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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1998
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[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24454
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Wave Technologies International, Inc.
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(Exact name of small business issuer as specified in its charter)
Missouri 43-1481443
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(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
10845 Olive Boulevard, Suite 250, Saint Louis, Missouri 63141
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(314) 995-5767
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(Issuer's telephone number)
n/a
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The issuer had 4,132,461 shares of
common stock, par value $.50,
outstanding as of March 10, 1998
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Transitional Small Business Disclosure Format (check one): Yes No X
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WAVE TECHNOLOGIES INTERNATIONAL, INC.
Table of Contents
Form 10-QSB for the Quarterly Period
Ended January 31, 1998
PART I FINANCIAL INFORMATION Page
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Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at January 31, 1998
and April 30, 1997 3
Consolidated Statements of Operations for the
three and nine months ended January 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
three and nine months ended January 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
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Page
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 30 January 31
1997 1998
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ASSETS
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<TABLE>
<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 948,280 $ 686,107
Accounts receivable (less allowance of $446,000
and $397,000, respectively) 7,107,651 8,500,430
Inventory 785,011 1,119,234
Prepaid expenses 475,949 808,230
Other current assets 169,305 279,826
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Total current assets 9,486,196 11,393,827
Property, plant & equipment - net 3,956,964 3,740,981
Prepaid direct mail cost 558,025 628,103
Deferred courseware 1,653,993 2,159,393
Other assets 839,348 1,320,956
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Total assets $ 16,494,526 $ 19,243,260
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------
Current liabilities:
Accounts payable $ 2,489,814 $ 2,698,269
Accrued expenses 1,408,946 1,596,893
Deferred revenue 4,098,761 3,655,950
Bank line-of-credit - 1,424,000
Current portion of long-term debt and
capital lease obligations:
Related party 280,099 228,676
Other 76,451 61,283
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Total current liabilities 8,354,071 9,665,071
Long-term debt:
Related party 147,020 -
Other 94,766 52,971
Accrued rent liability 297,987 319,617
Common shareholders' equity:
Common stock, $.50 par value, authorized 20,000,000
shares; issued, 3,933,459 and 4,132,461 shares;
outstanding, 3,926,102 and 4,125,104 shares 1,966,729 2,066,231
Additional paid-in capital 7,038,285 7,987,723
Accumulated deficit (1,468,461) (921,848)
Cumulative translation adjustment 78,827 88,193
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7,615,380 9,220,299
Less treasury stock, at cost (7,357 shares) (14,698) (14,698)
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Total common shareholders' equity 7,600,682 9,205,601
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Total liabilities and shareholders' equity $ 16,494,526 $ 19,243,260
=========== ===========
See notes to financial statements
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</TABLE>
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<TABLE>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
January 31 January 31
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1997 1998 1997 1998
-------------- --------------- -------------- ------------
<CAPTION>
<S> <C> <C> <C> <C>
Revenues:
Publishing $ 4,460,984 $ 4,701,977 $ 10,999,020 $ 13,145,526
Instructor-led training 2,447,875 2,442,032 7,557,033 8,447,556
Custom solutions 1,118,377 2,404,245 3,495,354 5,207,476
----------- ----------- ----------- ------------
Total revenues 8,027,236 9,548,254 22,051,407 26,800,558
----------- ----------- ----------- ------------
Cost and expenses:
Cost of services, products and development 3,854,766 5,077,299 10,829,975 13,924,973
Sales and marketing 2,161,669 2,250,978 5,615,137 6,522,058
General and administrative 1,630,109 1,913,854 4,630,357 5,462,852
----------- ----------- ----------- -----------
Total costs and expenses 7,646,544 9,242,131 21,075,469 25,909,883
----------- ----------- ----------- -----------
Income from operations 380,692 306,123 975,938 890,675
Other income/(expenses) - net 8,364 (38,405) (33,944) (88,027)
----------- ----------- ----------- -----------
Income before tax 389,056 267,718 941,994 802,648
Less provision for income taxes - 67,535 - 256,035
----------- ----------- ----------- -----------
Net income $ 389,056 $ 200,183 $ 941,994 $ 546,613
============= =========== ============= ===========
Basic net income per common shares $ 0.10 $ 0.05 $ 0.24 $ 0.14
============= =========== ============= ===========
Basic weighted average common shares 3,932,326 3,994,973 3,926,600 3,969,059
============= =========== ============= ===========
Diluted net income per common shares $ 0.10 $ 0.05 $ 0.24 $ 0.14
============= =========== ============= ===========
Diluted weighted average common shares 3,976,992 4,063,756 3,963,464 4,045,104
============= =========== ============= ===========
See notes to financial statements
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</TABLE>
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WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JANUARY 31
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 941,994 $ 546,613
Adjustments to reconcile net income to net cash
used in operating activities
Depreciation and amortization 1,320,966 1,759,731
Barter activity (696,407) (183,960)
Loss on disposal of capital assets 108 -
Other 43,296 9,366
Net changes in other assets and liabilities, net of acquisitions:
Accounts receivable (1,551,610) (1,292,779)
Inventory 138,006 (334,223)
Other current assets (188,847) (442,802)
Prepaid direct mail (126,771) (70,078)
Deferred courseware 22,490 (505,400)
Other assets 39,027 225,424
Accounts payable 401,759 208,455
Accrued expenses (47,838) 187,947
Deferred charges 421,056 (489,516)
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Net cash provided (used) by operating activities 717,229 (381,222)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (713,119) (1,220,698)
Acquisition of assets from QA Training, Inc. - (10,788)
Disposal of capital equipment 1,712 -
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Net cash used in investing activities (711,407) (1,231,486)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - net 29,031 181,940
Proceeds from borrowings under line of credit - net 6,000 1,424,000
Proceeds from capital leases 131,006 -
Repayments of notes payable (172,925) (198,442)
Payments of capital lease obligations (31,723) (56,963)
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Net cash (used) provided by financing activities (38,611) 1,350,535
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (32,789) (262,173)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 747,064 948,280
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 714,275 $ 686,107
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activity:
Stock issued for acquisition $ 867,000
===========
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I. - GENERAL
The financial information herein is unaudited. However, in the opinion of
management, such information reflects all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operation for the period being reported. Additionally, it should be noted that
the accompanying condensed consolidated financial statements do not purport to
contain complete disclosures in conformity with generally accepted accounting
principles.
The results of operations for the nine months ended January 31, 1998, are not
necessarily indicative of the results of operations for the full year.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements for the year ended April
30, 1997, and the notes thereto.
The Company has reclassified certain 1997 fiscal year amounts to conform to
current year presentation.
The provision for income taxes was determined using an effective income tax rate
of 32% in fiscal 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS
131), which requires disclosure for each segment in which the chief operating
decision maker organizes these segments within a company for making operating
decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure and any manner in
which management disaggregates a company. The Company intends to adopt SFAS 131
in the first quarter of fiscal 1999. The Company anticipates that adoption of
SFAS 131 will not be material.
NOTE II. - DEBT
On January 5, 1996, the Company issued a three-year term note to a bank in the
amount of $600,000, bearing interest at 9.25% per year, secured by certain of
Wave's equipment. The Company's operating line of credit of $2,500,000 is with
the same bank. It bears interest at the bank's prime rate and is secured by the
Company's accounts receivables, inventory and equipment. The Chairman of the
Board of the bank is a member of the Board of Directors of the Company.
NOTE III. - EARNINGS PER SHARE
In the quarter ended January 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128 "EARNINGS PER SHARE" (SFAS 128), and
restated fiscal 1997 earnings per share data.
In accordance with SFAS 128, basic earnings per share are computed by dividing
net income by the weighted average number of common shares outstanding during
the period. Diluted earnings per share are computed similar to basic except the
denominator is increased to include the number of additional common shares that
would have been outstanding if dilutive potential common shares had been issued.
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NOTE IV. - ACQUISITION
On January 22, 1998, the Company purchased substantially all of the assets of QA
Training, Inc. ("QA") through the issuance of 20,000 shares of common stock and
cash payment for direct transaction costs of approximately $11,000. In addition
to the acquisition, the Company also entered into a perpetual license agreement
with QA Training, Ltd. ("QA Ltd.") of the United Kingdom in exchange for the
issuance of 130,000 shares of common stock, with a fair market value of
$751,400. The perpetual license agreement gives the Company exclusive rights in
the United States and non-exclusive rights worldwide, excluding the United
Kingdom and Ireland, to distribute published products and provide instructor-led
training based on training materials developed by QA Ltd. The acquisition of QA
has been accounted for as a purchase transaction in accordance with the
Accounting Principles Board Opinion No. 16 The purchase price was allocated to
tangible and intangible assets acquired based on preliminary estimates of their
fair values at January 22, 1998.
QA was a wholly-owned U.S. subsidiary of QA Ltd., a United Kingdom company, that
provided information technology training in the United States. The excess of
the aggregate purchase price over the fair market value of the assets acquired
is approximately $60,000 and will be amortized over four years. The portion of
the purchase price allocated to intangible assets, primarily product licenses,
is approximately $751,000 and will be amortized on a straight-line basis over
four years.
