIAL TRAINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1) BASIS OF PRESENTATION
The condensed 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. In
the opinion of management of the Company, the interim condensed consolidated
financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The interim condensed
consolidated financial statements should be read in conjunction with the
Company's December 31, 1996 and 1995 audited financial statements included with
the Company's filing on Form 10-KSB. The interim operating results are not
necessarily indicative of the operating results for the full fiscal year.
2) 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 joint venture profits. Sales of
programs related to these affiliates were $371,000 and $655,000 for the first
quarter of 1997 and 1996, respectively. Additionally, during the fourth quarter
of 1995 and the first quarter of 1996, the Company developed new training
products for certain partnerships. Revenues recognized by the Company for the
development of these training programs were $532,000 for the first quarter of
1996. No such revenues were recognized during the first quarter of 1997.
3) LINE OF CREDIT
At March 31, 1997, the Company had no amounts outstanding relating to its
$3,000,000 revolving bank line of credit, which bears interest at the bank's
prime lending rate.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
- --------
For the quarter ended March 31, 1997, net revenues were $4,722,000 as compared
to $3,716,000 for the quarter ended March 31, 1996, an increase of $1,006,000 or
27%. The increase in the Company's revenues was primarily due to the impact of
acquisition activities and the expansion of international operations occurring
during 1996. For the quarter ended March 31, 1997, sales of off-the-shelf
training products totaled $4,142,000, an increase of $1,512,000 or 57% from the
first quarter of 1996. This increase is principally attributable to the December
31, 1996 acquisition of Anderson Soft-Teach. Sales of hardware systems for the
quarter ended March 31, 1997 totaled $230,000 as compared to $449,000 achieved
during the comparable period in 1996, representing a decrease of $219,000 or
49%. Revenues from custom courseware and consulting services amounted to
$275,000 for the first quarter of 1997 as compared to $594,000 for the first
quarter of 1996, a decrease of $319,000.
Revenues from international operations included in the training product revenues
mentioned above totaled $930,000 for the three months ended March 31, 1997 as
compared to $556,000 for the same period in 1996. The significant increase of
$374,000 or 67% was primarily due to the acquisition of Acumen People and
Productivity in the third quarter of 1996.
Costs and Expenses
- ------------------
During the first quarter of 1997, gross margin increased $1,265,000 over the
first quarter of 1996, as margin percentages grew from 29% to 50%. The
substantial growth in margin is due to the overall increase in revenues as well
as the higher proportion of product revenues for the quarter, and lower levels
of amortization from capitalized program development costs compared to last
year.
Selling, general and administrative expenses totaled $3,105,000 during the first
quarter of 1997, representing an increase of $1,172,000 over the comparable
period in 1996. The overall increase in selling, general and administrative
expenses was primarily due to the additional operating expenses associated with
the two acquisitions mentioned above as well as additional expansion of
operations internationally.
Net Loss
- --------
The loss before income taxes was partially offset by the recognition of an
interim tax benefit, resulting in a net loss for the three months ended March
31, 1997 of $456,000 or 12 cents per share. This compares to a net loss of
$397,000 or 11 cents per share recorded during the first quarter of 1996.
Cash Flow, Liquidity and Capital Resources
- ------------------------------------------
Working capital at March 31, 1997 was $5,766,000, remaining relatively unchanged
from $6,056,000 at December 31, 1996.
Cash flows from operations were $1,250,000, as significant non-cash charges for
depreciation and amortization and collections of significant receivables from
fourth quarter sales offset the effect of operating losses. Cash used in
investing activities includes costs for the ongoing development of Office 97
products. Cash used in financing activities includes the repayment of the line
of credit assumed in the acquisition of Anderson Soft-Teach.
6
<PAGE>
Management believes that the cash generated from operations combined with the
Company's existing resources and available line of credit are adequate to meet
ITC's working capital needs and other financing requirements for 1997.
7
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See attached Exhibit Index
(b) Reports on Form 8-K
On January 13, 1997, the Company filed a report on Form 8-K relating to the
acquisition of Anderson Soft-Teach.
On February 10, 1997, the Company filed a report on Form 8-K relating to the
resignation of a Director of the Company.
