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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 1997
(_) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________________ to __________________
Commission File No. 0-24454
WAVE TECHNOLOGIES INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
Missouri 43-1481443
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10845 Olive Boulevard, Suite 250, St. Louis, Missouri 63141
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 314/995-5767
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.0.50 par value The Nasdaq National arket
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. [ X ] Yes [__] No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [__]
State issuer's revenues for its most recent fiscal year: $30,826,456
At May 31, 1997, there were 2,601,793 shares of Common Stock held by non-
affiliates. The aggregate market value of such shares held by non-affiliates,
based on the last sale price on July 14, 1997, was $19,513,447. The number of
shares outstanding of each of the issuer's classes of common equity as of July
14, 1997 was 3,959,942 shares of Common Stock, $.50 par value.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
in connection with the Annual Meeting of Shareholders of the registrant to be
held on September 10, 1997, are incorporated by reference into Part III of this
report.
Transitional Small Business Disclosure Format: [__] Yes [ X ] No
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ITEM 1. DESCRIPTION OF BUSINESS.
General
Wave Technologies International, Inc. ("Wave" or the "Company") develops,
markets and delivers training and instructional products related to
sophisticated information technologies, including the Internet, data
communications and telecommunications systems, advanced operating systems and
client-server systems. Wave provides these services and products through an
integrated approach utilizing multi-media products, including computer-based
training, videos, published materials and CD-ROM, as well as instructor-led
courses and informational seminars. The Company directly markets its products
and services to information systems professionals and sells its published
products through a variety of distribution channels.
The Company's publishing business produces and distributes course books,
self-study guides, training videotapes, CD-ROM and CBT (computer-based training)
materials. The Company offers instructor-led courses at its eleven leased
training centers in the United States and at its current training center in the
United Kingdom. A second London center is scheduled to open in September of
1997. Wave's custom solutions division also assists technology manufacturers in
introducing and promoting emerging information technologies through
informational seminars, and it provides training fulfillment services on behalf
of manufacturers that offer such training to their customers. Wave's services
include designing, developing and/or delivering manufacturers' product-specific
training.
A growing factor in the technology training market is the development of
technical certification standards. A number of manufacturers and associations,
including Microsoft, CompTIA and Novell have established certification programs
for their hardware or software products. Wave currently provides certification
training for Microsoft's MCSE and MCSD programs, and Novell's CNE and CompTIA's
A+ certifications. The certification sponsors set certification standards that
are satisfied by passage of standardized tests, but do not dictate the methods
that students may use to prepare for the tests. Typically, students prepare by
taking courses or undertaking self-study. In addition to the knowledge gained
in studying for certification tests, students obtaining certification generally
have increased credibility in the industry and enhanced job possibilities. The
Company believes that demand for courses and programs to help information
systems professionals achieve certification will increase and is actively
monitoring these trends to identify opportunities.
Wave's training strategy includes four key elements that differentiate it
from its competitors:
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. Wave integrates its self-study media products with its instructor-led
and on-line distance learning services, based upon research that indicates that
adult learning requires significant interaction with instructors/other students
combined with independent study.
. Wave develops and owns the majority of the intellectual content of its
published products and courseware, which permits the Company to customize
materials and to respond more quickly to market changes, as Wave is not subject
to constraints imposed by manufacturers or other third party sources on the use
of their materials.
. Wave utilizes assessment tools to prescribe training programs specific
to individual needs rather than a standardized offering for an entire
organization's staff.
. Wave's multi-vendor product line allows it to better meet customer's
technology training needs, as virtually all information systems today
incorporate technology from several different manufacturers/vendors.
Wave, a Missouri corporation, was formed in 1988. The principal offices of
the Company are located at 10845 Olive Boulevard, Suite 250, St. Louis, Missouri
63141, and its telephone number is (314) 995-5767.
Publishing
The Company has significantly expanded its publishing sales over the past
three years, and offers self-study materials and course materials for
instructor-led classes. As a part of its publishing business, the Company
produces video training materials, software simulations, computer-based
assessment materials, books and on-line electronic documents (via Intranet or
CD-ROM).
The Company derives many of its titles from either its instructor-led
training or custom solutions materials, but continues to add a number of titles
for targeted market niches developed from other sources. The Company also
updates certain titles periodically and offers these "upgrades" to holders of
the titles at special prices or on a subscription basis.
Wave distributes its publishing products both directly to information
technology professionals and to independent training companies. Sales of course
materials to other training companies continue to increase as the demand for
training for Microsoft products and A+ certification grows. Wave is expanding
distribution of its courseware and other published products internationally,
particularly in countries where English is the primary language for application
software and manuals, and has entered into agreements with distributors in some
of those countries. Wave also has
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translated certain of its products into German and Japanese for distribution
internationally.
Instructor-Led Training
The Company's instructor-led training consists of courses and class
materials for students and instructors on information technologies. The Company
currently offers a core program of standard courses that it has designed for
information systems professionals. In addition to its standard courses, Wave
offers several complete curricula that combine self-study materials with on-line
tutorials and classroom training, under the name "Integrated Solution Program"
(ISP). Wave also provides customized offerings to meet a customer's needs by
tailoring one or more standard courses or by creating an entirely new course.
The Company typically delivers customized courses at the customers' facilities
and often prepares customized courseware or other published products to
accompany the instruction.
In selecting the information technologies that merit development of a
course or other product, Wave evaluates its experiences with emerging
information technologies in informational seminars and considers sales volume
trends of other emerging information technologies. The Company can evaluate and
learn new technologies without incurring research and development costs, through
its custom solutions programs funded by manufacturers. If Wave believes that
there may be interest in a new course, it may initially offer the course in
selected markets with course materials largely compiled from independent
sources. Once the Company decides to offer a course more widely, it develops
proprietary course materials.
The Company currently employs 10 full-time technical writers in addition to
using a portion of trainers' nonteaching time to develop courseware. The
Company believes that instructors bring insights to the drafting process from
the classroom where instructors and students discuss the technological issues
encountered in the workplace.
The Company offers a bundled set of services and products that it markets
to individual information systems professionals under the name Club Wave/TM/,
and to corporations and other organizations as the corporate Club Wave program.
For a flat fee, Club Wave customers obtain access to Wave courses and typically
enroll in a core curriculum and attend additional courses on a space-available
basis for up to one year. Club Wave customers receive the same support services
as other Wave customers, including telephone technical support and access to on-
line network bulletin boards and electronic mail messaging systems. At the time
of payment, Club Wave customers also receive Wave published products, including
videotapes, CBT materials and other courseware.
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Locations. Wave currently conducts its U.S. training operations at its
leased training centers in the following metropolitan areas: St. Louis;
Washington, D.C.; Los Angeles; Dallas; Chicago; San Jose; Atlanta; Boston;
Minneapolis; New York City; and Philadelphia. Wave offers instructor-led
training in London through its United Kingdom subsidiary. Currently, the
Company's U.K. offerings are delivered in its Richmond center. In September, a
second U.K. location is being added in London's financial district.
The Company currently employs two to four trainers and at least one sales
representative at each of its leased training centers. Center operations are
managed by five regional managers. These centers also typically have an
education coordinator to provide classroom assistance and sales and registration
support.
Custom Solutions
The Company develops educational seminars and promotional programs to
assist manufacturers in marketing new technologies. Wave also assists
manufacturers in providing training for their internal staffs as well as
addressing their need to train customers. The Company also administers entire
technical training programs for large corporations, including needs assessment,
curriculum design and updating, development or procurement of all training
materials, and cataloguing, scheduling and delivery of media and live training.
The Company has developed a range of programs designed to meet these needs.
Since calendar 1993, GTE has sponsored the Company's largest annual custom
solutions program under the name "GTE University." GTE uses the program, which
is presented through seminars, to introduce and demonstrate emerging
telecommunications technologies, such as products to facilitate telecommuting,
computer integrated telephones, ATM (asynchronous transfer mode) and fast packet
networking. Wave provides speakers, creates course materials and assists in the
direct-response mailings to an audience selected by GTE.
The Company currently presents other seminars, including its Technology
Solutions Workshop. Wave also provides training fulfillment programs on behalf
of manufacturers that sell training along with a product. The Company may
fulfill the manufacturer's training commitment using the manufacturer's program
and materials and Wave trainers.
Sales and Marketing
The Company markets its services and products through a three-tier sales
strategy: direct-response mailings and telemarketing, a sales force that
develops major accounts and third party distributors. The Company currently has
a sales and
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marketing staff of approximately 75 persons. Wave markets its published products
and instructor-led training services through Company catalogs mailed to
information systems professionals and independent training companies as well as
through trade publication advertising. Wave also uses resellers to distribute
its published products. The Company has distribution agreements with
ComputerPrep, Inc. and Ingram Micro Inc. and also uses other distributors to
resell its published products to information systems professionals. Wave markets
its custom solutions primarily through direct contacts with manufacturers and
other large corporations.
Using trade lists, compilations of prior Wave students and other sources,
the Company has developed databases containing the names, addresses and other
information about information systems professionals. Wave believes that its
emphasis on database marketing gives it greater market coverage and an advantage
over instructor-led training competitors that rely only on referrals from
manufacturers or a direct sales force to generate sales in such a dispersed
market.
Competition
Each of the Company's lines of business is highly competitive, and there
are few economic barriers to market entry in any of them. The Company not only
faces competition from many other companies offering similar services and
products, but it must also compete with the internal training, marketing and
publishing units of large corporations. The Company believes, however, that no
single company competes with Wave in all of its lines of business. The Company
believes that being involved in all three lines of business gives it certain
competitive advantages. For example, unlike most of its competitors, the
Company offers programs that utilize both self-study and instructor-led
training. Further, Wave can use the knowledge and experience it gains from its
custom solutions business to reduce the cost of developing new instructor-led
training courses and published products. Similarly, the insights the Company
gains in its instructor-led training assist it in producing published materials
that are responsive to its customers' needs.
Wave competes in its publishing business on the basis of its ability to
develop products quickly and on the quality of its published products. Because
Wave employees who have extensive contact with information systems professionals
assist in developing Wave's published products, the Company believes that it is
well positioned to respond to the developing needs of the market for published
products. The Company's publishing business is, however, small in comparison to
most publishing houses that specialize in PC and information technology
publications. There also are many other medium-sized and smaller companies that
conduct publishing businesses similar to that of the Company. Many such
competitors have access to greater resources and capital and more authors and
developers than currently available to the Company.
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Wave competes in the instructor-led training business on the basis of its
pricing, perceived quality, independence and breadth of course offerings. There
are a large number of competitors in the highly fragmented training industry,
and there is also competition among the available training methods, such as
instructor-led training, multimedia, CBT and video instruction. Within the
instructor-led training segment, there are many companies ranging in size from
those that are smaller than Wave to others that are substantially larger. In
addition, some of the major software and equipment manufacturers that maintain
their own training programs for both internal training and public training
compete with the Company. These manufacturer training programs have access to
substantial resources and capital not available to the Company. The Company
believes, however, that its independence allows it to assess such a
manufacturer's product objectively, which helps it compete with the
manufacturer's training programs. Wave also believes its established library of
courses and course materials that can be updated (or customized for a particular
customer) helps it compete. Through Club Wave and its published products, the
Company offers customers the ability to combine self-directed training with
classroom instruction in a single curriculum. Moreover, the Company believes
that the diversity of its course offerings, the quality of its personnel and the
multiple locations at which it offers training permit it to remain competitive
with others in the marketplace. The Company also believes that it prices its
courses at levels below those of its competitors. Wave's ongoing customer
support and toll-free telephone line also help to distinguish it from smaller
competitors in the third-party information training industry.
In custom solutions, Wave competes primarily with internal marketing
departments of manufacturers, as well as with numerous independent firms. The
Company believes that it can render services efficiently and is perceived as
independent from individual manufacturers.
Regulation
All the jurisdictions in which the Company operates its training centers
regulate and license certain kinds of vocational, trade, technical or other
post-secondary education. The Company believes that employer-funded or
reimbursed information technology training is exempt from such requirements in
many of these states. To the extent that Wave desires to participate in
programs funded by government entities, it will apply for licensing in
jurisdictions in which it operates training centers. If the Company were found
to be in violation of a state's licensing or other regulatory requirements, it
could be subject to civil or criminal sanctions, including monetary penalties.
The Company is also subject to federal, state and local regulations
concerning the environment, occupational safety and health. The Company has not
experienced
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significant difficulty in complying with such regulations and compliance has not
had a material impact on the Company's business or its financial results.
Trademarks and Intellectual Property
The Company's only federally registered trademark is the "Wave" name and
design, which is registered with the United States Patent and Trademark office,
although the Company is in the process of registering other marks. The
Company's material intellectual property consists of copyrighted published
products.
Employees
As of June 30, 1997, the Company had 219 employees, including 217 full-time
employees. There were 62 trainers and supervisors, 16 employees engaged in
providing custom solutions, 34 in full-time development and production of
published products, 73 in sales and marketing and 34 in general and
administrative services. None of the Company's employees are represented by
unions. The Company considers its employee relations to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's corporate headquarters is located in St. Louis, Missouri.
The leased property consists of 23,000 square feet and contains the Company's
executive offices, three classrooms and production facilities for courseware,
videotapes and other published products and advertising materials. The
Company's lease expires on March 31, 1999, with a one-year renewal option. The
base rent is $310,257 through the lease expiration date. The Company is
actively looking for additional space for its corporate headquarters, and
believes it will be able to locate suitable space and negotiate satisfactory
lease terms.
The Company also leases 6,360 square feet of warehouse space at an annual
rent of $36,576. The Company uses this space for its mailing and distribution
operations, equipment maintenance, and for storage.
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The following table sets forth the date the Company first leased space in a
market and certain information about each of the Company's current leased
training centers (other than St. Louis) at which the Company has classrooms:
<TABLE>
<CAPTION>
Date Square Current Annual Lease
Location of First Lease Feet Base Rental Term Ends
- -------- -------------- ------ -------------- -------------
<S> <C> <C> <C> <C>
Reston, Virginia........ August 1989 8,182 $152,922 June 1998
Dallas, Texas........... June 1990 5,659 104,691 May 2002
San Jose, California.... March 1993 7,915 171,000 December 1997
Chicago, Illinois....... August 1993 7,082 85,128 July 2000
Atlanta, Georgia........ June 1994 7,124 106,860 June 2001
London, United Kingdom.. August 1994 4,300 220,080 July 1999
London, United Kingdom.. September 1997 8,500 * December 2001
Los Angeles............. October 1994 6,999 131,121 June 1999
Philadelphia............ October 1994 6,613 107,461 December 2001
Boston.................. November 1994 5,439 102,525 January 2000
Minneapolis............. January 1995 7,462 119,392 March 2001
New York City........... March 1995 5,058 122,657 April 2005
</TABLE>
* No rent until May, 1998; from May 18, 1998, through November 18, 1998,
rent is (Pounds)102,937.50, and (Pounds)125,000 thereafter.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material lawsuits. The Company is
subject to claims arising in the ordinary course of its business which the
Company believes will not have, either individually or in the aggregate, a
material adverse effect on the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company completed its initial public offering of Common Stock on August
10, 1994. Its Common Stock is quoted on the Nasdaq National Market under the
symbol "WAVT." The following table sets forth the high and low reported sales
prices for the Common Stock as quoted on the Nasdaq National Market for the
periods indicated.
<TABLE>
<CAPTION>
==========================================================
Quarter Ended High Low
==========================================================
<S> <C> <C>
October 31, 1994 $ 7 1/2 $6 1/8
- ----------------------------------------------------------
January 31, 1995 $ 6 3/4 $6
- ----------------------------------------------------------
April 30, 1995 $11 1/2 $5 1/2
- ----------------------------------------------------------
July 31, 1995 $11 1/2 $5 1/4
- ----------------------------------------------------------
October 31, 1995 $ 8 1/4 $6 3/8
- ----------------------------------------------------------
January 31, 1996 $ 6 3/4 $5
- ----------------------------------------------------------
April 30, 1996 $ 6 1/2 $4 3/8
- ----------------------------------------------------------
July 31, 1996 $ 7 1/8 $4 1/2
- ----------------------------------------------------------
October 31, 1996 $ 6 1/8 $4 1/2
- ----------------------------------------------------------
January 31, 1997 $ 6 7/8 $4 3/4
- ----------------------------------------------------------
April 30, 1997 $ 7 1/4 $5 5/8
- ----------------------------------------------------------
July 31, 1997 (through July 14, 1997) $ 8 1/2 $5 5/8
==========================================================
</TABLE>
As of July 14, 1997, the Company had approximately 230 shareholders of
record.