Item 2. Management's Discussion and Analysis or Plan of Operations.
Overview
The Company designs, develops and delivers training and instructional
products addressing the Internet, data communications, networking and
client/server computing technologies. Wave delivers these products and services
through instructor-led courses, informational seminars and published products
and the Internet. The Company markets its courses and published products to
management information professionals, systems integrators, value-added resellers
and others with systems management responsibilities.
The Company delivers its instructor-led training through eleven Company-
owned facilities in the United States and two centers in the United Kingdom. The
Company increasingly sells training solutions utilizing a mix of multi-media
published materials and live training. Wave has developed both domestic and
international distribution channels for its products.
Three Months Ended January 31, 1998 Compared To
Three Months Ended January 31, 1997
Total revenues increased $1,521,000 or 19%, in the quarter ended January
31, 1998, to $9,548,000 from $8,027,000 in the same quarter in fiscal 1997, and
increased $160,000 or 2% over revenues in the second quarter in fiscal 1998.
Virtually all the revenue increase for the quarter related to custom solutions
revenue growth. International revenues accounted for approximately 23% of Wave's
total revenues in the quarter ended January 31, 1998, compared to 22% in the
same quarter in fiscal 1997.
Custom solutions revenues increased significantly, by $1,286,000, or 115%,
from the same period in fiscal 1997, and increased as a percentage of total
revenues to 25% compared to 13% in the third quarter of fiscal 1997. The
majority of the increase related to a $1,210,000 increase in GTE University
program revenues, as GTE engaged Wave to fulfill many services previously
handled directly by GTE. A significant portion of that growth, however,
represented facilities rental,
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promotional marketing and printing services provided by Wave to GTE, which carry
much smaller margins than most other custom solutions revenues. Custom solutions
revenues also included a $103,000 increase in revenues related to another custom
solutions contract. Custom solutions revenues in any particular quarter can be
significantly affected by the timing of such services.
Publishing revenues increased slightly, by $241,000, or 5%, from $4,461,000
to $4,702,000 and decreased as a percentage of total revenues to 49% from 55% in
the same quarter in fiscal 1997. Domestic publishing revenues actually
decreased, by $142,000 largely as the result of an influx of low-cost
competitive products in the Microsoft NT area, offered through bookstores and
the Internet. Actual sales of Wave's self-study kits through direct mail and
distributors declined dramatically, by over $1 million from the same period in
fiscal 1997, as the result of this competition. The Company was able to
compensate by expanding corporate direct sales of its Microsoft products
(through corporate licenses and corporate Club Wave). The net decline in
domestic publishing revenues was offset by a $383,000 increase in international
publishing revenues, primarily as the result of a large purchase of A+ kits by a
new customer.
ILT revenues decreased slightly to $2,442,000 from $2,448,000 in the same
quarter in fiscal 1997, and declined as a percentage of total revenues to 26%
from 30%. The decrease in ILT revenues included a $76,000 decrease in domestic
ILT revenue partially offset by a $70,000 increase in international ILT revenues
from Wave's new London training center.
The Company recognized $1,340,000 in Club Wave and corporate Club Wave
revenues in the quarter ended January 31, 1998, compared to $1,044,000 in the
same quarter in fiscal 1997. Deferred revenue for Club Wave and corporate Club
Wave sales was $1,990,000 as of the end of the quarter, compared to Club Wave
and corporate Club Wave deferred revenue at April 30, 1997 of $1,612,000.
Cost of services, products and development increased $1,223,000, or 32%, in
the quarter ended January 31, 1998, to $5,077,000, and increased as a percentage
of total revenues to 53% from 48% in the same quarter in fiscal 1997. Cost of
services, products and development for the quarter were impacted primarily by a
$1,199,000 increase in costs related to delivery of custom solutions programs,
previously for GTE University program. An additional $492,000 increase in
international costs of goods included an $88,000 increase in temporary labor
costs, primarily to staff courses at the Company's new London center, a $120,000
increase in royalty fees for reselling a third-party product and a $150,000
increase in product costs as the result of increased published product sales.
Total amortization of development costs for the quarter also increased, by
$131,000, as Wave expensed capitalized development costs for prior periods to
improve and expand its curriculum portfolio, including new Internet courses.
Domestic salaries and related payroll costs also increased by $98,000 compared
to the same quarter in fiscal 1997. These increases were partially offset by
decreases in some domestic expenses, including a $200,000 decrease in temporary
labor costs, as the domestic training centers worked to schedule courses to
better utilize internal trainers. Domestic product costs also decreased by
$73,000 in part as the result of softer sales of Wave's published products
discussed above.
Sales and marketing expenses for the quarter ended January 31, 1998,
increased by $89,000, or 4%, to $2,251,000, from the same quarter in fiscal
1997, and decreased as a percentage of total revenues, to 24% from 27%.
Increases and decreases in individual expense items reflect the shift in Wave's
sales methodology to a corporate direct sales force from direct mail marketing.
Total payroll expense increased $268,000, or 25%, including a $159,000 increase
in international payroll related expense for additional sales staff for Wave's
second London center and a $73,000 increase in domestic bonuses and commissions,
compared to the same quarter in fiscal 1997. The increased sales personnel costs
were partially offset by a decrease in costs related to Wave's direct mail
sales, including a $53,000 decrease in direct mail list expenses and a $54,000
decrease in printing and advertising expense. Wave also continued to invest in
sales and marketing and operational overhead in connection with the development
of its relationship with IBM and the QA acquisition and license, including
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payroll, product development and maintenance, travel and advertising and
marketing, of approximately $40,000 during the quarter.
General and administrative expenses increased $284,000, or 17%, to
$1,914,000 for the third quarter of fiscal 1998, but remained stable as a
percentage of total revenues, at 20%, compared to the same quarter in fiscal
1997. Individual expense items fluctuated compared to the same quarter last
year, with the largest single increase in depreciation and amortization of
$116,000, or 39%. General and administrative expenses include costs such as
rent, equipment depreciation and leases, telephone and postage.
Income from operations was $306,000, a decrease of $75,000, or 20%,
compared to the third quarter of fiscal 1997. This decline is attributable
primarily to Wave's international operations, where operating income declined by
$308,000, as the Company continued to incur start-up costs for its second London
center, which more than offset the $234,000 increase in domestic operating
income.
Interest expense, net of interest income, increased by $24,000 for the
quarter ended January 31, 1998 as the result of increased average daily
borrowings.
The Company recognized net income of $200,000, or $0.05 per share, for the
third quarter of fiscal 1998, compared to net income of $389,000, or $0.10 per
share, for the quarter ended January 31, 1997. Fiscal 1997 net income included
no provision by income tax, as Wave had net operating loss carryforwards, while
net income for the quarter ended January 31, 1998 included a $68,000 income tax
provisions.
Nine Months Ended January 31, 1998 Compared
To Nine Months Ended January 31, 1997
Total revenues increased $4,749,000 or 22%, in the nine months ended
January 31, 1998, to $26,801,000 from $22,051,000 in the same period in fiscal
1997. Publishing revenues increased $2,147,000, or 20%, but decreased slightly
as a percentage of revenues to 49%, compared to 50% for the first nine months of
fiscal 1997. Instructor-led training revenues increased $891,000, or 12%, to
$8,448,000, and decreased slightly as a percentage of total revenues to 32%
compared to 34% in the first nine months of fiscal 1997. Custom solutions
revenues increased $1,712,000, or 49%, to $5,207,000 for the first nine months
of fiscal 1998 and increased to 19% of total revenues, from 16% in the 1997
period. International sales represented a substantial component of both ILT and
publishing revenues. International publishing revenues for the nine-month period
were $3,178,000, or 24% of total publishing revenues, compared to 19% in the
same period in the prior fiscal year. International ILT revenues were
$2,588,000, or 31%, of total ILT revenues, for the first nine months of fiscal
1998, compared to 27% of total ILT revenues, for the same period in the prior
year.
Cost of services, products and development increased $3,095,000, or 29%,
for the nine months ended January 31, 1998, to $13,925,000, and increased as a
percentage of total revenues, to 52%, compared to 49% in the fiscal 1997 period.
The increase related to increased costs for GTE University, personnel related
expenses, and international expenses, primarily in the third quarter, as well as
increased costs for product development activities in the first six months of
fiscal 1998.
Sales and marketing expenses for the nine months ended January 31, 1998,
increased $907,000, or 16%, to $6,522,000, and decreased slightly as a
percentage of revenues, to 24% from 25% in the prior year. Total payroll and
related expenses for sales and marketing increased by $742,000, or 24%, during
the first nine months of fiscal 1998 as the result of Wave's expanded direct
sales force. Direct mail expenses increased by $37,000 from the fiscal 1997
nine-month period, while advertising, printing and promotional expenses
increased $182,000, as the result of increased advertising in trade
publications. Of the total dollar increase, international sales and marketing
expenses increased by $366,000, or 29%.
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General and administrative expenses increased by $832,000, or 18%, to
$5,463,000 for the first nine months of fiscal 1998, but decreased slightly as a
percentage of total revenues to 20% from 21% in the same period in fiscal 1997.