On March 12,1997, the Company filed a report on Form 8-K/A providing the
financial statements and pro forma financial information relating to the
acquisition of Anderson Soft-Teach as reported on Form 8-K on January 13, 1997.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INDUSTRIAL TRAINING CORPORATION
(Registrant)
BY /s/James H. Walton DATE 4/25/97
----------------------------- -------
James H. Walton
Chief Executive Officer
BY /s/Steven L. Roden DATE 4/25/97
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Steven L. Roden
President
BY /s/Frank A. Carchedi DATE 4/25/97
----------------------------- -------
Frank A. Carchedi
Vice President, Treasurer and
Chief Financial Officer
BY /s/Christopher E. Mack DATE 4/25/97
----------------------------- -------
Christopher E. Mack
Vice President and
Chief Operating Officer
9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
<S> <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).
10.6 Employment Agreements with Management
(i) Carl D. Stevens
10.11 IBM Subcontractor Agreement dated January 13, 1997
27.1 Financial Data Schedule
</TABLE>
10
<PAGE>
Exhibit 10.6
INDUSTRIAL TRAINING CORPORATION
---------- -------- -----------
EMPLOYMENT AGREEMENT
---------- ---------
This Employment Agreement (the "Agreement") is made and entered into effective
as of the 1st day of March, 1997 (the "Effective Date") by and between
Industrial Training Corporation (the "Company") and Carl D. Stevens
("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 has offered to employ the Executive in the capacity of Senior
Vice President of the Company, and Executive wishes to be so employed.
C. The parties hereto believe that it is in their best interests to provide for
the specific terms and conditions of employment and to impose restrictions
upon the parties in the event of the termination of the employment
relationship.
NOW, THEREFORE, in consideration of the mutual promises and covenants as
hereinafter set forth, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment. The Company agrees to employ the Executive as a Senior Vice
----------
President of 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 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.
<PAGE>
b. Basic Compensation. The Company shall, subject to the approval of the Board
------------------
of Directors of the Company and further subject to paragraph 3.g., 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.
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, but is not obligated to,
participate in the Company's 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. The parties agree that in lieu of
the Executive's participation in the Company's medical and dental plan(s),
the Executive shall participate in an IBM benefits program ("IBM Benefits
Program"). The Company agrees that it shall reimburse Executive in an
amount not to exceed $600.00 per month, for Executive's participation in
the IBM Benefits Program. Such reimbursement shall be made during the
initial term and renewal term, if any, of this Agreement, unless earlier
terminated. The parties agree that, in the event the IBM Benefits Program
is discontinued for any reason during the initial term, or any renewal
term, of this Agreement, Executive may participate in the Company's medical
and dental plan(s).
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, and after the CEO of the
Company and the Executive have met to review Executive' s performance, to a
salary adjustment for the Executive, and if so, in what amount; provided
however, that the Executive's salary shall not be decreased below the
amount set forth in paragraph 3.b above if the Executive remains as Senior
Vice President and is
<PAGE>
satisfactorily performing his duties in that capacity. 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, 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 30,000 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.
4. Term. The initial term of this Agreement shall begin on the Effective Date
----
and shall continue thereafter for a period of one (l) year, provided that
neither the 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. At the end of the initial term of this Agreement
(if not earlier terminated), this Agreement may be renewed upon the mutual
agreement of the Company and the Executive for an additional one (l) year
term. In the event either the Company or the Executive elects not to renew
the Agreement for the additional one year term, notice of such non-renewal
shall be given to the other party not less than ninety (90) days prior to the
scheduled expiration date. The renewal term 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).
<PAGE>
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.
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 S(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 S.a., S.c., or S.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
<PAGE>
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.
g. Acknowledgment of Termination Benefits. Executive agrees and acknowledges
--------------------------------------
that all termination benefits to which he may be entitled are contained in
this Section 5, and specifically acknowledges and agrees that he shall not
be entitled to any termination benefits contained in any version, past,
present, or future, of the Employee Handbook or which are offered to the
Company's non-contract employees.
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
<PAGE>
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 (l) 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.
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
<PAGE>
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 breach by the Executive 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 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
<PAGE>
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.
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 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/ Leslye Schrank By: /s/ James H. Walton
- -------------------------- -------------------------------
Name: James H. Walton
Title: CEO
EXECUTIVE:
/s/ John R. Dearie By: /s/ Carl D. Stevens
- -------------------------- -------------------------------
<PAGE>
Exhibit 10.11
IBM EDUCATION DIVISION
AND
INDUSTRIAL TRAINING CORPORATION
STATEMENT OF WORK
I. IBM RESPONSIBILITIES
a) IBM will provide to ITC the names of an IBM and customer coordinator for
each customer acquiring ITC products in connection with this SOW. IBM will
provide the names of these individuals to the ITC Marketing Representative
at FAX (703) 713-0065.
b) IBM will issue a purchase order for each order from ITC. The purchase order
will contain all applicable customer information. The purchase order will be
faxed to Marketing Education Coordinator in Herndon, Virginia at Fax
(703)713-0065.
c) If IBM requires ITC's support for a qualified customer at the point of sale,
IBM will engage one of the ITC Marketing Representatives by calling Joan
Dasher at (800) 638-3757.
