Exhibit 2.7
NOVASCOTIA Business World Trade and Bus: 902 424-8958
Development Convention Centre Fax: 902 424-6823
Corporation 1800 Argyle Street
PO Box 519
Halifax, Nova Scotia Our File Number:
Canada B3J 2R7
September 16, 1998
Mr. Carl Stevens
ITC Canada Limited
ITC Learning Corporation
13515 Dulles Technology Drive
Herndon, VA 20171, USA
Dear Mr. Stevens:
The Board of Directors of the Nova Scotia Business Development Corporation
(NSBDC) has reviewed the request of 3021586 Nova Scotia Limited now renamed ITC
Canada Limited for financial assistance.
I am pleased to inform you the Board of Directors has approved a $2,000,000 loan
relating to your purchase of the assets of Mentor Networks Inc. and High
Performance Group (Canada) Inc., subject to the terms and conditions as detailed
in the attached Schedule "A", which forms an integral part of the Offer.
We require your written acceptance to this Offer by September 21, 1998. You may
indicate your Acceptance by executing and returning the attached copy of this
Letter of Offer. Upon receipt of your Acceptance, we will instruct our
solicitors to prepare the appropriate legal documentation.
We are pleased to be able to provide your company with financial assistance and
look forward to working with you on this and future projects.
Yours truly,
ITC Canada Limited accepts
and agrees to comply with
the conditions of the Letter
of Offer and the attached
Schedule "A" which form an
Integral part of the Offer
/s/ Andrew H. Hare
- ----------------------------------- ----------------------------
Andrew H. Hare, C.A. ITC Canada Limited
Director of Lending and Special Projects
cc: Jeannine Lagasse
att: /s/ Wendy G. Berney
----------------------------
Per:
http://www.gov.ns.ca
/s/ Phillip Read
----------------------------
SCHEDULE "A"
TERMS AND CONDITIONS
RELATING TO A $2,000,000 LOAN (THE "LOAN")
AUTHORIZED ON BEHALF OF
3021586 NOVA SCOTIA LIMITED HEREIN DEFINED AS ITC CANADA
REGIONAL MUNICIPALITY OF HALIFAX
UNDER THE NOVA SCOTIA BUSINESS DEVELOPMENT CORPORATION ACT
BY THE NOVA SCOTIA BUSINESS DEVELOPMENT CORPORATION (NSBDC)
PROGRAM AND FINANCING
================================================================================
Program Financing
================================================================================
Assets of Mentor HPG $3,000,000 NSBDC $2,000,000
- --------------------------- ---------------- ---------------------- ------------
Working Capital 1,100,000 ITC Learning 2,100,000
--------- ------------
- --------------------------- ---------------- ---------------------- ------------
$4,100,000 $4,100,000
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================================================================================
Additional Considerations:
a) Up to an additional $1,600,00 will be paid by ITC Canada for the assets
of Mentor and HPG by royalty payments, which payments are anticipated
to be assigned by the receiver of Mentor and HPG to NSBDC and to be
payable as follows:
a) Beginning January 1, 1999, a 3% royalty payment to NSBCD on net
revenues (after deducting third party commissions, discounts, returns
and allowances) generated by sales of ITC Canada's generic courseware
products;
b) Effective January 1, 1999, a 1% royalty payment on custom course ware
developed by the Nova Scotia operations;
Total cash consideration to NSBDC, if full royalty earnings are
realized is $4,600,000;
c) In recognition of the Province of Nova Scotia's desire to continually
develop relevant employable skills within its workforce, ITC Learning
will provide the Province with access to ITC's Process & Manufacturing
libraries (153 titles) for utilization within the provincial education
system (P-12 and community colleges) for a period of two years at the
cost to the Province of only replication the titles and actual shipping
costs. These products are not for resale or general distribution and
will licensed in accordance with ITC Learning Corporation's normal
licensing arrangements.
3021586 NOVA SCOTIA LIMITED HEREIN DEFINED AS ITC CANADA PAGE 2
d) No changes to be made to the Program and Financing without the prior
written approval of NSBDC;
e) Should the legal documentation for this loan not be executed within one
(1) month of date of this offer, then the offer will expire unless
extended in writing by NSBDC.
TERMS
Interest - 8% simple interest paid monthly commencing September 30, 1998.
Principal Repayment:
a) Quarterly principal payments of $100,000 commencing with first payment
March 31, 1999. Maturity date for the loan is December 31, 2003. The
entire principal may be repaid in full or in part at any time without
notice, bonus or penalty.
Security:
The loan shall be on the obligation of the Company and shall be secured as
follows:
a) By a debenture and other security documents containing a fixed charge
on furniture, fixtures, computers, equipment, and the interest of the
company in the leased premises together with a floating charge on the
remaining undertakings and assets of the Company located in Nova Scotia
on terms satisfactory to NSBDC ranking pari passu to security on such
assets provided to a bank or other financial institution relating to
loan advances up to $1 Can. million loan advanced for purchase of ITC
Canada assets, the security to be held by NSBDC to rank subject to
security on Accounts Receivable and Inventory provided to a bank or
other financial institution.
b) Intellectual property, courseware and software engine to be assigned to
NSBDC on terms and conditions satisfactory to NSBDC; and ranking pari
passu with security on such assets provided to a bank or other
financial institution relating to loan advances up to $1 Can. Million
advanced for purchase of ITC Canada assets.