Depreciation expense for equipment purchases in prior periods increased
$388,000, or 50%. Expenses related to personnel recruitment and training also
increased, by $135,000, as Wave continued to search for additional high quality
senior level staff to support planned growth. General and administrative payroll
and related employee expenses increased $194,000 or 13%.
Wave had a provision for income taxes of $256,000 in fiscal 1998, while the
Company accrued no income tax expense in the prior fiscal year, as it utilized
net operating loss carryforwards.
Net income for the current nine-month period was $547,000, compared to a
$942,000 for the same period in the previous fiscal year. The Company's income
per share was $0.14 for the nine months ended January 31, 1998 compared to $0.24
per share for the same period in fiscal 1997.
Liquidity and Capital Resources
The Company's net cash balance at January 31, 1998, was $686,000, compared
to $948,000 at April 30, 1997. Total accounts receivable increased by
$1,393,000, to $8,500,000, primarily as the result of payment terms on the IBM
agreement and other large contracts. Inventory also increased significantly, by
$334,000, or 43%, in part as the result of softer published product sales, and
to prepare for potential orders under Wave's agreement with IBM. Due to the
timing of receipt of goods and services, accounts payable increased slightly, by
$208,000. Prepaid expenses increased by $332,000, or 69%, at January 31, 1998,
compared to the end of fiscal 1997, as Wave paid estimated taxes of $245,000.
Prepaid direct mail increased slightly, by $71,000, to $628,000 at January
31, 1998, but decreased by $121,000 compared to the end of the second quarter in
fiscal 1998. As the result of continued investment in new products, deferred
courseware also increased, by $505,000, or 31%, to $2,159,000, compared to the
end of fiscal 1997. While prepaid advertising and deferred courseware appear as
assets on the balance sheet, those amounts will be expensed over the following
six to 24 months.
Total deferred revenue was $3,656,000 as of the end of the quarter. This
compares to total deferred revenue at April 30, 1997 of $4,099,000, and to total
deferred revenue at October 31, 1997, the end of the second fiscal quarter, of
$3,573,000. Deferred revenue reflects completed sales by the Company, where the
Company has recognized the cost of selling and order execution, so that Wave
carries limited ongoing operating expenses to fulfill these additional sales and
recognize the related revenue.
Wave had drawn $1,424,000 on the line of credit at quarter end, compared to
no balance at the end of fiscal 1997. The Company had overnight borrowing
balances on the line on most days during the third quarter of fiscal 1998,
compared to 28 times during the same quarter in fiscal 1997. Cash flow for the
third fiscal quarter was affected by the loss in the first fiscal quarter and
the growth in accounts receivable.
Wave believes that cash generated from operations, together with existing
cash balances, and its available credit line, should be sufficient to satisfy
the Company's cash requirements for the next several months.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Title
- ----------- -----
3.1 Articles of Incorporation, as amended and restated (filed as Exhibit
3.1 to Registrant's Registration Statement on Form SB-2 (File No. 33-
80556) and incorporated herein by reference, as amended)
3.2 Restated Bylaws (filed as Exhibit 3.2 to Registrant's Annual Report on
Form 10-KSB for the fiscal year ended April 30, 1997, and incorporated
herein by reference)
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 (filed as Exhibit 10.1 to Registrant's Annual Report on
Form 10-KSB for the fiscal year ended April 30, 1997, and incorporated
herein by reference)
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)
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)
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Exhibit No. Title
- ----------- -----
10.9 $2,500,000 Line of Credit Note to Commerce Bank, National Association,
dated as of September 1, 1997
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)
10.16 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)
10.17 Courseware License Agreement effective as of July 31, 1997, between
the Company and International Business Machines Corporation (filed
as Exhibit 10.17 to Registrant's Quarterly Report on Form 10-QSB for
the quarter ended October 31, 1997 and incorporated herein by
reference)
10.18 Wave Technologies International, Inc. 1997 Stock Option Plan (files
as Exhibit 10.18 to Registrant's Quarterly Report on Form 10-QSB for
the quarter ended October 31, 1997 and incorporated herein by
reference)
10.19 Asset Purchase and License Agreement by and among QA Training, Inc.,
QA Training, Ltd. and Wave Technologies International, Inc. dated as
of January 22, 1998
10.20 Wave Distribution Agreement between Wave Technology International,
Inc. and QA Training, Ltd., dated as of January 22, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K - The registrant did not file any reports on Form
8-K during the quarter ended January 31, 1998.
-12-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Wave Technologies International, Inc.
Dated: March 16, 1998 By: /s/ J. Michael Bowles
----------------------------------------------
J. Michael Bowles, Chief Financial Officer
(Principal Accounting an Financial Officer
and Duly Authorized Officer)
-13-
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,500,000.00 09-01-1997 09-01-1998 9240904 4A0 9093 9240904 63141
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Borrower: Wave Technologies International, Inc. (TIN: 43-1481443) Lender: COMMERCE BANK, N.A.
10845 Olive Blvd 8000 Forsyth
St. Louis, MO 63141 P.O. Box 11573
St. Louis, MO 63105-0373
====================================================================================================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Principal Amount: $2,500,000.00 Initial Rate: 8.500% Date of Note: September 1, 1997
</TABLE>
PROMISE TO PAY. Wave Technologies International, Inc. ("Borrower") promises to
pay to COMMERCE BANK, N.A. ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Two Million Five Hundred Thousand &
00/100 Dollars ($2,500,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on September 1, 1998. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
October 1, 1997, and all subsequent interest payments are due on the same day of
each month after that. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the per annum rate from
time to time announced by Lender at its main office as the prime rate, or as the
case may be, the base, reference or other rate then in use for commercial loan
reference purposes, not necessarily the lowest or even favored rate, which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto (the "Index"). Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each Day. Rates of interest tied to the Index shall change
with and be effective on the date of each change in the Index. The Index
currently is 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate equal to the Index, resulting
in an initial rate of 8.500% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note or any guarantor seeks, claims or otherwise attempts to limit, modify
or revoke such guarantor's guarantee of this Note. (g) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired. (h) Lender in good faith
deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 3.000 percentage points over the index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. If not prohibited by applicable law, Borrower also
will pay any court costs, in addition to all other sums provided by law. This
Note has been delivered to Lender and accepted by Lender in the State of
Missouri. If there is a lawsuit, Borrower agrees upon Lender's request to submit
to the jurisdiction of the courts of St. Louis County, the State of Missouri.
Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other. This Note shall be governed by and construed in accordance with the laws
of the State of Missouri.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person.
Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: Kenneth W Kousky, President;
J. M. Bowles, CFO; and Douglas A Wilmsmeyer, Vice President. Borrower agrees to
be liable for all sums either: (a) advanced in accordance with the instructions
of an authorized person or (b) credited to any of Borrower's accounts with
Lender. The unpaid principal balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default under the
terms of this Note or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this
Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
PRIOR NOTE. "This is a renewal of Borrower's note dated September 1, 1996."
ALSO: This Note is subject to the terms and conditions of the General Loan and
Security Agreement dated August 31, 1995, and amended January 5, 1996 and
September 1, 1996.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made.
<PAGE>
PROMISSORY NOTE Page 2
09-01-1997 (Continued)
================================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
BORROWER:
Wave Technologies International, Inc.
x /s/ J. M. Bowles
- -----------------------------------------------
Authorized Officer
================================================================================
<PAGE>
EXHIBIT 10.19
** Indicates that a portion of the document is confidential and has been omitted
and filed separately with the Securities and Exchange Commission in connection
with a request for confidential treatment of such omitted material.
ASSET PURCHASE AND LICENSE AGREEMENT
BY AND AMONG
QA TRAINING, INC.
a Georgia Corporation
(the "Company")
QA TRAINING, LTD.
a Company incorporated in England
(the "Parent")
AND
WAVE TECHNOLOGIES INTERNATIONAL, INC.