The Company has not declared or paid any cash dividends on the Common
Stock. The Company currently anticipates that it will retain any earnings to
finance its growth and does not intend to pay cash dividends on its Common Stock
in the foreseeable future. The payment and rate of future cash dividends on the
Common Stock, if any, will be subject to review by the Company's Board of
Directors in light of the Company's financial condition, results of operations
and capital requirements, as well as other factors the Board of Directors deems
relevant.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview
Wave designs, develops and delivers technical training programs addressing
data communications, networking, Internet/Intranet, and client/server computing
technologies. The Company provides both published self-study and instructor-led
programs. By integrating these delivery formats and providing on-line distance
learning support, the Company believes it has a unique and highly effective
approach.
Review of Financial Results
Wave recognizes revenues from technology training based on actual
attendance. When individuals buy a curriculum of courses, income is recognized
as customers attend individual classes. The Company recognizes publishing
revenues at the time products are shipped. Custom solutions revenues are
recognized as specific services are fulfilled. As of April 30, 1997, the
Company had total deferred revenue of $4,099,000, reflecting sales not yet
recognized as revenue, compared to deferred revenue at April 30, 1996, of
$3,121,000.
The Company's costs of services, products and development include payroll,
payroll taxes, and travel and living expenses for trainers and custom solutions
personnel, expenses for the production of published products, and rental of
Company-operated and third-party facilities for training and manufacturing
service programs. Sales and marketing expenses include direct response mail
expenses, other advertising expenses and payroll and related taxes for sales
staff. Key components of general and administrative expense include management
compensation, bad debt expenses, depreciation and amortization, corporate
headquarters rent and telephone expenses. While the Company operates a
subsidiary in England, all revenues and expenses from international operations
are consolidated in the Company's financial statements.
Results of Operations - Fiscal 1997 Compared to Fiscal 1996
Revenues. Total fiscal 1997 revenues increased 26% to $30,826,000, from
$24,369,000, as Wave experienced revenue growth in all three segments of its
business.
Publishing revenues increased by $3,364,000, or 28%, compared to fiscal
1996 to $15,560,000 and represented approximately 50% of total revenues in both
fiscal 1996 and fiscal 1997. Much of the growth in publishing revenues related
to sales to large corporate clients, both domestic and international. Sales of
Wave's Microsoft NT products and A+ Certification products experienced the most
significant
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increases, 94% and 89%, respectively. The Company's strength in
these two content areas is based on its long presence in the certification
market. The percentage of published products sales through Wave's domestic and
international distributors remained fairly constant, at 33% in fiscal 1997,
compared to 32% in fiscal 1996.
Instructor-led training ("ILT") revenues increased 14%, or $1,228,000, to
$10,001,000 in fiscal 1997. Fiscal 1997 ILT revenues decreased to 32% of total
revenues, compared to 36% in the prior fiscal year. ILT revenues benefitted
from sales to major corporate accounts that integrate live training with self-
study and computer-based materials. The growth in ILT resulted primarily from
sales in the UK, which increased $1,358,000. The Company's London facility is
operating at near capacity and Wave plans to add an additional facility during
the first quarter of fiscal 1998. Domestic ILT revenues declined 2% to
$6,988,000 in fiscal 1997. The Company attributes this to an increased
proportion of sales to major corporate accounts that purchase training solutions
that integrate live training with self-study and custom training programs. A
significant portion of these revenues are recognized as publishing and custom
solutions revenue.
Custom solutions revenues increased 55% or $1,865,000 from fiscal 1996, and
increased as a percentage of total revenues to 17% from 14%. This segment of
Wave's business historically was dominated by its GTE University program.
Fiscal 1997 revenues also included significant sales to Sony Electronics, Inc.,
and sales of the Company's Integrated Solutions Workshop (ISW) and Technology
Solutions Workshop (TSW) programs. Wave showcases products of several vendors
to demonstrate integrated solutions to companies' technical needs. The ISW and
TSW programs provide the Company with strategic vendor relationships that enable
Wave to remain current on industry trends.
Costs and Expenses. Fiscal 1997 total costs and expenses increased
$4,479,000, or 18%.
Cost of services, products and development increased 15%, or $1,903,000,
but decreased as a percentage of revenues, to 47% in fiscal 1997, compared to
52% in fiscal 1996. The Company increased its use of consultants in both ILT
delivery and development and accounted for most of the dollar increase,
$1,190,000. Payroll and related costs decreased slightly, by 5%, to $5,096,000
in fiscal 1997 from $5,390,000 fiscal 1996, and employee travel and
entertainment costs also decreased, by $93,000, or 8%.
In fiscal 1997, the Company also amortized $1,244,422 of development costs
capitalized in prior periods, an increase of $472,000, or 61%, over fiscal 1996.
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Variable costs associated with published products increased slightly, by
$43,000, or 2%, but decreased as a percentage of revenues from 10% to 8% as Wave
focused on more cost-effective production methods. Shipping costs increased
$168,000, or 33%, largely as the result of continued growth in sales of
published products, and, to a lesser extent, shipments of materials for
classroom training and general intracompany shipments.
Wave's royalty payments decreased significantly in fiscal 1997, by
$260,000, or 90%, as it completed payments related to product acquisitions in
prior years. Costs of services also include outside facility and equipment
rentals where permanent Company facilities are not available, and rent for
Wave's training centers.
The Company decreased its expenses for outside facilities rental by
$79,000, or 96%, in fiscal 1997, and maintained rent expense for its own
facilities at $1,377,000, slightly above the level in fiscal 1996 of $1,361,000.
Equipment rental expenses increased $49,000, or 286%, as the Company implemented
its planned financing of computer hardware purchases through equipment leases.
Total sales and marketing expenses increased 29% in fiscal 1997, but
remained relatively stable as a percentage of revenues, at 27% in fiscal 1997,
compared to 26% in fiscal 1996. Payroll related items, including commissions,
increased $1,708,000, or 66%, as Wave continued to expand its field sales force,
and to increase incentive-based compensation to its sales and marketing team.
Employee travel and entertainment costs for sales and marketing personnel also
increased significantly, by 76%, or $123,000, in fiscal 1997 compared to the
prior year. Expenses for temporary and contract services increased $101,000, or
81%, in fiscal 1997, as Wave established a new out-bound telemarketing
operation, and increased the use of temporary labor on a trial basis.
Expenses related to direct mail in fiscal 1997 decreased 18%, or $507,000,
as the Company increased its emphasis on field sales. This increase is
attributable to increased printing and advertising costs associated with
advertising coop programs with distributors, advertising of Wave's ISW and TSW
programs and general corporate advertising. Outside marketing consultant fees
also increased $90,000 from fiscal 1996.
Advertising and promotional expenses, including trade show participation
also increased significantly in fiscal 1997, by $481,000, or 90%.
Total general and administrative expenses increased 12% in fiscal 1997, but
decreased as a percentage of revenues, to 22% compared to 24% in fiscal 1996.
Employee compensation expenses increased 21%, or $342,000, for international
employees to support the growth in international revenues. Employee travel
expenses also increased in fiscal 1997, by $114,000, or 148%, for domestic
management
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travel to support the growth in international revenues. Depreciation
expense increased significantly, by 26%, or $232,000, as Wave added hardware and
software to accommodate its growth. Telephone expense increased $137,000, or
21%, as the Company upgraded its phone and computer systems. Legal fees
increased $50,000, or 27%, in fiscal 1997, but were more than offset by a
significant decrease in outside accounting and other professional expenses, of
$258,000, or 57%.
One significant, non-recurring event in the fourth quarter of fiscal 1997
negatively impacted financial results. The Company expensed $165,000 for the
judgment in a lawsuit tried and lost during the quarter.
Income/Loss From Operations. Operating income for fiscal 1997 was
$1,332,000, or 4% of revenues, compared to an operating loss of $646,000, or 3%
of revenues, in fiscal 1996.
Other Income/Expense and Provision for Taxes. Other expense for fiscal
1997 was $85,000, a $13,000 decrease compared to fiscal 1996, primarily as the
result of decreased total borrowings during the fiscal year. Other income
increased by $11,000, to $32,000 in fiscal 1997. In addition, Wave recorded a
tax credit of $250,000 in the fourth quarter of fiscal 1997. As the Company
consistently recognizes, and anticipates continuing to recognize, net income,
this tax credit accounts for the remaining loss carryforward. Beginning in
fiscal 1998, Wave intends to book a provision for income taxes on a quarterly
basis.
Net Income/Loss. Net income for fiscal 1997 was $1,528,000, or $.39 per
share, compared to a net loss in fiscal 1996 of $724,000, or $.19 per share.
Results of Operations - Fiscal 1996 Compared to Fiscal 1995
Revenues. Total revenues for fiscal 1996 increased $6,352,000 or 35% to
$24,369,000 from $18,017,000 in fiscal 1995. Fiscal 1996 ILT revenues increased
$1,277,000, or 17%, to $8,773,000 from $7,496,000 in fiscal 1995. The Company's
revenues from its Novell curriculum decreased as a percentage of revenues from
72% to 48%. Wave attributes this continued decline to customers exploring
alternative networking systems and increased competition in the Novell training
market. Expansion of Wave's London operations accounted for $839,000, or 66%,
of the growth in ILT revenues. Revenues from the Club Wave program continued to
increase, by $1,268,000 to $3,175,000 for fiscal 1996, although a significant
portion of these annual increases replace traditional ILT sales of individual
courses.
Publishing revenues in fiscal 1996 increased $5,039,000, or 70%, to
$12,196,000 from $7,157,000 in the prior year. The Company's on-going emphasis
on publishing included the introduction of self-study materials and assessment
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software. Self-study kits for the Microsoft MCSE program accounted for
$4,112,000, or 34%, of publishing revenues in fiscal 1996. The percentage of
Wave's published products sales through domestic and international distributors
continued to increase, to 32% in fiscal 1996, compared to 5% in fiscal 1995.
Custom solutions revenues in fiscal 1996 increased slightly, by $36,000 or
1%, to $3,400,000 from $3,364,000 in fiscal 1995. Revenues from GTE and the GTE
University program declined by $458,000 in fiscal 1996. Revenues from new
custom solutions programs for other vendors offset this decline. Unlike past
years, GTE University 1996 extended beyond the end of Wave's fiscal year.
Costs and Expenses. Total costs and expenses in fiscal 1996 increased
$5,825,000, or 30%, to $25,016,000 from $19,191,000 in fiscal 1995. Total costs
and expenses represented 103% of total revenues for the fiscal year, but only
97% of total revenues for the fourth quarter of fiscal 1996.
Costs of services, products and development represented 52% of total
revenues in fiscal 1996, compared to 50% in fiscal 1995, increasing $3,686,000,
or 41%, to $12,701,000 from $9,015,000 in fiscal 1995. Payroll and payroll
taxes increased $846,000, or 19%, from $4,544,000 in fiscal 1995, to $5,390,000.
Production costs for publishing rose $1,561,000, or 186%, in fiscal 1996, to
$2,400,000 from $839,000 in fiscal 1995. Freight costs associated with the
shipping of published materials and study kits rose $193,000 to $494,000 in
1996. Both production and shipping costs increased as a percentage of revenues
as Wave continued to increase its reliance on distributors. Travel and living
expenses remained relatively stable at $1,178,000 in fiscal 1996. While the
Company had no royalty expense in fiscal 1995, it incurred $289,000 in fiscal
1996 related primarily to the acquisition of assets from a small training
company. Amortization of previously capitalized development costs, net of
current capitalization, increased by $116,000. Wave's costs relating to
payments to third parties for training, materials, consulting and other services
associated with its custom solutions line of business increased by $270,000 to
$782,000. As sales of custom solutions services to customers other than GTE
increased, the Company outsourced many products and services for these non-
recurring programs, rather than increasing fixed overhead costs.
Outside facility and equipment rental expenses declined $516,000, or 84%,
in fiscal 1996, primarily due to increased utilization of Company facilities,
including the new centers opened in fiscal 1995. Training center rent expense
increased $315,000, or 32%, to $1,301,000, from $986,000 in fiscal 1995, as Wave
paid rent for a full year for the seven centers opened in fiscal 1995. Wave
incurred an additional $60,000 of rent expenses in fiscal 1996 for a new
distribution center opened during the year. Depreciation related to equipment
used in the cost of sales area increased $254,000, or 88%, in fiscal 1996 to
$542,000, reflecting a full year's
14
<PAGE>
depreciation of the new equipment and personal property acquired in fiscal 1995
in addition to items purchased in fiscal 1996.
Sales and marketing expenses in fiscal 1996 increased $689,000, or 12%, to
$6,396,000 from $5,707,000 in fiscal 1995 and represented 26% of total revenues
in fiscal 1996, compared to 32% in the prior fiscal year. Most of the dollar
increase occurred in payroll costs as the Company added an outside sales force
and expanded its international sales organization. Employment-related expenses
for sales and marketing personnel in fiscal 1996 increased $1,110,000 or 75%, to
$2,594,000 from fiscal 1995. Direct-response mail expenses, which constitute
the largest component of sales and marketing expenses, declined by $66,000, or
2%, in fiscal 1996 to $2,750,000 from $2,816,000 in fiscal 1995. Other
advertising, promotional and trade show expenses in fiscal 1996 decreased
$593,000, or 53%, to $533,000 from $1,125,000 in fiscal 1995. Approximately
$192,000 of sales and marketing expenses incurred by the Company in fiscal 1996
were attributable to Wave's sales efforts in the Pacific Rim.
General and administrative expenses represented 24% of total revenues in
fiscal 1996 and 25% in fiscal 1995, and increased $1,450,000, or 32%, to
$5,919,000, from $4,469,000 in fiscal 1995. Employment-related expenses for
administrative personnel in fiscal 1996 increased $136,000, or 9%, to $1,664,000
from $1,528,000 in fiscal 1995, as the Company continued to add administrative
staff to accommodate current and anticipated growth. Depreciation in fiscal
1996 increased $417,000, or 88%, to $893,000 from $476,000 in fiscal 1995,
reflecting a full year's depreciation of the new equipment and personal property
acquired during fiscal 1995 and additional items purchased during fiscal 1996.
The Company had $150,000 of goodwill amortization in fiscal 1996 associated with
the asset acquisition. Wave incurred no significant costs in that acquisition
other than goodwill, as the primary assets acquired were courseware and the
related intellectual content, and customer relationships. Outside services,
comprised principally of legal and accounting expenses, rose $414,000, or 186%,
to $637,000 in fiscal 1996. In response to its rapid growth, the Company engaged
outside professional services to assist it with financial systems and procedures
and related accounting issues during the early part of fiscal 1996. Rent and
telephone expenses were $1,127,000 in fiscal 1996, a $289,000 or 35% increase,
reflecting a full fiscal year of operations in all Wave centers.
Income/Loss from Operations. Loss from operations in fiscal 1996 was $646,000,
or 3% of revenues, compared to $1,174,000 in fiscal 1995, or 7% of revenues.
Other Income/Expense--Net. Other expense--net in fiscal 1996 was $78,000
compared to other income-net of $20,000 in fiscal 1995, as the Company's
interest expense increased as it financed a portion of its growth with debt.
15
<PAGE>
Provision for Income Taxes. No provision for income taxes was made in fiscal
1996 or in fiscal 1995, because of the Company's current and historical tax
losses. As of the end of fiscal 1996, the Company had loss carryforwards of
approximately $1,814,000, which expire in varying amounts through 2010.
Liquidity and Capital Resources
The Company had net cash from operating activities of $1,511,000 in fiscal
1997 compared to using cash of $722,000 in fiscal 1996. Earnings before
interest, taxes, depreciation and amortization increased to $3,498,000 at April
30, 1997, compared to an increase of $925,000 at April 30 in the prior year.
Wave's deferred revenue increased from $3,121,000 at April 30, 1996, to
$4,099,000 at April 30, 1997. This increase included prepaid course offerings,
Club Wave receipts, and continuing custom solutions work. The Company's cash and
cash equivalents increased to $948,000 at April 30, 1997, from $747,000 at April
30, 1996. Wave's accounts payable increased to $2,490,000 at April 30, 1997,
from $1,970,000 at April 30, 1996. Total accounts receivable increased 41%, from
$5,044,000 at April 30, 1996, to $7,108,000 at April 30, 1997. Average days'
sales in accounts receivable were 84 at April 30, 1997, compared to 76 days at
April 30, 1996.
Inventory increased 12% from $700,000 at April 30, 1996, to 785,000 at
April 30, 1997.
Prepaid direct mail costs increased 19%, to $558,000 at April 30, 1997,
from $468,000 at April 30, 1996.
The Company used $815,000 of cash in fiscal 1997 for capital expenditures,
primarily for computer equipment and related software.
The Company expects to continue to finance its operations from internally
generated funds and bank or other third-party financing, which the Company will
seek as needed. In August 1995, the Company obtained a bank line of credit,
renewable annually, bearing interest at the bank's prime rate. In September of
1996, Wave increased that line of credit to $2,000,000, from $1,500,000. At
fiscal year-end, Wave had nothing drawn on its line of credit. In January of
1996, the Company executed a $600,000 term note due January 5, 1999, bearing
interest at 9.25%, with monthly installments of approximately $19,000.
