-----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, F4DIu3Hz2oXJS5wNPl+LCzHjgy9GRlRfo4r1g6q1Xdb81M/cOtwG4rC3MgCv5HTX o9ZAx3JtYokZadkEW/RE7Q== 0000928385-01-000405.txt : 20010214 0000928385-01-000405.hdr.sgml : 20010214 ACCESSION NUMBER: 0000928385-01-000405 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001215 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ITC LEARNING CORP CENTRAL INDEX KEY: 0000764867 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 521078263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-13741 FILM NUMBER: 1537202 BUSINESS ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037130065 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 8-K/A 1 0001.txt FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): December 15, 2000 ITC LEARNING CORPORATION (Exact name of registrant as specified in its charter) Maryland 0-13741 52-1078263 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification Number) 13515 Dulles Technology Drive Herndon, Virginia 20171-3413 (Address of principal executive offices) Registrant's telephone number, including area code: (703) 713-3335 None (Former name and address, if changed since last report) ITEM 2. DISPOSITION OF ASSETS On December 15, 2000, ITC Learning Corporation (the "Registrant" or "ITC") completed an agreement, which ITC sold its London-based subsidiary, Activ Training, Limited ("Activ") to a management team led by Phillip G. Jones. Total consideration for the transaction was $1,000,000, of which $250,000 was paid at closing and the balance being due over a five-year period. The remaining $750,000 is in the form of a secured, non-interest bearing promissory note whereby, Activ will pay ITC an additional royalty on each sale made by Activ over the next five years until the balance is paid in full. If the additional royalty payments over the next five years do not sufficiently pay off the outstanding debt, then the balance outstanding at the end of the term becomes due in full. Mr. Jones has been affiliated with ITC since Activ's inception in November of 1995. Since 1995, Mr. Jones was Managing Director of Activ. Activ has been the primary international distributor of ITC products in the United Kingdom, Europe, Africa and the Middle East. Pursuant to the agreement, ITC and Activ will maintain a strategic business partnership whereby Activ will remain ITC's exclusive sales distributor in the United Kingdom, Europe, Africa and the Middle East. Item 7 of the Company's current report on Form 8-K is amended to read in its entirety as follows. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS The following pro forma financial information concerning the Company is being provided in accordance with the instructions to this item not later than 60 days from the date of the Company's Form 8-K previously filed on January 3, 2000. No separate historical financial statements of the Registrant or its subsidiary, Activ, are presented. (a) Pro Forma Financial Information 1) Unaudited Pro Forma Combined Balance Sheet as of September 30, 2000. 2) Unaudited Pro Forma Combined Statement of Operations for the nine months ended September 30, 2000 and the twelve months ended December 31, 1999. 3) Notes to the Unaudited Pro Forma Information. (b) Exhibits 2.1 Stock Purchase Agreement between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. 2.2 Secured Promissory Note between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. 2.3 OEM License and Distribution Agreement between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ITC Learning Corporation (Registrant) By: /s/Christopher E. Mack ---------------------- Christopher E. Mack President and Chief Financial Officer Date: February 13, 2001 3 ITC LEARING CORPORATION PRO FORMA FINANCIAL INFORMATION (Unaudited) The following unaudited consolidated pro forma statements of operations and balance sheets for the twelve months ended December 31, 1999 and the nine months ended September 30, 2000 give effect to the sale of Activ Training Limited ("Activ"), a wholly-owned subsidiary of ITC Learning Corporation on December 12, 2000, for $1,000,000.00, including a cash payment of $250,000 and a secured promissory note for $750,000, as if the transaction had occurred on January 1, 1999. The unaudited pro forma statements of operations and balance sheets are not necessarily indicative of the results that would have occurred had the acquisition been completed on the date indicated nor are purported to be indicative of future results. 4 ITC LEARNING CORPORATION PRO FORMA COMBINED BALANCE SHEETS (Unaudited) As Adjusted Retroactively for the Divestiture of Activ Training Limited ("Activ") For the Period Ending September 30, 2000
Pro forma ITC Consolidated Activ Adjustments (3) Consolidated (Historical) (Historical) Dr. (Cr.) Pro forma ----------------- ------------ ------------------ ------------- Current Assets: Cash $ 246,819 $ (88,743) $ 250,000 (3) $ 408,076 Accounts receivable, net 940,129 (142,476) -- 797,653 Prepaid expenses 951,986 (150,139) -- 801,847 Other current assets 309,734 -- -- 309,734 ------------ --------- -------------- ------------ Total current assets 2,448,668 (381,358) 250,000 2,317,310 Note receivable 344,828 -- 750,000 (3) 1,094,328 Property, plant and equipment, net 446,805 (7,287) -- 439,518 Capitalized program development costs, net 2,634,429 -- -- 2,634,429 Intangible assets, net 1,779,245 -- -- 1,779,245 Other 1,602,534 -- -- 1,602,534 ------------ --------- -------------- ------------ Total assets $ 9,256,509 $(388,645) $ 1,000,000 $ 9,867,864 ============ ========= ============== ============ Current Liabilities: Line of credit $ -- $ -- $ -- $ -- Current installments of long-term debt 2,362,578 -- -- 2,362,578 Accounts payable 2,078,997 (35,456) -- 2,043,541 Other accrued expenses 1,687,542 (831,472) 466,518 (2)(3) 1,322,588 ------------ --------- -------------- ------------ Total current liabilities 6,129,117 (866,928) 466,518 5,728,707 Deferred lease obligations 17,837 -- -- 17,837 Long-term debt 1,074,068 -- -- 1,074,068 ------------ --------- -------------- ------------ Total liabilities 7,221,022 (866,928) 466,518 6,820,612 Stockholders' equity: Common stock 396,408 1,615 (1,615) (2) 396,408 Additional paid-in capital 17,083,716 -- -- 17,083,716 Note receivable from ESOP (290,002) -- -- (290,002) Retained deficit (15,216,386) 452,850 535,097 (3) (14,228,439) Accumulated other comprehensive loss 61,751 23,818 -- 85,569 ------------ --------- -------------- ------------ Total stockholders' equity 2,035,487 478,283 533,482 3,047,252 ------------ --------- -------------- ------------ Total liabilities and stockholders' equity $ 9,256,509 $(388,645) $ 1,000,000 $ 9,867,864 ============ ========= ============== ============
ITC LEARNING CORPORATION PRO FORMA COMBINED STATEMENT OF OPERATIONS (Unaudited) As Adjusted Retroactively for the Divestiture of Activ Training Limited ("Activ") For the Nine Months Ending September 30, 2000
Pro forma ITC Consolidated Activ Adjustments Consolidated (Historical) (Historical) Dr. (Cr.) Pro forma ---------------- ------------ ----------- ------------- Revenues, net $ 4,153,439 $(1,371,279) $ 798,608(1) $ 3,580,768 Costs and expenses: Cost of sales 3,162,458 (1,166,874) 798,608(1) 2,794,192 Selling, general and administrative expenses 6,384,362 (461,990) -- 5,922,372 Equity in earnings of affiliates (107,547) -- -- (107,547) ----------- ----------- ---------- ----------- Total costs and expenses 9,439,273 (1,628,864) 798,608 8,609,017 Gain on sale of product line 250,000 -- -- 250,000 ----------- ----------- ---------- ----------- Loss before interest and income tax benefit (5,035,834) 257,585 -- (4,778,249) Interest income 14,730 (1,956) -- 12,774 Interest expense (631,573) -- -- (631,573) ----------- ----------- ---------- ----------- Loss before income tax benefit (5,652,677) (255,629) -- (5,647,048) Income tax benefit -- -- -- -- ----------- ----------- ---------- ----------- Net loss $(5,652,677) $ 255,629 $ -- $(5,397,048) =========== =========== ========== =========== Net loss per common share, basic and diluted $ (1.44) $ (1.39) =========== =========== Weighted average number of shares outstanding 3,896,761 3,896,761 =========== ===========
ITC LEARNING CORPORATION PRO FORMA COMBINED STATEMENT OF OPERATIONS (Unaudited) As Adjusted Retroactively for the Divestiture of Activ Training Limited ("Activ") For the Period Ended December 31, 1999
Pro forma ITC Consolidated Activ Adjustments Consolidated (Historical) (Historical) Dr. (Cr.) Pro forma ----------------- ------------ ----------- ------------ Revenues, net: Courseware $15,678,478 $(2,324,250) $1,397,604 (1) $14,751,832 Hardware 997,087 (68,190) -- 928,897 ----------- ----------- ---------- ----------- Total revenues, net 16,675,565 (2,392,440) 1,397,604 15,680,729 Costs and expenses: Cost of sales 9,341,351 (1,995,598) 1,397,604 (1) 8,743,357 Selling, general and administrative expenses 11,912,916 (745,603) -- 11,167,313 Equity in earnings of affiliates (170,289) -- -- (170,289) ----------- ----------- ---------- ----------- Total costs and expenses 21,083,978 (2,741,201) 1,397,604 19,740,381 Loss on sale of subsidiary -- -- (543,171)(1) (543,171) ----------- ----------- ---------- ----------- Loss before interest and income tax benefit (4,408,413) 348,761 (543,171) (4,602,823) Interest income 89,190 (5,833) -- 83,357 Interest expense (394,861) 900 -- (393,961) ----------- ----------- ---------- ----------- Loss before income tax benefit (4,714,084) (343,828) (543,171) (4,913,427) Income tax benefit -- -- -- -- ----------- ----------- ---------- ----------- Net loss $(4,714,084) $ 343,828 $ (543,171) $(4,913,427) =========== =========== ========== =========== Net loss per common share, basic and diluted $ (1.21) $ (1.26) =========== =========== Weighted average number of shares outstanding 3,896,761 3,896,761 =========== ===========