a Missouri Corporation
("Buyer")
AS OF
January 22, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS........................................... 1
1.1. Assets................................................ 1
1.2. Assumed Liabilities................................... 1
1.3. Business.............................................. 1
1.4. Closing and Closing Date.............................. 1
1.5. Code.................................................. 1
1.6. Derivative Work....................................... 2
1.7. Enhancements.......................................... 2
1.8. Error Corrections..................................... 2
1.9. Exempted Contracts.................................... 2
1.10. Externals............................................. 2
1.11. Governmental Authority................................ 2
1.12. Intellectual Property................................. 2
1.13. Judgment.............................................. 2
1.14. Law................................................... 2
1.15. Licensed Work......................................... 3
1.16. Lien.................................................. 3
1.17. Moral Rights.......................................... 3
1.18. Ordinary Course of Business........................... 3
1.19. Person................................................ 3
1.20. Stock................................................. 3
1.21. Source Materials...................................... 3
1.22. Tools................................................. 3
ARTICLE II PURCHASE AND SALE..................................... 3
2.1. Sale of Assets........................................ 3
2.2. Consideration......................................... 4
2.3. Allocation............................................ 4
2.4. License Fees.......................................... 4
ARTICLE III LICENSE............................................... 4
3.1. License-Licensed Works................................ 4
3.2. Exclusivity........................................... 5
3.3. Ownership of Derivative Works......................... 5
3.4. Goodwill.............................................. 5
3.5. Media................................................. 5
3.6. Deliverables.......................................... 5
3.7. Enhancements and Error Corrections.................... 6
3.8. Transfer of Exempted Contract......................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 6
4.1. Organization and Authority............................ 7
4.2. Title to Assets; Authority; Litigation................ 7
4.3. Approvals and Consents................................ 7
4.4. Financial Statements.................................. 8
4.5. Undisclosed Liabilities............................... 8
4.6. Absence of Certain Changes or Events.................. 8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.7. Tax Returns; Other Reports............................ 9
4.8. Assets................................................ 9
4.9. Certain Customer Matters.............................. 9
4.10. Certain Employment Matters............................ 9
4.11. Company Contracts..................................... 10
4.12. Legal and Governmental Proceeding and Judgments....... 10
4.13. Compliance with Laws.................................. 11
4.14. Compliance with Environmental Laws.................... 11
4.15. No Other Agreements to Sell Assets.................... 11
4.16. Finders and Brokers................................... 12
4.17. Disclosure............................................ 12
4.18. Financial Status...................................... 12
4.19. Investor Representations.............................. 12
4.20. Authority to License.................................. 13
4.21. Contracts............................................. 13
4.22. Lien on Parent Assets................................. 13
4.23. Third Party Rights.................................... 13
4.24. Warranty.............................................. 13
4.25. Source Code........................................... 13
4.26. Moral Rights.......................................... 13
4.27. No Tools or Patents................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............... 14
5.1. Authority............................................. 14
5.2. Litigation............................................ 14
5.3. Finders and Brokers................................... 14
5.4. Disclosure............................................ 14
5.5. Compliance with Securities Laws....................... 15
ARTICLE VI CONDUCT PENDING THE CLOSING........................... 15
6.1. Operation of Business................................. 15
6.2. Certain Prohibited Transactions....................... 15
6.3. Reasonable Access..................................... 15
6.4. No Solicitation Covenant.............................. 15
ARTICLE VII DELIVERIES BY THE COMPANY AND THE PARENT.............. 15
7.1. At Closing............................................ 15
ARTICLE VIII DELIVERIES BY BUYER................................... 16
8.1. At Closing............................................ 16
ARTICLE IX CONDITIONS OF BUYER'S OBLIGATIONS..................... 17
9.1. Corporate Action...................................... 17
9.2. Performance........................................... 17
9.3. Representations and Warranties True and Complete...... 17
9.4. Termination of Employees.............................. 17
9.5. No Proceedings........................................ 17
ii
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.6. Due Diligence......................................... 18
9.7. Consents for Transferred Assets and License........... 18
ARTICLE X CONDITIONS OF THE COMPANY'S AND THE PARENT'S
OBLIGATIONS........................................... 18
10.1. Corporate Action...................................... 18
10.2. Performance by Buyer.................................. 18
10.3. Representations and Warranties True and Complete...... 18
10.4. No Proceedings........................................ 18
ARTICLE XI MUTUAL COVENANTS...................................... 19
11.1. Compliance with Conditions............................ 19
11.2. Public Announcements.................................. 19
ARTICLE XII SURVIVAL OF LICENSES, REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION; OTHER COVENANTS
OF PARENT............................................. 19
12.1. Survival of Representation and Warranties............. 19
12.2. Indemnification by the Parent and the Company......... 19
12.3. Indemnification by Buyer.............................. 20
12.4. Third Party Claims.................................... 20
12.5. Instructors from Parent............................... 21
12.6. Solicitation of Employees............................. 21
12.7. Hiring of Company Employees........................... 21
ARTICLE XIII CLOSING............................................... 22
13.1. Closing............................................... 22
13.2. Rights of Termination................................. 22
ARTICLE XIV MISCELLANEOUS......................................... 22
14.1. Amendments; Waivers................................... 22
14.2. Entire Agreement; Incorporation by Reference.......... 22
14.3. Binding Effect; Assignment............................ 23
14.4. Construction; Counterparts; Governing Law............. 23
14.5. Notices............................................... 23
14.6. Expenses of the Parties............................... 24
14.7. Waiver of Jury Trial.................................. 24
14.8. Dispute Resolution.................................... 24
iii
</TABLE>
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES CAPTION
- --------- -------
1 Employment Matters
2 Contracts Included in Assets
2-A Other Agreements
3 Lease
4 Licensed Works
5 Letter Agreement Regarding David Simpson
EXHIBITS CAPTION
- -------- -------
A. Opinion of Company/Parent Counsel
iv
<PAGE>
ASSET PURCHASE AND LICENSE AGREEMENT
THIS ASSET PURCHASE AND LICENSE AGREEMENT (the "Agreement") is made and
entered into as of the 22nd day of January, 1998, by and among QA TRAINING,
INC., a Georgia corporation (the "Company"), QA TRAINING, LTD., a company
incorporated in England, (the "Parent") and WAVE TECHNOLOGIES INTERNATIONAL,
INC., a Missouri corporation ("Buyer").
ARTICLE I
DEFINITIONS
-----------
For purposes of this Agreement, certain terms not otherwise defined in this
Agreement have the meanings designated below:
1.1. Assets: (a) All of the Company's office furniture and equipment,
customer lists and records, (b) the Company's contracts listed on Schedule 2,
(c) the Parent's contracts listed on Schedule 2, and (d) the Company's rights
under the Lease.
1.2. Assumed Liabilities: The Company's obligations under the contracts
included in the Assets listed on Schedule 2, and the Company's obligations under
the lease agreement with Live Oak Associates-I, L.P. dated June 30, 1995 ("the
Lease"), provided that the obligations under the Lease shall constitute an
Assumed Liability only in the event that Parent and the Company use their best
efforts to cause the landlord to consent to the assignment of the Company's
rights under the Lease within 30 days after the Closing.
1.3. Business: The business owned and operated by the Company, which
consists of the delivery of technical training.
1.4. Closing and Closing Date: A meeting for the purpose of concluding
the transactions contemplated by this Agreement held at the place and on the
date fixed in accordance with Section 13.1.
1.5. Code: Computer programming code, including both Object Code and
Source Code.
(a) Object Code: Code substantially in binary form, and includes
header files of the type necessary for use or interoperation with other computer
programs. It is directly executable by a computer after processing or linking,
but without compilation or assembly. Object Code is all Code other than Source
Code.
(b) Source Code: Code in a form which when printed out or displayed
is readable and understandable by a programmer of ordinary skills. It includes
related source code level system documentation, comments and procedural code.
Source Code does not include Object Code.
<PAGE>
1.6. Derivative Work: A work that is based on an underlying work and that
would be a copyright infringement if prepared without the authorization of the
copyright owners of the underlying work, and, in the case of products sold or
licensed solely as instructor-led training products, if such Derivative Work is
substantially changed from the Licensed Work as the result of efforts by or on
behalf of Buyer. "Substantially changed" includes, but is not limited to, an
increase in the number of days of instruction, the addition of at least 10% new
substantive content or the modification of at least 10% of the original
substantive content. Changes to substantive content do not include changes to
page size, type face or similar changes.
1.7. Enhancements: Changes or additions, other than Error Corrections, to
the Licensed Work.
1.8. Error Corrections: Revisions that correct errors and deficiencies
(collectively referred to as "errors") in the Licensed Work.
1.9. Exempted Contracts: The Company's agreements with ** provided that
such agreements are solely relating to provision of instructor-led training to
such parties' direct customers, and not for resale, distribution or other
licensing of the Licensed Works.
1.10. Externals: (1) Any pictorial, graphic, and audiovisual works (such
as icons, screens, sounds, and characters) generated by execution of Code which
are not part of the educational content of a product, and (2) any programming
interfaces, languages or protocols implemented in Code to enable interaction
with other computer programs or the end user.
1.11. Governmental Authority: The United States government, any state,
county, municipal, local or foreign government and any governmental agency,
bureau, commission, authority or body.
1.12. Intellectual Property: All patents, patent applications,
trademarks, trade names, service marks, copyrights, trade secrets, know-how and
other similar intangible rights of any kind.
1.13. Judgment: Any judgment, writ, order or decree of any court, any
order of or by a Governmental Authority, and any order by an arbitrator or
arbitration panel.
1.14. Law: The common law and any statute, ordinance, code or other law,
rule, regulation, order, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
1.15. Licensed Work: (1) Any material described in or that conforms to the
description in Schedule 4 or that is delivered to
2
<PAGE>
Buyer as a Licensed Work, including (but not limited to) Code, associated
documentation, and Externals, (2) Error Corrections and Enhancements, and (3)
any non-English translations of the Licensed Works.
1.16. Lien: Any security agreement, financing statement, conditional sale
or other title retention agreement; any lease, consignment or bailment given for
security purposes; any lien, charge, limitation, restrictive agreement,
mortgage, pledge, option, encumbrance, adverse interest, constructive trust or
other trust, claim, or attachment of any kind which constitutes an interest in,
or claim against the property, whether arising pursuant to any Law, contract, or
Judgment.
