-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CtmMXYJYboejyihkt/hqNAs+6Zk9rxlbI4hr90xrYTLRVzX0JspzfjPlpEMZwS6w cZ99OYZfW6ILBHM20M8lWw== 0000898432-98-000422.txt : 19980512 0000898432-98-000422.hdr.sgml : 19980512 ACCESSION NUMBER: 0000898432-98-000422 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19980508 EFFECTIVENESS DATE: 19980508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ITC LEARNING CORP CENTRAL INDEX KEY: 0000764867 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 521078263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-52281 FILM NUMBER: 98614612 BUSINESS ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037133335 MAIL ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DRIVE CITY: HERNDON STATE: VA ZIP: 22071 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL TRAINING CORP DATE OF NAME CHANGE: 19920703 S-8 1 As filed with the Securities and Exchange Commission on May 8, 1998 Registration No. 333- --------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- ITC Learning Corporation ---------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-1078263 - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13515 Dulles Technology Drive Herndon, Virginia 20171-3413 ------------------------------------------------- (Address of principal executive offices) (zip code) 1998 Incentive Stock Plan ------------------------- (Full title of plan) Christopher E. Mack ITC Learning Corporation 13515 Dulles Technology Drive Herndon, Virginia 20171-3413 ------------------------------------- (Name and address of agent for service) (703) 713-3335 ----------------------------------------------------------- (Telephone number, including area code, of agent for service) Copy to: Cary J. Meer, Esq. Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Second Floor Washington, D.C. 20036-1800 CALCULATION OF REGISTRATION FEE
Proposed Proposed maximum maximum Amount of Title of securities Amount to be offering price per aggregate offering registration to be registered registered share(1) price(1) fee - ------------------- ------------ ------------------ ------------------ ------------ Options (2) 200,000 Common stock, par value $0.10 per share 200,000 shares $ 6.00 $ 1,200,000 $ 354.00
- --------------- (1) Inserted solely for the purpose of calculating the registration fee pursuant to Rule 457(h). The fee is calculated on the basis of the average of the high and low sales prices for the Registrant's Common Stock reported on the Nasdaq National Market System on May 4, 1998. (2) The options to be registered hereunder are to be distributed by the Registrant for no value. Accordingly, no separate registration fee is required. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents filed by ITC Learning Corporation (the "Company") are incorporated by reference into this Registration Statement: (a) The Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 filed pursuant to Section 13 of the Securities Exchange Act of 1934, as amended ("Exchange Act"); (b) All other reports filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the Annual Report on Form 10-KSB referred to in (a) above; and (c) The description of the Company's common stock contained in the Registration Statement filed July 12, 1985 Form 8-B (Registration No. 0-13740). All documents subsequently filed by the Company with the Securities and Exchange Commission ("SEC") pursuant to Sections 12, 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Registration Statement, but prior to the filing of a post-effective amendment to this Registration Statement that indicates that all securities offered by this Registration Statement have been sold or that deregisters all such securities then remaining unsold, shall be deemed to be incorporated by reference into this Registration Statement. Each document incorporated by reference into this Registration Statement shall be deemed to be a part of this Registration Statement from the date of the filing of such document with the SEC until the information contained therein is superseded or updated by any subsequently filed document that is incorporated by reference into this Registration Statement or by any document that constitutes part of the prospectus relating to the 1998 Incentive Stock Plan (the "Plan") that meets the requirements of Section 10(a) of the Securities Act of 1933, as amended ("Securities Act"). ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. None. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under the Maryland General Corporation Law, and the Company's By-Laws, the Company has broad power to indemnify, and under certain circumstances is required to indemnify, its directors and officers against liabilities that they may incur while serving as directors or officers of the Company, including liabilities arising under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the 3 SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. The Company also maintains an insurance policy for directors and officers insuring them against certain liabilities incurred by them in the performances of their duties, including liabilities under the Securities Act. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. The following are filed herewith as part of this Registration Statement: Exhibit No. Description - ----------- ----------- 4.1 1998 Incentive Stock Plan 4.2 Form of 1998 Plan Incentive and Non-Qualified Stock Option Agreement for Employees 4.3 Form of 1998 Plan Non-Qualified Stock Option Agreement for Non-Employee Directors 4.4 Form of 1998 Plan Option Agreement for Carl D. Stevens 5.1 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the securities being registered 23.1 Consent of Ernst & Young LLP 23.2 The consent of Kirkpatrick & Lockhart LLP to the use of their opinion as an exhibit to this Registration Statement is included in their opinion filed herewith as Exhibit 5.1 24 Power of Attorney (see page 6) ITEM 9. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or 4 decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Herndon, State of Virginia, on this 8th day of May, 1998. ITC LEARNING CORPORATION By: /s/ Carl D. Stevens ------------------------------- Carl D. Stevens, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John D. Sanders, Carl D. Stevens and Christopher E. Mack, or any of them, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Registration Statement on Form S-8, and to file same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Daniel R. Bannister - ----------------------- Director May 8th, 1998 Daniel R. Bannister /s/ Christopher E. Mack - ----------------------- Vice President and Chief May 8th, 1998 Christopher E. Mack Financial Officer (Principal Financial and Accounting Officer) /s/ John D. Sanders - ----------------------- Director and Chairman of May 8th, 1998 John D. Sanders the Board 6 /s/ Carl D. Stevens - ----------------------- Director, President and Chief May 8th, 1998 Carl D. Stevens Executive Officer /s/ Richard E. Thomas - ----------------------- Director May 8th, 1998 Richard E. Thomas 7 EXHIBIT INDEX The following exhibits are filed herewith as part of this Registration Statement: Exhibit No. Description - ----------- ----------- 4.1 1998 Incentive Stock Plan 4.2 Form of 1998 Plan Incentive and Non-Qualified Stock Option Agreement for Employees 4.3 Form of 1998 Plan Non-Qualified Stock Option Agreement for Non-Employee Directors 4.4 Form of 1998 Plan Option Agreement for Carl D. Stevens 5.1 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the securities being registered 23.1 Consent of Ernst & Young LLP 23.2 The consent of Kirkpatrick & Lockhart LLP to the use of their opinion as an exhibit to this Registration Statement is included in their opinion filed herewith as Exhibit 5.1 24 Power of Attorney (see page 6) 8 EX-4.1 2 Exhibit 4.1 ITC LEARNING CORPORATION 1998 INCENTIVE STOCK PLAN ARTICLE I. PURPOSE, ADOPTION AND TERM OF THE PLAN 1.01 PURPOSE. The purpose of the ITC Learning Corporation 1998 Incentive Stock Plan (hereinafter referred to as the "Plan") is to advance the interests of the Company (as hereinafter defined) and its Subsidiaries (as hereinafter defined), if any, by encouraging and providing for the acquisition of an equity interest in the Company by non-employee directors, officers and key employees through the grant of awards with respect to shares of Common Stock (as hereinafter defined). The Plan will enable the Company to retain the services of non-employee directors, officers and key employees upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent and to compete effectively with other enterprises for the services of non-employee directors, officers and key employees as may be needed for the continued improvement of its business. 1.02 ADOPTION AND TERM. The Plan shall become effective on January 7, 1998 ("Effective Date"), subject to the approval of a simple majority of the holders of Voting Stock (as hereinafter defined) represented, by person or by proxy, and entitled to vote at the annual meeting of the holders of Voting Stock held in 1998. The Plan shall terminate on January 7, 2008, or such earlier date as shall be determined by the Board (as hereinafter defined); provided, however, that, in the event the Plan is not approved by a simple majority of the holders of Voting Stock at or before the Company's 1998 annual meeting of holders of Voting Stock, the Plan shall terminate on such date and any Awards (as hereinafter defined) made under the Plan prior to such date shall be void and of no force and effect. ARTICLE II. DEFINITIONS For purposes of the Plan, capitalized terms shall have the following meanings: 2.01 "ADMINISTRATOR" shall mean either the Board or the Committee. 2.02 "AWARD" means any grant to a Participant of any one or a combination of Non-Qualified Stock Options or Incentive Stock Options described in Article VI or Restricted Shares described in Article VII. 2.03 "AWARD AGREEMENT" means a written agreement between the Company and a Participant or a written acknowledgment from the Company specifically setting forth the terms and conditions of an Award granted to a Participant under the Plan. 2.04 "BENEFICIARY" means an individual, trust or estate who or that, by will or the laws of descent and distribution, succeeds to the rights and obligations of the Participant under the Plan and an Award Agreement upon the Participant's death. 2.05 "BOARD" means the Board of Directors of the Company. 2.06 "CAUSE" means, with respect to an Employee Participant, termination for, as determined by the Administrator in its sole and absolute discretion, (i) dishonest or fraudulent conduct relating to the Company or any of its Subsidiaries or their businesses; (ii) conviction of any felony that, in the judgment of the Administrator, involves moral turpitude or otherwise reflects on the Company or any of its Subsidiaries in a significantly adverse way; or (iii) gross neglect by the Participant in the performance of his or her duties as an employee or any material breach by a Participant under any employment agreement with the Company or any of its Subsidiaries. 