Wave anticipates investing approximately $500,000 in new computer equipment
in fiscal 1998, to be funded by a combination of operating and capital leases.
The Company's current commitments for operating lease obligations of $1,565,000
in fiscal 1998 consist primarily of the leases for the Company's headquarters
and training centers. The Company currently anticipates that cash generated from
operations, existing cash balances, additional equipment leases and
16
<PAGE>
available credit lines will be sufficient to satisfy the Company's cash
requirements for operations for at least twelve months.
ITEM 7. FINANCIAL STATEMENTS.
LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of Wave Technologies
International, Inc. and subsidiaries are included at the end of Part III of this
Annual Report on Form 10-KSB:
Consolidated Balance Sheets - April 30, 1996 and 1997
Consolidated Statements of Operations- Years Ended April 30, 1996 and 1997
Consolidated Statements of Common Shareholders' Equity - Years Ended
April 30, 1996 and 1997
Consolidated Statements of Cash Flows - Years Ended April 30, 1996 and
1997
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
17
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Pursuant to General Instruction E(3) to Form 10-KSB, the information
required by this Item is set forth in the section entitled "Election of
Directors" in the definitive proxy statement involving the election of directors
in connection with the Annual Meeting of Shareholders of the registrant to be
held on September 10, 1997 (the "Proxy Statement"), which section is
incorporated herein by reference. The Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after April 30, 1997,
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.
The information required with respect to Section 16(a) of the Securities
Exchange Act of 1934 is included under the caption "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Proxy Statement, which
section is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION.
Pursuant to General Instruction E(3) to Form 10-KSB, the information
required by this Item is set forth in the section entitled "Election of
Directors" in the Proxy Statement, which section is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction E(3) to Form 10-KSB, the information
required by this Item is set forth in the section entitled "Voting Rights" and
"Security Ownership of Management" in the Proxy Statement, which sections are
incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction E(3) to Form 10-KSB, the information
required by this Item is set forth in the section entitled "Election of
Directors" in the Proxy Statement, which section is incorporated herein by
reference.
18
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) Exhibits:
<C> <S>
3.2 Restated Bylaws, as amended
4.1 Specimen Stock Certificate (filed as
Exhibit 4.1 to Registrant's
Registration Statement on Form SB-2
(File No. 33-80556) and incorporated
herein by reference)
4.2 Warrant Agreement, including Form of
Representatives' Warrant (filed as
Exhibit 4.2 to Registrant's
Registration Statement on Form SB-2
(File No. 33-80556) and incorporated
herein by reference)
10.1 Employment Agreement dated June 25,
1997, between the Company and J.
Michael Bowles
10.2 Service Agreement dated June 1, 1994,
by and between the Company and John A.
Kirkham (filed as Exhibit 10.2 to
Registrant's Registration Statement on
Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.3 Amended and Restated 1993 Stock Option
Plan (filed as Exhibit 10.3 to
Registrant's Registration Statement on
Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.4 Wave Technologies International, Inc.
Outside Directors Stock Option Plan
(filed as Exhibit 10.4 to Registrant's
annual report on Form 10-KSB for the
fiscal year ended April 30, 1995, and
incorporated herein by reference)
10.5 Distribution Agreement between the
Company and Ingram Micro, Inc., dated
April 19, 1996 (filed as exhibit 10.8
to Registrant's annual report on Form
10-KSB for the fiscal year ended April
30, 1995, and incorporated herein by
reference)
10.6 Stock Purchase Agreement between the
Company and Radnor Venture Partners,
L.P. (filed as Exhibit 10.9 to
Registrant's Registration Statement on
Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.7 Agreement between the Company and
Radnor Venture Partners, L.P., dated
April 30, 1994 (filed as Exhibit 10.10
to Registrant's Registration Statement
on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.8 Amendment Agreement between the Company and Radnor Venture
Partners, L.P., dated May 31, 1994 (filed as Exhibit 10.11 to
Registrant's Registration Statement on Form SB-2 (File No. 33-
80556) and incorporated herein by reference)
10.9 $2,000,000 Line of Credit Note to Commerce Bank, National
Association, dated September 1, 1996 (filed as Exhibit 10.9 to
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
October 31, 1996 and incorporated herein by reference)
10.10 General Loan and Security Agreement between Commerce Bank,
National Association, and the Company, dated as of August 31, 1995
(filed as Exhibit 10.15 to Registrant's Quarterly Report on Form
10-QSB for the quarter ended October 31, 1995, and incorporated
herein by reference)
10.11 First Amendment to General Loan and Security Agreement, dated as
of January 5, 1996, between the Company and Commerce Bank,
National Association (filed as Exhibit 10.13 to Registrant's
Quarterly Report on Form 10-QSB for the quarter ended January 31,
1996, and incorporated herein by reference)
10.12 $600,000 Note dated January 5, 1996, to Commerce Bank, National
Association (filed as Exhibit 10.14 to Registrant's Quarterly
Report on Form 10-QSB for the quarter ended January 31, 1996 and
incorporated herein by reference)
10.13 Second Amendment to General Loan and Security Agreement between
the Company and Commerce Bank, National Association, dated as of
September 1, 1996 (filed as Exhibit 10.13 to Registrant's
Quarterly Report on Form 10-QSB for the quarter ended October 31,
1996, and incorporated herein by reference)
10.14 Wave Technologies International, Inc. 1995 Stock Option Plan
(filed as Exhibit 4.3 to Registrant's Registration Statement on
Form S-8 (File No. 33-98462) and incorporated herein by reference)
10.15 Waveware License Agreement between the Company and SHL Systemhouse
Corp., dated as of January 30, 1996 (filed as Exhibit 10.19 to
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
January 31, 1996 and incorporated herein by reference)
11.1 Statement Regarding Computation of Per Share Earnings (Loss)--
Included in notes to Consolidated Financial Statements
21.1 List of Subsidiaries
23.1 Consent of Deloitte & Touche, LLP
</TABLE>
20
<PAGE>
Executive Compensation Plans and Agreements
Service Agreement dated June 1, 1994, by and between the Company and John
A. Kirkham (filed as Exhibit 10.2 to Registrant's Registration Statement
on Form SB-2 (file No. 33-80556).
Employment Agreement dated June 25, 1997 between the Company and J.
Michael Bowles.
Amended and Restated 1993 Stock Option Plan (filed as Exhibit 10.3 to
Registrant's Registration Statement on Form SB-2 (File No. 33-80556)).
1995 Stock Option Plan (filed as Exhibit 4.3 to Registrant's Registration
Statement on Form S-8 (File No. 33-98462)).
Wave Technologies International, Inc. Outside Directors Stock Option Plan
(filed as Exhibit 10.4 to Registrant's annual report on Form 10-KSB for
the fiscal year ended April 30, 1997).
(b) Reports on Form 8-K - The registrant did not file any reports on Form 8-K
during the fiscal year ended April 30, 1997.
21
<PAGE>
WAVE TECHNOLOGIES
INTERNATIONAL, INC.
Financial Statements for the
Years Ended April 30, 1997 and 1996 and
Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Wave Technologies International, Inc.:
We have audited the accompanying consolidated balance sheets of Wave
Technologies International, Inc. and Subsidiaries (the "Company") as of April
30, 1997 and 1996, and the related consolidated statements of operations, common
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Wave Technologies International,
Inc. and Subsidiaries at April 30, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
St. Louis, Missouri
June 6, 1997
<PAGE>
<TABLE>
<CAPTION>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------
April 30,
----------------------------
ASSETS 1996 1997
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 747,064 $ 948,280
Accounts receivable - less allowance for doubtful accounts of
$474,000 and $446,000 5,044,471 7,107,651
Inventory 699,914 785,011
Prepaid expenses 203,296 475,949
Other current assets 168,141 169,305
----------- -----------
Total current assets 6,862,886 9,486,196
PROPERTY AND EQUIPMENT (Note 3) 3,883,263 3,956,964
PREPAID DIRECT MAIL COSTS 467,517 558,025
DEFERRED COURSEWARE DEVELOPMENT COSTS 1,617,634 1,653,993
OTHER ASSETS (Note 4) 826,510 839,348
----------- -----------
TOTAL $13,657,810 $16,494,526
=========== ===========
(Continued)
</TABLE>
F - 2
<PAGE>
<TABLE>
<CAPTION>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------
April 30,
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1997
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 1,969,700 $ 2,489,814
Accrued expenses 1,260,578 1,408,946
Deferred revenue 3,121,444 4,098,761
Bank line-of-credit (Note 5) 228,000
Current portions of long-term debt and capital lease obligation:
Note payable (Note 5) 228,163 280,099
Capital lease obligations (Note 6) 32,973 76,451
----------- -----------
Total current liabilities 6,840,858 8,354,071
----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION,
Excluding current portions:
Note payable (Note 5) 431,612 147,020
Capital lease obligations (Note 6) 56,295 94,766
ACCRUED RENT LIABILITY (Note 6) 345,496 297,987
COMMON SHAREHOLDERS' EQUITY:
Common stock, $.50 par value, authorized, 20,000,000 shares;
issued, 3,920,993 and 3,933,459 shares; outstanding, 3,913,636
and 3,926,102 shares 1,960,497 1,966,729
Additional paid-in capital 7,012,474 7,038,285
Accumulated deficit (2,996,833) (1,468,461)
Cumulative translation adjustment 22,109 78,827
----------- -----------
Total 5,998,247 7,615,380
Less treasury stock, at cost (7,357 shares) (14,698) (14,698)
----------- -----------
Total common shareholders' equity 5,983,549 7,600,682
----------- -----------
TOTAL $13,657,810 $16,494,526
=========== ===========
See notes to consolidated financial statements. (Concluded)
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------
1996 1997
REVENUES (Notes 10 and 11):
<S> <C> <C>
Publishing $12,196,294 $15,560,721
Instructor-led training 8,772,939 10,000,828
Custom solutions 3,400,103 5,264,907
----------- -----------
Total revenues 24,369,336 30,826,456
COSTS AND EXPENSES:
Cost of services, products and development 12,700,665 14,603,830
Sales and marketing 6,395,988 8,257,289
General and administrative 5,918,960 6,633,549
----------- -----------
Total costs and expenses 25,015,613 29,494,668
----------- -----------
INCOME (LOSS) FROM OPERATIONS (646,277) 1,331,788
INTEREST EXPENSE (74,301) (69,293)
OTHER INCOME (EXPENSE) - Net (3,375) 15,877
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES (723,953) 1,278,372
INCOME TAX CREDIT - 250,000
----------- -----------
NET INCOME (LOSS) $ (723,953) 1,528,372
=========== ===========
NET INCOME (LOSS) PER SHARE $(0.19) $0.39
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 3,791,562 3,968,739
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Total
Additional Cumulative Common
Common Paid-in Accumulated Translation Treasury Shareholders'
Stock Capital Deficit Adjustment Stock Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 30, 1995 $1,809,812 $6,056,407 $(2,272,880) $21,976 $(14,698) $5,600,617
Net loss (723,953) (723,953)
Options - warrants exercised 110,685 396,067 506,752
Issuance of common stock in
connection with ETI acquisition -
(See Note 12) 40,000 560,000 600,000
Change in cumulative translation
adjustment 0 0 0 133 0 133
---------- ---------- ----------- ----------- ---------- ----------
BALANCE, APRIL 30, 1996 1,960,497 7,012,474 (2,996,833) 22,109 (14,698) 5,983,549
Net income 1,528,372 1,528,372
Options - warrants exercised 6,232 25,811 32,043
Change in cumulative translation
adjustment 0 0 0 56,718 0 56,718
---------- ---------- ----------- ----------- ---------- ----------
BALANCE, APRIL 30, 1997 $1,966,729 $7,038,285 $(1,468,461) $78,827 $(14,698) $7,600,682
========== ========== =========== =========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE>
<TABLE>
<CAPTION>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------
Years Ended April 30,
---------------------------
1996 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (723,953) $ 1,528,372
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,574,661 1,899,853
Barter revenue (700,330) (842,995)
Deferred tax credit (250,000)
Other (9,767) (7,166)
Net changes in other assets and liabilities:
Accounts receivable (2,351,360) (2,063,180)
Inventory 210,629 (85,097)
Prepaid expenses and other current assets (110,630) (273,817)
Prepaid direct mail costs 1,212,924 (90,508)
Deferred courseware development (490,745) (36,359)
Other assets 17,102 69,162
Accounts payable (1,309,869) 520,115
Accrued expenses 598,952 148,368
Deferred revenue 1,360,522 977,317
----------- -----------
Net cash provided by (used in) operating activities (721,864) 1,494,065
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (503,293) (815,180)
Acquisition of ETI, Inc. (247,392) 0
----------- -----------
Net cash used in investing activities (750,685) (815,180)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance - net 506,752 32,043
Proceeds from borrowings under note payable 731,643 0
Borrowings (repayments) under line-of-credit 228,000 (228,000)
Repayments of notes payable (307,978) (232,404)
Payments of capital lease obligation (29,497) (49,308)
----------- -----------
Net cash provided by (used in) financing activities 1,128,920 (477,669)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (343,629) 201,216
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,090,693 747,064
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 747,064 $ 948,280
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for interest $ 76,191 $ 69,017
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F - 6
<PAGE>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. THE COMPANY
Wave Technologies International, Inc. ("Wave" or the "Company") is engaged
in the business of developing, marketing, and delivering training and
instructional products relating to sophisticated information technologies.
The Company operates 11 training centers in the United States, and one in
the United Kingdom.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Revenue is recognized for information technology
training and manufacturers' services as the services are rendered. Revenue
from the sale of published products is recognized at the time the product
is shipped. Deferred revenue consists of fees paid for services which have
not yet been rendered. The Company provides allowances for returns at the
time of sale based on management estimates.
Club Wave and Corporate Club Wave represent programs through which the
Company provides an integrated set of services and products. The portion of
revenue pertaining to products is recognized at the time the product is
shipped. The remaining revenue is deferred and recognized as the services
are provided over the term of the membership.
Basis of Consolidation - The consolidated financial statements include the
accounts of Wave and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less at date of
purchase to be cash equivalents.
Inventories - Inventories are primarily composed of published materials and
are valued at the lower of cost or market using the first-in, first-out
(FIFO) method of computing cost.
Property and Equipment - Property and equipment is stated at cost, less
accumulated depreciation and amortization. Depreciation is computed using
the straight-line method over 3 years for computer equipment and software,
7-10 years for furniture and fixtures and the term of the related lease for
leasehold improvements.
Advertising Costs - The Company expenses advertising costs as incurred,
except for direct-response advertising, which is capitalized and amortized
over its expected period of future benefits.
Direct-response advertising consists primarily of direct mail programs. The
capitalized costs of the advertising are amortized over a period not
exceeding six months following commencement of the program. Advertising
expense for the years ended April 30, 1996 and 1997 was $3,219,737 and
$3,081,501, respectively.
F - 7
<PAGE>
Deferred Courseware Development - The Company capitalizes the direct labor
and material costs incurred in connection with the development of
courseware. Such capitalized costs are amortized over the estimated useful
life, which is generally two years.
Income Taxes - The Company provides for income taxes based on Statement of
Financial Accounting Standards ("SFAS") 109, Accounting for Income Taxes.
Deferred income taxes are computed based on the expected future tax
consequences of temporary differences between the tax bases and financial
reporting bases of assets and liabilities.
Goodwill - Goodwill represents the excess of purchase price over the fair
value of net assets acquired and is amortized using the straight-line
method over 5 years. Management periodically reviews the value of its
goodwill to determine if an impairment has occurred or whether changes have
occurred that would require a revision to the remaining useful life. In
making such determination, management evaluates the performance, on a
discounted basis of the underlying operations or assets which give rise to
such amount. Based on this review, management does not believe that any
such impairment has occurred.
Long-Lived Assets - The Financial Accounting Standards Board issued SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of, in March 1995. The general requirements of
this statement are applicable to the properties and intangible assets of
the Company and require impairment to be considered whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company adopted this standard on May 1, 1996. No
impairment losses have been identified by the Company.
Stock-Based Compensation Plans - During fiscal 1996, the Company adopted
SFAS No. 123, Accounting for Stock-Based Compensation. The new standard
defines a fair value method of accounting for stock options and similar
equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but not required,
to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), but would be required to disclose
pro forma net income and, if presented, earnings per share as if the
company had applied the new method of accounting. The accounting
requirements of the new method are effective for all employee awards
granted after the beginning of the fiscal year of adoption, whereas the
disclosure requirements apply to all awards granted subsequent to April 30,
1995. The Company will continue to recognize and measure compensation for
its stock rights and stock option plans in accordance with the existing
provisions of APB 25. See Note 9 for pro forma disclosures of net income
(loss) and net income (loss) per share as if the fair value-based method
prescribed by SFAS No. 123 had been applied.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments - The carrying amount of the Company's
notes payable and long-term debt approximates the fair value based on
quoted market prices for similar issues or current rates offered to the
Corporation for debt with similar maturity schedules. The carrying amount
of all other
F - 8
<PAGE>
financial instruments, including cash and cash equivalents, accounts receivable
and accounts payable approximates fair value due to the short-term nature of
these investments.