ITC LEARNING CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEETS (Unaudited) The following pro forma adjustments have been made: 1. Amounts reflect sales and cost of sales associated with intercompany sales transaction 2. Elimination of intercompany balances 3. Record the sale of Activ as if the transaction occurred on January 1, 1999. INDEX OF EXHIBITS The following exhibit to this report is being incorporated herein by reference to the corresponding exhibits in the Company's Form 8-K (Commission File No. 0-13741) filed with the Securities and Exchange Commission on January 3, 2001. Exhibit No. Exhibit Description 2.1 Stock Purchase Agreement between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. 2.2 Secured Promissory Note between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. 2.3 OEM License and Distribution Agreement between ITC Learning Corporation and Phillip G. Jones dated December 12, 2000. EX-2.1 2 0002.txt STOCK PURCHASE AGREEMENT Exhibit 2.1 STOCK PURCHASE AGREEMENT ITC Learning Corporation and Phillip G. Jones STOCK PURCHASE AGREEMENT ("Agreement") entered into as of this 12th day of ---- December 2000, by and among Phillip G. Jones ("Buyer"), Activ Training Limited, - -------- a United Kingdom Corporation ("Company") and ITC Learning Corporation ("Seller"), the Buyer, the Seller and the Company are referred to collectively as the ("Parties"). Seller desires to sell all of the issued and outstanding shares of capital stock of the Company, consisting of one thousand shares of common stock ------------ ("Shares"), to Buyer, and Buyer desires to purchase the Shares on the terms and subject to the conditions set forth in this Agreement. Accordingly, the Parties, each intending to be legally bound hereby, agree as set forth in this Agreement. Article 1 The Transaction --------------- 1.01. Sale and Purchase of Shares. Upon the terms and subject to the --------------------------- conditions of this Agreement and in consideration of the Purchase Price, Seller shall sell, assign, transfer and deliver the Shares to Buyer, and Buyer shall purchase from Seller and take delivery of the Shares, at the Closing, free of all encumbrances. 1.02. The aggregate purchase price for the Shares shall be one thousand ----------------------------------------------------------------- pounds sterling("Purchase Price") consisting of a cash payment of - ------------------------------------------------- --------------- (Pounds)1,000.00 sterling (one thousand pounds) at Closing. - ------------------------------------------------------------ 1.03. Closing. The consummation of the purchase and sale of the Shares and ------- the other transactions contemplated hereby ("Closing") shall take place at 12 -- noon local time, on 8th December 2000 at the offices of the Buyer, 13515 Dulles - ---- ----------------- Technology Drive, Herndon, Virginia or at such other time, date or place as the Parties agree ("Closing Date"). 1.04. Payment. Upon the terms and subject to the conditions of this ------- Agreement at Closing, Buyer shall deliver the Purchase Price to Seller directly, or to an escrow agent engaged to facilitate the Closing, by wire transfers of federal funds. All funds contemplated in this Agreement are defined as UK sterling. 1.05. Delivery of Shares. Upon the terms and subject to the conditions of ------------------ this Agreement, Seller shall deliver the Shares at Closing free of all encumbrances and fully and duly completed and executed for transfer directly to Buyer, or to an escrow agent engaged to facilitate the Closing. 1.06. Related Agreements. It is contemplated by the Parties that the ------------------ Parties will enter into a Distribution Agreement as defined by the terms and conditions of Exhibit A and a Secured Note Payable as defined by the terms and - conditions of Exhibit B. - Article 2 Representations and Warranties Concerning The Parties ---------------------- 2.01. Representations and Warranties Concerning the Buyer. The Buyer --------------------------------------------------- represents and warrants to the Seller that the statements contained in this section 2.01 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date. (a) Authorization of Transaction. Buyer has full power and authority - ---------------------------- (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except as the enforceability hereof may be affected by bankruptcy, insolvency, fraudulent transfer, reorganization and similar laws affecting the rights of creditors generally, and by general principles of equity. (b) Noncontravention. Neither the execution and the delivery of this - ---------------- Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its Articles of Incorporation or Bylaws. (c) Brokers' Fees. Buyer has no liability or obligation to pay any fees - ------------- or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Seller could become liable or obligated. 2.02. Representations and Warranties Concerning the Seller. ---------------------------------------------------- 2 The Seller represents and warrants to the Buyer that the statements contained in this section 2.02 and contained in any answers to pre-agreement enquiries raised -------------------------------------------------------------- of the Seller by the Buyer are correct and complete as of the date of this - --------------------------- Agreement and will be correct and complete as of the Closing Date, with respect to itself, himself, or herself. (a) Authorization of Transaction. The Seller has full power and ---------------------------- authority to execute and deliver this Agreement to perform the obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against the Seller in accordance with its terms and conditions, except as the enforceability hereof may be affected by bankruptcy, insolvency, fraudulent transfer, reorganization, and similar laws affecting the rights of creditors generally, and by general principles of equity. The Seller is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government of governmental agency or any other person in order to consummate the transactions contemplated by this Agreement. (b) Noncontravention. Neither the execution and the delivery of this ---------------- Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any governmental agency, or court to which any Seller is subject. (c) Brokers' Fees. No Seller has any liability or obligation to pay any ------------- fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. Article 3 Certain Covenants ----------------- 3.01. Conduct of Business Pending Closing. From and after the date hereof ----------------------------------- and until the Closing Date, unless Buyer shall otherwise consent in writing, the Company and the Seller shall cause the Company conduct its affairs as follows: (a) Ordinary Course: Compliance. The Company's business shall be --------------------------- conducted only in the ordinary course and consistent with past practice. The Company shall maintain its property, equipment and other assets consistent with past practice and shall comply in a timely fashion with the provisions of all of its other agreements and commitments. The Company shall use its best efforts to keep its business organization intact, keep available the services of its 3 present employees and preserve the goodwill of its suppliers, customers and others having business relations with it. The Company shall maintain in full force and effect the policies of insurance listed in the Disclosure Schedule. (b) Transactions. The Company shall not: (i) amend its Articles of ------------ Incorporation or Bylaws; (ii) change its authorized or issued capital stock or issue any rights with respect to shares of its capital stock; (iii) enter into any contract or commitment the performance of which may extend beyond the Closing, except those made in the ordinary course of business, the terms of which are consistent with past practice and do not require any commitment in excess of $2,500; (iv) enter into any employment or consulting contract or arrangement that is not terminable at will and without penalty or continuing obligation; (v) fail to pay any tax or any other liability or charge when due, other than charges contested in good faith by appropriate proceedings; (vi) make, change or revoke any tax election or make any agreement or settlement with any taxing authority; (vii) take any action that is reasonably likely to result in the occurrence of any event described in Section 2.03(i); or (viii) take any action or omit to take any action that will cause a breach or termination of any Contract, other than termination by fulfillment of the terms thereunder. (c) Access; Information and Documents. The Company shall give to Buyer and --------------------------------- to Buyer's employees and representatives (including accountants and attorneys) access during normal business hours to all of the properties, books, tax returns, contracts, commitments, records, officers, personnel and accountants (including independent public accountants and their audit workpapers concerning the Company) of the Company and shall furnish to Buyer all such documents and copies of documents and all information with respect to the properties, liabilities and affairs of the Company as Buyer reasonably requests. Article 4 Conditions to Closing Termination --------------------------------- 4.01. Transfers in Contemplation of Closing. Notwithstanding any other ------------------------------------- provision of this Agreement, certain liabilities of the Company are not intended to be borne by the Company or the Buyer by reason of the purchase of the Shares pursuant to the terms of this Agreement and are to be transferred prior to or simultaneously with Closing, so that such liabilities will not be owned by the Company 4 at the consummation of the transactions contemplated hereby: (a) All liabilities and obligations to affiliates of the Company other than for the provision of the goods and services in the ordinary course of business on arms-length terms; (b) All other liabilities and obligations for which any Seller has expressly assumed responsibility pursuant to this Agreement or otherwise; (c) All liabilities and obligations relating to employment agreements between the Company and any officer or director of the Company, except as may be otherwise expressly provided for in this Agreement or the Related Agreement; 4.02 Conditions Precedent to Obligation of the Parties. The obligations ------------------------------------------------------------------- of the parties to proceed with the Closing under this Agreement is subject to - ----------------------------------------------------------------------------- the fulfilment prior to or at Closing of the following conditions any one or - ---------------------------------------------------------------------------- more of which may be waived in whole or in part by the Buyer at the Buyer's sole - -------------------------------------------------------------------------------- option. - ------- (a) Bringdown of Representations and Warranties; Covenants. Each of the ------------------------------------------------------ representations and warranties of Seller and the Company contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date. The Seller and the Company shall have performed in all respects all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by it at or before the Closing. (b) Litigation. No statute, regulation or order of any court or ---------- governmental body shall be in effect that restrains or prohibits the transactions contemplated hereby or that would limit or adversely affect Buyer's ownership of the Shares or control of the Company, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any governmental body challenging the lawfulness of or seeking to prevent or delay any of the transactions contemplated by this Agreement or seeking monetary or other relief by reason of the consummation of any of such transactions. (c) No Material Adverse Change. Between the date hereof and the Closing -------------------------- Date, there shall have been no material adverse change, regardless of insurance coverage therefor, in the Company's business or any of the assets, results of operations, liabilities, 5 prospects or condition, financial or otherwise, of the Company. (d) Closing Documents. Buyer shall have received the other documents - ----------------- referred to in Section 4.04(a). All agreements, certificates, opinions and other documents delivered by the Company to Buyer hereunder shall be in form and substance satisfactory to counsel for Buyer, in the exercise of such counsel's reasonable professional judgment. 