1.17. Moral Rights: Personal rights associated with authorship of a work
under applicable law. They include the rights to approve modifications and to
require authorship identification.
1.18. Ordinary Course of Business: The Company's ordinary course of
business consistent with past custom and practice.
1.19. Person: Any natural person, corporation, general or limited
partnership, limited liability company, joint venture, trust, association,
unincorporated entity of any kind or Governmental Authority.
1.20. Stock: The shares of the Buyer's common stock, $.50 par value, to
be issued to the Company and Parent.
1.21. Source Materials: All materials reasonably necessary for Buyer to
efficiently manufacture, produce, maintain, distribute, modify and enhance the
Licensed Works.
1.22. Tools: Devices, compilers, programming, documentation, media and
other items required for the development, maintenance or implementation of a
Licensed Work that are not commercially available.
ARTICLE II
PURCHASE AND SALE
-----------------
2.1. Sale of Assets. At the Closing, upon the terms and conditions set
forth in this Agreement, the Company shall sell, convey, transfer, assign and
deliver to Buyer the Assets. Such sale, conveyance, transfer and delivery shall
be effected by delivery to Buyer at the Closing of documents assigning,
transferring and conveying the Assets to Buyer, and such other documents
necessary to effectively vest in Buyer good and marketable title to the Assets,
subject only to the Assumed Liabilities.
3
<PAGE>
2.2. Consideration. At the Closing, upon the terms and conditions set
forth in this Agreement, Buyer shall purchase the Assets for the consideration
set forth below ("Purchase Price")
(a) delivery to the Company of 20,000 shares of Stock; and
(b) assumption of the Assumed Liabilities.
2.3. Allocation. Pursuant to applicable provisions of the Internal
Revenue Code (the "Code") and the required filing of Form 8594, at the Closing,
the parties will agree on an allocation of the purchase price among the Assets
for all purposes.
2.4. License Fees. For the rights and licenses granted to Buyer by
Parent, Buyer will issue to Parent 130,000 shares of Stock and pay Parent the
following royalties (the "Royalties"):
(a) ** of revenues (net of reimbursement of Buyer's out-of-pocket
expenses) from the Licensed Works billed and recognized as revenue by Buyer on
its publicly available financial statements after the first anniversary of the
Closing and before the second anniversary of the Closing, provided that no
Royalties are due on amounts not collected by Buyer; and
(b) ** of any revenues (net of reimbursement of Buyer out-of-pocket
expenses) billed and collected by Buyer after the Closing and before the first
anniversary of the Closing relating to agreements which obligate the Buyer to
provide Enhancements of the Licensed Works at no additional charge to Buyer's
customers beyond the first anniversary of the Closing.
Buyer may continue to pay Royalties after the second anniversary of Closing, in
order to receive the Enhancements as set forth in Section 3.9. Buyer will pay
Royalties within 60 days after the date Buyer receives payment of the relevant
revenues.
ARTICLE III
LICENSE
-------
3.1. License-Licensed Works. Subject to the restrictions set forth in
Section 3.4, Parent grants Buyer a nonexclusive, worldwide, perpetual,
irrevocable license to prepare Derivative Works of the Licensed Works, and to
use, execute, reproduce, display, perform, transfer, distribute and sublicense
the Licensed Works and such Derivative Works, in any medium or distribution
technology whatsoever, whether known or unknown. Parent grants Buyer the right
to authorize or sublicense others to exercise any of the rights granted to Buyer
in this Section on normal commercial terms in the ordinary course of Buyer's
business.
4
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3.2. Exclusivity. The licenses granted to Buyer in this Agreement are
exclusive in North America, except for licenses of the Licensed Works under the
Exempted Contracts solely for delivery by Parent or the other party to the
Exempted Contract for instructor-led training of such party's direct customers
(and not for resale, distribution or other licensing of the Licensed Works). The
licenses are non-exclusive throughout the rest of the world, except that, in the
United Kingdom and Ireland, Buyer will not distribute any Licensed Work.
3.3. Ownership of Derivative Works. Buyer will own any Derivative Works
it creates, and may mark each Derivative Work it creates with Buyer's copyright
notice. Parent grants Buyer the right to authorize or sublicense others to
exercise any of the rights granted to Buyer in this Article III.
3.4. Goodwill. Any goodwill attaching to Buyer's trade marks, service
marks, or tradenames belongs to Buyer and this Agreement does not grant Parent
or the Company any interest in any of them. Buyer has no right to use the trade
names of Parent or the Company, except to include the appropriate copyright
notice on the Licensed Works.
3.5. Media. The grant of rights and licenses to the Licensed Works
includes utilizing any combination of one or more of the following media: Code
and text, interactive capability, video, film, graphics (including animation),
still pictures, audio materials, musical compositions (including arrangements
and lyrics) and specific master recordings, and other creative or technical
content. The license to the Licensed Works applies to any and all languages,
purposes, formats, and computers, interactive and networked (for example,
Internet and intranet) media, whether known or unknown, and all music rights,
including, but not limited to, use of musical compositions of the Licensed Works
in products and all mechanical synchronization, videogram, master use and "new
media" rights.
3.6. Deliverables. Parent will provide the following items to Buyer at
Closing:
(a) one complete set of each Licensed Work and any Source Materials,
documentation, Code or Tools on CD-ROM in Microsoft Power Point format; and
(b) any updates to the following list, which identifies any commercially
available devices, compilers, programming, documentation, media and other items
required for the development, maintenance or implementation of a Licensed Work:
================================================================================
Description Version/Release Owner
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
none
- --------------------------------------------------------------------------------
================================================================================
3.7. Enhancements and Error Corrections. Until the second anniversary of
the Closing, Parent will:
(a) provide to Buyer, at no charge, all Enhancements and Error
Corrections for the Licensed Works;
(b) have agreements with Parent's personnel and third parties to perform
obligations and to grant or assign rights to Buyer as required by this
Agreement, and, on request, provide Buyer with evidence of these agreements;
(c) if any person has Moral Rights in a Licensed Work, obtain a written
agreement from such person not to assert such Moral Rights, and not assert any
Moral Rights, if any, of the Parent or its affiliates in the Licensed Works;
(d) obtain all necessary consents of individuals or entities required
for the use of names, likenesses, voices, and the like in the Licensed Works;
and
(e) not assign or transfer this Agreement or Parent's rights under it,
or delegate or subcontract Parent's obligations, without Buyer's prior written
consent.
Parent shall not be required to take any such actions as to any Licensed Work
after December 31 of the first calender year after 1998 in which royalties paid
by Buyer for such Licensed Work fall below $5,000.
3.8. Transfer of Exempted Contracts. The parties will use their best
efforts in good faith to transfer the Exempted Contracts to Buyer, on terms
satisfactory to the parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT
------------------------------------------------------------
To induce Buyer to enter into this Agreement, the Company and the Parent
each, jointly and severally, represent and warrant to Buyer that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV).
4.1. Organization and Authority. The Company is a corporation duly
organized, validly existing, and in good standing under the
6
<PAGE>
laws of the State of Georgia; has full corporate power and authority to carry on
its business as currently conducted and to own, lease, use and operate its
properties at the places currently located and in the manner currently used and
operated; and is duly qualified to transact business, and is in good standing in
each jurisdiction in which failure to be so qualified would have a material
adverse effect on the business or properties of the Company.
4.2. Title to Assets; Authority; Litigation.
(a) The Company is the beneficial and record owner of the Assets, other
than the contracts listed on Schedule 2 which indicate that Parent holds the
right to such agreements. Parent is the record and beneficial owner of all such
agreements so listed on Schedule 2.
(b) Each of the Company and the Parent has full corporate power and
authority to execute, deliver and perform this Agreement. All actions on the
part of either the Company or the Parent necessary to authorize the execution,
delivery and performance of this Agreement have been duly taken. This Agreement
has been duly executed and delivered by the Company and the Parent and is valid
and binding upon, and enforceable against the Company and the Parent in
accordance with its terms.
(c) There is no litigation, governmental or other proceeding or
investigation pending or, to their knowledge, threatened against the Company or
the Parent or their directors, officers, employees or agents relating to the
Assets, their business or the transactions contemplated by this Agreement.
4.3. Approvals and Consents.
(a) Neither the Company nor the Parent is required to submit or file any
notice, declaration, report or statement with any Governmental Authority in
connection with the execution, delivery or performance of, or the consummation
of the transactions contemplated by, this Agreement, and no consent, approval,
declaration or authorization of or by, or registration with, any Governmental
Authority is required to be obtained or made by the Company in connection with
the execution, delivery or performance of, or the consummation of the
transactions contemplated by, this Agreement.
(b) Neither the execution, delivery or performance by the Company or the
Parent, nor the consummation of the transactions contemplated by this Agreement,
does or shall (with the giving of notice or passage of time or both) (i)
conflict with or result in a breach or violation of, or constitute a default
under, or result in (or create in any party the right to cause) the acceleration
of any performance or any increase in any payment required by or the
7
<PAGE>
termination, suspension, modification or impairment of, or result in the loss,
revocation, impairment, suspension or forfeiture of any rights of the Company or
Parent under (A) any contract to which either of them is a party (other than the
Lease to the extent the landlord fails to consent to the assignment of the Lease
to Buyer); (B) the Articles or Certificate of Incorporation, Bylaws or other
charter or constituent documents of the Company or the Parent; (C) any Judgment
to or by which the Company, the Parent or any of the Assets may be bound or any
applicable Law; or (ii) result in the creation of any Lien upon the Assets.