II. ITC RESPONSIBILITIES
a) ITC will ship the products directly to IBM's customer within five days
following ITC's receipt of IBM's purchase order. Orders exceeding $100,000
may require additional lead time for shipment.
b) ITC will invoice IBM within one month following shipment of all products
included within the applicable IBM purchase order.
c) ITC will provide marketing support for large sales opportunities through
the designated IBM coordinator for that customer. ITC will pay all expense
associated with this support.
d) ITC's Help Desk will be available for the IBM Coordinator and customer
coordinator identified for each IBM account, and all end users on an as-
needed basis. IBM Client Representatives may use the Help Desk between the
hours of 5:00 pm and 7:00 pm EST.
Help Desk support will be available for 3 months from the agreed upon date
for such services, not to exceed a period of six months from the date of
product delivery. Extended help desk support can be arranged at a later date
at an agreed upon price.
e) ITC agrees to provide four days of training for IBM Professional Development
Consultants and other IBM personnel or representatives on how to
successfully implement a large ITC software and services installation. This
may be conducted in two separate sessions. ITC will cover ITC's expenses for
these trainings.
f) ITC may upon request and availability, provide subcontracted resources to
facilitate the implementation phase of these products at an agreed upon
price.
1
<PAGE>
g) If customers require additional ITC products, and contact ITC directly, ITC
agrees to involve the IBM Client Representatives in the transaction. ITC
will ship the product that the customer requires.
III. MUTUAL RESPONSIBILITIES
ITC and IBM are committed to joint marketing efforts which may include trade
shows, web site linkages, brochures, advertising, and press releases. All
joint marketing efforts will be mutually agreed upon. Except as otherwise
agreed, each party will be responsible for its own expenses incurred in
connection with such marketing activities.
IV. ELIGIBLE PROGRAM PRODUCTS
ACTIV/(R)/ PC Skills Learning Library
Windows Courseware:
Microsoft (R) Courseware
. Using Word
. Using Excel
. Using Access
. Using PowerPoint
. Using Microsoft Mail
Lotus (R) Courseware:
. Using AmiPro
. Using 1-2-3
. Using Lotus Notes
. Using Freelance
. Using cc:Mail
Plus Courseware:
. Using Personal Computers
. Using Windows 3.xx (R)
. Using Windows 95 (R)
. Using WordPerfect (R)
V. PRICING
a) Courseware
<TABLE>
<CAPTION>
QUANTITY ITC ED. PRICE IBM PRICE DISCOUNT
<S> <C> <C> <C>
1-7 Copies $1,568 $ 862 45%
Over 8 copies $1,125 $ 675 40%
</TABLE>
2
<PAGE>
b) Additional Workbooks
<TABLE>
<CAPTION>
# OF WORKBOOKS/ORDER IBM PRICE/WORKBOOK DISCOUNT
<S> <C> <C>
1-200 $12.00 25%
201-350 $10.88 32%
351-500 $9.60 40%
501-800 $8.32 48%
801 $6.72 58%
</TABLE>
c) Preferred Remarketer Status
ITC will grant to IBM pricing no less favorable than pricing offered by ITC
to other education market resellers.
d) Special Bid Pricing
Special bid pricing for district or school-wide implementations will be
mutually agreed upon by IBM and ITC. Specific financial considerations
relating to the special bid pricing will be agreed upon at that time. Items
for consideration at that time will include, but not be limited to, pricing,
discounting, marketing and services.
e) Demo Pricing
ITC will provide IBM up to a total of 40 copies of courses requested by IBM,
at no charge, to support IBM's Professional Development Consultants and
IBM's Courseware Marketing Specialists. Additional copies will be available
to IBM for $100 per title for marketing, training and demonstration
purposes.
Upon completion of development by ITC, ITC will provide to IBM, without
charge, 300 copies of its Marketing CD-ROMs, for use by IBM's Client
Representatives.