4.03. Conditions Precedent to Obligation of Seller. The obligation of -------------------------------------------- Seller to proceed with the Closing under this Agreement is subject to the fulfillment prior to or at Closing of the following conditions, any one or more of which may be waived in whole or in part by the Seller acting as a group: (a) Bringdown of Representations and Warranties; Covenants. Each of the ------------------------------------------------------ representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on, as of and with reference to the Closing Date. Buyer shall have and complied in all respects with all of the provisions required by this Agreement to be performed or complied with by it at or before the Closing. (b) Litigation. No statute, regulation or order of any court of ---------- governmental body shall be in effect that restrains or prohibits the transactions contemplated hereby, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or governmental body challenging the lawfulness of or seeking to prevent or delay any of the transactions contemplated by this Agreement or seeking monetary or other relief by reason of the consummation of such transactions. (c) Closing Documents. Seller shall have received the other documents ----------------- referred to in Section 4.04(b). All agreements, certificates, opinions and other documents delivered by Buyer to Seller hereunder shall be in form and substance satisfactory to counsel for Seller, in the exercise of such counsel's reasonable professional judgment. 4.04. Deliveries and Proceedings at Closing. ------------------------------------- (a) Deliveries by Seller. Seller shall deliver or cause to be delivered -------------------- to Buyer at the Closing: (i) Certificates representing the Shares duly endorsed in negotiable form or accompanied by stock powers duly executed in 6 blank with all transfer taxes, if any, paid in full. (ii) The minute books, stock ledgers and corporate seal of the -- Company. (iii) Resignations of the officers and directors of the Company --- effective at the Closing. (b) Deliveries by Buyer. Buyer shall deliver or cause to be delivered to ------------------- Seller at the Closing: (i) A wire transfer of federal funds in accordance with Section 2.05 pursuant to complete wire transfer instructions delivered by Seller, to Buyer in writing at least five days prior to Closing. (ii) A certificate of the Secretary of Buyer setting forth all -- resolutions of the Board of Directors of Buyer authorizing the execution and delivery of this Agreement and the performance by Buyer of the transactions contemplated hereby. 4.05. Termination. This Agreement may be terminated at any time prior to ----------- Closing by: (i) mutual consent of Buyer and Seller; (ii) Buyer, if any of the conditions specified in Section 4.02 hereof shall not have been fulfilled by 31st December 2000 and shall not have been waived by Buyer; or (iii) Seller, if -------- any of the conditions specified in Section 4.03 hereof shall not have been fulfilled by 31st December 2000 and shall not have been waived by Seller. ------------- Article 5 Survival of Representations; Indemnification -------------------------------------------- 5.01. Survival of Representations. All representations, warranties and --------------------------- agreements made by any party in this Agreement or pursuant hereto shall survive the Closing, but all claims for damages made by virtue of such representations, warranties and agreements shall be made under, and subject to the limitations set forth in, this Article 5. The representations and warranties set forth in Article 2 are cumulative, and any limitation or qualification set forth in any one representation and warranty therein shall not limit or qualify any other representation and warranty therein. After Closing, the Company shall have no liability to Buyer for any breach of any representation or warranty made by the Company to Buyer in this Agreement, in any certificate or document furnished pursuant hereto by the Company. 7 5.02. Indemnification by the Seller and the Company. The Seller and the --------------------------------------------- Company, shall indemnify, defend, save and hold Buyer and its officers, directors, employees, agents and Affiliates (including, after the Closing, the Company; collectively, "Buyer Indemnitees") harmless from and against all demands, claims, allegations, assertions, actions or causes of action, assessments, losses, damages, deficiencies, liabilities, costs and expenses (including reasonable legal fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing, whether or not any such demands, claims, allegations, etc., of third parties are meritorious; collectively, "Buyer Damages") asserted against, imposed upon, resulting to, required to be paid by or incurred by any Buyer Indemnitees, directly or indirectly, in connection with, arising out of, which could result in, or which would not have occurred but for, (i) a breach of any representation or warranty made by the Company in this Agreement, in any certificate or document furnished pursuant hereto by the Company, (ii) a breach or nonfulfillment of any covenant or agreement made by the Company in or pursuant to this Agreement, and (iii) any and all liabilities of the Company of any nature whatsoever, whether due or to become due, whether accrued, absolute, contingent or otherwise, existing on the Closing Date or arising out of any transaction entered into, or any state of facts existing, prior to the Closing Date, except for liabilities fully reserved on the September 30 Balance Sheet, but only to the extent reserved or reserved therein, and those liabilities not required under GAAP to be reserved in the September 30 Balance Sheet that are expressly quantified and set forth on the Disclosure Schedule. 5.04. Indemnification by Buyer. Buyer shall indemnify, defend, save and ------------------------ hold Seller (collectively, "Seller Indemnitees") harmless from and against any and all demands, claims, actions or causes of action, assessments, losses, damages, deficiencies, liabilities, costs and expenses (including reasonable legal fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing, whether or not any such demands, claims, allegations, etc., of third parties are meritorious; collectively, "Seller Damages") asserted against, imposed upon, resulting to, required to be paid by or incurred by any Seller Indemnitees, directly or indirectly, in connection with, arising out of, which could result in, or which would not have occurred but for, (i) a breach of any representation or warranty made by Buyer in this Agreement or in any certificate or document furnished pursuant hereto by Buyer (ii) a breach or nonfulfillment of any covenant or agreement made by Buyer in or pursuant to this Agreement. 5.05. Limitation of Liability. Notwithstanding the foregoing, ----------------------- 8 Seller's obligations to indemnify Buyer Indemnitees against any Buyer Damages shall be subject to all of the following limitations: (a) Threshold. Indemnification shall be made under section 5.02(i) only --------- to the extent the aggregate amount of Buyer Damages thereunder exceeds $1,000,000.00. - ------------- (b) Ceiling. No indemnification shall be made under section 5.02(i) to ------- the extent that Buyer's Damages exceed the entire amount of consideration payable by Buyer to the Majority Holder in consideration of entering into this Agreement. (c) Time Period. The Seller shall be obligated to indemnify Buyer ----------- Indemnitees by virtue of section 5.02(i) only for those Buyer Damages as to which Buyer has given Seller written notice thereof within three years after the Closing Date; provided, however, that with -------- respect to any claim for Buyer Damages sustained by reason of a breach of any representation or warranty relating to those matters governed by sections 2.03 (j),(t), and (w). Seller's liability shall be limited to Buyer Damages as to which such written notice shall have been given within the periods of the applicable federal and state statutes of limitations related to such matters. (d) (d) Fraud; Intentional Misrepresentation. The limitations set forth ------------------------------------ in Sections 5.05(a) (b) and (c) shall not apply to Buyer Damages arising out of fraud, or the breach of any representation or warranty contained herein or pursuant hereto if such representation or warranty was made with actual knowledge that it contained an untrue statement of a fact or omitted to state a fact necessary to make the statements of facts contained therein not misleading. 5.06. Right of Set-Off. ---------------- 5.07. Notice of Claims. If any Buyer Indemnitee or Seller Indemnitee (an ---------------- "Indemnified Party") believes that it has suffered or incurred or will suffer or incur any Buyer Damages or Seller Damages, as the case may be ("Damages"), for which it is entitled to indemnification under this Article 5, such Indemnified Party shall so notify the party or parties from whom indemnification is being claimed ("Indemnifying Party") with reasonable promptness and reasonable particularity in light of the circumstances then existing. If any action at law or suit in equity is instituted by or against a third party with respect to which any Indemnified Party intends to claim any Damages, such Indemnified Party shall 9 promptly notify the Indemnifying Party of such action or suit. The failure of an Indemnified Party to give any notice required by this Section shall not affect any of such party's rights under this Article 5 or otherwise except and to the extent that such failure is actually prejudicial to the rights or obligations of the Indemnified Party. 