4.4. Financial Statements. The Company has delivered to Buyer the
following financial statements of the Company (referred to herein collectively
as the "Financial Statements") all of which have been prepared in accordance
with generally accepted accounting principles, consistently applied throughout
the periods indicated and which fairly present the financial position and
results of operations of the Company and are in accordance with the books and
records of the Company as of the date and for the periods stated:
(a) the balance sheet, statement of income, statement of retained
earnings, and statement of cash flow of the Company for the fiscal year ended
November 30, 1997, (the "Balance Sheet");
(b) the balance sheet, statement of income, statement of retained
earnings, and statement of cash flow of the Company for each month after
November 30, 1997, until the Closing Date (the "Interim Monthly Statements").
4.5. Undisclosed Liabilities. The Company has no liabilities, whether
accrued, absolute, contingent or otherwise of a type required by generally
accepted accounting principles to be included as a liability on an audited
balance sheet or described in the notes thereto, other than (i) liabilities
which are reflected on the Balance Sheet, and (ii) liabilities incurred since
the date of the Balance Sheet in the Ordinary Course of Business in an aggregate
amount of less than $5,000.
4.6. Absence of Certain Changes or Events. Since the date of the Balance
Sheet there has not been any material adverse change in the condition of the
Company (financial or otherwise), its Assets, earnings or Business.
4.7. Tax Returns; Other Reports. The Company has duly filed in proper
form all federal, state and local income tax returns required to be filed by Law
with federal, state and local governments. The Company has duly filed all local,
franchise, sales, use, property, excise, payroll and other tax returns and all
other reports required to be filed. All taxes, fees and assessments due or
payable by the Company pursuant to said returns or reports have been paid or
adequately accrued. There is no unpaid interest, penalty or additional tax due
or claimed to be due from
8
<PAGE>
the Company, nor any unpaid tax deficiency determination or assessment
outstanding against the Company, nor any basis therefor known to the Company for
which adequate provision has not been made in the Financial Statements. All
returns and reports required to be filed, and all taxes, fees, assessments and
charges required to be paid, prior to the Closing, will have been so filed and
paid prior thereto.
4.8. Assets.
(a) Ownership of Assets. All material assets of the Company used,
held for use or usable in the Business, other than the contracts described in
Section 4.2(a) as belonging to the Parent and the intellectual property rights
licensed to Buyer by the Parent in this Agreement, are included on the Balance
Sheet. The Company has good and marketable title to such assets, free and clear
of any Lien.
(b) Leases. The Company's Lease is in the form attached as Schedule
3, is valid and effective and grants the leasehold estates or rights of
occupancy or use it purports to grant.
(c) No Encumbrances. On the Closing Date the Assets shall be subject
to, or encumbered by, no Liens, restrictions, encumbrances, mortgages, security
interests or covenants other than the Assumed Liabilities.
4.9. Certain Customer Matters. No default by the Company or Parent
exists in respect of any provision of any agreement governing relations with
customers or other users of the Company's or Parent's products. Neither the
Company nor Parent has knowledge or notice of any threatened or actual
termination, cancellation, limitation, modification or change in the Company's
business relationship with any customer or affiliated group of customers. There
are presently no pending controversies, hearings, audits or issues with any
Governmental Authority.
4.10. Certain Employment Matters.
(a) Schedule 1 contains a true and complete list of the names and
current hourly wage, monthly salary or other compensation of all officers,
employees or consultants of the Company with a list of existing bonuses,
additional compensation and other benefits (whether current or deferred), if
any, paid or payable to each such person for services rendered or to be
rendered. Schedule 1 contains a true and complete list of all employment,
deferred compensation, noncompetition, confidential information and consulting
agreements between the Company and its directors, officers, management
employees, consultants, and
9
<PAGE>
managers and reflects all employment information provided to employees at the
time of their hiring and thereafter.
(b) The Company has complied in all material respects with all
applicable Laws relating to the employment of labor, including without
limitation the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's compensation, equal employment opportunity and
the payment and withholding of taxes, including income and social security
taxes, and has withheld (and paid over to the appropriate authorities) all
amounts required by Law or agreement to be withheld from the wages or salaries
of its employees.
(c) The Company is not a party to any contract with any labor
organization and has not agreed to recognize any union or other collective
bargaining unit, and no union or other collective bargaining unit has been
certified as representing any of its employees. The Company has no knowledge of
any organization effort currently being made or threatened by or on behalf of
any labor union with respect to employees of the Company.
(d) The employment of all persons presently employed or retained by
the Company, other than Joe Mattuch and David Simpson, is terminable at will.
4.11. Company Contracts. Schedule 2-A contains a true and complete list
of (a) all contracts (written and oral) between the Company and its customers,
(b) all contracts between the Parent and the Company, and (c) all other
contracts relating to the Company's Business, in each case other than contracts
which are included in the Assets listed on Schedule 2. Neither Company nor
Parent is in default under any such contract and no other party thereto is in
default thereof. True and correct copies of each such written agreement, other
than the Exempted Contracts, have been provided to Buyer.
4.12. Legal and Governmental Proceeding and Judgments. There is no legal
action, proceeding or investigation, pending or to the knowledge of the Company
or the Parent threatened, against the Company, the Parent, the Business or the
Assets, nor are there any Judgments outstanding against the Company, or to or by
which the Company, any of the Assets, or the Business is bound, including
without limitation, any such legal action, proceeding, investigation, or
judgment by which it is sought to effect: (i) any modification, termination,
suspension, or reformation of any Company contracts; (ii) any change in the
character, location or use of any of the Assets; (iii) any impairment of the
transactions contemplated hereby; (iv) any adverse change in rates charged or
proposed to be charged for any products or services provided by the Business;
(v) any adverse changes in the Assets, or the condition
10
<PAGE>
of the Business; or (vi) an increase in the liabilities or obligations of the
Company.
4.13. Compliance with Laws.
(a) The Company has complied in all material respects with all Laws
in respect of the conduct of the Business and the ownership, possession,
maintenance and operation of its properties and assets, specifically including
but not limited to all rules and regulations of the Occupational Safety and
Health Administration.
(b) Neither the Company, nor any director or officer of the Company
has: (i) made or agreed to make any contributions, payments or gifts of funds or
property to any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift was or is illegal
under the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic); (ii) established or maintained any unrecorded fund or
asset for any purpose, or made any false or artificial entries on any of its
books or records for any reason; (iii) made or agreed to make any contribution,
or reimbursed any political gift or contribution made by any other person, to
candidates for public office whether federal, state, local or foreign, where
such contributions were or would be a violation of applicable Law; or (iv)
otherwise violated the Federal Election Campaigns Act.
4.14. Compliance with Environmental Laws. The Company has complied with
all environmental laws in the United States.
4.15. No Other Agreements to Sell Assets. Neither the Company nor the
Parent has any legal or contractual obligation, absolute or contingent, to any
other Person to sell any or all or substantially all of the Assets of the
Company, to effect any merger, consolidation or other reorganization of the
Company, to issue or sell shares of the Company's capital stock, to sell or
license the Licensed Works (other than the Exempted Contracts), or to enter into
any agreement with respect thereto.
4.16. Finders and Brokers. Neither the Company nor the Parent has entered
into any contract, arrangement or understanding with any person or firm which
may result in the obligation of Buyer to pay (and is not aware of any claim or
basis for any claim for payment of), any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
4.17. Disclosure. Neither this Agreement nor any other document,
description, inventory, opinion, certificate or written statement furnished or
to be furnished to Buyer by or on behalf of
11
<PAGE>
the Company or the Parent in connection with the transactions contemplated in
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make such statements
not misleading.
4.18. Financial Status. The Company is currently paying or making
provisions for the payment of all its debts and liabilities as they become due.
The Company believes the consideration paid for the Assets pursuant to this
Agreement represent the fair market value for the Assets.
4.19. Investor Representations. Each of the Company and the Parent
warrants, represents, agrees and acknowledges:
(a) That it is acquiring the Stock for its own account as an
investment and without a present view to make any distribution, resale or
fractionalization thereof;
(b) That it and its independent counselors have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the investment involved in the acquisition of the Stock;
(c) That it is able to bear the economic risks of such acquisition;
(d) That it and its independent counselors have received copies of
Buyer's quarterly and annual reports filed with the Securities and Exchange
Commission since April 30, 1996, and have made such investigation of Buyer
(including its business prospects and financial condition) that they deem
necessary;
(e) That in connection with the acquisition of the Stock, the Company
has been fully informed by its independent counsel as to the applicability of
the requirements of the Securities Act of 1933, as amended (the Securities Act")
and all applicable state securities or "blue sky" laws;
(f) That Buyer has informed the Company and the Parent that the Stock
is not registered under the Securities Act or any state securities law;
(g) That Buyer and their representatives have called to the Company's
and the Parent's attention that the transfer of the Stock is restricted, and
that such instrument cannot be expected to be readily transferred or liquidated;
and
(h) That the certificates representing stock to be issued under the
Agreement will bear the following restrictive legend:
12
<PAGE>
The shares represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities laws, and
may not be sold or otherwise transferred unless the shares are
registered or unless the transaction complies with the requirements
of an exemption from registration.