2.07 "CHANGE IN CONTROL" shall mean the occurrence, after the Effective Date, of any of the following events, directly or indirectly or in one or more series of transactions: (i) Approval of the Company's shareholders of a consolidation or merger of the Company with any Third Party, unless the Company is the entity surviving such merger or consolidation; (ii) Approval of the Company's shareholders of a transfer of all or substantially all of the assets of the Company to a Third Party or a complete liquidation or dissolution of the Company; (iii) A Third Party, directly or indirectly, through one or more subsidiaries or transactions or acting in concert with one or more persons or entities: (A) acquires beneficial ownership of more than 35% of the Voting Stock; (B) acquires irrevocable proxies representing more than 35% of the Voting Stock; (C) acquires any combination of beneficial ownership of Voting Stock and irrevocable proxies representing more than 35% of the Voting Stock; (D) acquires the ability to control in any manner the election of a majority of the directors of the Company; or (E) acquires the ability to directly or indirectly exercise a controlling influence over the management or policies of the Company; (iv) any election has occurred of persons to the Board that causes a majority of the Board to consist of persons other than (A) persons who were members of the Board on the Effective Date and/or (B) persons who were nominated for election as members of the Board by the Board (or a committee of the Board) at a time when the majority of the Board (or of such committee) consisted of persons who were members of the Board on the Effective Date; PROVIDED, HOWEVER, that any persons nominated for election by the Board (or a committee of the Board), a majority of whom are persons described in clauses (A) and/or (B), or are persons who were themselves nominated by such Board (or a committee of such Board), shall for this purpose be deemed to have been nominated by a Board composed of persons described in clause (A); or 2 (v) A determination is made by the SEC or any similar agency having regulatory control over the Company that a change in control, as defined in the securities laws or regulations then applicable to the Company, has occurred. Notwithstanding any provision contained herein, a Change in Control shall not include any of the above described events if they are the result of a Third Party's inadvertently acquiring beneficial ownership or irrevocable proxies or a combination of both for 35% or more of the Voting Stock, and the Third Party as promptly as practicable thereafter divests itself of beneficial ownership or irrevocable proxies for a sufficient number of shares so that the Third Party no longer has beneficial ownership or irrevocable proxies or a combination of both for 35% or more of the Voting Stock. 2.08 "CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements, or supersedes said section. 2.09 "COMMITTEE" means a committee of the Board as may be appointed, from time to time, by the Board. The Board may, from time to time, appoint members of the Committee in substitution for those members who were previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall be composed solely of at least two directors of the Company, each of whom is a "non-employee director" as defined in Rule 16b-3, as promulgated by the SEC under the Exchange Act, and an "outside director" within the meaning of Section 162(m). 2.10 "COMMON STOCK" means the Common Stock, par value $0.10 per share, of the Company. 2.11 "COMPANY" means ITC Learning Corporation, a corporation organized under the laws of the State of Maryland, and its successors. 2.12 "DATE OF GRANT" means the date designated by the Administrator as the date as of which an Award is granted, which shall not be earlier than the date on which the Administrator approves the granting of such Award. 2.13 "DISABILITY" means any physical or mental injury or disease of a permanent nature that renders an Employee Participant incapable of meeting the requirements of the employment or other work that Employee Participant performed immediately before that disability commenced. The determination of whether an Employee Participant is disabled and when an Employee Participant becomes disabled shall be made by the Administrator in its sole and absolute discretion. 2.14 "DISABILITY DATE" means the date which is six months after the date on which an Employee Participant is first absent from active employment or work with the Company due to a Disability. 2.15 "EMPLOYEE PARTICIPANT" means a Participant who is an employee of the Company or one of its Subsidiaries. 2.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.17 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2.18 "FAIR MARKET VALUE" of a share of Common Stock means, as of any given date, the closing sales price of a share of Common Stock on such date on 3 the principal national securities exchange on which the Common Stock is then traded or, if the Common Stock is not then traded on a national securities exchange, the closing sales price or, if none, the average of the bid and asked prices of the Common Stock on such date as reported on the National Association of Securities Dealers Automated Quotation System ("Nasdaq"); PROVIDED, HOWEVER, that, if there were no sales reported as of such date, Fair Market Value shall be computed as of the last date preceding such date on which a sale was reported; PROVIDED, FURTHER, that, if any such exchange or quotation system is closed on any day on which Fair Market Value is to be determined, Fair Market Value shall be determined as of the first date immediately preceding such date on which such exchange or quotation system was open for trading. In the event the Common Stock is not admitted to trade on a securities exchange or quoted on Nasdaq, the Fair Market Value of a share of Common Stock as of any given date shall be as determined by the Administrator in its sole and absolute discretion, which determination may be based on, among other things, the opinion of one or more independent and reputable appraisers qualified to value companies in the Company's line of business. Notwithstanding the foregoing, the Fair Market Value of a share of Common Stock shall never be less than par value per share. 2.19 "INCENTIVE STOCK OPTION" means an Option designated as an incentive stock option and that meets the requirements of Section 422 of the Code. 2.20 "NON-EMPLOYEE DIRECTOR" means each member of the Board or of the Board of Directors of a Subsidiary who is not an employee of the Company or of any of its Subsidiaries. 2.21 "NON-EMPLOYEE DIRECTOR OPTION" means an Option granted to a Non-Employee Director. 2.22 "NON-QUALIFIED STOCK OPTION" means an Option that is not an Incentive Stock Option. 2.23 "OPTION" means any option to purchase Common Stock granted to a Participant pursuant to Article VI. 2.24 "PARTICIPANT" means any director or employee of the Company or any of its Subsidiaries selected by the Administrator to receive an Option under the Plan in accordance with Article VI and/or Restricted Shares under the Plan in accordance with Article VII. 2.25 "PLAN" means the ITC Learning Corporation 1998 Incentive Stock Plan as set forth herein, and as the same may be amended from time to time. 2.26 "RESTRICTED SHARES" means shares of Common Stock subject to restrictions imposed in connection with Awards granted under Article VII. 2.27 "RULE 16B-3" means Rule 16b-3 promulgated by the SEC under Section 16 of the Exchange Act and any successor rule. 2.28 "SEC" means the Securities and Exchange Commission. 2.29 "SECTION 162(M)" means Section 162(m) of the Code and the regulations thereunder. 2.30 "SUBSIDIARY" means a company more than 50% of the equity interests of which are beneficially owned, directly or indirectly, by the Company. 4 2.31 "TEN PERCENT SHAREHOLDER" means a Participant who, at the time of grant of an Option, owns (or is deemed to own under Section 424(d) of the Code) more than 10% of the Voting Stock. 2.32 "TERMINATION OF EMPLOYMENT" means, with respect to an Employee Participant, the voluntary or involuntary termination of a Participant's employment with the Company or any of its Subsidiaries for any reason, including death, Disability, retirement or as the result of the sale or other divestiture of the Participant's employer or any similar transaction in which the Participant's employer ceases to be the Company or one of its Subsidiaries. Whether entering military or other government service shall constitute Termination of Employment, and whether a Termination of Employment is a result of Disability, shall be determined in each case by the Administrator in its sole and absolute discretion. 2.33 "THIRD PARTY" includes a single person or a group of persons or entities acting in concert not wholly owned directly or indirectly by the Company. 2.34 "VOTING STOCK" means the classes of stock of the Company entitled to vote generally in the election of directors of the Company. ARTICLE III. ADMINISTRATION 3.01 ADMINISTRATOR. The Plan shall be administered by the Administrator, which shall have exclusive and final authority in each determination, interpretation, or other action affecting the Plan and its Participants. The Administrator shall have the sole and absolute discretion to interpret the Plan, to establish and modify administrative rules for the Plan, to select the directors, officers and other key employees to whom Awards may be granted, to determine the terms and provisions of the respective Award Agreements (which need not be identical), to determine all claims for benefits under the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, to determine whether the shares offered with respect to an Award will be treasury shares or will be authorized but previously unissued shares, and to take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. No action of the Administrator will be effective if it contravenes or amends the Plan in any respect. Both the Board and the Committee may act as Administrator of the Plan and the Committee may act as Administrator with respect to Options granted to members of the Committee. 3.02 ACTIONS OF THE COMMITTEE. All determinations of the Committee shall be made by a majority vote of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee shall also have express authorization to hold Committee meetings by conference telephone, or similar communication equipment by means of which all persons participating in the meeting can hear each other. ARTICLE IV. SHARES OF COMMON STOCK 4.01 NUMBER OF SHARES OF COMMON STOCK ISSUABLE. Subject to adjustments as provided in Section 8.05, 200,000 shares of Common Stock shall be available for Awards under the Plan. The Common Stock to be offered under the Plan shall be authorized and unissued Common Stock, or issued Common Stock that shall have been reacquired by the Company and held in its treasury. 