VI. PRODUCT UPGRADES
a) Upgrades are available from ITC when new versions of a purchased product
are released. Version upgrades do not include new titles in a Library (for
example, "Using Windows 95" is not an upgrade for "Using Windows").
b) Upgrade Pricing:
<TABLE>
<CAPTION>
DAYS AFTER PURCHASE PRICE
<S> <C>
Up to 90 days Free
91-180 days $300 per title
181-365 days $600 per title
</TABLE>
3
<PAGE>
Actual shipping charges will be billed.
c) Upgrade Ordering Procedure
1) Upgrades will be ordered through a customer purchase order issued to IBM,
which will be submitted to the ITC representative. The purchase order
must refer to the original order number.
2) When the order is received by ITC, a return authorization number will be
issued to the customer for returning the courseware to be upgraded.
3) The upgraded courseware will be shipped by ITC to the customer or IBM site
if specified.
4) An invoice will be submitted to IBM.
5) The old courseware must be returned to ITC within 10 days of receipt of the
upgraded courseware. If not returned within the specified time frame, ITC
will issue a new invoice for the differential between the upgrade pricing
and the new courseware pricing to the customer.
6) The customer will pay all shipping charges for return of the old
courseware.
VII. RETURN AND EXCHANGE POLICY
1) Unopened courseware may be returned within 30 days of the date of purchase
for a full refund.
2) After 30 days, but not to exceed 90 days, unopened courseware may be
exchanged for different courseware titles.
3) Workbooks may not be returned more than 30 days after the date of receipt.
VIII. IBM AND ITC COORDINATORS
The contract coordinators responsible for receiving all notices and
administering this SOW are as follows:
4
<PAGE>
For IBM:
Gary Wolfe
IBM
Mail Stop WG2D
3200 Windy Hill Road
Atlanta, GA 30329
(770) 835-7107
For ITC:
Harvey Shuster
ITC
2000 RiverEdge Parkway, Suite 590
Atlanta, GA 30328
(770) 984-0991
The technical coordinators responsible for coordinating all technical matters
associated with this SOW are as follows:
For IBM:
Jennifer Stowell
IBM H06B1
4111 Northside Drive
Atlanta, GA 30327
(404) 238-3514
For ITC:
Joan Dasher
ITC
13515 Dulles Technology Drive
Herndon, VA 20171
(703) 713-3335
IX. DURATION OF SOW
The initial term of this SOW will be for a period of one year commencing January
1, 1997. Thereafter, this SOW will be automatically renewed for additional one
year terms, unless either party provides written notice to the other that it
does not intend to renew not less than 90 days prior to the expiration of the
then current term. Any material changes to the SOW need to be materially agreed
upon by both parties.
X. ADDITIONAL TERMS AND CONDITIONS
For purposes of this Statement of Work, the IBM Subcontractor Agreement is
amended as follows:
5
<PAGE>
1) Notwithstanding the definition of "Materials" in Section 1 of the
Agreement, modifications ITC makes to its Program Products in connection
with this SOW will not be considered Materials, but will be considered part
of ITC's program product.
2) IBM agrees not to reverse assemble, reverse compile, or otherwise translate
ITC's Program Products.
3) Under the heading of "Your Other Responsibilities" and the subheading of
"you agree to" in Section 4 of the Agreement, the first sentence of Item 4
is amended to read as follows:
"comply with all reasonable requirements issued by us (such as those
regarding hazardous materials, safety, and your performance of work on our
premises)."
4) Except as specifically granted in the Agreement or this Statement of Work,
no rights or licenses are granted to IBM in ITC's Program Products.
5) For purposes of Section 13 of the Agreement ("Changes to Agreement Terms),
this Statement of Work will not be deemed to be an on-going transaction.
Agreed to: Agreed to:
Industrial Training Corporation International Business Machines Corporation
By: /s/ Christopher E. Mack By: /s/ David E. Moran
----------------------------- --------------------------------
Authorized Signature Authorized Signature
Name: /s/ Christopher E. Mack Name: /s/ David E. Moran
----------------------------- ------------------------------
Type or Print Type or Print
Date: 12/27/96 Date: 1/13/97
--------------------------- ------------------------------
Subcontractor Address: IBM Office Address:
13515 Dulles Technology Drive P.O. Box 218
Herndon, VA 20171-3413 Building #1, Room 035
Dayton, NJ 08810
Attn: Stewart Horton
6
<PAGE>
IBM SUBCONTRACTOR AGREEMENT
We welcome you as our subcontractor.