5.08. Third Party Claims. The Indemnified Party shall have the right to ------------------ conduct and control, through counsel of its choosing, the defense of any third party claim, action or suit, and the Indemnified Party may compromise or settle the same, provided that the Indemnified Party shall give the Indemnifying Party advance notice of any proposed compromise or settlement. The Indemnified Party shall permit the Indemnifying Party to participate in the defense of any such action or suit through counsel chosen by the Indemnifying Party, provided that the fees and expenses of such counsel shall be borne by the Indemnifying Party. If the Indemnified Party permits the Indemnifying Party to undertake, conduct and control the conduct and settlement of such action or suit, (i) the Indemnifying Party shall not thereby permit to exist any encumbrance upon any asset of the Indemnified Party; (ii) the Indemnifying Party shall not consent to any settlement that does not include as an unconditional term thereof the giving of a complete release from liability with respect to such action or suit to the Indemnified Party; (iii) the Indemnifying Party shall permit the Indemnified Party to participate in such conduct or settlement through counsel chosen by the Indemnified Party; and (iv) the Indemnifying Party shall agree promptly to reimburse the Indemnified Party for the full amount of any Damages including fees and expenses of counsel for the Indemnified Party incurred after giving the foregoing notice to the Indemnifying Party and prior to the assumption of the conduct and control of such action or suit by the Indemnifying Party. Article 6 Miscellaneous ------------- 6.01. Costs and Expenses. Buyer and Seller shall each pay their respective ------------------ expenses, brokers' fees and commissions, and Seller shall be responsible for all of the pre-Closing expenses of the Company incurred in connection with this Agreement, the Related agreement any other agreement or commitment connected to transactions contemplated hereby, including all accounting, legal and appraisal fees and settlement charges. 6.02. Further Assurances. Seller shall, at any time and from ------------------ 10 time to time on and after the Closing Date, upon request by Buyer and without further consideration, take or cause to be taken such actions and execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, documents, transfers, conveyances and assurances as may be required or desirable for the better conveying, transferring, assigning, delivering, assuring and confirming the Shares to Buyer or any of the assets used in its business to the Company. 6.03. Notices. All notices and other communications given or made pursuant ------- to this Agreement shall be in writing and shall be deemed to have been duly given or made (i) the second business day after the date of mailing, if delivered by registered or certified mail, postage prepaid, (ii) upon delivery, if sent by hand delivery, (iii) upon delivery, if sent by prepaid courier, with a record of receipt, or (iv) the next day after the date of dispatch, if sent by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by registered or certified mail, postage prepaid, return receipt requested), to the parties at the following addresses: (i) if to Buyer, to: Activ Training Limited Activ House 45 Bromham Road Bedford, England MK40 2AA Attention: Phillip G. Jones with a copy to: Mellows Royal Chambers 1 St. Peter's Street Bedford England MK40 2PN Attention: Kevin R Nutt (ii) if to Seller, to: ITC Learning Corporation 13515 Dulles Technology Drive Herndon, VA 20171 Attention: President with a copy to: 11 Kirkpatrick and Lockhart, LLP Insert Address Attention: Alan J. Berkeley 6.04. Assignment; Governing Law. This Agreement and all the rights and ------------------------- powers granted hereby shall bind and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and the rights, interests and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, except that Buyer may make such assignments to any affiliate of Buyer provided that Buyer remains liable hereunder. This Agreement shall be governed by and construed in accordance with the laws of England and Wales. ----------------- 6.05. Amendment and Waiver; Cumulative Effect. To be effective, any --------------------------------------- amendment or waiver under this Agreement must be in writing and be signed by the party against whom enforcement of the same is sought. Neither the failure of any party hereto to exercise any right, power or remedy provided under this Agreement or to insist upon compliance by any other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver by such party of its right to exercise any such right, power or remedy or to demand such compliance. The rights and remedies of the parties hereto are cumulative and not exclusive of the rights and remedies that they otherwise might have now or hereafter, at law, in equity, by statute or otherwise. 6.06. Entire Agreement; No Third Party Beneficiaries. This Agreement and ---------------------------------------------- the Disclosure Schedule and Exhibits set forth all of the promises, covenants, agreements, conditions and undertakings between the parties hereto with respect to the subject matter hereof, and supersede all prior or contemporaneous agreements and understandings, negotiations, inducements or conditions, express or implied, oral or written, including the letter of intent. This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder, except the provisions of Sections 5.02 and 5.03 and 5.04 relating to Buyer Indemnitees and Seller Indemnitees. 6.07. Severability. If any term or other provision of this Agreement is ------------ held by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced under any rule of 12 Law in any particular respect or under any particular circumstances, such term or provision shall nevertheless remain in full force and effect in all other respects and under all other circumstances, and all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. 6.08. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original but all of which together shall be deemed to be one and the same instrument. 7.0 Stock Purchase Option 7.1 Notwithstanding the provisions of this Agreement the following documents as listed below shall continue to be binding upon the Buyer and Seller in accordance with their terms irrespective of any terms in those documents to the contrary and/or termination under clause 4.05 above. For the avoidance of doubt Clause 3 of the Key Employee Stock Option Agreement dated 12 December 1996 shall continue to apply as to the exercise of the Options by the Buyer from the Seller notwithstanding the termination of employment by the Buyer with ITC and to the necessary extent the terms of that 1996 Agreement are hereby varied to preserve the Buyer's ability to exercise those Options. 7.2 The documents referred to above are 7.2.1 The Key Employee Stock Option Agreement dated 12th December 1996 between Industrial Training Corporation and Phillip Jones. 7.2.2 The Stock Option Agreement dated 16th November 13 1998 between ITC Learning Corporation and Phillip G Jones. 7.2.3 A document entitled Industrial Training Corporation `1992 Key Employee Incentive Stock Option Plan as adopted 30th April 1992'. 7.2.4 Letters from ITC Learning to Phillip G Jones dated 24th December 1996, 6th January 1999, 14th February 2000 and 11th September 2000 AND copies of these documents are attached as Exhibit C. -- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ITC LEARNING CORPORATION By: /s/Christopher E. Mack ---------------------- PHILLIP G. JONES By: /s/Phillip G. Jones ------------------- 14 STOCK PURCHASE AGREEMENT ITC Learning Corporation And Phillip G Jones Exhibit List THIS PAGE WILL NEED TO BE UPDATED FOR THE EXHIBITS Exhibit A OEM License and Distribution Agreement dated 12th December 2000 --------------------------------------------------------------- Exhibit B Secured Promissory Note dated 12th December 2000 ------------------------------------------------ Exhibit C Stock Purchase Option documentation ----------------------------------- EX-2.2 3 0003.txt SECURED PROMISSORY NOTE Exhibit 2.2 SECURED PROMISSORY NOTE (pound)500,000.00 12th December 2000 - ----------------- ------------- FOR VALUE RECEIVED, the undersigned Activ Training Ltd, a U.K. corporation ("Payor"), hereby promises to pay to ITC Learning Corporation, a Maryland corporation ("Payee"), the principal sum FIVE HUNDRED THOUSAND POUNDS ---------------------------- UK STERLING ((British pounds)500,000.00). Except as provided herein, Payor - ----------- ---------------------------- shall repay the outstanding principal balance hereof (subject to payment of the "Royalties" as described below), by the fifth anniversary hereof. Payor may ------------ prepay from time to time all or any portion of any amounts owing hereunder without premium or penalty of any kind. Notwithstanding any other provision contained in this Note to the contrary, this Note is non-negotiable and may not be transferred or assigned (by operation of law or otherwise) in whole or in part, without the express prior written consent of Payor. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Stock Purchase Agreement of even date. - ------------ Amounts due hereunder are payable by wire transfer, check, or other means reasonably acceptable to Payee (including, without limitation, by setoff of amounts receivable by Payor under the "Dealer Agreement" described below) tendered to Payee at its address at 13515 Dulles Technology Drive, Herndon, Virginia 20171, or such other address as Payee may designate from time to time by written notice to Payor. To the extent of the principal amount outstanding hereunder from time to time, any "Royalties" under and as defined below and in the "Dealer Agreement" (as defined in the Stock Purchase Agreement) paid or payable by Payee to Payor shall be applied as a prepayment of the principal amount hereof in accordance with the terms of the Dealer Agreement. "Royalties" or royalty payment shall mean payment of 50% to ITC on all - ------------------------------------------------------------------------------- Activ Training Product(s) sales pursuant to the OEM Licence and Distribution - ---------------------------------------------------------------------------- Agreement dated 8th December 2000 until repayment in full of the outstanding - ---------------------------------------------------------------------------- principal balance stated above of (pound)500,000.00 UK sterling and thereafter - ------------------------------------------------------------------------------ 30% on all such Activ Training Product(s) sales. - ------------------------------------------------ To secure the payment when due of all amounts owing hereunder, and solely for so long as the same shall remain outstanding, the payment obligations of Payor hereunder are secured by the Payor taking all necessary steps to: --------------------------------------- 1. Enter details of this Secured Promissory Note in the Company's Register - -------------------------------------------------------------------------------- of Mortgages and Charges and ---------------------------- 1 2. Register the Secured Promissory Note as a security against the - ----------------------------------------------------------------------- Company's assets in the appropriate registers held at Companies ------------------------------------------------------------------- House, Crown Way, Cardiff CF14 3UZ in the United Kingdom --------------------------------------------------------- and the Payor shall give sufficient proof of compliance to the Payee as ----------------------------------------------------------------------- the Payee may reasonably require. - -------------------------------- Any one or more of the following shall constitute a "Default" by Payor hereunder: ( I ) continued failure to make any payment of principal when due under this Note after written notice by Payee and the expiration of a thirty ------ (30) day