Computation of Net Income (Loss) Per Share - Net income (loss) per share is
computed by dividing net income (loss) by the weighted average number of shares
of common stock. Potentially dilutive securities, including stock options and
warrants, have not been included in the calculation for 1996 as a result of
their anti-dilutive effect.
Reclassifications - Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 presentation.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consist of:
April 30,
---------------------------
1996 1997
<S> <C> <C>
Computer equipment and software $ 5,586,701 $ 6,463,027
Furniture and fixtures 1,217,045 2,131,322
Leasehold improvements 295,309 284,195
----------- -----------
7,099,055 8,878,544
Less - Accumulated depreciation and amortization (3,215,792) (4,921,580)
----------- -----------
$ 3,883,263 $ 3,956,964
=========== ===========
</TABLE>
The Company provides technology training to certain customers in exchange for
computer hardware and software. Computer hardware and software of $700,330 and
$842,995 was acquired in the years ended April 30, 1996 and 1997, respectively,
in connection with such nonmonetary transactions. The Company records such
nonmonetary transactions at the lower of the fair market value of the assets
received or the average price of the related training program.
4. OTHER ASSETS
<TABLE>
<CAPTION>
Other assets consist of:
April 30,
----------------------
1996 1997
<S> <C> <C>
Goodwill (see Note 12) $669,336 $524,756
Deposits 153,611 64,592
Deferred tax asset 3,563 250,000
-------- --------
Total $826,510 $839,348
======== ========
Amortization of goodwill was $168,000 and $150,000 in the years ended April 30,
1997 and 1996, respectively.
</TABLE>
F - 9
<PAGE>
5. NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C> <C>
April 30,
----------------------
1996 1997
Note payable to the bank, at 9.25%, payable in monthly payments
of interest and principal of $19,187 through January 1999,
collateralized by accounts receivable, equipment, inventory and
other assets of the Company. $555,190 $368,379
Note payable to the bank, at 9%, payable in monthly payments of
interest and principal of $4,155 through August 1998,
collateralized by equipment of the Company. 104,585 58,740
------- --------
659,775 427,119
Current maturities 228,163 280,099
------- --------
Total long-term obligations $431,612 $147,020
======== ========
</TABLE>
In August 1995, the Company entered into a line-of-credit agreement with the
bank that extends until September 1997. The Company had borrowed $228,000 and
$-0- under this line-of-credit agreement as of April 30, 1996 and 1997,
respectively. The line bears interest at the prime rate (8.5% as of April 30,
1997). The line-of-credit agreement is collateralized by accounts receivable,
equipment, inventory and other assets of the Company and includes certain
covenants which require the maintenance of a certain level of tangible net worth
and restrict the payment of dividends.
The scheduled maturities of long-term debt at April 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1998 $280,099
1999 147,020
--------
Total $427,119
========
</TABLE>
F - 10
<PAGE>
6. LEASING ARRANGEMENTS
The Company leases equipment under noncancelable capital lease agreements.
The equipment acquired under the leases have been capitalized and the
related obligation is included in long-term debt and capital lease
obligation in the financial statements. The Company leases facilities and
other equipment under various noncancelable lease agreements. The following
is a schedule of future minimum lease payments under the leases, together
with the present value of net minimum lease payments for the capital lease
as of April 30, 1997:
<TABLE>
<CAPTION>
Year Ended Capital Operating
April 30, Lease Leases
<S> <C> <C>
1998 $ 91,820 $1,565,024
1999 63,690 1,302,034
2000 40,155 837,741
2001 0 660,428
2002 366,572
Thereafter 0 420,432
-------- ----------
Net minimum lease payments, April 30, 1997 195,665 $5,152,231
==========
Less - Amount representing interest (24,448)
--------
Present value of net minimum lease $171,217
payments ========
Current portion of capitalized lease $ 76,451
obligation
Long-term portion of capitalized lease 94,766
obligation --------
$171,217
========
</TABLE>
During fiscal 1996 and 1997, the Company entered into capital lease
agreements to purchase $56,351 and $131,006 of equipment, respectively. As
of April 30, 1996 and 1997, the total cost of equipment capitalized
amounted to $137,775 and $268,781 and the corresponding accumulated
depreciation amounted to approximately $55,159 and $94,883, respectively.
Rent expense under operating leases was $1,609,693 and $1,621,041 for the
years ended April 30, 1996 and 1997, respectively.
Accrued rent liability consists of rent incentives received for leased
operating facilities and is being amortized on a straight-line basis to
offset rent expense over the life of the lease. Certain of the Company's
leases include scheduled base rent increases over the term of the lease.
The total amount of such base rent payments is being charged to expense on
a straight-line basis over the term of the lease.
7. INCOME TAXES
Due to the Company's historical taxable losses, no tax provision was
recorded in fiscal 1996. The Company had historically generated significant
net operating loss carryforwards as well as other deferred tax assets
resulting from deductible temporary differences. The Company recognized
deferred tax valuation allowances in an amount sufficient to eliminate
deferred tax assets as the Company had been in a cumulative loss position.
F - 11
<PAGE>
The income tax credit for fiscal 1997 consists of the deferred tax benefit
associated with the elimination of the Company's valuation allowance. During
1997 the Company generated positive taxable income and used a significant
portion of its previously existing net operating loss carryforwards. Based on
operations over the past 18 months and projections for fiscal 1998, management
expects to fully utilize its remaining net operating loss carryforwards in the
next year, and to fully realize the benefits of its other deferred tax assets.
Temporary differences which gave rise to deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
April 30,
------------------------
1996 1997
Deferred tax assets:
<S> <C> <C>
Operating loss carryforwards $ 671,000 $ 135,000
Allowance for doubtful accounts 154,000 90,000
Courseware development costs 95,000 19,000
Accruals not currently deductible for 202,000 168,000
tax purposes
Other 77,000 88,000
---------- ---------
Gross deferred tax assets 1,199,000 500,000
---------- ---------
Deferred tax liabilities:
Depreciation (164,000) (43,000)
Prepaid advertising (152,000) (207,000)
---------- ---------
Gross deferred tax liabilities (316,000) (250,000)
---------- ---------
Net 883,000 250,000
Valuation allowances (883,000) -
---------- ---------
Net deferred tax assets $ - $ 250,000
========== =========
</TABLE>
Approximately $346,000 of net operating loss carryforwards remain as of April
30, 1997, which expire in various amounts through 2010.
8. EMPLOYEE BENEFIT PLAN
The Company has a salary reduction defined contribution profit sharing
plan, including features designed to qualify the plan under Section 401(k)
of the Internal Revenue Code, which provides retirement benefits to
substantially all of its employees. The Company's contribution to the plan
is determined annually by the Board of Directors. The Company contributed
$82,000 and $90,000 under this plan in the years ended April 30, 1996 and
1997, respectively.
9. STOCK OPTIONS AND WARRANTS
Effective May 1, 1996 Wave Technologies International adopted SFAS No. 123,
Accounting for Stock-Based Compensation. As permitted by the standard, the
Company has elected to continue following the guidance of Accounting
Principles Board ("APB") Opinion No. 25 Accounting for Stock Issued to
Employees, for measurement and recognition of stock-based transactions with
employees. Accordingly, no compensation cost has been recognized for the
Company's option plans. Had the determination of
F - 12
<PAGE>
compensation cost for these plans been based on the fair value of the grant
dates for awards under these plans, consistent with the method of SFAS No. 123,
the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
April 30,
--------------------------
1996 1997
<S> <C> <C>
Net income (loss):
As reported $(724,000) $1,528,000
Pro forma (807,000) 1,417,000
Earnings per share:
As reported (0.19) 0.39
Pro forma (0.21) 0.36
</TABLE>
The resulting compensation expense may not be representative of compensation
expense to be incurred on a pro forma basis in future years.
Under the Company's 1993 and 1995 Stock Option Plans, the Company may grant
options for selected officers and employees of the Company and its subsidiaries
for up to 590,000 shares of common stock. Under this plan, the exercise price of
each option equals not less than fair market value of company's stock on the
date of grant, and an option's maximum term is 10 years. Options are granted by
the Board of Directors and the President of the company or its delegates. The
majority of options granted vest over three years, in equal installments. If the
optionee's employment is terminated, this option remains exercisable for a
period between 30 and 90 days, unless the employee is terminated "for cause",
then the option terminates immediately.
The fair value of each option grant is estimated on the date of grant by using
the Black-Scholes option-pricing model. The following weighted-average
assumptions were used for grants in 1996 and 1997:
<TABLE>
<CAPTION>
April 30,
-----------------
1996 1997
<S> <C> <C>
Expected dividend yield 0.00% 0.00%
Expected volatility 61.00% 68.00%
Risk-free interest rates 6.88% 6.87%
Expected option lives (years) 5.00 5.00
</TABLE>
F - 13
<PAGE>
A summary of the status of the Company's stock option plan for the two-year
period ended April 30, 1997 follows:
<TABLE>
<CAPTION>
Outstanding
---------------------
Weighted-
Average
Exercisable Exercise
Shares Shares Price
<S> <C> <C> <C>
Outstanding, April 30, 1995 348,877 4.59
Granted 237,700 6.28
Exercised (86,466) 2.70
Expired (146,362) 6.45
-------
Outstanding, April 30, 1996 135,314 353,749 5.52
Granted 74,700 5.30
Exercised (12,466) 2.57
Expired (81,866) 5.48
-------
Outstanding, April 30, 1997 191,866 334,117 5.43
=======
</TABLE>
The weighted-average fair values of options granted during 1996 and 1997 were
$2.96 and $2.80, respectively:
The following tables summarize information about stock options outstanding as of
April 30, 1997:
<TABLE>
Options Outstanding Weighted- Weighted-
Average Average
Remaining Exercise
Range of exercise price Shares Contractual Price
Life
<S> <C> <C> <C>
$2 - $5 208,051 7.95 $4.35
$6 - $7.50 126,066 8.53 6.90
Options Exercisable Weighted-
Average
Range of exercise price Shares Exercise Price
<S> <C> <C>
$2 - $5 134,716 $4.21
$6 - $7.50 57,150 6.70
</TABLE>
The majority of options granted vest over three years, in equal installments.
An option granted under the Plan expires not more than ten years after grant.
If an optionee's employment is terminated, the option remains exercisable for a
period between 30 and 90 days, unless the employee is terminated "for cause",
then the option terminates immediately. The exercise price of such options are
generally the fair market value of the underlying stock at the date of grant.
As of April 30, 1997, the Company has 132,479 shares available for future
options under the Plans.
During fiscal 1996, warrants were exercised by the president of the Company to
acquire 134,902 shares of common stock at a price of $2.02 per share.
F - 14
<PAGE>
10. GEOGRAPHIC SEGMENTS
Information about the Company's operations in different geographic areas for the
two years ended April 30, 1997 is as follows:
<TABLE>
<CAPTION>
United Foreign
States Operations Eliminations Consolidated
TOTAL REVENUE:
<S> <C> <C> <C> <C>
1997 $25,601,441 $5,618,236 $(393,220) $30,826,457
1996 21,000,728 3,427,262 (58,654) 24,369,336
INCOME (LOSS) FROM OPERATIONS:
1997 1,209,581 146,003 (23,796) 1,331,788
1996 (624,895) (15,557) (5,825) (646,277)
IDENTIFIABLE ASSETS:
1997 14,016,285 2,502,037 (23,796) 16,494,526
1996 12,496,976 1,166,668 (5,834) 13,657,810
</TABLE>
11. BUSINESS CONCENTRATIONS
A substantial portion of the Company's revenue is derived from the sale of
published materials and instructor-led training relating to Microsoft and Novell
technology.
12. ACQUISITION
On June 1, 1995, the Company purchased substantially all of the assets of
Enterprise Technology Institute International, Inc. ("ETI") through the issuance
of 80,000 shares of common stock and a cash payment of approximately $247,000.
ETI develops and distributes published products and provides instructor-led
training throughout the United States. The ETI acquisition has been accounted
for as a purchase transaction in accordance with Accounting Principle Board
Opinion No. 16. The purchase price was allocated to tangible and intangible
assets acquired and liabilities assumed based on their estimated fair values at
June 1, 1995. The allocation is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable $ 32,083
Inventory 3,982
Property 14,140
Goodwill 819,595
--------
$869,800
========
</TABLE>
* * * * * *
F - 15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WAVE TECHNOLOGIES INTERNATIONAL, INC.
Dated: July 21, 1997 By: /s/ Kenneth W. Kousky
-------------------------
Kenneth W. Kousky, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Kenneth W. Kousky President, Chairman of the Board, July 21, 1997
- --------------------------- and Chief Executive Officer
Kenneth W. Kousky (principal executive officer)
/s/ J. Michael Bowles Chief Financial Officer (principal July 21, 1997
- --------------------------- financial officer and principal
J. Michael Bowles accounting officer)
/s/ Maxine K. Clark Director July 21, 1997
- ---------------------------
Maxine K. Clark
/s/ Raymond J. Kalinowski Director July 21, 1997
- ---------------------------
Raymond J. Kalinowski
/s/ Robert E. Keith, Jr. Director July 21, 1997
- ---------------------------
Robert E. Keith, Jr.
/s/ David W. Kemper Director July 21, 1997
- ---------------------------
David Kemper
/s/ Robert E. Lefton Director July 21, 1997
- ---------------------------
Robert E. Lefton
/s/ Walter N. Torus Director July 21, 1997
- ---------------------------
Walter N. Torus
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page No.
- --------------------------------------------------------------------------------
<C> <S> <C>
3.1 Articles of Incorporation, as amended and restated
(filed as Exhibit 3.1 to Registrant's Statement on
Form SB-2 (File No. 33-80556) and incorporated
herein by reference)
3.2 Restated Bylaws, as amended
4.1 Specimen Stock Certificate (filed as Exhibit 4.1 to
Registrant's Registration Statement on Form SB-2 (File
No. 33-80556) and incorporated herein by reference)
4.2 Warrant Agreement, including Form of Representatives'
Warrant (filed as Exhibit 4.2 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556)
and incorporated herein by reference)
10.1 Employment Agreement dated June 25, 1997, between the
Company and J. Michael Bowles
10.2 Service Agreement date June 1, 1994, by and between
the Company and John A. Kirkham (filed as Exhibit 10.2
to Registrant's Registration Statement on Form SB-2
(file No. 33-80556) and incorporated herein by
reference)
10.3 Amended and Restated 1993 Stock Option Plan (filed as
Exhibit 10.3 to Registrant's Registration Statement
on Form SB-2 (File No. 33-80556) and incorporated
herein by reference)
10.4 Wave Technologies International, Inc. Outside
Directors Stock Option Plan (filed as Exhibit 10.4
to Registrants annual report on Form 10-KSB for
the fiscal year ended April 30, 1995, and
incorporated herein by reference)
10.5 Distribution Agreement between the Company and
Ingram Micro, Inc., dated April 19, 1996
(filed as exhibit 10.8 to Registrant's annual
report on Form 10-KSB for the fiscal year
ended April 30, 1995, and incorporated herein
by reference)
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page No.
- -------------------------------------------------------------------------------------------
<S> <C> <C>
10.6 Stock Purchase Agreement between the Company and Radnor
Venture Partners, L. P. (filed as Exhibit 10.9 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.7 Agreement between the Company and Radnor Venture Partners,
L.P., dated April 30, 1994 (filed as Exhibit 10.10 to
Registrant's Registration Statement on Form SB-2 (File No. 33-
80556) and incorporated herein by reference)
10.8 Amendment Agreement between the Company and Radnor Venture
Partners, L.P., dated May 31, 1994 (filed as Exhibit 10.11 to
Registrant's Registration Statement on Form SB-2 (File No. 33-
80556) and incorporated herein by reference)
10.9 $2,000,000 Line of Credit Note to Commerce Bank, National
Association, dated September 1, 1996 (filed as Exhibit 10.9 to
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended October 31, 1996 and incorporated herein by reference)
10.10 General Loan and Security Agreement between Commerce Bank,
National Association, and the Company, dated as of August 31,
1995 (filed as Exhibit 10.15 to Registrant's Quarterly Report
on Form 10-QSB for the quarter ended October 31, 1995, and
incorporated herein by reference)
10.11 First Amendment to General Loan and Security Agreement, dated
as of January 5, 1996, between the Company and Commerce Bank,
National Association (filed as Exhibit 10.13 to Registrant's
Quarterly Report on Form 10-QSB for the quarter ended January
31, 1996, and incorporated herein by reference)
10.12 $600,000 Note dated January 5, 1996, to Commerce Bank, National
Association (filed as Exhibit 10.14 to Registrant's Quarterly
Report on Form 10-QSB for the quarter ended January 31, 1996
and incorporated herein by reference)
</TABLE>
E-2
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page No.