We are committed to providing our customers with the highest quality products
and services, and establishing and maintaining their satisfaction. As our
subcontractor. we look to you to help us fulfill this commitment.
This IBM Subcontractor Agreement (called the "Agreement") and its applicable
Attachments and Transaction Documents are the complete agreement regarding your
provision of Services and Deliverables, and replace any prior oral or written
communications between
us.
By signing below, each of us agrees to the terms of this Agreement. Once signed,
1) any reproduction of this Agreement, an Attachment, or Transaction Document
made by reliable means (for example, photocopy or facsimile) is considered an
original and 2) all Services and Deliverables you provide under this Agreement
are subject to it.
Agreed to: Agreed to:
Industrial Training Corporation International Business Machines Corporation
By: /s/ Christopher E. Mack By: /s/ David E. Moran
--------------------------- ------------------------------
Name (type or print): Name (type or print):
Christopher E. Mack David E. Moran
Date: 12/27/96 Date: 1/13/97
Subcontractor address IBM Office address:
13515 Dulles Technology Drive P.O. Box 218
Herndon, VA 20171 Bldg #1 Room 035
Dayton, NJ 08810
Attention: Stewart Horton
IBM Subcontract Agreement number:
IE672101
After signing, please return a copy of this Attachment to the local "IBM Office
address" show above.
7
<PAGE>
IBM SUBCONTRACTOR AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page Section Title Page
<S> <C> <C> <C> <C> <C>
1. Definitions...................... 2 10. Materials and Inventions...... 7
2. Agreement Structure.............. 2 11. Patents and Copyrights........ 7
3. How We Engage You For a Project.. 3 12. Liability..................... 7
4. Our Relationship................. 3 13. Changes to the Agreement Terms 8
5. Personnel,....................... 5 14. Termination................... 8
6. Compliance with Laws............. 5 15. Waiver of Noncompliance....... 8
7. Insurance Coverage............... 5 16. Electronic Communications..... 8
8. Prices, Payment, and Taxes....... 6 17. Governing Law................. 8
9. Warranty......................... 6
</TABLE>
1. DEFINITIONS
DELIVERABLE IS any item, specified in the Statement of Work, that you provide
(for example, equipment, Program Products, or Materials).
EQUIPMENT is a machine, its features, elements, cables, or accessories, or
any combination of them. The term "Equipment" includes the documentation
required to install, support, use, and maintain the Equipment.
MATERIALS are work product such as programs, program listings, programming
tools, documentation, reports, and drawings. The term "Materials" does not
include Program Products, but does include modifications of a Program
Product.
PROGRAM PRODUCT is your commercially available software product and the
documentation required to install, support, use, and maintain it. Our
customer is the licensee (and we are not).
SERVICES are the work you and your personnel perform to complete the scope of
work described in a Statement of Work. Deliverables may result from such
work.
2. AGREEMENT STRUCTURE
ATTACHMENTS
We may specify terms in addition to those in this Agreement (for example,
terms that apply specifically to construction work) in documents called
"Attachments", which are also part of this Agreement. Both of us agree to the
terms of an Attachment by signing it.
TRANSACTION DOCUMENTS
We will provide to you the appropriate "Transaction Documents" that supply
additional information about your provision of Services or Deliverables, and
which are also part of this Agreement. The following are examples of
Transaction Documents, with examples of the information they may contain:
8
<PAGE>
1. Statements of Work (scope of work and payment schedule);
2. Change Orders (changes to the Statement of Work); and
3. Exhibits (residency requirements. travel expense guidelines, and sales/use
tax registration numbers). You accept the terms in an Exhibit by 1)
signing it, 2) performing Services, 3) providing a Deliverable, or 4)
accepting payment from us.
CONFLICTING TERMS
If there is a conflict among the terms in the various documents, those of an
Attachment prevail over those of this Agreement. The terms of a Transaction
Document prevail over those of both of these documents.
3. HOW WE ENGAGE YOU FOR A PROJECT
This Agreement is not a commitment by us to give you any work. When we wish
to engage you as our subcontractor for a specific project, we will issue a
Statement of Work, which both of us must sign. You may not begin work until
we have specifically authorized you to do so, in writing.
CHANGES TO A STATEMENT OF WORK
A Statement of Work may only be modified by a Change Order, which both of us
must sign. Any changes to the Statement of Work may affect the estimated
schedule, payments, and other terms.