cure period; (2) continued breach, after written notice by Payee and - ---- the expiration of a thirty (30) day cure period, by Payor of any material non-payment provision of this Note; (3) any representation or warranty made or given by Payor in this Note is materially false or misleading when made; (4) the continued subjection of any portion of the Collateral (which, in the aggregate, has a fair market value or book value, whichever is greater, in excess of (British pounds)133,333.33) to levy of execution or other judicial process and - ---------------- the failure by Payor or Activ to have the same dismissed or discharged within ninety (90) days after the institution thereof, unless Payor shall offer reasonable substitute collateral therefor or establish a reasonable monetary reserve with respect thereto; (5) a bankruptcy or insolvency proceeding by or against Payor, and the same shall remain undismissed or undischarged for a period of ninety (90) days; or (6) the dissolution of, merger of, or sale of substantially all of the stock or assets of, Payor, except where a successor entity assumes Payor's obligations (by operation of law or otherwise) hereunder. Notwithstanding anything herein, in any of the Security Documents, or in the Stock Purchase Agreement to the contrary, Payor may incur "Senior Debt" (as defined below) from time to time in its sole discretion, and Payee hereby agrees that the obligations of Payor hereunder are and shall be at all applicable times subordinate in all respects to all Senior Debt of Payor. In addition, Payor may grant security interests (including without limitation in the Collateral) securing any Senior Debt, and Payee hereby agrees that the security interest granted Payee under the Security Documents is and shall be at all applicable times subordinate in all respects to a security interest granted by Payor to secure any Senior Debt. Payee hereby agrees that it shall execute (or cause to be executed) all documents, instruments, or agreements, and shall take (or cause to be taken) all actions, which are necessary or desirable to effectuate the terms of this paragraph, including, without limitation, the execution and delivery of subordination agreements from time to time in form and substance acceptable to a holder of Senior Debt, and Payor. "Senior Debt" means obligations of Payor (as applicable) arising with respect to debt financing to such party from any lender (including without limitation, from a commercial lending institution) other than a shareholder, director officer, or other affiliate of Payor. Payee hereby acknowledges and agrees that the obligations of Payee under this paragraph are material consideration to Payor for the issuance of this Note. Waiver of or acquiescence in any Default by Payor, or failure of the Payee to insist upon strict performance by Payor of any obligations in this Note shall not constitute a waiver of any subsequent or other Default. 2 This Note shall be governed by and construed in accordance with the internal laws of the State of Virginia, without giving effect to the principles -------- of conflicts of law thereof. ACTIV TRAINING LTD By: /s/Phillip G. Jones ------------------------------- Phillip G. Jones Managing Director 3 EX-2.3 4 0004.txt OEM LICENCE AND DISTRIBUTION AGREEMENT Exhibit 2.3 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement This OEM Licence and Distribution ("Agreement") is entered into as of 12th ---- December 2000 ("Effective Date"), by and between ITC Learning Corporation -------- ---- ("ITC"), a Maryland corporation having its principal place of business at 13515 Dulles Technology Drive, Herndon, Virginia 20171 and Activ Training -------------- Limited ("OEM"), a United Kingdom business, having its principal place of ------- ----------------------- business at 45 Bromham Road, Bedford, MK40 2AA United Kingdom. ------------------------------------------------- The parties have entered into this agreement on the terms and conditions set forth in the following documents: 1. TERMS AND CONDITIONS 2. EXHIBIT A: LICENCED PRODUCTS 3. EXHIBIT B: LICENCE FEE AND ROYALTIES 4. EXHIBIT C: SUBLICENCE TERMS EACH PARTY ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT AND THAT IT AGREES TO ALL OF THE TERMS AND CONDITIONS AS SET FORTH IN THE ABOVE NOTED DOCUMENTS. IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE DULY EXECUTED BELOW: ITC LEARNING CORPORATION ACTIV TRAINING LIMITED ("OEM") ------------------------------ By: /s/Christopher E. Mack By: /s/Phillip G. Jones --------------------------- ------------------------------ Authorized Signature Authorized Signature Name: Name: -------------------------- ---------------------------- Please Type or Print Please Type or Print Title: President Title: Managing Director ----------------------- -------------------------- Please Type or Print Please Type or Print Date: 12/12/00 Date: 12/12/00 ------------------------ --------------------------- ITC OEM Contract Number: --------------------- ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement TERMS AND CONDITIONS DEFINITIONS Product(s). shall mean only where the singular word "Product(s)" appears those ------------ which are defined below as ITC Owned Product(s), Third Party Product(s) and Composite Product(s). ITC Owned Product(s). shall mean ITC courseware modules (including but not ------------------- limited to all media elements instructional design related documentation and software programmes in object and source code format) in which ITC have greater than 50% of any intellectual property rights. Third Party Product(s). shall mean ITC courseware modules (including but not ----------------------- limited to all media elements instructional design related documentation and software programmes in object and source code format) which ITC does not itself own but are licensed or sub-licensed to it or in which ITC has 50% or less of any intellectual property rights. Composite Product(s). means new product(s) created by OEM by (i) incorporating --------------------- modifications and/or additional programming code to ITC Owned Product(s) which add substantially new or different functionality to them, and/or (ii) by integrating those ITC Owned Product(s) with OEM's own product(s) to create a highly differentiating offering. Documentation. Information related to all elements of the Product. -------------- Object Code. The representation of Product(s) in the binary instruction code ------------ form suitable for execution by a computer. Source Code. The representation of Product(s) in a relatively high-level ------------ software programming language and digital media assets. End-User(s). Customers who acquire product(s) for their internal use and not ------------ for redistribution, remarketing, time-sharing, or service bureau use. Sub-Distributor(s). Distributors and Resellers of the OEM who purchase and ------------------- resell products and provide distribution and logistical resources for the ultimate purpose purchase by End-Users. Territory. United Kingdom, Europe (as defined by any geographical/political ---------- definition referring to Europe currently in operation of which shall be extended to include those countries not presently within `Europe' but which may become part of `Europe' during the currency of this Agreement) Scandinavia, Ireland, Baltic Republics, the Middle East and the continent of Africa (including any islands off shore of any of the aforementioned). Effective Date. The date of execution hereof by both parties as specified --------------- above. 1. OEM AND DISTRIBUTION LICENCE GRANTED 1.1. OEM Licence. ITC hereby grants to OEM a non-transferable and non- ----------- exclusive restricted right to develop Composite Product(s) based on the items licenced as described in "Exhibit A: Part 1". Rights and ability (including the provision of Source codes or any such similar) to modify the ITC Owned Product(s) are granted herein. OEM shall reproduce and apply the copyright, trademark and other proprietary notices, including any applicable third party notices on all copies of the Composite Product(s) made by OEM. OEM hereby grants ITC an OEM Licence on Composite Product(s) developed by OEM as shall separately be agreed between them. 1.2. Distribution Licence. ITC hereby grants to OEM an exclusive and non- -------------------- transferable licence during the term of this Agreement to distribute the ITC Owned Product(s) as described in "Exhibit A: Part 1" and Composite Product(s) in the agreed Territory. ITC grants OEM a non-exclusive and non-transferable licence to distribute Third-Party Product(s) as described in "Exhibit A: Part 2". OEM may, in its sole discretion, appoint sales agents, sub-distributors, and resellers to distribute Product(s). OEM is authorized to sublicence reproductions of Product(s) to End-User(s) without consent, and Sub- Distributor(s) with the prior consent of ITC which shall not be unreasonably withheld. No distribution rights for Call Centre Product(s) for the Temporary Staffing Services market is granted herein. Where there is already in existence an Agreement in place between ITC, OEM and any End-User or Sub-Distributor the prohibition for the distribution rights for the Temporary Staffing Services Markets will not apply (specifically in South Africa). ITC shall have a unilateral approval authority over any new exclusive Sub-Distributor(s) Agreement that OEM may make, such approval authority not to be 2 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement unreasonably withheld. OEM Sub-Distributor(s) Licence Agreement shall include the mandatory terms provided by ITC in "Exhibit C: Sub-Licence terms: mandatory terms for OEM's Sub-Distributor(s) Licence Agreement". 1.3. End-User(s) Licence. OEM will grant Sublicences to End-User(s) for ------------------- use of the Product(s). OEM End-User(s) licence shall include End-User(s) Sublicence terms provided by ITC in "Exhibit C: Sublicence Terms: mandatory terms for OEM's End-User(s) Licence Agreement", save in respect of any existing End-User(s) Licence Agreements already entered into by OEM. OEM shall make no representations and warranties on behalf of ITC and shall not grant any rights to End-Users beyond those contemplated by this Agreement. Upon request, OEM will promptly provide ITC with reasonable access to all End-User(s) agreements licensing Product(s). 1.4 Conflict. This Agreement shall apply to any existing End-User(s) and -------- Sub-Distributor(s) Agreements entered into by OEM before the date of this Agreement save where those are expressly excluded by this Agreement. In the event of any conflict between the terms of this Agreement and any such prior Agreements the terms of those prior Agreements between OEM and its End-User(s) and Sub-Distributor(s) shall prevail. 1.5 EXCLUSIVITY --- ----------- 1.5.1 ITC will not appoint any third party as a competitor as agent, distributor or otherwise for the sale and distribution of the Product(s) for the duration of this Agreement or any holding over or extension thereof and shall not itself make any sale of or other such distribution or disposal of Product(s) directly or indirectly within the Territory for the duration of the Agreement or any holding over or extension thereof. 