3021586 NOVA SCOTIA LIMITED HEREIN DEFINED AS ITC CANADA PAGE 3
c) Fire and extended insurance coverage on all leaseholds, machinery,
equipment and chattels in amounts and on terms satisfactory to NSBDC to
be assigned to NSBDC to the extent of its interest for the term of the
loan.
d) Corporate guarantee from ITC Learning Corporation in the full amount of
the obligations of ITC Canada to the NSBDC.
e) Such additional security and other documents as may be required by
NSBDC, including an agreement with the Company's bank or financial
institution that NSBDC will provide copies of notices of default and
will receive similar notices from the bank or other financial
institution.
CONDITIONS PRECEDENT
The following are conditions precedent to NSDC's obligations to disburse the
loan:
a) All security documents and other legal requirements will be completed
and registered in form and substance satisfactory of NSBDC solicitors;
ADDITIONAL CONDITIONS AND COVENANTS
a) The Company shall be responsible for and pay all legal and other
charges up to Cdn. $5,000 relative to the preparation, execution and
registration of the security documents and completion of the Program
and Financing;
b) All licenses and permits shall be obtained and all laws (municipal,
provincial and federal) shall be adhered to;
c) The Company shall use its best efforts to employ and use whenever
possible, Nova Scotia and/or Maritime companies, contractors and
labour, Nova Scotia and/or Maritime products and materials, and Nova
Scotia and/or Maritime services for all work undertaken and products
and materials purchased, provided such companies, contractors, labour,
products and materials are competitive in productivity, equality, price
and delivery terms;
d) Closing maybe withheld if, in the opinion of the NSBDC, any material
adverse change in risk occurs;
e) This offer may, at the discretion of the NSBDC, be cancelled or
withdrawn in the event the applicant or the officers of the company or
any of its shareholders are involved in any litigation, or any
proceedings before any government board, tribunal or agency which has
not been disclosed;
3021586 NOVA SCOTIA LIMITED HEREIN DEFINED AS ITC CANADA PAGE 4
f) The obligation of ITC Canada relating to the loan will become due and
payable by ITC Learning Corporation/ITC Canada should ITC Canada
discontinue operating as a going concern in Nova Scotia. Should ITC
Canada discontinue Nova Scotia operations the payment of royalties on
applicable products will continue as an obligation of ITC Learning
Corporation until fully paid.
g) The Company shall provide to NSBDC annual audited financial statements
of the Company within 90 days of each fiscal year end and
company-prepared statements within 45 days of the end of each quarter;
h) The Company will provide to NSBDC an auditor prepared calculation of
the royalty payment calculation, together with the appropriate royalty
payment within 120 days of each fiscal year;
i) The Company's parent (ITC Learning Corporation) shall covenant to fund
the Company's working capital requirements to an amount of not less
than $1,100,000;
j) The Company will not, without the prior written consent of NSBDC, which
will not be unreasonably withheld:
[1] redeem or purchase any shares of the Company or pay out dividends
or make any other distributions thereon.
[2] repay any shareholder's loans or interest thereon.
[3] pay bonuses, management fees, or remuneration of any kind to any
shareholder of the company or associated or related party.
In addition, the Company will at all times deal at fair market value and at arms
length with affiliated, associated or related companies or persons and, upon
request, provide satisfactory evidence to that effect to NSBDC.
k) The Company shall undertake to cause the election to its Board a
Director nominated by NSBDC, if requested by NSBDC, which appointment
may terminate upon the payout of this loan.
The applicant consents to a public announcement of the project, by or on behalf
of the Nova Scotia Business Development Corporation (NSBDC) or the Province of
Nova Scotia. In such cases, the NSBDC shall inform the Applicant of the date on
which the announcements is to be made and the Applicant shall keep this offer
confidential until such date, except as may in ITC Learning's reasonable
judgment be consistent with generally accepted practices for publicly held
companies or as required by the U.S. Federal Securities Law or other contractual
obligations. If the NSBDC does not communicate its intention to make an
announcement to the Applicant within sixty (60) days of the Applicant's
acceptance of this Offer, the Applicant may proceed independently.
3021586 NOVA SCOTIA LIMITED HEREIN DEFINED AS ITC CANADA PAGE 5
The Province shall be advised, at least 14 days in advance, of any ceremony the
Applicant proposes to held in connection with the announcement of the Project. A
ceremony shall only be held on a date which is mutually acceptable to the NSBDC
and the Applicant. Furthermore, the Applicant consents to having the officials
of NSBDC and the Minister or his designate participate in any such ceremony.
HALIFAX, NOVA SCOTIA
SEPTEMBER , 1998