4. OUR RELATIONSHIP
MUTUAL RESPONSIBILITIES
Each of us agrees that under this Agreement
1. you are an independent contractor. Neither of us is a legal representative
or agent of the other, and you and your personnel are not our employees;
2. the term personnel includes your employees, professionals you engage (such
as consultants, architects. and engineers), and all of your other
subcontractors. You agree that you are responsible for the work performed
under this Agreement, whether by you or your personnel;
3. you are incorporated or organized as a partnership, authorized to do
business in the State in which Services or Deliverables are provided;
4. we will provide your license agreement for each Program Product to our
customer. We are not a party to the license agreement and do not assume
any obligation for violations of it. We may install and test the Program
Product for our customer. For recurring-charge licenses, we will notify
you when to begin invoicing our customer. If a Program Product is
available under the IBM Cooperative Software Program, the terms of that
agreement will control the distribution of that Program Product;
9
<PAGE>
5. we may independently develop, acquire, and market materials, equipment, or
programs that may be competitive with (despite any similarity to those you
provide:
6. each of us is free to enter into similar agreements with others, set its
own prices, and conduct its business in whatever way it chooses, provided
there is no interference with performing the obligations under this
Agreement:
7. neither of us will offer gifts or gratuities to personnel of the other or
members of their families;
8. neither of us grants the other the right to use its trademarks, trade
names, or other designations in any promotion or publication, without
prior written consent;
9. all information exchanged is nonconfidential. If either of us requires the
exchange of confidential information, it will be made under a signed
confidentiality agreement; and
10. neither of us will bring a legal action against the other more than two
years after the cause of action arose.
YOUR OTHER RESPONSIBILITIES
You agree not to do any of the following:
1. subcontract any of your obligations under this Agreement, without our
prior written consent:
2. assign, or otherwise transfer, this Agreement or your rights under it, or
delegate your obligations, without our prior written consent. Any attempt
to do so is void:
3. assume or create any obligations on our behalf, or make any
representations about us other than those we authorize (in writing);
4. disclose the terms of this Agreement without our prior written consent; or
5. conduct your business in a way (for example, failure to maintain the
highest quality professionalism) that adversely affects our reputation or
goodwill.
You agree to:
1. perform Services and provide Deliverables as specified in the Statement of
Work, and according to their schedule (if any). You also agree to have a
process-driven approach to your work efforts that is repeatable and
measurable. On our request, you agree to review the approach with us;
2. ensure that the Equipment is certified to the applicable national
standards by a nationally recognized testing laboratory, such as the
Underwriters Laboratory (UL);
3. transfer title to Equipment to our customer (and not to us). You are
responsible for risk or loss for a Deliverable until it is delivered to us
or our customer;
10
<PAGE>
4. comply with all requirements issued by us (such as those regarding
hazardous materials, safety, and your performance of work on our
premises). You also agree to dispose of all chemicals and other toxic
materials or substances according to all applicable laws and regulations;
5. not interfere with our customer's business operations while performing
under this Agreement;
6. use information connected with this Agreement only in support of your work
under it:
7. provide us with relevant financial information about your business
enterprise on request;
8. maintain records according to generally accepted accounting principles to
support your invoices to us. You agree to retain such records for three
years following the end of the related Statement of Work. You also agree,
upon our request, to provide us with relevant records, including proof of
required licenses and permits. We have the right to inspect them and audit
your compliance with this Agreement on your premises during normal
business hours. We also have the right to reproduce such records and
retain the copies. We may use an independent auditor
9. refund amounts we paid to you (including license fees) for Equipment or
Program Products, if we refund amounts our customer paid us for them (for
example. when they are returned);
and
10. meet customer satisfaction requirements (if any) specified in a Statement
of Work. You also agree, upon our request, to 1) review with us your
process for assessing customer satisfaction and 2) participate in customer
satisfaction programs.
5. PERSONNEL
Each of us will authorize a person to represent us in all matters concerning
this Agreement. These representatives will be available throughout the term
of this Agreement. Each of us will 1) address all notices to the other's
representative and 2) promptly notify the other in writing if this person is
replaced.
You agree to:
1. ensure that your personnel are adequately trained;
2. have agreements with your personnel to enable you to meet your obligations
under this Agreement. You agree to ensure that such personnel are licensed
under all applicable laws and regulations;
3. be responsible for the supervision, control, compensation, and health and
safety of your personnel;
4. for your personnel who perform work on our premises, provide us advance
written notice regarding those you plan to assign. You also agree to
promptly notify us of personnel you plan to remove; and
11
<PAGE>
5. inform us if you plan to assign a former employee of ours to perform under
this Agreement. We reserve the right not to approve such assignment.