- --------------------------------------------------------------------------------
<C> <S> <C>
10.13 Second Amendment to General Loan and Security
Agreement between the Company and Commerce
Bank, National Association, dated as of September
1, 1996 (filed as Exhibit 10.13 to Registrant's
Quarterly Report on Form 10-QSB for the quarter ended
October 31, 1996, and incorporated herein by
reference)
10.14 Wave Technologies International, Inc. 1995 Stock
Option Plan (filed as Exhibit 4.3 to Registrant's
Registration Statement on Form S-8 (File No. 33-
98462) and incorporated herein by reference)
10.15 Waveware License Agreement between the Company
and SHL Systemhouse Corp., dated as of January 30,
1996 (filed as Exhibit 10.19 to Registrant's Quarterly
Report on Form 10-QSB for the quarter ended January
31, 1996 and incorporated herein by reference
11.1 Statement Regarding Computation of Per Share
Earnings (Loss)--Included in notes to Consolidated
Financial Statements
21.1 List of Subsidiaries
23.1 Consent of Deloitte & Touche, LLP
</TABLE>
E-3
<PAGE>
EXHIBIT 3.2
RESTATED BY-LAWS
OF
WAVE TECHNOLOGIES INTERNATIONAL, INC.
(As Amended through June 30, 1997)
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I Offices and Records
ARTICLE II Corporate Seal
ARTICLE III Shareholders
ARTICLE IV Directors
ARTICLE V Officers
ARTICLE VI Shares of Stock
ARTICLE VII Indemnification
ARTICLE VIII General Provisions
</TABLE>
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
SECTION NO. Page No.
<S> <C> <C>
ARTICLE I Offices and Records.......................................... 1
Section 1. Registered Office and Registered Agent..................... 1
Section 2. Corporate Offices.......................................... 1
Section 3. Records.................................................... 1
Section 4. Inspection of Records...................................... 1
ARTICLE II Corporate Seal
............................................................................ 2
Section 1. Corporate Seal............................................. 2
ARTICLE III Shareholders................................................. 2
Section 1. Place of Meetings.......................................... 2
Section 2. Annual Meeting............................................. 2
Section 3. Special Meetings........................................... 2
Section 4. No Action in Lieu of Meeting............................... 2
Section 5. Notice of Meetings......................................... 3
Section 6. Presiding Officials........................................ 3
Section 7. Waiver of Notice........................................... 3
Section 8. Business Transacted at Annual Meetings..................... 3
Section 9. Business Transacted at Special Meetings.................... 3
Section 10. Quorum..................................................... 4
Section 11. Proxies.................................................... 4
Section 12. Voting..................................................... 4
Section 13. Registered Shareholders.................................... 5
Section 14. Shareholders Lists......................................... 6
Section 15. Removal of Directors....................................... 7
Section 16. Nomination of Directors.................................... 7
Section 17. Proposals for Annual Meeting............................... 8
Section 18. Conduct of Business at Meetings............................ 8
ARTICLE IV Directors.................................................... 9
Section 1. Qualifications and Number.................................. 9
Section 2. Powers of the Board........................................ 9
Section 3. Annual Meeting of the Board, Notice........................ 9
Section 4. Regular Meetings, Notice................................... 10
Section 5. Special Meetings, Notice................................... 10
Section 6. Action in Lieu of Meetings................................. 11
Section 7. Meeting by Conference Telephone or Similar
Communications Equipment.......................................... 11
Section 8. Quorum..................................................... 11
Section 9. Waiver of Notice; Attendance at Meeting.................... 11
Section 10. Vacancies.................................................. 12
Section 11. Executive Committee........................................ 12
Section 12. Audit Committee and Compensation Committee................. 12
Section 13. Other Committees........................................... 14
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
SECTION NO. Page No.
<S> <C> <C>
Section 14. Compensation of Directors and Committee
Members.......................................................... 14
Section 15. Protection of Director for Reliance on
Corporate Records
ARTICLE V Officers.................................................... 15
Section 1. Officers--Who Shall Constitute............................ 15
Section 2. Term of Office............................................ 15
Section 3. Appointment of Officers and Agents--Terms of
Office...........................................................
Section 4. Removal................................................... 16
Section 5. Salaries and Compensation................................. 16
Section 6. Delegation of Authority to Hire, Discharge,
Etc.............................................................. 16
Section 7. The Chairman of the Board and the
President........................................................
Section 8. Vice Presidents........................................... 17
Section 9. The Secretary and Assistant Secretaries................... 17
Section 10. The Treasurer and Assistant Treasurers.................... 18
Section 11. Bond...................................................... 19
Section 12. Checks and Other Instruments.............................. 19
Section 13. Duties of Officers May be Delegated....................... 19
ARTICLE VI Shares of Stock............................................. 20
Section 1. Payment for Shares of Stock............................... 20
Section 2. Certificates for Shares of Stock.......................... 20
Section 3. Lost or Destroyed Certificates............................ 20
Section 4. Transfers of Shares, Transfer Agent,
Registrar........................................................ 21
Section 5. Closing of Transfer Books, Record Date.................... 21
Section 6. Fractional Share Interests or Scrip....................... 22
ARTICLE VII Indemnification............................................. 22
Section 1. Third Party Actions....................................... 22
Section 2. Actions By or in the Right of the
Corporation...................................................... 23
Section 3. Indemnity if Successful................................... 23
Section 4. Standard of Conduct....................................... 23
Section 5. Expenses.................................................. 24
Section 6. Nonexclusivity............................................ 24
Section 7. Further Indemnity Permissible............................. 24
Section 8. Insurance................................................. 24
Section 9. Corporation............................................... 25
Section 10. Other Definitions......................................... 25
Section 11. Indemnity for Agents and Employees........................ 25
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
SECTION NO. Page No.
<S> <C> <C>
ARTICLE VIII General Provisions........................................ 26
Section 1. Fixing of Capital, Transfers of Surplus................. 26
Section 2. Dividends............................................... 26
Section 3. Creation of Reserves.................................... 26
Section 4. Fiscal Year............................................. 26
Section 5. Notices................................................. 27
Section 6. Amendments to By-laws................................... 27
</TABLE>
-iii-
<PAGE>
ARTICLE I
Offices and Records
-------------------
Section 1. Registered Office and Registered Agent. The location of the
registered office and the name of the registered agent of the corporation in the
State of Missouri shall be determined from time to time by the Board of
Directors and shall be on file in the appropriate office of the State of
Missouri pursuant to applicable provisions of law.
Section 2. Corporate Offices. The corporation may have such corporate
offices, anywhere within and without the State of Missouri as the Board of
Directors from time to time may appoint, or the business of the corporation may
require. The "principal place of business" or "principal business" or
"executive" office or offices of the corporation may be fixed and so designated
from time to time by the Board of Directors, but the location or residence of
the corporation in Missouri shall be deemed for all purposes to be in the county
in which its registered office in Missouri is maintained.
Section 3. Records. The corporation shall keep at its registered office
in Missouri, at its principal place of business, or at the office of its
transfer agent in Missouri, if any, original or duplicate books in which shall
be recorded the number of its shares subscribed, the names of the owners of its
shares, the numbers owned of record by them respectively, the amount of shares
paid, and by whom, and the transfer of said shares with the date of transfer.
The corporation shall also keep correct and accurate books and records of
account, including the amount of its assets and liabilities, minutes of
proceedings of its shareholders and Board of Directors, the names and places of
residence of its officers, and from time to time such other or additional
records, statements, lists, and information as may be required by law, including
the shareholder lists mentioned in these By-laws.
Section 4. Inspection of Records. A shareholder, if he is entitled and
demands to inspect the records of the corporation pursuant to any statutory or
other legal right, shall be privileged to inspect such records only during the
usual and customary hours of business and in such manner as will not unduly
interfere with the regular conduct of the business of the corporation. In order
to exercise this right of examination, a shareholder must make written demand
upon the corporation, stating with particularly the records sought to be
examined and the purpose therefor. A shareholder may delegate his right of
inspection to his representative on the condition that, if the representative is
not an attorney, the shareholder and representative agree with the corporation
to furnish to the corporation, promptly as completed or made, a true and correct
copy of each report with respect to such inspection made by such representative.
No shareholder shall use
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or permit to be used or acquiesce in the use by others of any information so
obtained, to the detriment competitively of the corporation, nor shall he
furnish or permit to be furnished any information so obtained to any competitor
or prospective competitor of the corporation. The corporation as a condition
precedent to any shareholder's inspection of the records of the corporation may
require the shareholder to indemnify the corporation against any loss or damage
which may be suffered by it arising out of or resulting from any unauthorized
disclosure made or permitted to be made by such shareholder of information
obtained in the course of such inspection.
ARTICLE II
Corporate Seal
--------------
Section 1. Corporate Seal. The corporate seal, if any, shall have
inscribed thereon the name of the corporation and the words: Corporate Seal--
Missouri. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE III
Shareholders
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Section 1. Place of Meetings. All meetings of the shareholders shall be
held at the principal business office of the corporation, except such meetings
as the Board of Directors to the extent permissible by law expressly determines
shall be held elsewhere, in which case such meetings may be held, upon notice
thereof as herein provided, at such other place or places, within or without the
State of Missouri, as said Board of Directors shall determine and as shall be
stated in such notice; and, unless specifically prohibited by law, any meeting
may be held at any place and time, and for any purpose if consented to in
writing by all of the shareholders entitled to vote thereat.
Section 2. Annual Meeting. An annual meeting of the shareholders shall be
held on the second Wednesday in the month of September of each year, commencing
in September 1995, and at such time on that day or on such other day within such
month, as shall be determined by the Board of Directors, at which time the
shareholders shall elect directors to succeed those whose terms expire and
transact such other business as may properly come before the meeting.
Section 3. Special Meetings. Special Meetings of the shareholders may be
called only by the Chairman of the Board (if any), the President, or by the
Board of Directors, and shall be held on such date and at such time as he or
they shall fix.
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Section 4. No Action in Lieu of Meeting. No action required to be taken
at a meeting of the shareholders nor any other action which may be taken at a
meeting of the shareholders may be taken without a meeting of the shareholders
entitled to vote with respect to the subject matter thereof.
Section 5. Notice of Meetings. Written or printed notice stating the
place, day, and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the Board of Directors, the
Chairman of the Board (if any), the President, or the Secretary, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail in a
sealed envelope addressed to the shareholder at his address as it appears on the
records of the corporation, with postage thereon prepaid.
Section 6. Presiding Officials. Every meeting of the shareholders for
whatever object, shall be convened (in the order shown, unless otherwise
determined by resolution of the Board of Directors) by the Chairman of the Board
(if any), or by the President, or by the officer who called the meeting by
notice as above provided; but it shall be presided over by the officers
specified elsewhere in these By-laws.
Section 7. Waiver of Notice. Whenever any notice is required to be given
under the provisions of these By-laws, the Articles of Incorporation of the
corporation, or any law, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed the equivalent of the giving of such notice to the
extent provided by law, attendance at any meeting shall constitute a waiver of
notice of such meeting.
Section 8. Business Transacted at Annual Meetings. At each annual meeting
of the shareholders, the shareholders shall elect the class of directors whose
terms expire at such annual meeting to hold office for a three-year term, until
the annual meeting three years thereafter, and they may transact such other
business as may be desired, whether or not the same was specified in the notice
of the meeting, unless the consideration of such other business without its
having been specified in the notice of the meeting as one of the purposes
thereof is prohibited by law.
Section 9. Business Transacted at Special Meetings. Business transacted
at all special meetings of the shareholders shall be confined to the purposes
stated in the notice of such meetings, unless the transaction of other business
is consented to by the
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holders of all of the outstanding shares of stock of the corporation entitled to
vote thereat.
Section 10. Quorum. Except as may be otherwise required by law or by the
Articles of Incorporation, the holders of a majority of the voting shares issued
and outstanding and entitled to vote for the election of directors, whether
present in person or by proxy, shall constitute a quorum for the transaction of
business at all meetings of the shareholders. Every decision of a majority in
amount of shares of such quorum shall be valid as a corporate act, except in
those specific instances in which a larger vote is required by law, by these By-
laws, or by the Articles of Incorporation. If, however, such quorum should not
be present at any meeting, the shareholders present and entitled to vote shall
have the power successively to adjourn the meeting, without notice other than
announcement at the meeting, to a specified date not longer than ninety days
after such adjournment. At any such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
meeting of which the shareholders were originally notified. However, if the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given in the manner otherwise provided herein to each shareholder of
record entitled to vote at such adjourned meeting. Withdrawal of shareholders
from any meeting shall not cause the failure of a duly constituted quorum at
such meeting.
Section 11. Proxies. At any meeting of the shareholders every shareholder
having the right to vote shall be entitled to vote in person, or by vesting
another person with authority to exercise the voting power of any or all of his
stock by executing in writing any voting trust agreement, proxy, or any other
type of appointment form or agreement, except as may be expressly limited by law
or by the Articles of Incorporation. Any copy, facsimile telecommunication, or
other reliable reproduction of any writing referred to in this Section may be
used in lieu of the original writing for any and all purposes for which the
original writing could be used, provided that such copy, facsimile
telecommunication, or other reproduction shall be a complete reproduction of the
entire original writing. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
Section 12. Voting. Subject to such voting rights as the Board of
Directors may establish for any series of Preferred Stock in accordance with
Article III.2.(a)(vi) of the Articles of Incorporation, each shareholder shall
have one vote for each share of stock entitled to vote under the provisions of
the Articles of Incorporation which is registered in his name on the books of
the corporation; in all elections of directors or a class of directors
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of the corporation, each share of stock entitled to vote shall be entitled to
one vote as to each director to be elected by the holders thereof and no
shareholder shall have the right to cast votes in the aggregate or to cumulate
his votes for the election of any director, and cumulative voting of shares in
elections of directors is hereby specifically negated. All elections for
directors and all other matters shall be determined by a majority of the votes
cast, except as law or the Articles of Incorporation may requires a greater
vote. Any shareholder who is in attendance at a meeting of the shareholders
either in person or by proxy, but who abstains from voting on any matter, shall
not be deemed present or represented at such meeting for purposes of the
preceding sentence with respect to such vote, but shall be deemed present or
represented for all other purposes.
The rights and powers of the holders of any class or series of preferred
stock with respect to the election of directors shall be only as may be duly
designated with respect to such class or series and as is consistent with the
provisions of the Articles of Incorporation.
No person shall be permitted to vote any shares belonging to or pledged to
the corporation.
Shares standing in the names of two or more persons shall be voted or
represented in accordance with the vote or consent of a majority of the persons
in whose names the shares are registered. If only one such person is present in
person or by proxy, he or she may vote all of the shares, and all of the shares
standing in the names of such persons shall be deemed represented for purposes
of determining a quorum. The foregoing provisions shall also apply to shares
held by two or more personal representatives, trustees, or other fiduciaries
unless the instrument or order appointing them otherwise directs.
If the Board of Directors shall not have closed the transfer books of the
corporation or set a record date for the determination of its shareholders
entitled to vote, as otherwise provided in these By-laws, no person shall be
admitted to vote directly or by proxy except those in whose names the shares of
the corporation shall have stood on the transfer books on a date twenty days
previous to the date of the meeting.
Section 13. Registered Shareholders. The corporation shall be entitled to
treat the holder of any share or shares of stock of the corporation, as recorded
on the stock record or transfer books of the corporation, as the holder of
record and as the holder and owner in fact thereof and, accordingly shall not be
required to recognize any equitable or other claim to or interest in such
share(s) on the part of any other person, firm, partnership, corporation or
association, whether or not the corporation shall
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have express or other notice thereof, except as is otherwise expressly required
by law, and the term "shareholder" as used in these By-laws means one who is a
holder of record of shares of the corporation; provided, however, that if
permitted by law:
Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the by-laws of
such corporation prescribe, or, in the absence of such provision, as the
board of directors of such corporation may determine;
Shares standing in the name of a deceased person may be voted by his
administrator or personal representative, either in person or by proxy; and
shares standing in the name of a guardian, curator, or trustee may be voted
by such fiduciary, either in person or by proxy; but no guardian, curator,
or trustee shall be entitled, as such fiduciary, to vote shares held by him
without a transfer of such shares into his name;
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name if
authority so to do be contained in an appropriate order of the court by
which such receiver was appointed; and
A shareholder whose shares are pledged shall be entitled to vote such
shares (except for shares pledged to the Corporation) until the shares have
been transferred of record into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred.