1.5.2 In the event that ITC is approached by any End-User and/or Sub-Distributor directly for the purchase, sale, delivery or distribution of product(s), directly or indirectly to it, ITC will refer any such End-User(s) and Sub-Distributor(s) to OEM. 1.5.3 ITC will not grant any form of licence or distribution agreement relating to product(s) to any third party which will result in competition with the activities of OEM within the Territory for the duration of the Agreement or any holding over or extension thereof. 1.5.4 ITC will not refer or recommend any End-User or Sub-Distributor, who has a place of business within the Territory, to any other licencee or agent with whom it has the same or similar Agreement as entered into with OEM, outside the Territory so that any End-User and/or Sub- Distributor has access to or is supplied with Product(s) which otherwise should be supplied by OEM. 1.5.5 In the event that ITC merges with or acquires or is acquired by any other form of legal corporation, undergoes amalgamation, reconstruction or de-merger, is subject to any management buy-out or form of receivership or winding-up procedure (until actually wound up) or in the event that in any way assigns or sub-licences its obligations and benefits or any of them as set out in this Agreement, the exclusivity of this Agreement shall be preserved by ITC ensuring that any such third party shall be subject to the obligations of this Agreement, and will, enter into a positive obligation to perform the terms set out in this clause as to exclusivity for the continuing benefit of OEM. 1.5.6 ITC will honour and maintain OEM exclusively in relation to any End-User or Sub-Distributor Agreement entered into by OEM with any End-User or Sub-Distributor and which are in existence and operative as at the Effective Date and which may be subject to extension or renewal during the operation of this Agreement and that the foregoing provisions as to exclusivity under clause 1.4 shall apply to those existing End-User(s) or Sub Distributor(s) Agreements as if entered into with OEM after the Effective date. 1.5.7 ITC shall be released from its obligations under the forgoing sub clauses by giving three months written notice to OEM. Such notice may only be given where ITC becomes a wholly owned subsidiary of another company or merges with another company (already formed trading and not an `associated company' or another company in a `group' of companies with which ITC is or shall have become already concerned by the time such notice is given) and not being a company formed for that purpose. In the event of such notice being given ITC will: 3 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement 1) Repay all royalty payments paid by OEM under this Agreement 2) Forthwith release OEM from any obligations under this Agreement 3) Forthwith release OEM from the Secured Promissory Note and remove all entries related to that Secured Promissory Note at Companies House or wherever else placed. ITC's release from its obligations under this sub-clause shall not apply in any event to all or any of OEM's existing Sub-Distributor(s) Agreements (where exclusive in nature) and existing End-User(s). For the purpose of this sub-clause "existing" includes those End-User(s) and Sub-Distributor(s) with whom OEM dealt prior to the date of this Agreement and during its operation. 1.6 Limitations. All associated patents, copyrights, trade secrets and ----------- other proprietary rights shall remain with ITC. Title to the Third Party Product(s) developed by third parties and all associated patents, copyrights, trade secrets and other proprietary rights shall remain with such third parties. 1.6 Product Availability. ITC shall use reasonable efforts to upgrade and --------------------- update existing ITC Owned Product(s) and Third Party Product(s) and introduce new Third Party Product(s) and ITC Owned Product(s) and to review the need for the same regular intervals throughout the period for which this Agreement is in operation. ITC may withdraw any ITC Owned Product(s) and Third Party Product(s) at any time within twelve (12) months prior notice. 1.7 Standard of Performance. OEM shall use its reasonable efforts to perform ------------------------ responsibilities described in this agreement. 1.8 Retained Rights. All rights that are not expressly granted to OEM herein ---------------- are retained by ITC. 2. ROYALTIES, PAYMENT AND REPORTS 2.1. Royalties. For each copy of Product(s) distributed by OEM, OEM shall --------- pay royalties as set out on Exhibit B. The royalties shall accrue when the end copy is shipped by OEM to a Sub-Distributor or End-User. 2.2. Reports and Payment; Audit Rights. ---------------------------------- a) OEM shall provide, within 10 days after the end of each calendar month, a report of all payments due ITC for sales of new licences and upgrades made during the month. OEM shall also provide, within sixty (60) days after the end of each calendar quarter, royalties due ITC for sales made during the preceding quarter. Payment shall be accompanied by a list of customers sold to during this royalty period. Such list shall show each customer by name and customer contact, including address, and telephone number. ITC agrees that it will not directly or indirectly contact any third party appearing on any such list unless by prior agreement with OEM. b) OEM agrees to make and to maintain until the expiration of two (2) years after the last payment under this Agreement is due, complete books, records and accounts regarding OEM's copies and the Licence Fees due ITC hereunder. ITC shall have the right not more than once every twelve (12) months to examine such books, records and accounts during OEM's normal business hours to verify OEM's reports on the amount of payments made to ITC under this Agreement. If any such examination discloses a shortfall in payment to ITC of more than five (5%) for any quarter, OEM agrees to pay or reimburse ITC for the reasonable expenses of the examination. 3. WARRANTY AND SUPPORT 3.1. Warranty. ITC warrants to OEM that, for a period of one (1) year from -------- the shipment to OEM, the ITC Owned Product(s) and Third Party Product(s) will conform substantially to the documentation supplied with the ITC Owned Product(s) and Third Party Product(s). If OEM discovers a material defect in a ITC Owned Product(s) and Third Party Product(s) which causes such product to fail to substantially so conform, within the warranty period, OEM will promptly notify ITC. ITC's obligation will be, in the case of ITC Owned Product(s), developed by ITC, for ITC to use all reasonable commercial efforts promptly to correct such failure to conform, and, in the case of Third Party Product(s) developed by a third party, to all use reasonable commercial efforts to provide OEM with a corrected version of the third party product. In the event of such failure not being cured within sixty days or in the event of delay in rectification beyond sixty days (both periods of sixty days being calculated from the time/date of notification to ITC by OEM) such as to cause a significant effect upon or delay on Gross Receipts by OEM the terms of this Agreement and the Secured Promissory Note shall be renegotiated between the parties. THE PROVISIONS OF THIS SECTION 3.1 SETS FORTH OEM'S SOLE REMEDY AND ITC'S SOLE LIABILITY WITH RESPECT TO THE WARRANTY SET FORTH HEREIN, REGARDLESS OF WHETHER THIS REMEDY FAILS OF ITS ESSENTIAL PURPOSE. 4 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement 3.2. Disclaimer. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTY, ITC MAKES ---------- AND OEM RECEIVES NO WARRANTIES ON THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH OEM, AND ITC SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ITC does not warrant that the operation of the Products will be uninterrupted or error free. 3.3. Support. OEM shall offer and provide prompt and efficient first line ------- support for the Products to its Sub-Distributor(s) and End-User(s), including, without limitation, installation, training and telephone support. OEM will maintain at least one designated full-time-equivalent employees adequately trained and able to provide such support services. ITC will train such employees at ITC's facilities at no charge. ITC will provide OEM back-up telephone support for the designated employees only during ITC's normal business hours for answering questions regarding use and operation of the Products and for receiving reports of errors in the Products. ITC will supply OEM all workarounds, bug fixes and modifications to the Products which it makes generally available to its customers. In order to allow ITC to provide support, and as a condition of ITC's support obligations, OEM will provide ITC two units of each representative Composite Product free of charge within thirty (30) days after commercial release of the Composite Product. As maintenance, ITC shall provide, to OEM only, on an ongoing basis, upgrades and significant updates or revisions to the ITC Owned Product(s) and Third Party Product(s), over the Term of the Agreement. ITC shall determine what constitutes an upgrade and a significant update or revision. 3.4. Supplemental Support. ITC shall provide to OEM in addition to and in -------------------- order to support its obligations otherwise set out the following: 3.4.1 All and any artwork for marketing literature/collaterals in respect of Third Party Product(s) and ITC Owned Product(s) to OEM within 14 days of such materials being produced for or on behalf of ITC to enable OEM to produce customized literature in support of its performance of its obligations under this Agreement entered into by it with End-Users and Sub-Distributors. 3.4.2 Two master copies of all courseware which shall be full, complete and defect free together with any associated literature within 14 days of such being produced and marketed by ITC. 4. INDEMNIFICATION 4.1. ITC will defend at its expense any action brought against OEM to the extent that it is based on a claim that the ITC Owned Product(s) and Third Party Product(s) or any part thereof, when used within the scope of this Agreement, infringe any copyright or infringe any patent issued as of the Effective Date, and ITC will pay any settlements and any costs, damages and attorneys' fees incurred by OEM in such action which are attributable to such claim; provided, the foregoing obligation shall be subject to OEM notifying ITC promptly in writing of the claim, giving ITC the exclusive control of the defense and settlement thereof, and providing all reasonable assistance in connection therewith. ITC shall have no liability for any claim of infringement arising out of (i) the use of other than an unaltered release of a ITC Owned Product(s) and Third Party (Product(s) developed by ITC, (ii) the use or combination of a ITC Owned Product(s) and Third Party Product(s) developed by ITC with non- ITC programs, data or equipment if such infringement was caused by such use or combination, or (iii) OEM's continued distribution of a ITC Owned Product(s) and Third Party Product(s) developed by ITC after notification from ITC to cease such distribution due to ITC 's determination that the ITC Owned Product(s) and Third Party (Product(s) developed by ITC is or is likely to become the subject of a claim of infringement. THE FOREGOING SETS FORTH ITC 'S ENTIRE LIABILITY FOR ANY INFRINGEMENT BY THE PRODUCTS OR ANY PART THEREOF. 