5 4.02 CALCULATION OF NUMBER OF SHARES OF COMMON STOCK AWARDED TO ANY PARTICIPANT. In the event the purchase price of an Option is paid, or tax or withholding payments relating to an Award are satisfied, in whole or in part through the delivery of shares of Common Stock, a Participant will be deemed to have received an Award with respect to those shares of Common Stock. 4.03 SHARES OF COMMON STOCK SUBJECT TO TERMINATED AWARDS. The Common Stock covered by any unexercised portions of terminated Options, shares of Common Stock forfeited as provided in Section 7.02(a) and shares of Common Stock subject to Awards that are otherwise surrendered by the Participant without receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan. ARTICLE V. PARTICIPATION 5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall include such directors, officers and other key employees of the Company or its Subsidiaries as the Administrator, in its sole and absolute discretion, may designate from time to time. In making such designation, the Administrator may take into account the nature of the services rendered by the directors, officers and key employees, their present and potential contributions to the success of the Company, and such other factors as the Administrator, in its sole and absolute discretion, may deem relevant. The Administrator's designation of a Participant in any year shall not require the Administrator to designate such person to receive Awards in any other year. The Administrator shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards. A Participant may hold more than one Award granted under the Plan. During the term of the Plan, no Employee Participant may receive Awards with respect to more than 150,000 shares of Common Stock. ARTICLE VI. STOCK OPTIONS 6.01 GRANT OF OPTION. Any Option granted under this Article VI shall have such terms as the Administrator may, from time to time, approve, and the terms and conditions of Options need not be the same with respect to each Participant. Under this Article VI, the Administrator may grant to any Participant one or more Incentive Stock Options, Non-Qualified Stock Options or both types of Options; PROVIDED, HOWEVER, that Incentive Stock Options may only be granted to Employee Participants. To the extent any Option does not qualify as an Incentive Stock Option (whether because of its provisions, the time or manner of its exercise or otherwise), that Option or the portion thereof that does not so qualify shall constitute a separate Non-Qualified Stock Option. 6.02 INCENTIVE STOCK OPTIONS. In the case of any grant of an Incentive Stock Option, whenever possible, each provision hereof and in any Award Agreement relating to such Option shall be interpreted to entitle the holder thereof to the tax treatment afforded by Section 422 of the Code, except (a) in connection with the exercise of Options following a Participant's Termination of Employment, (b) in accordance with a specific determination of the Administrator with the consent of the affected Participant or (c) to the extent that the operation of Section 8.05 would cause an Option to no longer be entitled to such treatment. If any provision hereof or that Award Agreement is held not to comply with requirements necessary to entitle that Option to that tax treatment, then except as otherwise provided in the preceding sentence: (i) that provision shall be deemed to have contained from the outset such language as is necessary to entitle the Option to the tax treatment afforded under Section 422 of the Code; and (ii) all other provisions hereof and of that Award Agreement remain in full force and effect. Except as otherwise specified in the first sentence of this Section 6.02, if any Award Agreement covering an Option the Administrator designates to be an Incentive Stock Option hereunder does not explicitly include 6 any term required to entitle that Incentive Stock Option to the tax treatment afforded by Section 422 of the Code, all such terms shall be deemed implicit in the designation of that Option, and that Option shall be deemed to have been granted subject to all such terms. 6.03 TERMS OF OPTIONS. Options granted under this Article VI shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable: (a) OPTION PRICE. The option price per share of Common Stock purchasable under an Option shall be determined by the Administrator at the time of grant but, if the Option is an Incentive Stock Option, the option price per share shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant; PROVIDED, HOWEVER, that, if an Incentive Stock Option is granted to a Ten Percent Shareholder, the option price per share shall be at least 110% of the Fair Market Value of a share of Common Stock on the Date of Grant and PROVIDED, FURTHER, that, except as otherwise required under the Code with respect to Incentive Stock Options and as required by Rule 16b-3 with respect to Options granted to persons subject to Section 16 of the Exchange Act, no amendment of an Option shall be deemed to be the grant of a new Option for purposes of this Section 6.03(a). (b) OPTION TERM. The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten years after its Date of Grant; PROVIDED, HOWEVER, that, if an Incentive Stock Option is granted to a Ten Percent Shareholder, the Option shall not be exercisable more than five years after its Date of Grant. (c) EXERCISABILITY. An Award Agreement with respect to Options may contain such performance targets, waiting periods, exercise dates, restrictions on exercise (including, but not limited to, a requirement that an Option is exercisable in periodic installments), and restrictions on the transfer of the underlying shares of Common Stock, if any, as may be determined by the Administrator at the time of grant. To the extent not exercised, installments shall cumulate and be exercisable, in whole or in part, at any time after becoming exercisable, subject to the limitations set forth in Sections 6.03(b), (g) and (h). If an Option is an Incentive Stock Option and if required by Section 422 of the Code, the aggregate Fair Market Value of the shares of Common Stock underlying such Option and all other incentive stock options granted to the Employee Participant (determined at the time the Option is granted) that become exercisable in any one calendar year shall not exceed $100,000. (d) METHOD OF EXERCISE. Subject to whatever installment exercise and waiting period provisions that apply under Section 6.03(c) above, Options may be exercised in whole or in part at any time during the term of the Option, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price in such form as the Administrator may accept (including payment in accordance with a cashless exercise program approved by the Administrator). If and to the extent the Administrator determines in 7 its sole and absolute discretion at or after grant, payment in full or in part may also be made in the form of shares of Common Stock already owned by the Participant (and for which the Participant has good title, free and clear of any liens or encumbrances) based on the Fair Market Value of the shares of Common Stock on the date the Option is exercised; PROVIDED, HOWEVER, that any already owned Common Stock used for payment must have been held by the Participant for at least six months. No Common Stock shall be issued on exercise of an Option until payment, as provided herein, therefor has been made. A Participant shall generally have the right to dividends or other rights of a stockholder with respect to Common Stock subject to the Option only when certificates for shares of Common Stock are issued to the Participant. (e) NON-TRANSFERABILITY OF OPTIONS. No Option shall be transferable by the Participant otherwise than by will or the laws of descent and distribution. (f) ACCELERATION OR EXTENSION OF EXERCISE TIME. The Administrator, in its sole and absolute discretion, shall have the right (but shall not in any case be obligated) to permit purchase of Common Stock subject to any Option granted to a Participant prior to the time such Option would otherwise become exercisable under the terms of the Award Agreement. In addition, the Administrator, in its sole and absolute discretion, shall have the right (but shall not in any case be obligated) to permit any Option granted to a Participant to be exercised after its expiration date, subject, however to the limitation set forth in Section 6.03(b). (g) EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT. The following provisions apply to Options granted to Employee Participants: (i) EXERCISE OF VESTED OPTIONS UPON TERMINATION OF EMPLOYMENT. (A) TERMINATION. Unless the Administrator, in its sole and absolute discretion, provides for a shorter or longer period of time in the Award Agreement or a longer period of time in accordance with Section 6.03(f), upon an Employee Participant's Termination of Employment other than by reason of death or Disability, an Employee Participant may, within three months from the date of such Termination of Employment, exercise all or any part of his or her Options as were exercisable on the date of Termination of Employment if such Termination of Employment is not for Cause. If such Termination of Employment is for Cause, the right of the Employee Participant to exercise such Options shall terminate on the date of Termination of Employment. In no event, however, may any Option be exercised later than the date determined pursuant to Section 6.03(b). (B) DISABILITY. Unless the Administrator, in its sole and absolute discretion, provides for a shorter or longer period of time in the Award Agreement or a longer period of time in accordance with Section 6.03(f), upon an Employee Participant's Disability Date, the Employee Participant may, within 8 one year after the Disability Date, exercise his or her Options, but only to the extent such Options were exercisable on the Disability Date and only to the extent not previously exercised. In no event, however, may any Option be exercised later than the date determined pursuant to Section 6.03(b). (C) DEATH. Unless the Administrator, in its sole and absolute discretion, provides for a shorter or longer period of time in the Award Agreement or a longer period of time in accordance with Section 6.03(f), in the event of the death of an Employee Participant while employed by the Company or a Subsidiary, the right of the Employee Participant's Beneficiary to exercise his or her Options (but only to the