Section 14. Shareholders Lists. A complete list of the shareholders
entitled to vote at each meeting of the shareholders, arranged in alphabetical
order, with the address of, and the number of voting shares held by each, shall
be prepared by the officer of the corporation having charge of the stock
transfer books of the corporation, and shall for a period of ten days prior to
the meeting be kept on file in the registered office of the corporation in
Missouri, and shall at any time during the usual hours for business be subject
to inspection by any shareholder. A similar or duplicate list shall also be
produced and kept open for the inspection of any shareholder during the whole
time of the meeting. The original share ledger or transfer book, or a duplicate
thereof kept in the State of Missouri, shall be prima facie evidence as to who
are shareholders entitled to examine such list, ledger, or transfer book or to
vote at any meeting of shareholders. Failure to comply with the foregoing shall
not affect the validity of any action taken at any such meeting.
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Section 15. Removal of Directors. Except as otherwise provided in the
Articles of Incorporation or these By-laws, the shareholders shall have the
power by an affirmative vote of a majority of the outstanding shares then
entitled to vote for the election of directors at any regular meeting or special
meeting expressly called for that purpose, to remove any director from office.
Such meeting shall be held at any place prescribed by law or at any other place
which may, under law, permissibly be, and which is, designated in the notice of
the special meeting.
Section 16. Nomination of Directors. Nominations of persons for election
to the Board of Directors of the corporation at a meeting of the shareholders
may be made by or at the direction of the Board of Directors or may be made at a
meeting of shareholders by any shareholder of the corporation entitled to vote
for the election of directors at the meeting who complies with the procedures
set forth in this Section. The procedures for making such nominations, other
than those made by or at the direction of the Board, shall be commenced by
delivering timely notice in writing to the Secretary of the corporation. To be
timely, a shareholder's notice shall be delivered to or mailed and received at
the principal office of the corporation not less than one hundred twenty days
nor more than one hundred eighty days prior to the anniversary of the previous
year's Annual Meeting of Shareholders. To be valid, such shareholder's notice
to the Secretary shall set forth: (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director, (i) the name,
age, business address, and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the number of shares of stock of
the corporation that are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (whether or not the
provisions of such Regulation are then applicable to the corporation), provided,
however, that nothing in this Section is intended to imply or create any
obligation on the part of the corporation to include within the corporation's
proxy solicitation materials, if any, any materials or information regarding
persons nominated for election to the Board of Directors by shareholders of the
corporation; and (b) as to the shareholder giving notice (i) the name and record
address of the shareholder and (ii) the number of shares of stock of the
corporation that are beneficially owned by the shareholder. The corporation may
require any proposed nominee to furnish such other information as may be
reasonably required by the Board of Directors to determine the eligibility of
such proposed nominee to serve as director of the corporation. No person shall
be eligible for election as a director of the corporation at a meeting of the
shareholders unless nominated in accordance with the procedures set forth
herein. The chairman of the meeting shall, if the facts
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warrant, determine and declare that a nomination was not made in accordance with
the foregoing procedure, in which case the defective nomination shall be
disregarded.
Notwithstanding anything in the second sentence of Section 16 to the
contrary, in the event that (a) the date of the annual meeting is advanced by
more than thirty (30) days or delayed by more than sixty (60) days from such
anniversary date or (b) the number of directors to be elected to the Board of
Directors is increased and the corporation makes no public announcement naming
all of the nominees for director or specifying the size of the increased Board
of Directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this Section
shall also be considered timely if delivered not earlier than the 90th day prior
to such annual meeting and not later than the close of business on the later of
the 60th day prior to such annual meeting or the 10th day following the day on
which the corporation makes such public announcement of the date of such meeting
or the increased size of the Board of Directors.
Section 17. Proposals for Annual Meeting. Shareholder proposals intended
for presentation at the annual meeting of shareholders must comply as respects
time, contents, and otherwise with Rule 14a-8 promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended
from time to time (whether or not the provisions of Rule 14a-8 are then
applicable to the corporation), and as respects time of submission also with the
procedural requirements set forth in Section 16 for shareholder nominations for
director. Any shareholder proposal that is advisory or precatory in nature and
which requests the Board of Directors to take any action shall require the
affirmative vote of a majority of the shares entitled to vote for the election
of directors in order for any resolution, shareholder referendum, or the like
embodying such proposal to be adopted.
Section 18. Conduct of Business at Meetings. The date and time of the
opening and the closing of the polls for each matter upon which the shareholders
will vote at a meeting shall be announced at the meeting by the person presiding
over the meeting. The Board of Directors of the Corporation may adopt by
resolution such rules and regulations for the conduct of the meeting of
shareholders as it shall deem appropriate. Except to the extent inconsistent
with any such rules and regulations as adopted by the Board of Directors, the
chairman of any meeting of shareholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations, or procedures, whether adopted by the Board
of Directors or prescribed by the chairman of
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the meeting, may include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the meeting to
shareholders of record of the corporation, their duly authorized and constituted
proxies or such other persons as the chairman of the meeting shall determine;
(iv) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (v) limitations on the time allotted to questions or
comments by participants. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of shareholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
ARTICLE IV
Directors
---------
Section 1. Qualifications and Number. Each director shall be a natural
person who is at least eighteen years of age. A director need not be a
shareholder, a citizen of the United States, or a resident of the State of
Missouri unless required by law or the Articles of Incorporation.
Unless and until changed, the number of directors to constitute the full
Board of Directors shall be seven. The Board of Directors shall have the power
to change the number of directors, but said number shall be not less than three
nor more than eleven. In the event of any change in the number, any notice
required by law of any such change shall be duly given.
Section 2. Powers of the Board. The property and business of the
Corporation shall be managed by the Board of Directors. The Board shall have
and is vested with all and unlimited powers and authorities, except as may be
expressly limited by law, the Articles of Incorporation, or by these By-laws, to
do or cause to be done any and all lawful things for and on behalf of the
corporation (including, without limitation, the declaration of dividends on the
outstanding shares of the corporation and the payment thereof in cash, property
or shares), and to exercise or cause to be exercised any or all of its powers,
privileges and franchises, and to seek the effectuation of its objects and
purposes.
Section 3. Annual Meeting of the Board, Notice. Any continuing members
and the newly elected members of the Board shall meet: (i) immediately
following the conclusion of the annual meeting of the shareholders for the
purpose of electing officers and for such other purposes as may come before the
meeting, and the time and place of such meeting shall be announced at the annual
meeting of the shareholders by the chairman of such meeting, and no
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other notice to any continuing or the newly elected directors shall be necessary
in order to legally constitute the meeting, provided a quorum of the directors
shall be present; or (ii) if no meeting immediately following the annual meeting
of shareholders is announced, at such time and place, either within or without
the State of Missouri, as may be suggested or provided for by resolution of the
shareholders at their annual meeting and no other notice of such meeting shall
be necessary to the newly elected directors in order to legally constitute the
meeting, provided a quorum of the directors shall be present; or (iii) if not so
suggested or provided for by resolution of the shareholders or if a quorum of
the directors shall not be present, at such time and place as may be consented
to in writing by a majority of any continuing and the newly elected directors,
provided that written or printed notice of such meeting shall be given to each
of any continuing and the newly elected directors in the same manner as provided
in these By-laws with respect to the notice for special meetings of the Board,
except that it shall not be necessary to state the purpose of the meeting in
such notice; or (iv) regardless of whether or not the time and place of such
meeting shall be suggested or provided for by resolution of the shareholders at
the annual meeting, at such time and place as may be consented to in writing by
all of any continuing and the newly elected directors. Each director, upon his
election, shall qualify by accepting the office of director, and his attendance
at, or his written approval of the minutes of, any meeting of the newly elected
directors shall constitute his acceptance of such office; or he may execute such
acceptance by a separate writing, which shall be placed in the minute book.
Section 4. Regular Meetings, Notice. Regular meetings of the Board may be
held at such times and places either within or without the State of Missouri as
shall from time to time be fixed by resolution adopted by a majority of the full
Board of Directors. No notice of any regular meeting need be given other than
by announcement at the immediately preceding regular meeting and communicated in
writing to all absent directors; provided, however, that written notice of any
regular meeting of the Board of Directors stating the place, day, and hour of
such meeting shall be given if required by resolution adopted by the Board of
Directors. Any business may be transacted at a regular meeting. Neither the
business to be transacted at nor the purpose need be specified in any notice or
waiver of notice of any regular meeting of the Board of Directors.
Section 5. Special Meetings, Notice. Special meetings of the Board may be
called at any time by the Chairman of the Board (if any), the President, or by
one-third of the directors (rounded up to the nearest whole number). The place
may be within or without the State of Missouri as designated in the notice.
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Written notice of each special meeting of the Board, stating the place,
day, and hour of the meeting shall be given to each director at least two days
before the date on which the meeting is to be held. The notice shall be given
(i) in the manner provided for in these By-laws or (ii) may be given
telephonically, if confirmed promptly in writing, in which case the notice shall
be deemed to have been given at the time of telephonic communication. The
notice may be given by any officer directed to do so by any officer having
authority to call the meeting or by the director(s) who have called the meeting.
Neither the business to be transacted at nor the purpose need be specified
in the notice or any waiver of notice of any special meeting of the Board of
Directors.
Section 6. Action in Lieu of Meetings. Unless otherwise restricted by the
Articles of Incorporation or these By-laws or by law, any action required to be
taken at a meeting of the Board of Directors or any other action which may be
taken at a meeting of the Board of Directors may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by all the
directors entitled to vote with respect to the subject matter thereof. Any such
consent signed by all the directors shall have the same effect as a unanimous
vote and may be stated as such in any document describing the action taken by
the Board of Directors.
Section 7. Meeting by Conference Telephone or Similar Communications
Equipment. Unless otherwise restricted by the Articles of Incorporation or
these By-laws or by law, members of the Board of Directors of the corporation,
or any committee designated by the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other, and participation in a meeting in such manner shall constitute
presence in person at such meeting.
Section 8. Quorum. At all meetings of the Board a majority of the full
Board of Directors shall, unless a greater number as to any particular matter is
required by the Articles of Incorporation or these By-laws, constitute a quorum
for the transaction of business. The act of a majority of the directors present
at any meeting at which there is a quorum, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation, or by these
By-laws, shall be the act of the Board of Directors.
Less than a quorum may adjourn a meeting successively until a quorum is
present, and no notice of adjournment shall be required.
Section 9. Waiver of Notice; Attendance at Meeting. Any notice provided
or required to be given to the directors may be
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waived in writing by any of them, whether before, at, or after the time stated
therein.
Attendance of a director at any meeting shall constitute a waiver of notice
of such meeting except where the director attends for the express purpose, and
so states at the opening of the meeting, of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 10. Vacancies. If the office of any director is or becomes vacant
by reason of death, resignation, or due to an increase in the number of
directors, a majority of the survivors or remaining directors, though less than
a quorum, may appoint a director to fill the vacancy until a successor shall
have been duly elected at a shareholders' meeting.
Section 11. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the full Board, designate an executive
committee, such committee to consist of two or more directors of the
corporation. Such committee, except to the extent limited in said resolution,
shall have and may exercise all of the powers of the Board of Directors in the
management of the corporation. The members constituting the executive committee
shall be determined from time to time by resolution adopted by a majority of the
full Board; and any director may vote for himself as a member of the executive
committee. In no event, however, shall the executive committee have any
authority to amend the Articles of Incorporation, to adopt any plan of merger or
consolidation with another corporation or corporations, to recommend to the
shareholders the sale, lease, exchange, mortgage, pledge, or other disposition
of all or substantially all of the property and assets of the corporation if not
made in the usual and regular course of its business, to recommend to the
shareholders a voluntary dissolution of the corporation or a revocation thereof,
to amend, alter or repeal the By-laws of the corporation, to elect or remove
officers of the corporation or members of the executive committee, to declare
any dividend, or to amend, alter or repeal any resolution of the Board of
Directors which by its terms provides that it shall not be amended, altered or
repealed by the executive committee.
The executive committee shall keep regular minutes of its proceedings and
the same shall be recorded in the minute book of the corporation. The Secretary
or an Assistant Secretary of the corporation may act as secretary for the
executive committee if the executive committee so requests.
Section 12. Audit Committee and Compensation Committee. The Board shall
designate an audit committee and a compensation committee, each such committee
to consist of two or more outside directors who are independent of management
and free from any
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relationships that, in the opinion of the Board, would interfere with their
exercise of independent judgment as a committee member. Any director who would
be eligible to serve on either such committee under the rules of the exchange or
national market on which the corporation's shares are traded shall be considered
"independent" for the purpose of serving on such committee.
Each such committee, to the extent provided in the enabling resolution and
permitted by law, shall have and may exercise the power of the Board of
Directors. The members constituting each such committee shall be determined
from time to time by resolution adopted by a majority of the full Board; and any
eligible director may vote for himself as a member of any such committee.
The audit committee shall assist the Board in fulfilling its
responsibilities for the corporation's accounting and financial reporting
responsibilities and provide a channel of communication between the Board and
the corporation's independent auditors. The audit committee's duties shall
include: recommending to the Board the accounting firm to be selected as
independent auditor of the corporation by the Board or to be recommended by it
for shareholder approval; and acting on behalf of the Board in meeting and
reviewing with such independent auditors, the chief internal auditor and the
appropriate corporate officers (a) matters relating to corporate financial
reporting and accounting procedures and policies, (b) the adequacy of financial,
accounting, and operating controls, (c) regular quarterly and annual financial
reports required to be prepared and filed with the Securities and Exchange
Commission, as well as any registration statements or other documents to be
filed which relate to the corporation's financial condition, and (d) the scope
of the respective audits of the independent auditors and the internal auditor.
The audit committee shall review the results of such audits with the respective
auditors and shall promptly report to the full Board. The committee shall
additionally submit to the Board any recommendations it may have from time to
tie with respect to financial reporting and accounting practices and policies
and financial, accounting, and operation controls and safeguards.
The compensation committee shall assist the Board in fulfilling its
responsibilities to provide appropriate compensation arrangements and plans for
the corporation's principal executive officers, in order to attract, retain,
motivate, and properly compensate effective, talented persons for the employ of
the corporation. The compensation committee's duties shall include:
recommending to the Board the base salary and any incentive compensation for the
corporation's principal executive officers, including without limitation
establishing performance goals for compensation and determining and certifying
whether such performance goals and other material terms of such compensation
arrangements have been satisfied; and recommending to the Board
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other executive compensation plans and benefit programs, including retirement
plans, appropriate for executives in business concerns comparable to the
corporation.
Each such committee shall, to the extent required by resolution of the
Board of Directors (or, in the absence of any such resolution, to the extent a
majority of its members determines is appropriate) keep minutes of its
proceedings and the same shall be recorded in the minute book of the
corporation. The Secretary or Assistant Secretary of the corporation may act as
secretary for any such committee if the committee so requests.
Section 13. Other Committees. The Board of Directors may, by resolution
passed by a majority of the full Board, designate one or more standing or ad hoc
committees, each committee to consist of two or more of the directors of the
corporation and such other person(s) as may be appointed as advisory members
under authority provided in the resolution. Each such committee, to the extent
provided in the resolution and permitted by law, shall have and may exercise the
power of the Board of Directors. The members constituting each such committee
shall be determined from time to time by resolution adopted by a majority of the
full Board; and any director may vote for himself as a member of any such
committee.
Each such committee shall, to the extent required by resolution of the
Board of Directors (or, in the absence of any such resolution, to the extent a
majority of its members determines is appropriate) keep minutes of its
proceedings and the same shall be recorded in the minute book of the
corporation. The Secretary or Assistant Secretary of the corporation may act as
secretary for any such committee if the committee so requests.
Section 14. Compensation of Directors and Committee Members. Directors
and members of all committees shall receive such compensation for their services
as may be determined from time to time by resolution adopted from time to time
by the Board, as well as such expenses, if any, as may be allowed pursuant to
resolution adopted from time to time by the Board. Nothing herein contained
shall be construed to preclude any director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
Section 15. Protection of Director for Reliance on Corporate Records. No
director shall be liable for dividends legally declared, distributions legally
made to shareholders, or any other action taken in reliance in good faith upon
financial statements of the corporation represented to him to be correct by the
Chairman of the Board (if any), the President or the officer of the corporation
having charge of the books of account, or certified by an accountant to fairly
represent the financial condition of the corporation; nor shall any such
director be liable for determining
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in good faith the amount available for dividends or distributions by considering
the assets to be of their book values.
ARTICLE V
Officers
--------
Section 1. Officers--Who Shall Constitute. The officers of the
corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries, and one
or more Assistant Treasurers. The Board shall elect or appoint a President and
Secretary at its first meeting and at each annual meeting of the Board of
Directors which shall follow the annual meeting of the shareholders. The Board
then, or from time to time, may also elect or appoint one or more of the other
prescribed officers as it shall deem advisable, but need not elect or appoint
any officers other than a President and a Secretary. The Board may, if it
desires, further identify or describe any one or more of such officers.