6. COMPLIANCE WITH LAWS
You agree to comply, and assist us in complying, with all applicable 1)
Federal, State, and local laws and regulations (such as those regarding FCC
Class A or B certification for Equipment, and environmental protection) and
2) building codes, ordinances, and standards (such as those issued by utility
companies and public authorities). Upon our request, you agree to provide us
with appropriate Equipment safety and certification documentation.
In particular, you agree to comply (unless you are exempt) with 1) Executive
Order 11248 (Equal Employment Opportunity) and 2) the Occupational Safety and
Health Act of 1970.
You agree to promptly notify us, in writing, of any charge of noncompliance
filed against you.
FEDERAL REPORTING REQUIREMENTS
To comply with Federal law, you agree not to employ or compensate any
individuals to perform activities under this Agreement (without our prior
written approval) who were, within the last two years:
1. members of the armed forces in a pay grade or 0-4 or higher; or
2. civilians employed by the Department or Defense with a pay rate equal to,
or greater than, the minimum rate for a grade GS-13.
You agree to provide us with any information that we need to comply with this
law.
7. INSURANCE COVERAGE
You agree to maintain during the term of this Agreement, and at your expense:
1. Workers Compensation insurance, as required by law, including employer's
liability insurance with a minimum limit of $100,000 per occurrence;
2. general liability insurance, covering bodily injury (including death) and
property damage arising out of acts or omissions by you or your personnel.
The minimum limit is $1,000,000 per occurrence; and
3. automobile insurance, covering bodily injury (including death) and
property damage. The minimum limit is $1,000,000 per occurrence.
We may require other types of insurance (for example, property coverage). If
so, we will specify the type and minimum limits.
You agree to 1) name us as an additional insured on each insurance policy and
2) provide that the insurer gives us one month's written notice of any change
in, or cancellation of, the insurance. Upon our request, you will provide us
insurance certificates reflecting the above.
12
<PAGE>
8. PRICES, PAYMENT, AND TAXES
You agree not to charge higher prices to us than those you charge to others
who are similarly situated. You agree to give us the benefit of any price
decrease for 1) Equipment and Program Products not yet installed and 2)
recurring-charge licenses, from the date a price decrease becomes effective.
We will pay you the price specified in the Statement of Work. That price
will include all applicable taxes, but not those based o your net income. We
will also reimburse you for expenses (such as those for travel), provided
you have obtained our prior written approval and adhered to our guidelines.
You are not eligible for payment under this Agreement, when we approve you
as an IBM Business Partner and those activities duplicate any of your
subcontractor activities. We may withhold payment if 1) we find the Services
or Deliverables to be unsatisfactory or 2) you otherwise fail to comply with
the terms of this Agreement.
As a reseller of Equipment, Program Products, and some Services (for
example, Multiple Vendor Services), we are not required to pay, and you
agree not to charge us, taxes for those items. Upon your request, we will
provide supporting documentation.
You agree to pay all transportation charges required for the shipment of
Equipment and Program Products (if applicable) to the location we specify.
You agree to submit invoices within one month following completion of the
work specified in the Statement of Work, We will pay you following our
receipt of an acceptable invoice and supporting documentation (such as an
itemized list or reimbursable expenses).
9. WARRANTY
You warrant that:
1. Services are performed
a. in a skillful, competent, and workmanlike manner,
b. according to the description in the Statement of Work, and
c. to meet any specific conditions (called Completion Criteria )
identified in the Statement of Work:
2. Equipment conforms to its specifications, and is free from defects in
materials and workmanship; and
3. each Program Product and Material conforms to its specifications.
You agree that for each Deliverable, the above warranties will be in effect
for a period of one year from its date or installation or acceptance (for
example, acceptance of an architectural drawing). If Services or
Deliverables do not comply with their warranties, you agree to correct the
deficiency without charge and in a timely manner. You agree that we may
pass your standard warranty for a
13
<PAGE>
Deliverable through to our customer who may deal directly with you. If
there is a conflict between the above warranties and your standard
warranty, the more favorable warranty applies. You agree to offer an
optional post-warranty maintenance service for Equipment or to cooperate
with us on arrangements for such service.