extent the Options were exercisable as of the date of death of the Employee Participant and only to the extent not previously exercised) shall expire upon the expiration of one year from the date of the Employee Participant's death or on the date of expiration of the Option determined pursuant to Section 6.03(b), whichever is earlier. (ii) EXPIRATION OF UNVESTED OPTIONS UPON TERMINATION OF EMPLOYMENT. Subject to Sections 6.03(f) and 6.03(g)(i)(B) and (C), to the extent all or any part of an Option granted to an Employee Participant was not exercisable as of the date of Termination of Employment, such right shall expire at the date of such Termination of Employment. Notwithstanding the foregoing, the Administrator, in its sole and absolute discretion and under such terms as it deems appropriate, may permit an Employee Participant who will continue to render significant services to the Company or a Subsidiary after his or her Termination of Employment to continue to accrue service with respect to the right to exercise his or her Options during the period in which the individual continues to render such services. (h) EXERCISE OF OPTIONS FOLLOWING TERMINATION OF SERVICE AS A NON-EMPLOYEE DIRECTOR. Unless the Administrator, in its sole and absolute discretion, provides for a shorter or longer period of time in the Award Agreement or a longer period of time in accordance with Section 6.03(f), (A) if a Non-Employee Director's service with the Company or a Subsidiary terminates by reason of death, any Option held by such Non-Employee Director may be exercised for a period of one year from the date of death or until the expiration of the Option, whichever is shorter, and (B) if a Non-Employee Director's service with the Company or a Subsidiary terminates other than by reason of death, any Option held by such Non-Employee Director may be exercised for a period of three months from the date of such termination or until the expiration of the stated term of the Option, whichever is shorter. Unless the Administrator, in its sole and absolute discretion, provides otherwise in an Award Agreement, all or any part of an Option granted to a Non-Employee Director that was not exercisable as of the date such Non-Employee Director's service with the Company or a Subsidiary terminates for any reason shall expire at the date of such termination of service. 9 ARTICLE VII. RESTRICTED SHARES 7.01 RESTRICTED SHARE AWARDS. Restricted Shares may be issued either alone or in addition to other Awards granted under the Plan. The Administrator may grant to any Employee Participant an Award of shares of Common Stock in such number, and subject to such terms and conditions relating to forfeitability and restrictions on delivery and transfer (whether based on performance standards, periods of service or otherwise) as the Administrator shall establish. The terms of any Restricted Share Award granted under the Plan shall be set forth in an Award Agreement, which shall contain provisions determined by the Administrator and not inconsistent with the Plan. The provisions of Restricted Share Awards need not be the same for each Participant receiving such Awards. (a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the Date of Grant of a Restricted Share Award by the Administrator, the Company shall cause to be transferred on the books of the Company shares of Common Stock, registered on behalf of the Participant in nominee form, evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company retroactive to the Date of Grant if an Award Agreement delivered to the Participant by the Company with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. Each Participant, as a condition to the receipt of a Restricted Share Award, shall pay to the Company in cash the par value of a share of Common Stock multiplied by the number of shares of Common Stock covered by such Restricted Share Award. All shares of Common Stock covered by Awards under this Article VII shall be subject to the restrictions, terms and conditions contained in the Plan and the Award Agreement entered into by and between the Company and the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the stock certificates representing such Restricted Shares shall be held in custody by the Company or its designee. Upon the lapse or release of all restrictions with respect to an Award as described in Section 7.01(d), one or more stock certificates, registered in the name of the Participant, for an appropriate number of shares of Common Stock as provided in Section 7.01(d), free of any restrictions set forth in the Plan and the Award Agreement, shall be delivered to the Participant. (b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the Restricted Share Award and subject to execution of the Award Agreement as provided in Section 7.01(a), the Participant shall become a shareholder of the Company with respect to all shares of Common Stock subject to the Award Agreement and shall have all of the rights of a shareholder, including, but not limited to, the right to vote such shares of Common Stock and, except as otherwise determined by the Administrator and specified in the applicable Award Agreement, the right to receive dividends (or dividend equivalents); PROVIDED, HOWEVER, that any shares of Common Stock distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares and shall be held in custody by the Company as prescribed in Section 7.01(a). (c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution), pledged or sold prior to lapse or release of the restrictions applicable thereto. (d) DELIVERY OF SHARES OF COMMON STOCK UPON RELEASE OF RESTRICTIONS. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any 10 other conditions prescribed by the Administrator, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 8.04, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's Beneficiary, one or more stock certificates for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law. 7.02 TERMS OF RESTRICTED SHARES. (a) FORFEITURE OF RESTRICTED SHARES. Subject to Section 7.02(b), all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company or any Subsidiary of the Company as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Administrator, in its sole and absolute discretion, shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award. (b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained in this Article VII to the contrary, the Administrator may, in its sole and absolute discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, Disability or retirement of the Participant or a material change in circumstances arising after the Date of Grant of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of Restricted Shares) as the Administrator shall deem appropriate, provided that the Participant shall at that time have completed at least one year of employment after the Date of Grant. ARTICLE VIII. TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN 8.01 AWARD AGREEMENT. No person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant to whom such Award shall have been granted shall have executed and delivered an Award Agreement authorized by the Administrator expressly granting the Award to such person and containing provisions setting forth the terms of the Award. 8.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Administrator have the power to grant to a Participant any Award under the Plan that is contrary to any provisions of the Plan. If any provision of any Award shall conflict with any of the terms in the Plan as constituted on the Date of Grant of such Award, the terms in the Plan as constituted on the Date of Grant of such Award shall control. 8.03 MODIFICATION OF AWARD AFTER GRANT. Except as provided by the Administrator, in its sole and absolute discretion, in the Award Agreement or as provided in Section 8.05, no Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award) after the Date of Grant except by express written agreement between the Company and the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Administrator. 11 8.04 TAXES. The Company shall be entitled, if the Administrator deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any Award. The Company may defer issuance of Common Stock under an Award unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Administrator or its delegate and shall be payable by the Participant at such time as the Administrator determines. A Participant shall be permitted to satisfy his or her tax or withholding obligation by (a) having cash withheld from the Participant's salary or other compensation payable by the Company or a Subsidiary, (b) the payment of cash by the Participant to the Company, (c) the payment in shares of Common Stock already owned by the Participant valued at Fair Market Value, and/or (d) the withholding from the Award, at the appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market Value of such Common Stock, to satisfy such tax or withholding requirements. The Administrator shall be authorized, in its sole and absolute discretion, to establish rules and procedures relating to any such withholding methods it deems necessary or appropriate (including, without limitation, rules and procedures relating to elections by Participants who are subject to the provisions of Section 16 of the Exchange Act to have shares of Common Stock withheld from an Award to meet those withholding obligations). 