4.2. Except for warranty claims for which ITC is liable under Section 3.1 and infringement claims covered by Section 4.1, OEM agrees to indemnify and hold ITC harmless against any cost, loss, liability, or expense (including attorneys' fees) arising out of third party claims against ITC as a result of OEM's negligent promotion or distribution of the ITC Owned Product(s) and Third Party Product(s), including, without limitation, providing unauthorized - representations or warranties to its customers regarding the ITC Owned Product(s) and Third Party Product(s) or breaching any term, representation or warranty of this Agreement. 5. LIMITATION OF LIABILITY 5.1. SAVE AS OTHERWISE PROVIDED FOR ELSEWHERE IN THIS AGREEMENT IN NO EVENT WILL ITC BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOST PROFITS, OR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE TERMINATION THEREOF, WHETHER OR NOT ITC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH 5 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement DAMAGE, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED IN THIS AGREEMENT. 6. CONFIDENTIALITY 6.1. OEM and ITC agree that any inventions, algorithms, know-how, ideas and other business, technical or financial information (specifically source codes or - other such coding or information) obtained from each other are the confidential property of each party or its licensors ("Confidential Information"). Except as expressly provided herein, both parties will hold in confidence and not use or disclose any Confidential Information, and shall similarly bind its employees in writing. Both parties nondisclosure obligation shall continue for three (3) years following termination of this Agreement, but shall not apply to information that (a) is known by the receiving party or is publicly available at the time of disclosure by the disclosing party to the receiving party through no breach of this Agreement by the receiving party; (b) becomes publicly available after disclosure by the disclosing party to the receiving party through no breach of this Agreement by the receiving party; (c) is hereafter rightfully furnished to the receiving party by a third party without restriction as to use or disclosure; d) is disclosed with the prior written consent of the disclosing party; (e) is information that was independently developed by the receiving party; or (f) is required to be disclosed pursuant to any judicial or administrative proceeding, provided that the receiving party immediately after receiving notice of such action notifies the disclosing party of such action to give the disclosing party the opportunity to seek any other legal remedies to maintain such information in confidence. 7. TRADEMARKS 7.1. Use. During the term of this Agreement, OEM shall have the right to --- indicate to the public that it is an authorized OEM of the Product(s) and to advertise such Products under the trademarks, marks, and trade names that are contained on the Products (the "Trademarks"). OEM will not, and will ensure that its distributors will not, alter or remove any Trademark, or affix, without the written permission of ITC, any other trademarks, marks or other logos on the products. Nothing herein shall grant to OEM any right, title or interest in the Trademarks. At no time during or after the term of this Agreement shall OEM challenge or assist others to challenge the Trademarks or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to the Trademarks. 7.2. Approval. All representations of the Trademarks, which OEM intends to -------- use for the Product(s) and shall first be submitted to ITC for approval (which shall not be unreasonably withheld). 8. TERM AND TERMINATION 8.1. This Agreement shall continue in force from the Effective Date hereof and shall continue for a period of 5 years unless terminated under the provisions of this Agreement. After the end of the 5 year period the Agreement shall continue unless terminated by other party upon not giving less than 12 months written notice which may not be given to expire before the end of the 5 year period. 8.2. Termination. If either party defaults in the performance of any provisions of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within thirty (30) days the Agreement shall be terminated. If the non-defaulting party gives such notice and the default is not cured during the thirty-day period, then the Agreement shall terminate immediately without further notice. This Agreement shall terminate automatically, without notice, (i) upon the institution by or against OEM of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of OEM's debts, (ii) upon OEM's making an assignment for the benefit of creditors, or (iii) upon OEM's dissolution. 8.3. Effect of Termination. Upon the termination of this Agreement the rights and licences granted to OEM pursuant to this Agreement will automatically cease provided that all existing sub-licences to End-Users and Sub-Distributors will continue for their duration as agreed with OEM and OEM shall be able to discharge their obligations under those licences and they shall be entitled to purchase from ITC and sell any ITC Owned Product(s) and Third Party Product(s) necessary to fulfil those obligations. The unpaid balance of any royalties shall become due and payable within 60 days of such termination. Except as provided in the last sentence of this Section 8.3, all Trademarks, marks, trade names, patents, copyrights, designs, drawings, formulae or other data, photographs, samples, literature, and sales aids of every kind supplied by ITC shall be returned to ITC. Within sixty (60) days after the termination of this Agreement, OEM shall prepare all such items in its possession for shipment, as ITC may direct, at ITC's expense. OEM shall not make or retain any copies of any confidential items or information which may have been entrusted to it. Effective upon the termination of this Agreement, OEM shall cease to use the Trademarks. Provided, however, that OEM may use the Trademarks after termination of this Agreement to sell any Product(s) it has in inventory at that time. 6 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement 8.4. Survival Provisions. If this Agreement is terminated for any reason, ------------------- the provisions of Sections 2.2.b, 4.2, 5, 6, 3.2, 7, 8.4, 9.6 and 9.11 shall survive. 9. GENERAL TERMS ------------- 9.1. ITC will continue and maintain its support of OEM in relation to any current or future dispute, Court action or dispute resolution and in the taking of any reasonable steps to maintain OEM's involvement in South Africa and further that ITC will declare and state such support when reasonably asked by OEM to do so, in particular in statements to the effect that Infocast have no legal right either to establish relationships with End-Users and/or Sub-Distributors or purport to or actually act as End-Users, Distributors or Sub-Distributors or in any way otherwise infringe OEM's rights in South Africa. 9.2. Assignment and Binding Effect. ITC and OEM agree that their rights ----------------------------- and obligations under this Agreement may not be transferred or assigned directly or indirectly without the prior written consent of the other which shall not be unreasonably withheld. Nor shall an assignment or transfer of this Agreement be effected by the operation of law such as for example by merger, consolidation, sale of business assets or by acquisition of the majority of the voting stock of either ITC or OEM without prior written consent of the other party which shall not be unreasonably withheld. Any attempted assignment in violation of the provisions of this Section shall be null and void. Subject to the foregoing this Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. 9.3. Notices. Notices under this Agreement shall be sufficient only if ------- personally delivered, delivered by a major commercial rapid delivery courier service, delivered by facsimile transmission, or mailed by certified or registered mail, return receipt requested to a party at its addresses first set forth herein or as amended by notice pursuant to this subsection. If not received sooner, notice by mail shall be deemed received seven (7) days after deposit. 9.4. Publicity. --------- 9.4.1 No press release, press statement, policy statement or publicity material whatsoever or in whatever format shall be disseminated or distributed howsoever directly or indirectly relating to any or all aspects of the relationship between OEM and ITC before, during or after this Agreement without the prior express joint agreement of ITC and OEM. 9.4.2 Following execution of this Agreement a Policy Statement shall jointly be produced by ITC and OEM (the precise wording of which shall be agreed separately) which should clearly state that OEM are the exclusive master distributor for ITC Product(s) (in the Territory, that OEM exclusively represents all ITC interest in the Territory and to the effect that anyone reading the Policy Statement can have every confidence that OEM will provide them with Product(s) service and support in at least a professional manner as ITC themselves would do. Such Policy Statement to be readily available to and provided to any Third Party enquiring of ITC as to the status of OEM. 9.4.3 Will state with prominence on their website and any appropriate literature that OEM are the exclusive master distributor for the Territory and such statement will have the same prominence as ITC will by locations or at least the same prominence given whilst the OEM was wholly owned by ITC. 9.5. Import and Export Controls. OEM and ITC will comply with all export -------------------------- laws and restrictions and regulations of the Department of Commerce or other United States or foreign agency or authority, and not export, or allow the export or re-export of any Product or any direct product thereof in violation of any such restrictions, laws or regulations. 9.6. Proper Law and Jurisdiction. --------------------------- 9.6.1. This Agreement shall be governed by English law in every particular including formation and interpretation shall be deemed to have been made in England. 9.6.2. Any proceedings arising out of or in connection with this Agreement may be brought in any Court of competent jurisdiction in the United Kingdom. 9.6.3. The submission by ITC and OEM to such jurisdiction shall not limit the right of either part to commence any proceedings arising out of this Agreement in any other jurisdiction that may be considered appropriate. 