4.20. Authority to License. Parent has full legal rights to grant the
licenses and rights granted to Buyer herein.
4.21. Contracts. Parent is not under, and will not assume, any
contractual obligation that prevents Parent from performing its obligations or
conflicts with the rights and licenses granted in this Agreement.
4.22. Lien on Parent Assets. There are no liens, encumbranc es or claims
pending or threatened against Parent, or anyone else, that relate to the rights
and License granted in this Agreement.
4.23. Third Party Rights. Neither the Licensed Works nor the Tools
contain libelous matters nor do they directly or indirectly infringe any
publicity, privacy or intellectual property rights of a third party including,
any patents or patent applications.
4.24. Warranty. The Licensed Works and the Tools conform to the Parent's
user documentation, and any sales and marketing materials provided by Parent.
4.25. Source Code. The fully commented Source Code, Source Materials and
documentation that Parent provides correspond to the current release or version
of the Licensed Works provided by the Parent under this Agreement.
4.26. Moral Rights. All authors have waived their Moral Rights in the
Licensed Works to the extent permitted by law.
4.27. No Tools or Patents. There are no Tools related to or used in the
Licensed Works. Neither the Company nor the Parent holds any patent or patent
application or rights in any patent or patent application relating to the
Licensed Works.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
To induce the Company and the Parent to enter into this Agreement, Buyer
represents and warrants that:
5.1. Authority. Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State
13
<PAGE>
of Missouri, with all requisite corporate power and authority to conduct its
business and operations as presently conducted and to execute, deliver and
perform this Agreement and the other instruments and documents required to be
executed and delivered by Buyer, and has, or as of the Closing Date shall have,
taken all actions required to duly authorize said execution, delivery and
performance. This Agreement is the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms. Neither the execution, delivery or
performance by the Buyer, nor the consummation of the transactions contemplated
by this Agreement constitute a violation of or contravene the Articles or
Certificate of Incorporation, Bylaws or other charter or constituent documents
of Buyer.
5.2. Litigation. There is no litigation, governmental or other
proceeding or investigation pending or threatened against the Buyer relating to
the transactions contemplated by this Agreement.
5.3. Finders and Brokers. The Buyer has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or the Parent to pay (and is not aware of any claim or
basis for any claim for payment of), any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
5.4. Disclosure. Neither this Agreement nor any other document,
description, inventory, opinion, certificate or written statement furnished or
to be furnished to the Company or the Parent by or on behalf of the Buyer in
connection with the transactions contemplated in this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make such statements not misleading.
5.5. Compliance with Securities Laws. The Buyer has complied in all
material respects with all federal and state securities laws applicable to the
issuance of the Stock.
ARTICLE VI
CONDUCT PENDING THE CLOSING
---------------------------
Pending the Closing, and except as otherwise consented to or approved by
Buyer in writing, the Company and the Parent each covenant and agree as follows:
6.1. Operation of Business. The Company shall conduct its Business
diligently, in good faith, consistent with past practices, and shall not engage
in any transaction other than in the Ordinary Course of Business except as
provided in this Agreement, or change its business policies or practices. The
Company shall use its best
14
<PAGE>
efforts to preserve its Business intact, to retain the services of its present
employees and to preserve its business relationship with, and the goodwill of
its customers, suppliers and others. The Company shall keep Buyer informed with
respect to operational matters of a material nature.
6.2. Certain Prohibited Transactions. The Company shall not take any
action or omit to take any action which would or might result in violation of
any Law or Judgment.
6.3. Reasonable Access. The Company shall afford to Buyer, and its
attorneys, accountants and other authorized representatives, reasonable access
(including, without limitation, the right to make copies of documents), to its
offices, properties, personnel files, books and records, in order that Buyer may
have full opportunity to make such investigations, as it shall reasonably desire
to make, of the affairs of the Company.
6.4. No Solicitation Covenant. The Company and the Parent agree that
from the date hereof until the earlier of (i) the date Buyer notifies Company
that it has ceased consideration of this transaction, or (ii) January 31, 1998,
it will not solicit any other offers, hold further discussions regarding a sale
with any other prospective purchaser or sell or agree to sell to any other party
any stock of the Company or any or all of the Assets.
ARTICLE VII
DELIVERIES BY THE COMPANY AND THE PARENT
----------------------------------------
7.1. At Closing. At the Closing, the Company and the Parent shall, with
duly and fully executed instruments, certificates, documents and opinions in
form and substance satisfactory, in each instance, to Buyer, deliver to Buyer:
(a) All bills of sale, assignments, deeds, conveyances, title
documents and other documents, in recordable form where appropriate, properly
executed, evidenced and notarized where appropriate, assigning, transferring and
conveying the Assets to Buyer, all in form and substance acceptable to Buyer.
(b) Documentation satisfactory to Buyer that all employees of the
Company have been terminated effective as of the Closing Date, and that all
required federal, state and local notices applicable to the termination of said
employees have been timely filed.
(c) Certified copies of resolutions of the Board of Directors or
similar governing body of, and, if required by applicable law, the shareholders
or other holders of ownership interests in the Company and the Parent,
authorizing the execution, delivery and performance of this Agreement by the
Company and the
15
<PAGE>
parent, which resolutions shall be in full force and effect at and as of the
Closing.
(d) An opinion of counsel to the Company and the Parent dated the
Closing Date, addressed to Buyer in substantially the form attached as Exhibit
A.
(e) The Licensed Works and all other items related to the License, as
set forth in Article III, including copies of each Licensed Work and Tool, and
the related instructor materials.
(f) Such other instruments and documents as Buyer may have reasonably
requested.
ARTICLE VIII
DELIVERIES BY BUYER
-------------------
8.1. At Closing. At the Closing, Buyer shall deliver to the Company:
(a) a certificate for 20,000 shares of Stock issued in the name of
the Company;
(b) a certificate for 130,000 shares of Stock issued in the name of
the Parent;
(c) duly certified copies of resolutions of the Board of Directors of
the Buyer, authorizing the execution, delivery and performance of this Agreement
by the Buyer, which resolutions shall be in full force and effect at and as of
the Closing; and
(d) an agreement assuming the Assumed Liabilities.
ARTICLE IX
CONDITIONS OF BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to complete the transactions provided for herein
are subject to all of the following conditions, any of which may be waived in
writing by Buyer:
9.1. Corporate Action. All corporate or other actions necessary to
authorize (i) the execution, delivery and performance by the Company and the
Parent of this Agreement and (ii) the consummation of the contemplated
transactions, shall have been duly and validly taken and shall be in full force
and effect.
9.2. Performance. The Company and the Parent each shall have performed
and complied with all agreements, covenants and
16
<PAGE>
conditions to be performed and complied with by it at or prior to the Closing.
9.3. Representations and Warranties True and Complete. Each of the
representations and warranties by the Company and the Parent contained in or
made pursuant to this Agreement shall be true and complete when made and as of
the Closing except as otherwise contemplated in this Agreement, with the same
effect as if made at and as of the time of Closing.
9.4. Termination of Employees. The Company shall have terminated all its
employees as of the Closing Date, and neither Parent, the Company nor Lockheed-
Martin shall have continued to employ or have hired any of such employees,
except as specifically set forth in that letter agreement attached as Schedule
5.
9.5. No Proceedings. No judgment shall have been issued, and no action
or proceeding shall have been instituted or threatened, on or prior to the
Closing, to set aside or modify any authorization of the contemplated
transactions or any required approvals or consents, or to enjoin or prevent the
consummation of the contemplated transactions, or any of them, in the manner
provided herein, or the subsequent operation of the Business by Buyer, or
seeking damages in connection with any such transactions or which might require
Buyer to divest itself of the Assets or the License.
9.6. Due Diligence. Within ten (10) business days after the date Buyer
receives printed copy of all Licensed Works, including all student materials,
instructor manuals, notes and guidelines, classroom exercises and set-up
instructions, Buyer shall be satisfied, in its sole discretion, with the results
of its due diligence investigation of the Company and Licensed Works.
9.7. Consents for Transferred Assets and License. All of the approvals
and consents required for the assignment of the Assets (other than the Lease)
and the grant of the License shall have been obtained, on terms and conditions
acceptable to Buyer in its sole discretion.
ARTICLE X
CONDITIONS OF THE COMPANY'S AND THE PARENT'S OBLIGATIONS
--------------------------------------------------------
The obligations of the Company and the Parent to complete the transactions
provided for herein are subject to all of the following conditions any of which
may be waived in writing by the Company:
10.1. Corporate Action. All corporate or other actions necessary to
authorize (i) the execution, delivery and performance by Buyer of this Agreement
and (ii) the consummation of the
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contemplated transactions, shall have been duly and validly taken by Buyer and
shall be in full force and effect.