8.05 ADJUSTMENTS TO REFLECT CAPITAL CHANGES; CHANGE IN CONTROL. (a) RECAPITALIZATION. The number and kind of shares subject to outstanding Awards, the limit set forth in the last sentence of Section 5.01, and the number and kind of shares available for Awards subsequently granted under the Plan shall be appropriately adjusted to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan or the Awards granted under the Plan. The Administrator shall have the power and sole and absolute discretion to determine the nature and amount of the adjustment to be made in each case. In no event shall any adjustments be made under the provisions of this Section 8.05(a) to any outstanding Restricted Share Award if an adjustment has been or will be made to the shares of Common Stock awarded to a Participant in such person's capacity as a stockholder. (b) SALE OR REORGANIZATION. After any reorganization, merger or consolidation in which the Company is or is not the surviving entity, each Participant shall, at no additional cost, be entitled upon the exercise of an Option outstanding prior to such event to receive (subject to any required action by stockholders), in lieu of the number of shares of Common Stock receivable on exercise pursuant to such Option, the number and class of shares of stock or other securities to which such Participant would have been entitled pursuant to the terms of the reorganization, merger or consolidation if, at the time of such reorganization, merger or consolidation, such Participant had been the holder of record of a number of shares of Common Stock equal to the number of shares of Common Stock receivable on exercise of such Option. Comparable rights shall accrue to each Participant in the event of successive reorganizations, mergers or consolidations of the character described above. (c) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any reorganization, merger, or consolidation in which the Company shall be a surviving entity, the Administrator may grant substituted Options under the provisions of the Plan, replacing old options granted under a 12 plan of another party to the reorganization, merger or consolidation whose stock subject to the old options may no longer be issued following such reorganization, merger or consolidation. The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Administrator in its sole and absolute discretion. Any such adjustments may provide for the elimination of any fractional shares of Common Stock that might otherwise become subject to any Options. (d) CHANGE IN CONTROL. Upon a Change in Control, unless otherwise specifically prohibited by Rule 16b-3: (1) Any and all Options shall become exercisable as of the date of the Change in Control; and (2) The restrictions on vesting on all Restricted Share Awards shall be deemed to have satisfied as of the date of the Change in Control. (e) EXISTENCE OF AWARDS. The existence of outstanding Awards shall not affect the right of the Company or its stockholders to make or authorize any and all adjustments, recapitalizations, reclassifications, reorganizations and other changes in the Company's capital structure, the Company's business, any merger or consolidation of the Company, any issue of bonds, debentures or preferred stock of the Company, the Company's liquidation or dissolution, any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise. 13 8.06 SURRENDER OF AWARDS. Any Award granted to a Participant under the Plan may be surrendered to the Company for cancellation on such terms as the Administrator and holder approve. 8.07 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No director, officer, employee or other person shall have any claim or right to be granted an Award. Neither the Plan nor any action taken hereunder shall be construed as giving any director, officer or employee any right to be retained by the Company or any of its Subsidiaries. 8.08 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Income recognized by a Participant pursuant to the provisions of the Plan shall not be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA) or group insurance or other benefit plans applicable to the Participant that are maintained by the Company or any of its Subsidiaries, except as may be provided under the terms of such plans or determined by resolution of the Board. 8.09 GOVERNING LAW. The Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Maryland other than the conflict of laws provisions of such laws, and shall be construed in accordance therewith. 8.10 NO STRICT CONSTRUCTION. No rule of strict construction shall be implied against the Company, the Administrator, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Administrator. 14 8.11 COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M). It is intended that the Plan be applied and administered in compliance with Rule 16b-3 and with Section 162(m). If any provision of the Plan would be in violation of Section 162(m) if applied as written, such provision shall not have effect as written and shall be given effect so as to comply with Section 162(m) as determined by the Administrator in its sole and absolute discretion. The Board is authorized to amend the Plan and to make any such modifications to Award Agreements to comply with Rule 16b-3 and Section 162(m), as they may be amended from time to time, and to make any other such amendments or modifications deemed necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3 or Section 162(m). Notwithstanding the foregoing, the Board may amend the Plan so that it (or certain of its provisions) no longer comply with either or both Rule 16b-3 or Section 162(m) if the Board specifically determines that such compliance is no longer desired. 8.12 CAPTIONS. The captions (I.E., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize, or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions have been used in the Plan. 8.13 SEVERABILITY. Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law, and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect. 8.14 LEGENDS. All certificates for Common Stock delivered under the Plan shall be subject to such transfer restrictions set forth in the Plan and such other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the SEC, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. The Administrator may cause a legend or legends to be put on any such certificates to make appropriate references to such restrictions. 8.15 INVESTMENT REPRESENTATION. The Administrator may, in its sole and absolute discretion, demand that any Participant awarded an Award deliver to the Administrator at the time of grant or exercise of such Award a written representation that the shares of Common Stock subject to such Award are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such written representation by the Participant prior to the delivery of any shares of Common Stock pursuant to the grant or exercise of his or her Award shall be a condition precedent to the Participant's right to purchase or otherwise acquire such shares of Common Stock by such grant or exercise. The Company is not legally obliged hereunder if fulfillment of its obligations under the Plan would violate federal or state securities laws. 8.16 AMENDMENT AND TERMINATION. (a) AMENDMENT. The Board shall have complete power and authority to amend the Plan at any time it is deemed necessary or appropriate; PROVIDED, HOWEVER, that the Board shall not, without the affirmative approval of a simple majority of the holders of Voting Stock, represented, by person or by proxy, and entitled to vote at an annual or special meeting of the holders of Voting Stock, make any 15 amendment that requires stockholder approval under any applicable law or rule, unless the Board determines that compliance with such law or rule is no longer desired. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted under the Plan, adversely affect the right of such individual under such Award; PROVIDED, HOWEVER, that the Administrator may, in its sole and absolute discretion, make provision in an Award Agreement for such amendments that, in its sole and absolute discretion, it deems appropriate. (b) TERMINATION. The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the time of the termination of the Plan may be amended and exercised and may vest after termination of the Plan at any time prior to the expiration date of such Award to the same extent such Award could have been amended or would have been exercisable or vest had the Plan not terminated. 8.17 COSTS AND EXPENSES. All costs and expenses incurred in administering the Plan shall be borne by the Company. 8.18 UNFUNDED PLAN. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or make any other segregation of assets to assure the payment of any Award under the Plan. 16 EX-4.2 3 Exhibit 4.2 ITC LEARNING CORPORATION INCENTIVE AND NON-QUALIFIED STOCK OPTION AGREEMENT -------------------------------------------------- FOR EMPLOYEES ------------- AGREEMENT ("Agreement") dated the __th day of ______, 1998 by and between ITC Learning Corporation, a Maryland corporation ("Corporation"), and ______, an employee of the Corporation ("Optionee"). WHEREAS, the Corporation desires to have Optionee continue in its employ and to provide Optionee with an incentive by sharing in the success of the Corporation; WHEREAS, in order to provide such an incentive to its officers and key employees, the Corporation has adopted the ITC Learning Corporation 1998 Incentive Stock Plan ("Plan"); WHEREAS, the Corporation desires to grant to Optionee under the Plan options intended to qualify as "incentive stock options" within the meaning of Section 422 or any successor provision of the Internal Revenue Code of 1986, as amended ("Code"), and/or the options not intended to qualify as "incentive stock options" within the meaning of Section 422 or any successor provision of the Code; and WHEREAS, unless otherwise provided herein, capitalized terms used in this Agreement shall have the meaning given them in the Plan; NOW, THEREFORE, in consideration of the mutual covenants and representations herein contained and intending to be legally bound, the parties hereto agree as follows: 1. NUMBER OF SHARES AND PRICE. The Corporation hereby grants to the Optionee an option ("Option") to purchase the number of shares of Common Stock set forth on the last page of this Agreement. The exercise price per share of Common Stock of the Option shall be as is set forth on the last page of this Agreement. As indicated on the last page of this Agreement, the Option is an Incentive Stock Option and/or Non-Qualified Stock Option. 2. TERM AND EXERCISE. The Option shall expire five (5) years from the date hereof, subject to earlier termination as set forth in Section 3. Subject to the provisions of Section 3, the Option shall become exercisable in installments as set forth on the last page of this Agreement. Notwithstanding anything to the contrary in this Agreement, this Option shall terminate and be void and of no effect if the Plan is not approved by the holders of Voting Stock at the Corporation's 1998 annual meeting of shareholders. 3. EXERCISE OF OPTION UPON TERMINATION OF EMPLOYMENT. (a) TERMINATION OF VESTED OPTION UPON TERMINATION OF EMPLOYMENT. (i) IN GENERAL. Upon the Optionee's Termination of Employment other than by reason of death or Disability, he or she may, within three months from the date of such Termination of Employment, exercise all or any part of the Option as was exercisable on the date of Termination of Employment if such Termination of Employment is not for Cause. If such Termination of Employment is for Cause, the right of the Optionee to exercise the Option shall terminate on the date of Termination of Employment. In no event, however, may the Option be exercised later than the date determined pursuant to Section 2. (ii) DISABILITY. Upon the Optionee's Disability Date, he or she may, within one year after the Disability Date, exercise the Option, but only to the extent the Option was exercisable on the Disability Date and only to the extent not previously exercised. In no event, however, may the Option be exercised later than the date determined pursuant to Section 2. (iii) DEATH. In the event of the death of the Optionee while employed by the Corporation, the right of the Optionee's Beneficiary to exercise the Option (but only to the extent the Option was exercisable as of the date of death of the Optionee and only to the extent not previously exercised) shall expire upon the expiration of one year from the date of the Optionee's death or on the date of expiration of the Option determined pursuant to Section 2, whichever is earlier. (b) TERMINATION OF UNVESTED OPTION UPON TERMINATION OF EMPLOYMENT. Except as specified in Section 3(a), to the extent all or any part of the Option was not exercisable as of the date of Termination of Employment, the unexercisable portion of the Option shall expire at the date of such Termination of Employment. 