9.6.4. Any notice of proceedings or other notices in connection with or which would give effect to any such proceedings may without prejudice to any other method of service be served on any party in accordance with 9.2 above. 7 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement 9.7. Partial Invalidity. If any provision of this Agreement is held to be ------------------ invalid, then the remaining provisions shall nevertheless remain in full force and effect. The parties agree to renegotiate in good faith any term held invalid and to be bound by the mutually agreed substitute provision. 9.8. No Agency. ITC and OEM are each independent entities and neither --------- party shall be, nor represent itself to be, a franchisor, franchisee, joint venturer, partner, master, servant, principal, agent or legal representative of the other party for any purpose whatsoever. 9.9. No Waiver. No waiver of any term or condition of this Agreement shall --------- be valid or binding on either party unless the same shall have been mutually assented to in writing by both parties. The failure of either party to enforce at any time any of the provisions of this Agreement, or the failure to require at any time performance by the other party of any of the provisions of this Agreement, shall in no way be construed to be a present or future waiver of such provisions, nor in any way affect the validity of either party to enforce each and every such provision thereafter. 9.10. Force Majeure. Nonperformance by either party shall be excused to the ------------- extent that performance is rendered impossible by strike, fire, flood, earthquake, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond in the control and not caused by the negligence of the non-performing party; provided that any such nonperformance shall be cause for termination of this Agreement by the other party if the nonperformance continues for more than sixty (60) days. 9.11. Legal Expenses. The prevailing party in any legal action brought by -------------- one party against the other and arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys' fees. 9.12. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 9.13. Language. This Agreement is in the English language only, which -------- language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language. 9.14. Entire Agreement. This Agreement sets forth the entire agreement and ---------------- understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the party to be charged. 8 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement EXHIBIT A: LICENCED PRODUCTS SEE ATTACHED "A" 9 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement EXHIBIT B: LICENCE FEE AND ROYALTIES OEM commits to minimum royalty of (British pounds)666,666.66 UK sterling which will be paid as to 1. (British pounds)166,666.66 by way of advance royalty payment and in consideration for the grant of this Agreement on the Effective Date and thereafter the balance as set out below 2. On the balance (British pounds)500,000.00 throughout the five year term of this agreement OEM shall pay 50% royalty to ITC on all Product(s) sales until its financial obligations pursuant to the Secured Promissory Note dated the 8th December 2000 are met in full. Thereafter OEM shall pay for each licence of any Product and product sale sold by OEM to its Sub-Distributors and or End-Users, OEM shall pay to ITC 30% of Gross Receipts derived from Product(s). 'Gross Receipts' shall mean all licence fee revenues received by OEM from the licence of Product(s) at sale price less returns. It does not include charges for shipping and handling, sales and use taxes, reimbursements for out of pocket costs, charges for customization etc. 3. ITC agrees to provide OEM with 180 days' notice of any changes to its published list prices and ITC will solicitor OEM input before making any such changes. 4. ITC shall not impose on OEM any restrictions on the sale of any Product(s) by OEM to all or any of its Sub-Distributors or End-Users, within the Territory. 10 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement EXHIBIT C: SUBLICENCE TERMS MANDATORY TERMS FOR OEM'S END-USER LICENCE AGREEMENT ---------------------------------------------------- Each End User Licence shall at a minimum contain terms and conditions substantially similar to the following: Copyright and Licence Notice. ITC Learning Corporation. 1993-2000. All ----------------------------- rights reserved. This software is protected by copyright law and international treaties. Unauthorized use, reproduction, or distribution of all or part of this software may result in civil or criminal penalties. This software is licenced, not sold, to licencees who have agreed to the terms of an end user licence agreement ("agreement") entered into with ITC Learning Corporation ("ITC") that restricts use of the software to a specified number of copies and authorized users or to a number of workstations and servers, at specific locations, and also contains warranty disclaimers and limitations on ITC's liability. This software is licenced for licencee's use only and not for redistribution. This is a legal document. Read it carefully before completing the ------------------------- installation process and using the software. The software may only be used in accordance with the following restrictions, which may only be modified upon ITC's written approval. By installing and using the software, licencee is confirming acceptance of the software and agreeing to become bound by the terms of this document. If licencee does not wish to become so bound, do not complete the installation process. Licence Restrictions. Except as set forth in a written Agreement signed by --------------------- ITC, Licencee may not: 1. Copy the Software; 2. Cause or permit reverse compilation, reverse assembly, reverse engineering, or any other attempt to discover the human-readable form of all or any portion of the Software; 3. Distribute, sublicence, disclose, market, rent, lease, or transfer to any third party any portion of the Software or ITC documentation or use the Software or such documentation in any service bureau arrangement, facility management, or third party training; 4. Transfer the Software to a different location without prior written notice to ITC; or 5. Export the Software. No licence, right, or interest in any ITC trademark, trade name, or service mark is granted hereunder. Proprietary Rights Notice. ITC (or its third-party providers) retains title -------------------------- to all portions of the Software and any copies thereof. Title to the physical media only for the Software vests in Licencee upon shipment to Licencee. The Software contains valuable proprietary information and Licencees are obligated not to disclose the Software to anyone other than those of their employees or ITC-authorized contractors under nondisclosure obligations who have a need to know for purposes consistent with the terms of the Agreement. Disclaimer of Warranty. Except as indicated in a written Agreement signed by ----------------------- ITC, the software and any documentation are provided on an "as is" basis, without any warranty whatsoever. ITC expressly disclaims all warranties on behalf of itself or its suppliers, express, implied or statutory, including, without limitation, the implied warranties of merchantability, title, non- infringement and fitness for a particular purpose, or that the software operation will be uninterrupted or error free. Limitation of Liability. Except as indicated in a written Agreement signed by ------------------------ ITC, ITC shall not be liable for any special, indirect, punitive, consequential or incidental damages (including but not limited to such damages arising from breach of contract or warranty or from negligence or strict liability), or for lost data or lost profits, arising out of or in connection with this agreement, even if advised beforehand of the possibility of such damages. In no event shall ITC's liability exceed the amount paid by licencee to ITC for the software upon which the claim is based. The parties agree to the allocation of liability and risk as set forth in this section. Assignment. Licencee may not assign this Agreement without the prior written ----------- consent of ITC, and any prohibited assignment shall be null and void. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the parties and of their successors or assigns. U.S. Government End Users. The Software is a "commercial" item" as that term -------------------------- is defined at 48 C.F.R. 2.101, consisting of "commercial computer software" and "commercial computer software documentation" as such terms are used in 48 C.F.R. 12.212. Consistent with 48 C.F.R. 212 and 48 C.F.R. 227.7202-1 through 227.7202-4, all U.S. Government End Users acquire the Software with only those rights set forth herein. 11 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement MANDATORY TERMS FOR OEM'S SUB-DISTRIBUTOR LICENCE AGREEMENT ----------------------------------------------------------- Licensing Restriction. The licence agreement shall provide for (i) a ---------------------- prohibition of reproduction and modification of the Product(s)); (ii) distribution in accordance with applicable terms and conditions hereof and as limited to the Territory and Field of Use; and (iii) a prohibition of bundling or combining the Product(s) with any product, except ------ (a) for existing Sub-Distributor(s) Licence Agreements and (b) as may be reasonably necessary to enable the Product(s) to be sold and used in the Territory appropriate to the Sub-Distributor(s) taking into account any local requirements demands or conditions of sale. Flow-Down Provisions for End-User Licences. OEM shall require by written ------------------------------------------- contracts, signed by all Resellers that the mandatory provisions for End-Users provided above are maintained throughout the channel of distribution for Product(s). Audit Provision. The licence agreement shall provide for the right of OEM and ---------------- its suppliers to audit the Reseller under terms and conditions similar to the audit provisions of this Agreement. 12 ITC LEARNING CORPORATION OEM LICENCE and Distribution Agreement EXHIBIT C: LICENCE FEE AND ROYALTIES 1. For each licence of any Product and Composite sold by OEM, its distributors, or agents, the OEM will pay to LICENSOR: the percentage/per unit royalty is the greater of: (i) thirty (30%) of Gross Receipts derived from Product(s); (ii.a) six dollars ($6) per unit of Product(a course) distributed on single-user annual subscription licence; (ii.b) thirty dollars ($30) per unit of Product distributed on single- user perpetual licence; or (ii.c) three hundred dollars ($300) per unit of Product distributed on an stand-alone workstation perpetual licence. Gross Receipts shall mean all licence fee revenues received by the OEM, from the licence of Product(s) and Composite Product(s) at sales price less returns. It does not include other charges for shipping and handling, sales and use taxes, reimbursements for out of pocket costs, charges for customization, etc. 13 -----END PRIVACY-ENHANCED MESSAGE-----