An officer need not be a shareholder unless required by law or the Articles
of Incorporation. Any two or more of such offices may be held by the same
person.
An officer shall be deemed qualified when he enters upon the duties of the
office to which he has been elected or appointed and furnishes any bond required
by the Board; but the Board may also require of such person his written
acceptance and promise faithfully to discharge the duties of such office.
Section 2. Term of Office. Each officer of the corporation shall hold his
office for the term for which he was elected, or until he resigns or is removed
by the Board, whichever first occurs.
Section 3. Appointment of Officers and Agents--Terms of Office. The Board
from time to time may also appoint such other officers and agents for the
corporation as it shall deem necessary or advisable. All appointed officers and
agents shall hold their respective positions at the pleasure of the Board or for
such terms as the Board may specify, and they shall exercise such powers and
perform such duties as shall be determined from time to time by the Board, or by
an elected officer empowered by the Board to make such determination.
Section 4. Removal. Any officer or agent elected or appointed by the
Board of Directors, and any employee, may be removed or discharged by the Board
whenever in its judgment the best interests of the corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any,
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of the person so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 5. Salaries and Compensation. Salaries and compensation of the
principal executive officers of the corporation shall be fixed, increased or
decreased by the Board of Directors, upon recommendation of the compensation
committee, and to the extent that the compensation committee deems appropriate,
upon approval by the shareholders of the corporation. Salaries and compensation
of all other elected or appointed officers and agents, and employees of the
corporation, may be fixed, increased or decreased by the Board of Directors or a
committee thereof, but until action is taken with respect thereto by the Board
of Directors or a committee thereof, the same may be fixed, increased or
decreased by the Chairman of the Board (if any), the President, or by such other
officer or officers as may be empowered by the Board of Directors or a committee
thereof to do so.
Section 6. Delegation of Authority to Hire, Discharge, Etc. The Board,
from time to time, may delegate to the Chairman of the Board (if any), the
President, or any other officer or executive employee of the Corporation,
authority to hire, discharge, and fix and modify the duties, salary, or other
compensation of employees of the corporation under their jurisdiction; and the
Board may delegate to such officer or executive employee similar authority with
respect to obtaining and retaining for the corporation the services of
attorneys, accountants, and other experts.
Section 7. The Chairman of the Board and the President. The Chairman of
the Board shall be the chief executive officer of the corporation. The
President shall be the chief operating officer of the corporation. Except as
otherwise provided for in these By-laws, the Chairman of the Board, or in his
absence the President, shall preside at all meetings of the shareholders and of
the Board of Directors. Both shall have general and active management of the
business of the corporation and shall carry into effect all directions and
resolutions of the Board.
Either the Chairman of the Board or the President may execute all bonds,
notes, debentures, mortgages and other contracts requiring a seal, under the
seal of the corporation, and may cause the seal to be affixed thereto, and all
other instruments for and in the name of the corporation, except that if, by
law, such instruments are required to be executed only by the President, he or
she shall execute them.
Either the Chairman of the Board or the President, when authorized to do so
by the Board, may execute powers of attorney from, for, and in the name of the
corporation, to such proper person or persons as he may deem fit, in order that
thereby the business of the corporation may be furthered or action taken as may
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be deemed by him or her necessary or advisable in furtherance of the interests
of the corporation.
Either the Chairman of the Board or the President, except as may be
otherwise directed by the Board, shall attend meetings of shareholders of other
corporations to represent this corporation thereat and to vote or take action
with respect to the shares of any such corporation owned by this corporation in
such manner as he or she shall deem to be for the interest of the corporation or
as may be directed by the Board.
The Chairman of the Board and, in his absence, the President, shall, unless
the Board otherwise provides, be ex officio a member of all standing committees.
Each of said officers shall have such general executive powers and duties of
supervision and management as are usually vested in the office of a managing
executive of a corporation, provided that the President shall report to and
follow the directives of the Chairman of the Board.
Each shall have such other or further duties and authority as may be
prescribed elsewhere in these By-laws or from time to time by the Board of
Directors, and the Board may from time to time divide the responsibilities,
duties, and authority between them to such extent as it may deem advisable.
Notwithstanding anything to the contrary herein stated, the Chairman of the
Board shall not be authorized to do any act required by law to be done by the
President of the corporation until written notice of his designation as chief
executive officer, attested to by the Secretary of the corporation, has been
filed in writing with the Secretary of State of Missouri.
Section 8. Vice Presidents. The Vice Presidents, in the order of their
seniority as determined by the Board, shall, in the absence, disability or
inability to act of the Chairman of the Board and the President, perform the
duties and exercise the powers of the Chairman of the Board and the President,
and shall perform such other duties as the Board of Directors shall from time to
time prescribe.
Section 9. The Secretary and Assistant Secretaries. The Secretary shall
attend all sessions of the Board and except as otherwise provided for in these
By-laws, all meetings of the shareholders, and shall record or cause to be
recorded all votes taken and the minutes of all proceedings in a minute book of
the corporation to be kept for that purpose. The Secretary shall perform like
duties for the executive and other standing committees when requested by the
Board or such committee to do so.
The Secretary shall have the principal responsibility to give, or cause to
be given, notice of all meetings of the shareholders
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and of the Board of directors, but this shall not lessen the authority of others
to give such notice as is authorized elsewhere in these By-laws.
The Secretary shall see that all books, records, lists and information, or
duplicates, required to be maintained at the registered office or at some office
of the corporation in Missouri, or elsewhere, are so maintained.
The Secretary shall keep in safe custody the seal of the corporation, and
when duly authorized to do so, shall affix the same to any instrument requiring
it, and when so affixed, shall attest the same by his signature.
The Secretary shall perform such other duties and have such other authority
as may be prescribed elsewhere in these By-laws or from time to time by the
Board of Directors or the President, under whose direct supervision the
Secretary shall be.
The Secretary shall have the general duties, powers and responsibilities of
a Secretary of a corporation.
The Assistant Secretaries, in the order of their seniority, in the absence,
disability, or inability to act of the Secretary, shall perform the duties and
exercise the powers of the Secretary, and shall perform such other duties as the
Board may from time to time prescribe.
Section 10. The Treasurer and Assistant Treasurers. The Treasurer shall
have responsibility for the safekeeping of the funds and securities of the
corporation, and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the corporation. The Treasurer
shall keep, or cause to be kept, all other books of account and accounting
records of the corporation, and shall deposit or cause to be deposited all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse, or permit to be disbursed, the funds of the
corporation as may be ordered, or authorized generally, by the Board and shall
render to the chief executive officer of the corporation and the directors,
whenever they may require it, an account of all of his transactions as Treasurer
and of those under his jurisdiction, and of the financial condition of the
corporation.
The Treasurer shall perform such other duties and shall have such other
responsibility and authority as may be prescribed elsewhere in these By-laws or
from time to time by the Board or Directors.
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The Treasurer shall have the general duties, powers and responsibility of a
Treasurer of a corporation, and shall be the chief financial and accounting
officer of the corporation.
If required by the Board, the Treasurer shall give the corporation a bond
in a sum and with one or more sureties satisfactory to the Board for the
faithful performance of the duties of his or office, and for the restoration to
the corporation, in the case of his death, resignation, retirement, or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control which belong to the
corporation.
The Assistant Treasurers in the order of their seniority shall, in the
absence, disability or inability to act of the Treasurer, perform the duties and
exercise the powers of the Treasurer, and shall perform such other duties as the
Board of Directors shall from time to time prescribe.
Section 11. Bond. At the option of the Board of Directors, any officer
may be required to give bond for the faithful performance of his duties.
Section 12. Checks and Other Instruments. All checks, drafts, notes,
acceptances, bills of exchange and other negotiable and non-negotiable
instruments and obligations for the payment of money, and all contracts, deeds,
mortgages and all other papers and documents whatsoever, unless otherwise
provided for by these By-laws, shall be signed by such officer or officers or
such other person or persons and in such manner as the Board of Directors from
time to time shall designate. If no such designation is made, and unless and
until the Board otherwise provides, the Chairman of the Board (if any) or the
President and the Treasurer, shall have power to sign all such instruments for,
and on behalf of and in the name of the corporation, which are executed or made
in the ordinary course of the corporation's business.
Section 13. Duties of Officers May be Delegated. If any officer of the
corporation shall be absent or unable to act, or for any other reason the Board
may deem sufficient, the Board may delegate, for the time being, some or all of
the functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the corporation or other
responsible person, provided a majority of the then sitting Board concurs
therein.
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ARTICLE VI
Shares of Stock
---------------
Section 1. Payment for Shares of Stock. The corporation shall not issue
shares of stock except for (i) money paid, (ii) labor done or services actually
received, or (iii) property actually received; provided, however, that shares
may also be issued (iv) in consideration of the cancellation of valid bona fide
antecedent debts, (v) as stock dividends, (vi) pursuant to stock splits, reverse
stock splits, stock combinations, reclassifications of outstanding shares into
shares of another class or classes, exchanges of outstanding shares for shares
of another class or classes, or (vii) other bona fide changes respecting
outstanding shares. No note or obligation given by any shareholder, whether
secured by deed of trust, mortgage or otherwise shall be considered as payment
of any part of any share or shares.
Section 2. Certificates for Shares of Stock. The certificates for shares
of stock of the corporation shall be numbered, shall be in such form as may be
prescribed by the Board of Directors in conformity with law, and shall be
entered in the stock books of the corporation as they are issued, and such
entries shall show the name and address of the person, firm, partnership,
corporation or association to whom each certificate is issued. Each certificate
shall have printed, typed or written thereon the name of the person, firm,
partnership, corporation, or association to whom it is issued, and the number of
shares represented thereby and shall be signed by the Chairman of the Board (if
any) or the President or a Vice President, and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the corporation and
sealed with the seal of the corporation, which seal may be facsimile, engraved
or printed. If the corporation has a registrar, a transfer agent, or a transfer
clerk who actually signs such certificates, the signature of any of the other
officers above mentioned may be facsimile, engraved, or printed. In case any
such officer who has signed or whose facsimile signature has been placed upon
any such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nevertheless be issued by the
corporation with the same effect as if such officer were an officer at the date
of its issue.
Section 3. Lost or Destroyed Certificates. In case of the loss or
destruction of any certificate for shares of stock of the corporation, upon due
proof of the registered owner thereof or his representative, by affidavit of
such loss or otherwise, the Chairman of the Board (if any) or the President and
Secretary may issue a duplicate certificate or replacement certificate in its
place, upon the corporation being fully indemnified therefor. Any such officer
may request the posting of an indemnity bond in favor of the corporation
whenever and to the extent that they deem
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appropriate as a precondition to the issuance of any duplicate or replacement
certificate.
Section 4. Transfers of Shares, Transfer Agent, Registrar. Transfers of
shares of stock shall be made on the stock record or transfer books of the
corporation only by the person named in the stock certificate, or by his
attorney lawfully constituted in writing, and upon surrender of the certificate
therefor. The stock record book and other transfer records shall be in the
possession of the Secretary (or other person appointed and empowered by the
Board to do so) or of a transfer agent or clerk for the corporation. The
corporation, by resolution of the Board, may from time to time appoint a
transfer agent, and, if desired, a registrar, under such arrangements and upon
such terms and conditions as the Board deems advisable; but until and unless the
Board appoints some other person, firm or corporation as its transfer agent (and
upon the revocation of any such appointment, thereafter until a new appointment
is similarly made) the Secretary of the corporation (or other person appointed
and empowered by the Board) shall be the transfer agent or clerk of the
corporation, without the necessity of any formal action of the Board, and the
Secretary or other person shall perform all of the duties thereof.
Section 5. Closing of Transfer Books, Record Date. The Board of Directors
shall have the power to close the stock transfer books of the corporation for
a period not exceeding seventy days preceding the date of any meeting of the
shareholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date not exceeding seventy days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, the meeting or any
adjournment thereof, or entitled to receive payment of the dividends, or
entitled to the allotment of rights, or entitled to exercise the rights in
respect of the change, conversion, or exchange of shares. In such case, only the
shareholders who are shareholders of record on the date of closing of the
transfer books or on the record date so fixed shall be entitled to such notice
of, and to vote at, the meeting, and any adjournment thereof, or to receive
payment of the dividend, or to receive the allotment of rights, or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the date of closing of the transfer books or
the record date fixed as aforesaid. If the Board of Directors does not close the
transfer books or set a record date for the determination of the shareholders
entitled to notice of,
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and to vote at, the meeting, and any adjournment of the meeting, the record date
shall be the date that is twenty days previous to the meeting; except that, if
prior to the meeting written waivers of notice of the meeting are signed and
delivered to the corporation by all of the shareholders of record at the time
the meeting is convened, only the shareholders who are shareholders of record at
the time the meeting is convened shall be entitled to vote at the meeting and at
any adjournment of the meeting.
Section 6. Fractional Share Interests or Scrip. The corporation may issue
fractions of a share and it may issue a certificate for a fractional share, or
by action of the Board of Directors, the corporation may issue in lieu thereof
scrip or other evidence or ownership which shall entitle the holder to receive a
certificate for a full share upon the surrender of such scrip or other evidence
of ownership aggregating a full share. A certificate for a fractional share
shall (but scrip or other evidence of ownership shall not, unless otherwise
provided by resolution of the Board of Directors) entitle the holder to all of
the rights of a shareholder, including without limitation the right to exercise
any voting right, or to receive dividends thereon or to participate in any of
the assets of the corporation in the event of liquidation. The Board of
Directors may cause such scrip or evidence of ownership (other than a
certificate for a fractional share) to be issued subject to the condition that
it shall become void if not exchanged for share certificates before a specified
date, or subject to the condition that the shares for which such scrip or
evidence of ownership is exchangeable may be sold by the corporation and the
proceeds thereof distributed to the holders of such scrip or evidence of
ownership, or subject to any other condition which the Board of Directors may
deem advisable.
ARTICLE VII
Indemnification
---------------
Section 1. Third Party Actions. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses, including attorney fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to
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believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. Actions By or in the Right of the Corporation. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the corporation, or is or was serving at
the request of the corporation, as a director or officer of another corporation,
partnership, joint venture, trust, or other enterprise against expenses,
including attorney fees and amounts paid in settlement, actually and reasonably
incurred by him in connection with the defense or settlement of the action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought determines
upon application that, despite the adjudication of liability and in view of all
the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
Section 3. Indemnity if Successful. To the extent that a director,
officer, employee, or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in
Sections 1 and 2 of this Article, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorney fees)
actually and reasonably incurred by him in connection with the action, suit, or
proceeding.
Section 4. Standard of Conduct. Any indemnification under Sections 1
and 2 of this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in this Article.
The determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit,
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of
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disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the shareholders by majority vote of the shares eligible to
vote for directors and actually voted, where shares held by the individual about
whom such indemnification is at issue shall not be eligible to vote.
Section 5. Expenses. Expenses incurred in defending a civil or criminal
action, suit, or proceeding may be paid by the corporation in advance of the
final disposition of the action, suit, or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
Section 6. Nonexclusivity. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under the Articles of Incorporation, these By-
laws, or any agreement, vote of the shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, personal representatives, and administrators of such a person.
Section 7. Further Indemnity Permissible. The corporation shall have the
power to give further indemnity, in addition to the indemnity authorized or
contemplated under the various sections of this Article, including Section 6
thereof, to any person who is or was a director, officer, employee, or agent, or
to any person who is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, provided such further indemnity is either
(i) authorized, directed, or provided for in the Articles of Incorporation of
the corporation or a duly adopted amendment thereof or (ii) authorized,
directed, or provided for in these By-laws or in any agreement of the
corporation which has been adopted by the shareholders of the corporation, and
provided further that no such indemnity shall indemnify any person from or on
account of such person's conduct which has been finally adjudged to have been
knowingly fraudulent, deliberately dishonest, or willful misconduct. Nothing in
this Section 7 shall be deemed to limit the power of the corporation under
Section 6 of this Article to enact By-laws or to enter into agreements without
shareholder adoption of the same.
Section 8. Insurance. The corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a
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director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 9. Corporation. For the purpose of this Article, references to
"the corporation" include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director or officer of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director or officer of another corporation, partnership, joint venture,
trust, or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
Section 10. Other Definitions. For purposes of this Article, the term
"other enterprise" shall include without limitation employee benefit plans; the
term "fines" shall include without limitation any excise taxes assessed on a
person with respect to an employee benefit plan; and the term "serving at the
request of the corporation" shall include without limitation any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article.