4. EXERCISE PROCEDURES. The Option shall be exercisable by written notice to the Corporation, which must be received by the Secretary of the Corporation not later than 5:00 P.M. local time at the principal executive office of the Corporation on the expiration date of the Option. Such written notice shall set forth (a) the number of shares of Common Stock being purchased, (b) the total exercise price for the shares of Common Stock being purchased, (c) the exact name as it should appear on the stock certificate(s) to be issued for the shares of Common Stock being purchased, and (d) the address to which the stock certificate(s) should be sent. The exercise price of shares of Common Stock purchased upon exercise of the Option shall be paid in full (a) in cash, (b) by delivery to the Corporation of already owned shares of Common Stock that have been held by the Optionee for at least six months, (c) in any combination of cash and already owned shares of Common Stock that have been held by the Optionee for at least six months, or (d) by delivery of such other consideration as the Administrator deems appropriate and in compliance with applicable law (including payment in accordance with a cashless exercise program approved by the Administrator). In the event that any shares of Common Stock shall be transferred to the Corporation to satisfy all or any part of the exercise price, the part of the exercise price deemed to have been satisfied by such transfer of shares of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Corporation. The Optionee may not transfer to the Corporation in satisfaction of the exercise price any fraction of a share of Common Stock, and any portion of the exercise price that would represent less than a full share of Common Stock must be paid in cash by the Optionee. Subject to Section 8 hereof, certificates for the purchased shares of -2- Common Stock will be issued and delivered to the Optionee as soon as practicable after the receipt of such payment of the exercise price; PROVIDED, HOWEVER, that delivery of any such shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Corporation shall have deposited such certificates in the United States mail, addressed to Optionee, at the address set forth on the last page of this Agreement or to such other address as Optionee may from time to time designate in a written notice to the Corporation. The Optionee shall not be deemed for any purpose to be a shareholder of the Corporation in respect of any shares of Common Stock as to which the Option shall not have been exercised, as herein provided, until such shares of Common Stock have been issued to Optionee by the Corporation hereunder. 5. PLAN PROVISIONS CONTROL OPTION TERMS; MODIFICATIONS. The Option is granted pursuant and subject to the terms and conditions of the Plan, the provisions of which are incorporated herein by reference. In the event any provision of this Agreement shall conflict with any of the terms in the Plan as constituted on the Date of Grant, the terms of the Plan as constituted on the Date of Grant shall control. The Option shall not be modified after the Date of Grant except by express written agreement between the Corporation and the Optionee; PROVIDED, HOWEVER, that any such modification (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Administrator. 6. LIMITATIONS ON TRANSFER. The Option may not be assigned or transferred other than by will or the laws of descent and distribution. The Optionee's Beneficiary may exercise the Optionee's rights hereunder only to the extent they were exercisable under this Agreement at the date of the death of the Optionee and are otherwise currently exercisable. 7. TAXES. The Corporation shall be entitled, if the Administrator deems it necessary or desirable, to withhold (or secure payment from the Optionee in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Corporation with respect to the Option. The Corporation may defer issuance of Common Stock under the Option unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Administrator or its delegate and shall be payable by the Optionee at such time as the Administrator determines. The Optionee shall be permitted to satisfy his or her tax or withholding obligation by (a) having cash withheld from the Optionee's salary or other compensation payable by the Corporation or a Subsidiary, (b) the payment of cash by the Optionee to the Corporation, (c) the payment in shares of Common Stock already owned by the Optionee valued at Fair Market Value, and/or (d) the withholding from the Option, at the appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market Value of such Common Stock, to satisfy such tax or withholding requirements. 8. NO EXERCISE IN VIOLATION OF LAW. Notwithstanding any of the provisions of this Agreement, the Optionee hereby agrees that he or she will not exercise the Option granted hereby, and that the Corporation will not be obligated to issue any shares of Common Stock to the Optionee hereunder, if the exercise thereof or the issuance of such shares of Common Stock shall constitute a violation by the Optionee or the Corporation of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Administrator shall be final, binding and conclusive. 9. SECURITIES LAW COMPLIANCE. The Optionee acknowledges that the shares of Common Stock issuable on exercise of the Option may not have been registered under the Securities Act of 1993, as amended ("Act"). In such case, the Optionee represents and acknowledges that such shares of Common Stock, when purchased, shall be held for investment and not with a view to the sale or distribution of -3- any part thereof, and that the Optionee may be required to bear the economic risk of his or her investment for an indefinite period of time. The Optionee further represents and warrants that the Optionee and his or her Beneficiaries will not sell or otherwise dispose of these shares of Common Stock except pursuant to an effective registration statement under the Act or in a transaction that, in the opinion of counsel for the Corporation, is exempt from registration under the Act. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATTEST: ITC LEARNING CORPORATION By: - -------------------------- ------------------------------- Name: ----------------------------- Title: ---------------------------- WITNESS: OPTIONEE - -------------------------- -------------------------------- * * * * * Number of shares of Common Stock subject to Incentive Stock Option: _____ shares of Common Stock Exercise Price per share of Common Stock of Incentive Stock Option: $____ Installment Exercise Schedule of Incentive Stock Option: Cumulative Number of Shares of Common Stock in Respect Vesting Schedule of which Option is Exercisable ---------------- ------------------------------ Number of shares of Common Stock subject to Non-Qualified Stock Option: _____ shares of Common Stock Exercise Price per share of Common Stock of Non-Qualified Stock Option: $____ Installment Exercise Schedule of Non-Qualified Stock Option: Cumulative Number of Shares of Common Stock in Respect Vesting Schedule of which Option is Exercisable ---------------- ------------------------------ Notice Addresses: If to the Corporation: If to the Optionee: ITC Learning Corporation ------------------------------ 13515 Dulles Technology Drive ------------------------------ Herndon, Virginia 20171-3413 ------------------------------ Attention: Chief Financial Officer EX-4.3 4 Exhibit 4.3 ITC LEARNING CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT FOR NON-EMPLOYEE ----------------------------------------------------- DIRECTORS --------- AGREEMENT ("Agreement") dated the ___th day of ____, 1998 by and between ITC Learning Corporation, a Maryland corporation ("Corporation"), and , a non-employee director of the Corporation ("Optionee"). - ---------- WHEREAS, the Corporation desires to have Optionee remain as a director of the Corporation and to provide Optionee with an incentive by sharing in the success of the Corporation; WHEREAS, in order to provide such an incentive to non-employee directors, the Corporation has adopted the ITC Learning Corporation 1998 Incentive Stock Plan ("Plan"); WHEREAS, the Corporation desires to grant to Optionee under the Plan options not intended to qualify as "incentive stock options" within the meaning of Section 422 or any successor provision of the Internal Revenue Code of 1986, as amended ("Code"); and WHEREAS, unless otherwise provided herein, capitalized terms used in this Agreement shall have the meaning given them in the Plan; NOW, THEREFORE, in consideration of the mutual covenants and representations herein contained and intending to be legally bound, the parties hereto agree as follows: 1. NUMBER OF SHARES AND PRICE. The Corporation hereby grants to the Optionee an option ("Option") to purchase _____ shares of Common Stock. The exercise price per share of Common Stock of the Option shall be $______ per share. The Option is a Non-Qualified Stock Option. 2. TERM AND EXERCISE. The Option shall expire five (5) years from the date hereof, subject to earlier termination as set forth in Section 3. Subject to the provisions of Section 3, the Option shall become exercisable in installments as set forth on the last page of this Agreement. Notwithstanding anything to the contrary in this Agreement, this Option shall terminate and be void and of no effect if the Plan is not approved by the holders of Voting Stock at the Corporation's 1998 annual meeting of shareholders. 3. EXERCISE OF OPTION UPON TERMINATION OF SERVICE. (a) If a Optionee's service with the Corporation terminates by reason of death, the Option may be exercised for a period of one (1) year from the date of death or until the expiration of the Option pursuant to Section 2, whichever is shorter. If the Optionee's service with the Corporation terminates other than by reason of death, the Option may be exercised for a period of three (3) months from the date of such termination, or until the expiration of the stated term of the Option pursuant to Section 2, whichever is shorter. (b) In the event the Optionee's service with the Corporation terminates for any reason, all or part of the Option that was not exercisable as of the date of such termination of service shall expire at the date of such termination of service. 