In addition, you warrant that:
1. each Deliverable does not violate anyone's intellectual property or
other rights;
2. you have the right to license each Program Product or Material, or to
grant us the rights in it; and
3. you have tested each Program Product or Material for harmful code and
removed any such code.
10. MATERIALS AND INVENTIONS
All materials you create under this Agreement are Works Made for Hire. If
any of the Materials do not qualify as Works Made for Hire, you hereby
assign to us all right, title, and interest (including ownership of
copyright) in such Materials. Such assignment allows us to obtain in our
name, copyrights, registrations, and similar protections, which may be
available in the Materials. You agree to assist us, if required, to perfect
these rights. You will provide us with at least one copy of such Materials.
If any preexisting materials are contained in the Materials you provide to
us, you grant us 1) an irrevocable, nonexclusive, worldwide, paid-up license
to use, execute, reproduce, display, perform, distribute (internally and
externally) copies of, and prepare derivative works based on, such materials
and 2) the right to authorize others to do any of the former.
INVENTIONS
An "Invention" is any idea, concept, design, technique, invention,
discovery, or improvement, whether or not patentable, that any of your
personnel first conceives or reduces to practice while performing under this
Agreement, and for which a patent application is filed.
You grant us 1) an irrevocable, nonexclusive, world-wide, paid-up license
(under any patent covering an Invention) to make, have made, use, lease,
sell or otherwise transfer. any apparatus, and to practice any method,
covered by an Invention and 2) the right to authorize others to do any of
the former.
11. PATENTS AND COPYRIGHTS
You will indemnify us for all damages, liabilities, losses, and expenses
arising out of any claim that a Deliverable infringes a patent or copyright.
If such a claim is made, or appears likely to be made, you agree to enable
our and our customer s continued exercise of all rights granted in the
Deliverable, or modify or replace it. If we determine that none of these
alternatives is reasonably available, the Deliverable will be returned to
you. In addition to your obligation to indemnify us, you agree to refund the
money we paid you for it.
12. LIABILITY
14
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Under no circumstances are we liable for economic consequential damages
(including lost profits or savings) or incidental damages, even if we are
informed of their possibility
You are responsible for:
1. obligations referred to in the patent and copyright terms described above.
You are also responsible for any damages associated with the infringement
or violation of our intellectual property rights by you or your personnel;
2. bodily injury (including death), and damage to real property and tangible
personal property, arising out of your or your personnel's performance
under this agreement; and
3. any other actual loss or damage, including any reprocurement costs we
incur associated with your breach of this Agreement.
Except for the obligations stated above, under no circumstances are you liable
for economic or consequential damages (including lost profits or savings) or
incidental damages, even if you are informed of their possibility.
You will indemnify us for claims by others made against us arising out of your
performance under this Agreement or as a result of your relations with anyone
else.
13. CHANGES TO THE AGREEMENT TERMS
In order to maintain flexibility in our relationship, we may change the terms
of this Agreement by giving you one month's written notice. However, these
changes are not retroactive. They apply, as of the effective date we specify
in the notice, only to Statements of Work that are 1) signed on or after the
date of the notice and 2) for on-going transactions (such as Multiple Vendor
Services).
14. TERMINATION
We may terminate a Statement of Work. with or without cause, on written
notice. Upon receipt of such notice, you agree to stop work immediately. You
agree to make available to us all Deliverables, including work-in-progress
such as notes. drafts, and sketches). We will pay you for all Services and
Deliverables we accept. Such payment constitutes our entire liability to you.
Otherwise, a Statement of Work terminates when your obligations under it are
met.
You may terminate this Agreement effective upon the termination or completion
of all Statements of Work under it.
Any terms of this Agreement, which by their nature extend beyond its
termination, remain in effect until fulfilled, and apply to respective
successors and assignees.
15. WAIVER OF NONCOMPLIANCE
Failure by us to insist on strict performance or to exercise a right when
entitled. does not prevent us from doing so at a later time. either in
relation to that act or any subsequent one.
15
<PAGE>
16. ELECTRONIC COMMUNICATIONS
Each of us may communicate with the other by electronic means. Each of us
agrees to the following for all electronic communications:
1. an identification code (called a "USERID") contained in an electronic
document is legally sufficient to verify the sender's identity and the
document's authenticity;
2. an electronic document that contains a USERID is a signed writing; and
3. an electronic document, or any computer printout of it, is an original
when maintained in the normal course of business.
17. GOVERNING LAW
The laws of the State of New York govern this Agreement.
16
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