Section 11. Indemnity for Agents and Employees. The corporation may, by
resolution duly adopted by a majority of the disinterested members of the Board
of Directors, grant such indemnity rights and reimbursement for such expenses as
it determines to be appropriate to any person who was or is a party to any
threatened, pending, or completed action or suit, whether civil, criminal,
administrative, or investigative, including any action by or in the right of the
corporation, by reason of the fact that such person is or was an agent or
employee of the corporation, or is or was serving as an agent or employee, at
the request of the corporation, of another corporation, partnership, joint
venture, trust, or other enterprise. Any such grant of indemnification shall be
only to the extent so provided in the resolution granting indemnification, but
shall, in no event, be greater than the rights of indemnification and
reimbursement of expenses granted to directors and officers of this corporation.
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ARTICLE VIII
General Provisions
------------------
Section 1. Fixing of Capital, Transfers of Surplus. Except as may be
specifically otherwise provided in the Articles of Incorporation, the Board of
Directors is expressly empowered to exercise all authority conferred upon it or
the corporation by any law or statute, and in conformity therewith, relative to:
The determination of what part of the consideration received for
shares of the corporation shall be capital, if any;
Increasing capital;
The consideration to be received by the corporation for its shares;
and
All similar or related matters;
provided that any concurrent action or consent by or of the corporation and its
shareholders required to be taken or given pursuant to law shall be duly taken
or given in connection therewith.
Section 2. Dividends. Ordinary dividends upon the shares of the
corporation, subject to the provisions of the Articles of Incorporation and of
any applicable law or statute, may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash, in property, or in
shares of its stock.
Liquidating dividends or dividends representing a distribution of paid-in
surplus or a return of capital shall be made only when and in the manner
permitted by law.
Section 3. Creation of Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in their
reasonable discretion, think proper as a reserve fund or funds, to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purposes as the Board of
Directors shall determine in the best interests of the corporation, and the
Board may abolish any such reserve in the manner in which it was created.
Section 4. Fiscal Year. The Board of Directors shall have the paramount
power to fix, and from time to time, to change, the fiscal year of the
corporation. In the absence of action by the Board of Directors, however, the
fiscal year of the corporation
-26-
<PAGE>
shall commence on the first day of May of each year and conclude on the
thirtieth day of April of the next following year.
Section 5. Notices. Except as otherwise specifically provided herein with
respect to notice to shareholders or otherwise, or as otherwise required by law,
all notices required to be given by any provision of these By-laws shall be in
writing and shall be deemed to have been given: (i) when received if delivered
in person; (ii) on the date of acknowledgment or confirmation of receipt if sent
by telex, facsimile, or other electronic transmission; (iii) one day after
delivery, properly addressed and fees prepaid, to a reputable courier for same
day or overnight delivery; or (iv) two days after being deposited, properly
addressed and postage prepaid, in the United States mail.
Section 6. Amendments to By-laws. The By-laws of the corporation may from
time to time be repealed, amended or altered, or new and/or restated By-laws may
be adopted, in either of the following ways:
By such vote of the shareholders entitled to vote at any annual or
special meeting thereof as may be required by the Articles of
Incorporation, and if there is no such specific requirement, then by the
vote of a majority of said shareholders; or
By resolution adopted by the Board of Directors if such power shall
have been vested in the Board of Directors by the Articles of
Incorporation; provided, however, that such power shall be exercisable only
by such number or percentage of the Directors as is required by the
Articles of Incorporation, and if there is no such specific requirement,
then by a majority of the Board of Directors. Notwithstanding the
foregoing, the Board of Directors shall not have the power to suspend,
repeal, amend or otherwise alter the By-laws or portion thereof enacted by
the shareholders if at the time of such enactment or thereafter the
shareholders shall so expressly provide.
* * * * * * * * *
-27-
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT effective as of the 25th day of June, 1997, between
Wave Technologies International, Inc., a Missouri corporation ("Wave"), and J.
Michael Bowles, a resident of St. Louis, Missouri (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been serving as Chief Financial Officer of Wave.
WHEREAS, the Board of Directors of Wave has determined that the retention
of the Executive is important to the continued long-term viability of Wave; and
WHEREAS, Wave desires to continue the services of the Executive, and the
Executive is willing to continue on the terms and conditions hereinafter set
forth; and
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, the parties hereby agree as follows:
1. Definition of Wave. For the purposes of this Agreement, unless the
context otherwise requires, all references to Wave herein shall include both
Wave and any subsidiaries.
2. Engagement. Wave hereby continues the engagement of the Executive as
Chief Financial Officer, and the Executive hereby accepts said continued
engagement upon the terms and conditions hereinafter set forth.
3. Term. Subject to the provisions for termination hereinafter set
forth, the term of this Agreement began as of the date first above written, and
shall expire on June 30, 2000.
4. Compensation.
(a) Salary. As base compensation for the services to be rendered
hereunder, Wave shall pay the Executive his current annual salary payable
in equal bi-weekly installments. Said salary may be increased to take into
account the nature of the contributions to Wave by the Executive and any
other factors that may be deemed relevant by the Compensation Committee of
the Board of Directors of Wave (the "Compensation Committee").
(b) Compensation Plans. The Executive shall be entitled to
participate in any stock option plans(s), employees' stock purchase
plan(s), 401(k) savings plan, retirement plans, profit sharing plans, bonus
programs and deferred compensation plan(s) as Wave may from time to time
adopt upon the terms and conditions established by the Compensation
Committee or the board of Directors of Wave.
<PAGE>
(c) Bonus Compensation. The Executive shall be entitled to such cash
bonuses, if any, during the term of his employment based upon the success
of Wave and/or the Executive in reaching certain goals and objectives as
determined by the Executive, the President of Wave and the Compensation
Committee.
5. Employment Benefits. Wave shall maintain such policies of health,
hospitalization, disability and life insurance covering the Executive as Wave
shall reasonably determine to be comparable to policies covering other senior
executive officers of Wave.
6. Vacations. The Executive shall be entitled to vacation time and
sick leave in accordance with the Wave policy then in effect.
7. Duties, Understandings and Expectations. The Executive shall devote
his full and exclusive business time, attention, energies and best efforts to
the performance of his duties hereunder, in such manner and at such times as may
be determined by the President or the Board of Directors from time to time, in
accordance with the usual standards of ethics and the usual customs and
procedures applicable to the commercial businesses in which Wave is engaged.
During the term of this Agreement, or any extension hereof, the Executive shall
neither directly nor indirectly be employed by any other person, firm or
corporation, in any capacity whatsoever except (a) as a director or the like of
any business or charitable entity or organization provided such entity or
organization are not engaged in activity competitive with Wave or its
affiliates, and (b) as an officer and/or director of any corporation or manager
of any limited liability company as requested by Wave. It is expressly
understood that the Executive's primary mission is to enhance the growth and
value of Wave through sound management.
8. Expenses. Wave shall reimburse the Executive for all reasonable and
necessary costs and expenses incurred by him in connection with the performance
of his duties hereunder upon the presentation by the Executive from time to time
in accordance with Wave's policy of itemized accounts of such expenditures.
9. Executive Covenants. To induce Wave to execute, deliver and perform
this Agreement, and for $10.00 in hand paid, Executive hereby covenants and
agrees:
(a) Nondisclosure of Information - Executive agrees that during the
term of employment by Wave and thereafter, Executive shall not disclose
Wave's (or Wave's customers') trade secrets or confidential, technical, and
business information and shall use such information only for the benefit of
Wave. Upon request, or automatically upon termination of employment with
Wave, Executive agrees to return all of Wave's property, including but not
limited to material related to trade secrets, and confidential, technical
and business information.
(b) Executive's Restrictive Covenants - As an inducement to Wave to
enter into this Employment Agreement and to agree to pay to the Executive
his regular compensation, bonuses and other payments and fringe benefits
provided hereunder, and
- 2 -
<PAGE>
in view of the Executive's services and his access to confidential
information, Executive agrees that during the period of his employment by
Wave and for a period of 12 months after termination of this employment,
for any reason other than a Wave Cause or by Wave without Executive Cause,
the Executive will not, directly or indirectly, on his own account, or as
an employee, consultant, adviser, partner, co-venturer, owner, member,
manager, officer, director or stockholder of any other person, firm,
partnership, limited liability company, or corporation:
(i) conduct, engage in, be connected with, or directly aid or
assist as a member of or consultant to management anyone else to
engage in, a business directly competitive with Wave throughout the
United States of America,
(ii) during such time, directly or indirectly, for himself or on
behalf of any other person or entity in which he shall have any direct
or indirect business or employment interest (collectively an
"affiliated entity"), induce or attempt to induce any present or
future management or other key employee of Wave to leave the employ of
Wave and/or to seek or accept employment with the Executive or any
affiliated entity, nor shall he negotiate with any such employee in
the employ of Wave with respect to such person's present or future
employment outside of Wave.
Nothing herein contained shall prevent the Executive from
purchasing and owning stock in any corporation listed on any stock
exchange or traded in the over-the-counter market provided such
purchases shall not result in the Executive owning in the aggregate
directly or beneficially, five percent (5%) or more of the equity
securities of any corporation or other entity engaged in a business
which is competitive to that of Wave.
The Executive further agrees that, in view of the present scope
of Wave's business activities, the time periods, territory and scope
of activities specified above describe the minimum reasonable time,
area and scope of activities necessary to protect Wave and its
successors and assigns, in the use of the good will of the business to
be conducted by Wave, and therefore he agrees that Wave, in case of
violation of this Paragraph 9(b), may have injunctive relief, without
bond (but upon due notice) in addition to such other relief as may
appertain inequity or at law. No waiver of any violation hereof shall
be implied from Wave's forbearance or failure to take action pursuant
hereof. All covenants and provisions of this Paragraph 9(b)
constitute a series of separate covenants, and if any particular
portion of this Paragraph 9(b) is adjudicated invalid or
unenforceable, because of its scope in terms of area, time or business
activities, the parties agree that such provision may be made
enforceable by reductions or limitations thereon so as to be
enforceable to the fullest extent permissible under the laws and
public policies of any applicable jurisdiction.
- 3 -
<PAGE>
The provisions of this Paragraph 9 shall continue in full force and effect
notwithstanding the termination of this Employment Agreement.
10. Termination.
(a) Events of Termination. This Agreement and the Executive's
employment with Wave may be terminated:
(1) at any time by mutual consent of Wave and the Executive;
(2) by Wave for Executive Cause upon written notice to the
Executive;
(3) by Wave without Executive Cause upon 30 days prior written
notice to the Executive;
(4) by the Executive for Wave Cause; or
(5) by the Executive without Wave Cause upon no less than 30
days prior written notice to Wave.
(b) Definition of Executive Cause. For purposes of this Agreement,
termination of the Executive by Wave shall be deemed to be for "Executive
Cause" if the Board of Directors of Wave shall have determined in good
faith that the Executive has:
(1) willfully neglected his normal and material duties
hereunder;
(2) willfully breached any of the material covenants contained
herein;
(3) wrongfully converted funds or property of Wave;
(4) made any unauthorized disclosure of any trade secrets,
patents, trademarks, copyrights or other proprietary business
information owned or developed by or on behalf of Wave, its successors
or assigns; or
(5) been arrested and arraigned for any felony.
(c) Definition of Wave Cause. For purposes of this Agreement,
termination by the Executive shall be deemed for "Wave Cause" if the
Executive shall have terminated his employment with Wave due to:
(1) the assignment to the Executive of duties not consistent
with the position of Chief Financial Officer or demanding
additional, official work days per week;
- 4 -
<PAGE>
(2) a reduction in salary or discontinuance of any bonus plan
now in effect in which the Executive may participate; or
(3) a change in the geographic location where the Executive's
position is primarily based in excess of fifty (50) miles
from the Wave facility at which the Executive predominantly
performs his duties at the time of a change in control.
11. Severance Benefits from Wave.
(a) Benefits/accrual. To induce the Executive to continue to serve
Wave in his present capacities, Wave shall provide the Executive with
severance benefits set forth in Section 11(c) below, if, within one (1)
year after there has occurred a "change in control" (as hereinafter
defined) the Executive has terminated his employment due to a Wave Cause,
or the Executive's employment is terminated by Wave or its successor in
interest for any reason other than Executive Cause.
(b) Definition of Change of Control. A "change of control" shall
have occurred if (i) any person (as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) that presently owns
50% or less of the outstanding shares of Wave Common Stock becomes the
beneficial owner (as defined in Rule 13(d)-3 of the Exchange Act) of a
total of more than 50% of the outstanding shares of Wave Common Stock, or
(ii) Wave shall have sold all or substantially all of its assets.
(c) Description of Severance Benefits. Severance benefits for the
Executive pursuant to Section 11(a) shall be as follows:
(1) a lump-sum payment of eighteen (18) months' salary based on
the total annual rate of base compensation for the Executive in effect
prior to the date of change of control;
(2) continued participation in all employee benefits for a
period of one (1) year. Should such participation not be possible due
to terms of the employee benefit plans, equivalent benefits shall be
provided to the Executive through alternative means. These benefits
shall include, but not be limited to, all health, accident, and
disability plans, as well as any life insurance plans, provided by or
through Wave; and
(3) a release and discharge of the covenants set forth in
Section 9(b).
(d) Time of Paying Severance Benefits. The severance benefits
described above shall be payable by Wave or its successor in interest to
the Executive on the last day of the Executive's employment. The Executive
shall not be required to
- 5 -
<PAGE>
mitigate the amount of severance benefit by seeking other employment and
none of these payments may be reduced by any future salary the Executive
may earn.
12. Arbitration. Except as otherwise specifically provided herein, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in the County of St. Louis in
accordance with the rules of the American Arbitration Association then
obtaining, and judgment upon any award so rendered may be entered in any court
having jurisdiction thereof.
13. Notices. Any notice or other communication required or permitted to
be transmitted under this Agreement shall be in writing and personally delivered
(by commercial courier or otherwise) or mailed, return receipt requested,
postage prepaid, addressed to the parties hereto at their addresses indicated
below, or at such other addresses as may be hereafter designated by a party by
notice delivered in accordance herewith. Any notice delivered personally shall
be effective on the day of delivery; any notice mailed, as aforesaid, shall be
effective on the second day following posting.
14. Assignment. The rights and obligations of Wave under this Agreement
shall inure to the benefit of, and shall be binding upon, Wave and its
successors and assigns.
15. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be deemed originals and together shall
constitute one and the same instrument.
16. Severability. The invalidity, illegality or unenforceability of any
provision hereof shall not in any way affect, impair, invalidate or render
unenforceable this Agreement or any other provision hereof.
17. Taxes. Wave shall be entitled to deduct or withhold all applicable
payroll and social security taxes where required on all applicable compensation
paid to the Executive or any successor in interest.
18. Entire Agreement. This instrument contains the entire agreement
between the parties. It supersedes any and all other agreements and
understandings of or by the parties with respect to the subject matter hereof.
It may not be changed orally, but only by agreement in writing and signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.
19. Governing Law. This Agreement shall be governed by the internal laws
of the State of Missouri.
- 6 -
<PAGE>
IN WITNESS WHEREOF, this Agreement is effective as of the day and year
first above written.
WAVE:
WAVE TECHNOLOGIES INTERNATIONAL, INC.
10845 Olive Blvd., Suite 250
St. Louis, MO 63141
By: /s/Kenneth W. Kousky
---------------------------------------
Kenneth W. Kousky
President and Chief Executive Officer
EXECUTIVE:
/s/ J. Michael Bowles
-------------------------------------------
J. Michael Bowles
Address: 9016 Skycrest
St. Louis, MO 63126
-7-
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Wave Technologies (UK) Limited, incorporated in England, 1993
Wave Technologies Australia Pty. Ltd., formed in Australia in 1995
Wave Technologies International Publishing, Inc., a Missouri corporation formed
in 1995
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Wave Technologies International, Inc. on Form S-8 of our report dated June 6,
1997 appearing in this Annual Report on Form 10-KSB of Wave Technologies
International, Inc. for the year ended April 30, 1997.
St. Louis, Missouri
June 6, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the registrant's financial statements as of and for the period ended April 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 948,280
<SECURITIES> 0
<RECEIVABLES> 7,553,651
<ALLOWANCES> 446,000
<INVENTORY> 785,011
<CURRENT-ASSETS> 9,486,196
<PP&E> 8,878,544
<DEPRECIATION> 4,921,580
<TOTAL-ASSETS> 16,494,526
<CURRENT-LIABILITIES> 8,354,071
<BONDS> 0
0
0
<COMMON> 1,966,729
<OTHER-SE> 5,633,953
<TOTAL-LIABILITY-AND-EQUITY> 16,494,526
<SALES> 15,560,721
<TOTAL-REVENUES> 30,826,456
<CGS> 2,443,083
<TOTAL-COSTS> 14,603,830
<OTHER-EXPENSES> 14,890,838
<LOSS-PROVISION> 78,422
<INTEREST-EXPENSE> 69,293
<INCOME-PRETAX> 1,278,372
<INCOME-TAX> (250,000)
<INCOME-CONTINUING> 1,528,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,528,372
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