4. EXERCISE PROCEDURES. The Option shall be exercisable by written notice to the Corporation, which must be received by the Secretary of the Corporation not later than 5:00 P.M. local time at the principal executive office of the Corporation on the expiration date of the Option. Such written notice shall set forth (a) the number of shares of Common Stock being purchased, (b) the total exercise price for the shares of Common Stock being purchased, (c) the exact name as it should appear on the stock certificate(s) to be issued for the shares of Common Stock being purchased, and (d) the address to which the stock certificate(s) should be sent. The exercise price of shares of Common Stock purchased upon exercise of the Option shall be paid in full (a) in cash, (b) by delivery to the Corporation of already owned shares of Common Stock that have been held by the Optionee for at least six months, (c) in any combination of cash and already owned shares of Common Stock that have been held by the Optionee for at least six months, or (d) by delivery of such other consideration as the Administrator deems appropriate and in compliance with applicable law (including payment in accordance with a cashless exercise program approved by the Administrator). In the event that any shares of Common Stock shall be transferred to the Corporation to satisfy all or any part of the exercise price, the part of the exercise price deemed to have been satisfied by such transfer of shares of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Corporation. The Optionee may not transfer to the Corporation in satisfaction of the exercise price any fraction of a share of Common Stock, and any portion of the exercise price that would represent less than a full share of Common Stock must be paid in cash by the Optionee. Subject to Section 8 hereof, certificates for the purchased shares of Common Stock will be issued and delivered to the Optionee as soon as practicable after the receipt of such payment of the exercise price; PROVIDED, HOWEVER, that delivery of any such shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Corporation shall have deposited such certificates in the United States mail, addressed to Optionee, at the address set forth on the last page of this Agreement or to such other address as Optionee may from time to time designate in a written notice to the Corporation. The Optionee shall not be deemed for any purpose to be a shareholder of the Corporation in respect of any shares of Common Stock as to which the Option shall not have been exercised, as herein provided, until such shares of Common Stock have been issued to Optionee by the Corporation hereunder. 5. PLAN PROVISIONS CONTROL OPTION TERMS; MODIFICATIONS. The Option is granted pursuant and subject to the terms and conditions of the Plan, the provisions of which are incorporated herein by reference. In the event any provision of this Agreement shall conflict with any of the terms in the Plan as constituted on the Date of Grant, the terms of the Plan as constituted on the Date of Grant shall control. The Option shall not be modified after the Date of Grant except by express written agreement between the Corporation and the Optionee; PROVIDED, HOWEVER, that any such modification (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Administrator. 6. LIMITATIONS ON TRANSFER. The Option may not be assigned or transferred other than by will or the laws of descent and distribution. The Optionee's Beneficiary may exercise the Optionee's rights hereunder only to the extent they were exercisable under this Agreement at the date of the death of the Optionee and are otherwise currently exercisable. 7. TAXES. The Corporation shall be entitled, if the Administrator deems it necessary or desirable, to withhold (or secure payment from the Optionee in lieu of withholding) the amount of any withholding or other tax required by law 2 to be withheld or paid by the Corporation with respect to the Option. The Corporation may defer issuance of Common Stock under the Option unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Administrator or its delegate and shall be payable by the Optionee at such time as the Administrator determines. The Optionee shall be permitted to satisfy his or her tax or withholding obligation by (a) having cash withheld from the Optionee's salary or other compensation payable by the Corporation or a Subsidiary, (b) the payment of cash by the Optionee to the Corporation, (c) the payment in shares of Common Stock already owned by the Optionee valued at Fair Market Value, and/or (d) the withholding from the Option, at the appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market Value of such Common Stock, to satisfy such tax or withholding requirements. 8. NO EXERCISE IN VIOLATION OF LAW. Notwithstanding any of the provisions of this Agreement, the Optionee hereby agrees that he or she will not exercise the Option granted hereby, and that the Corporation will not be obligated to issue any shares of Common Stock to the Optionee hereunder, if the exercise thereof or the issuance of such shares of Common Stock shall constitute a violation by the Optionee or the Corporation of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Administrator shall be final, binding and conclusive. 9. SECURITIES LAW COMPLIANCE. The Optionee acknowledges that the shares of Common Stock issuable on exercise of the Option may not have been registered under the Securities Act of 1993, as amended ("Act"). In such case, the Optionee represents and acknowledges that such shares of Common Stock, when purchased, shall be held for investment and not with a view to the sale or distribution of any part thereof, and that the Optionee may be required to bear the economic risk of his or her investment for an indefinite period of time. The Optionee further represents and warrants that the Optionee and his or her Beneficiaries will not sell or otherwise dispose of these shares of Common Stock except pursuant to an effective registration statement under the Act or in a transaction that, in the opinion of counsel for the Corporation, is exempt from registration under the Act. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATTEST: ITC LEARNING CORPORATION By: - -------------------------- ------------------------------ Name: ---------------------------- Title: --------------------------- WITNESS: OPTIONEE - -------------------------- --------------------------------- * * * * * 3 Installment Exercise Schedule: Cumulative Number of Shares of Common Stock in Respect Vesting Schedule of which Option is Exercisable ---------------- ------------------------------ Notice Addresses: If to the Corporation: If to the Optionee: ITC Learning Corporation ----------------------------- 13515 Dulles Technology Drive ----------------------------- Herndon, Virginia 20171-3413 ----------------------------- Attention: Chief Financial Officer 4 EX-4.4 5 Exhibit 4.4 ITC LEARNING CORPORATION INCENTIVE AND NON-QUALIFIED STOCK OPTION AGREEMENT -------------------------------------------------- FOR EMPLOYEES ------------- AGREEMENT ("Agreement") dated the 9th day of January, 1998 by and between ITC Learning Corporation, a Maryland corporation ("Corporation"), and Carl D. Stevens, an employee of the Corporation ("Optionee"). WHEREAS, the Corporation desires to have Optionee continue in its employ and to provide Optionee with an incentive by sharing in the success of the Corporation; WHEREAS, in order to provide such an incentive to its officers and key employees, the Corporation has adopted the ITC Learning Corporation 1998 Incentive Stock Plan ("Plan"); WHEREAS, the Corporation desires to grant to Optionee under the Plan options intended to qualify as "incentive stock options" within the meaning of Section 422 or any successor provision of the Internal Revenue Code of 1986, as amended ("Code"), and/or the options not intended to qualify as "incentive stock options" within the meaning of Section 422 or any successor provision of the Code; and WHEREAS, unless otherwise provided herein, capitalized terms used in this Agreement shall have the meaning given them in the Plan; NOW, THEREFORE, in consideration of the mutual covenants and representations herein contained and intending to be legally bound, the parties hereto agree as follows: 1. NUMBER OF SHARES AND PRICE. The Corporation hereby grants to the Optionee an option ("Option") to purchase the number of shares of Common Stock set forth on the last page of this Agreement. The exercise price per share of Common Stock of the Option shall be as is set forth on the last page of this Agreement. As indicated on the last page of this Agreement, the Option is an Incentive Stock Option and/or Non-Qualified Stock Option. 2. TERM AND EXERCISE. The Option shall expire five (5) years from the date hereof, subject to earlier termination as set forth in Section 3. Subject to the provisions of Section 3, the Option shall become exercisable in installments as set forth on the last page of this Agreement. Notwithstanding anything to the contrary in this Agreement, this Option shall terminate and be void and of no effect if the Plan is not approved by the holders of Voting Stock at the Corporation's 1998 annual meeting of shareholders. 3. EXERCISE OF OPTION UPON TERMINATION OF EMPLOYMENT. (a) TERMINATION OF VESTED OPTION UPON TERMINATION OF EMPLOYMENT. (i) IN GENERAL. Upon the Optionee's Termination of Employment other than by reason of death or Disability, he or she may, within three months from the date of such Termination of Employment, exercise all or any part of the Option as was exercisable on the date of Termination of Employment if such Termination of Employment is not for Cause. If such Termination of Employment is for Cause, the right of the Optionee to exercise the Option shall terminate on the date of Termination of Employment. In no event, however, may the Option be exercised later than the date determined pursuant to Section 2. (ii) DISABILITY. Upon the Optionee's Disability Date, he or she may, within one year after the Disability Date, exercise the Option, but only to the extent the Option was exercisable on the Disability Date and only to the extent not previously exercised. In no event, however, may the Option be exercised later than the date determined pursuant to Section 2. (iii) DEATH. In the event of the death of the Optionee while employed by the Corporation, the right of the Optionee's Beneficiary to exercise the Option (but only to the extent the Option was exercisable as of the date of death of the Optionee and only to the extent not previously exercised) shall expire upon the expiration of one year from the date of the Optionee's death or on the date of expiration of the Option determined pursuant to Section 2, whichever is earlier. (b) TERMINATION OF UNVESTED OPTION UPON TERMINATION OF EMPLOYMENT. Except as specified in Section 3(a), to the extent all or any part of the Option was not exercisable as of the date of Termination of Employment, the unexercisable portion of the Option shall expire at the date of such Termination of Employment. 4. EXERCISE PROCEDURES. The Option shall be exercisable by written notice to the Corporation, which must be received by the Secretary of the Corporation not later than 5:00 P.M. local time at the principal executive office of the Corporation on the expiration date of the Option. Such written notice shall set forth (a) the number of shares of Common Stock being purchased, (b) the total exercise price for the shares of Common Stock being purchased, (c) the exact name as it should appear on the stock certificate(s) to be issued for the shares of Common Stock being purchased, and (d) the address to which the stock certificate(s) should be sent. The exercise price of shares of Common Stock purchased upon exercise of the Option shall be paid in full (a) in cash, (b) by delivery to the Corporation of already owned shares of Common Stock that have been held by the Optionee for at least six months, (c) in any combination of cash and already owned shares of Common Stock that have been held by the Optionee for at least six months, or (d) by delivery of such other consideration as the Administrator deems appropriate and in compliance with applicable law (including payment in accordance with a cashless exercise program approved by the Administrator). In the event that any shares of Common Stock shall be transferred to the Corporation to satisfy all or any part of the exercise price, the part of the exercise price deemed to have been satisfied by such transfer of shares of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Corporation. The Optionee may not transfer to the Corporation in satisfaction of the exercise price any fraction of a share of Common Stock, and any portion of the exercise price that would represent less than a full share of Common Stock must be paid in cash by the Optionee. Subject to Section 8 hereof, certificates for the purchased shares of Common Stock will be issued and delivered to the Optionee as soon as practicable after the receipt of such payment of the exercise price; PROVIDED, HOWEVER, that delivery of any such shares of Common Stock shall be deemed effected for all purposes when a stock transfer agent of the Corporation shall have deposited such certificates in the United States mail, addressed to Optionee, at the address set forth on the last page of this Agreement or to such other address as Optionee may from time to time designate in a written notice to the Corporation. -2- The Optionee shall not be deemed for any purpose to be a shareholder of the Corporation in respect of any shares of Common Stock as to which the Option shall not have been exercised, as herein provided, until such shares of Common Stock have been issued to Optionee by the Corporation hereunder. 5. PLAN PROVISIONS CONTROL OPTION TERMS; MODIFICATIONS. The Option is granted pursuant and subject to the terms and conditions of the Plan, the provisions of which are incorporated herein by reference. In the event any provision of this Agreement shall conflict with any of the terms in the Plan as constituted on the Date of Grant, the terms of the Plan as constituted on the Date of Grant shall control. The Option shall not be modified after the Date of Grant except by express written agreement between the Corporation and the Optionee; PROVIDED, HOWEVER, that any such modification (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Administrator. 6. LIMITATIONS ON TRANSFER. The Option may not be assigned or transferred other than by will or the laws of descent and distribution. The Optionee's Beneficiary may exercise the Optionee's rights hereunder only to the extent they were exercisable under this Agreement at the date of the death of the Optionee and are otherwise currently exercisable. 7. TAXES. The Corporation shall be entitled, if the Administrator deems it necessary or desirable, to withhold (or secure payment from the Optionee in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Corporation with respect to the Option. The Corporation may defer issuance of Common Stock under the Option unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Administrator or its delegate and shall be payable by the Optionee at such time as the Administrator determines. The Optionee shall be permitted to satisfy his or her tax or withholding obligation by (a) having cash withheld from the Optionee's salary or other compensation payable by the Corporation or a Subsidiary, (b) the payment of cash by the Optionee to the Corporation, (c) the payment in shares of Common Stock already owned by the Optionee valued at Fair Market Value, and/or (d) the withholding from the Option, at the appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market Value of such Common Stock, to satisfy such tax or withholding requirements. 8. NO EXERCISE IN VIOLATION OF LAW. Notwithstanding any of the provisions of this Agreement, the Optionee hereby agrees that he or she will not exercise the Option granted hereby, and that the Corporation will not be obligated to issue any shares of Common Stock to the Optionee hereunder, if the exercise thereof or the issuance of such shares of Common Stock shall constitute a violation by the Optionee or the Corporation of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Administrator shall be final, binding and conclusive. 9. SECURITIES LAW COMPLIANCE. The Optionee acknowledges that the shares of Common Stock issuable on exercise of the Option may not have been registered under the Securities Act of 1993, as amended ("Act"). In such case, the Optionee represents and acknowledges that such shares of Common Stock, when purchased, shall be held for investment and not with a view to the sale or distribution of any part thereof, and that the Optionee may be required to bear the economic risk of his or her investment for an indefinite period of time. The Optionee further represents and warrants that the Optionee and his or her Beneficiaries will not sell or otherwise dispose of these shares of Common Stock except pursuant to an effective registration statement under the Act or in a -3- transaction that, in the opinion of counsel for the Corporation, is exempt from registration under the Act. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATTEST: ITC LEARNING CORPORATION /s/ Anne J. Fletcher By: /s/ Christopher E. Mack - ---------------------------- ------------------------------- Secretary Name: Christopher E. Mack title: Vice President and Chief Financial Officer WITNESS: OPTIONEE /s/ John Dobey /s/Carl D. Stevens - ---------------------------- ------------------ * * * * * 4 Number of shares of Common Stock subject to Non-Qualified Stock Option: 59,374 shares of Common Stock Exercise Price per share of Common Stock of Non-Qualified Stock Option: $4.00 Installment Exercise Schedule of Non-Qualified Stock Option: Cumulative Number of Shares of Common Stock in Respect Vesting Schedule of which Option is Exercisable ---------------- ------------------------------ January 7, 1999 13,437 January 7, 2000 26,874 January 7, 2001 43,124 January 8, 2002 59,374 Number of shares of Common Stock subject to Non-Qualified Stock Option: 5,626 shares of Common Stock Exercise Price per share of Common Stock of Non-Qualified Stock Option: $4.00 Installment Exercise Schedule of Non-Qualified Stock Option: Cumulative Number of Shares of Common Stock in Respect Vesting Schedule of which Option is Exercisable ---------------- ------------------------------ January 7, 1999 2,813 January 7, 2000 5,626 Notice Addresses: If to the Corporation: If to the Optionee: ITC Learning Corporation 12120 Brookfield Club Drive 13515 Dulles Technology Drive Roswell, Georgia 30075 Herndon, Virginia 20171-3413 Attention: Chief Financial Officer EX-5.1 6 KIRKPATRICK & LOCKHART LLP 1800 Massachusetts Avenue, N.W. Second Floor Washington, D.C. 20036-1800 Exhibit 5.1 May 8, 1998 ITC Learning Corporation 13515 Dulles Technology Drive Herndon, Virginia 20171-3413 Re: ITC Learning Corporation Registration Statement on Form S-8 ---------------------------------- Ladies/Gentlemen: We have acted as counsel to ITC Learning Corporation, a Maryland corporation ("Corporation"), in connection with the preparation and filing of the above-captioned Registration Statement on Form S-8 ("Registration Statement") under the Securities Act of 1933, as amended, covering awards relating to 200,000 shares of Common Stock, $0.10 par value per share ("Common Stock"), of the Corporation pursuant to the Corporation's 1998 Incentive Stock Plan ("Plan"). We have examined copies of the Registration Statement, the Prospectus forming a part thereof, the Certificate of Incorporation and By-Laws of the Corporation, each as amended to date, the minutes of various meetings and unanimous written consents of the Board of Directors and the shareholders of the Corporation, and original, reproduced or certified copies of such records of the Corporation and such agreements, certificates of public officials, certificates of officers and representatives of the Corporation and others, and such other documents, papers, statutes and authorities as we deem necessary to form the basis of the opinions hereinafter expressed. In such examination, we have assumed the genuineness of all signatures and the conformity to original documents of all documents supplied to us as copies. As to various questions of fact material to such opinions, we have relied upon statements and certificates of officers and representatives of the Corporation and others. Based on the foregoing, we are of the opinion that each of the 200,000 shares of Common Stock, when issued in accordance with the terms of the Plan, will be duly and validly issued by the Corporation, fully paid and non-assessable. ITC Learning Corporation May 8, 1998 Page 2 We hereby consent to your filing a copy of this Opinion as an exhibit to said Registration Statement. Very truly yours, /s/KIRKPATRICK & LOCKHART LLP KIRKPATRICK & LOCKHART LLP EX-23.1 7 Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-00000) pertaining to the 1998 Incentive Stock Plan of ITC Learning Corporation of our report dated February 23, 1998, with respect to the consolidated financial statements of ITC Learning Corporation included in its Annual Report (Form 10-KSB) for the year ended December 31, 1997, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Ernst & Young LLP Washington, D.C. 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