10.2. Performance by Buyer. Buyer shall have performed and complied with
all agreements, covenants and conditions to be performed and complied with by it
at or prior to the Closing.
10.3. Representations and Warranties True and Complete. Each of the
representations and warranties by Buyer contained in or made pursuant to this
Agreement shall be true and complete in all material respects when made and as
of the Closing except as otherwise contemplated in this Agreement, with the same
effect as if made at and as of the time of Closing.
10.4. No Proceedings. No judgment shall have been issued, and no action
or proceeding shall have been instituted or threatened, on or prior to the
Closing, to set aside or modify any authorization of the contemplated
transactions or any required approvals or consents, or to enjoin or prevent the
consummation of the contemplated transactions, or any of them, in the manner
provided herein.
ARTICLE XI
MUTUAL COVENANTS
----------------
11.1. Compliance with Conditions. Each of the parties covenants and
agrees with the other parties to exercise reasonable efforts and the utmost good
faith to perform, comply with and otherwise satisfy each and every one of the
conditions to be satisfied by each party.
11.2. Public Announcements. Unless required by law, no public
announcements regarding this transaction shall be made prior to closing by any
party hereto without the written consent of the other parties; provided,
however, Company may make such disclosure to such of its employees as it deems
reasonably necessary.
ARTICLE XII
SURVIVAL OF LICENSES, REPRESENTATIONS AND WARRANTIES;
----------------------------------------------------
INDEMNIFICATION; OTHER COVENANTS OF PARENT;
------------------------------------------
12.1. Survival of Representation and Warranties. The licenses granted by
Parent to Buyer will survive any termination of this Agreement, and except as
set forth herein, all representations, warranties, covenants and agreements
made by the Company or the Parent in this Agreement shall survive the Closing
for a period of twenty-four (24) months.
12.2. Indemnification by the Parent and the Company. Subject to the
limitations set forth below, the Company and the Parent,
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<PAGE>
jointly and severally, agree to indemnify, defend and hold harmless Buyer, its
affiliates and their respective shareholders, directors, officers, employees,
agents, successors and assigns from and against:
(a) all losses, damages, liabilities, or obligations of Buyer or
any such other indemnified person resulting from or arising out of (i) any
misrepresentation or breach of representation or warranty or any
nonperformance or breach of any covenant or agreement of the Company or the
Parent contained in this Agreement; (ii) infringement by Parent or the
Licensed Works in the form delivered to Buyer of licenses, patents,
copyrights, trademarks, trade secrets, and other intellectual property
rights; and (iii) any liability or assessment (including tax liability or
assessment) related to the Business, the Company, the Parent, the Assets,
the licenses granted herein or this Agreement, or the transactions
contemplated hereby, which Buyer has not specifically assumed pursuant to
this Agreement, based on occurrences, events, acts or omissions which arose
prior to the Closing Date, whether discovered before or after the Closing
Date. The Company and the Parent specifically acknowledge and agree that
Buyer shall have no liability for, nor is Buyer assuming, any liabilities
of the Company, the Parent or the Business or any liabilities related to
the Assets incurred or accruing prior to the Closing Date other than the
Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including,
without limitation, settlement costs and reasonable legal, accounting,
experts' and other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing.
Notwithstanding the foregoing, aggregate payments by the Company and the Parent
relating to subsections (i) and (iii) of Section 12.2(a) shall not exceed **.
12.3. Indemnification by Buyer. Buyer agrees to indemnify, defend and
hold harmless the Company and the Parent from and against all losses, damages,
liabilities, obligations and expenses (including, without limitation, settlement
costs and reasonable legal or other expenses) incurred by the Company and the
Parent in connection with (a) any misrepresentation or breach of any warranty
made by Buyer in this Agreement or the nonperformance or breach of any covenant,
agreement or obligation of Buyer contained in this Agreement, and (b) the
Assumed Liabilities, and any and all losses, damages, liabilities, obligations
and expenses including, without limitation, settlement costs and reasonable
legal or other expenses, resulting from causes of action or claims of any kind
asserted by unrelated third parties arising with respect to the
19
<PAGE>
operation of the Business conducted by Buyer after the Closing Date.
12.4. Third Party Claims. Promptly after the receipt by any party hereto
of notice of any claim, action, suit or proceeding by any person who is not a
party to this Agreement (collectively, an "Action") which is subject to
indemnification hereunder, such party (the "Indemnified Party") shall give
reasonable written notice to the party from whom indemnification is claimed (the
"Indemnifying Party"). At the sole expense and liability of the Indemnifying
Party and within a reasonable time after the giving of such notice by the
Indemnified Party, the Indemnifying Party shall: (i) notify the Indemnified
Party in writing of the Indemnifying Party's intention to assume the defense of
such action, and (ii) retain legal counsel reasonably satisfactory to the
Indemnified Party to conduct the defense of such Action. The Indemnified Party
and the Indemnifying Party shall cooperate with the party assuming the defense,
in defending, compromising or settling any such Action in any manner that such
party reasonably may request. If the Indemnifying Party so assumes the defense
of any such Action, the Indemnified Party shall have the right to employ
separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of the Indemnified Party. No Indemnified Party shall settle
or compromise any such Action for which it is entitled to indemnification
hereunder without the prior written consent of the Indemnifying Party, unless
the Indemnifying Party shall have failed, after reasonable notice thereof, to
undertake control of such Action in the manner provided above in this Section
11.4. No Indemnifying Party shall settle or compromise any such Action in which
relief other than the payment of money damages is sought against any Indemnified
Party unless the Indemnified Party consents in writing to such compromise or
settlement.
12.5. Instructors from Parent. Parent agrees to provide Buyer with
qualified instructors of at least the caliber provided to the Company, at the
times and places requested by Buyer for an aggregate of up to ** trainer-days in
each calendar year, to enable Buyer to fulfill delivery of courses currently
offered by the Company for a period of one year after Closing, at the rate of **
per trainer-day. In the event that Buyer requests a trainer for less than four
(4) consecutive days, the Buyer will pay the Parent ** per day for up to two (2)
travel days for such trainer. Buyer also agrees to reimburse the trainer for his
or her reasonable out-of-pocket travel and lodging expenses in accordance with
Buyer's employee travel policy. Parent also will provide instructors for **
trainer-days of "Train the Trainer" programs to Buyer at locations designated by
Buyer in the United States, at no cost to Buyer. Buyer will cooperate with the
Parent as reasonably necessary to comply with immigration and visa laws,
regulations and policies applicable to trainers residing outside of the United
States.
20
<PAGE>
12.6. Solicitation of Employees. Neither Parent nor the Company will
solicit for employment or employ any of Buyer's employees, and Buyer will not
solicit for employment or employ any of Parent's employees, at any time prior to
or within two years after Closing.
12.7. Hiring of Company Employees. Except as specifically set forth in
the letter agreement attached as Schedule 5, in the event that the Company, the
Parent, Lockheed-Martin or any Lockheed-Martin affiliate employs or uses as an
independent contractor any of the Company's employees at any time within six (6)
months after the Closing Date, all of the rights of Lockheed-Martin and its
affiliates to the Licensed Works shall immediately terminate, and any agreement
with Lockheed-Martin or its affiliates shall cease to be an "Exempted Contract."
The Parent and the Company agree to cause any agreement with Lockheed-Martin or
its affiliates to include provisions implementing this covenant.
ARTICLE XIII
CLOSING
-------
13.1. Closing. The Closing shall take place at the Buyer's home office at
8:00 A.M., local time, on January 22, 1998 or such later date as the parties may
agree.
13.2. Rights of Termination. This Agreement (and the trans actions
contemplated hereunder) may be terminated as follows without limiting any other
rights or remedies the terminating party may have:
(a) upon the mutual consent of the Buyer and the Company;
(b) by Buyer, if any of the conditions to the obligations of Buyer
set forth in Article IX shall not have been satisfied on or before January 31,
1998, and the Buyer shall have performed and complied with all of its covenants
hereunder; or
(c) by the Parent, if any of the conditions to the obligations of the
Company and the Parent, set forth in Article X shall not have been satisfied on
or before January 31, 1998, and the Company and the Parent shall have performed
and complied with all of their covenants hereunder.
ARTICLE XIV
MISCELLANEOUS
-------------
14.1. Amendments; Waivers. This Agreement cannot be changed or terminated
orally and no waiver of compliance with any provision or condition hereof and no
consent provided for herein shall be
21
<PAGE>
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent. No waiver of any
term or provision shall be construed as a further or continuing waiver of such
term or provision or any other term or provision.
14.2. Entire Agreement; Incorporation by Reference. This Agreement sets
forth the entire understanding of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the subject
matter hereof, but excluding any confidentiality agreements between the parties.
No representation, warranty, promise, inducement or statement of intention has
been made by any party which is not contained in this Agreement and no party
shall be bound by, or be liable for, any alleged representation, promise,
inducement or statement of intention not contained herein. All Schedules and
Exhibits referenced herein are incorporated herein by reference as if fully set
forth in this Agreement.
14.3. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, assigns
and legal representatives, but this Agreement may not be assigned to any party
without the prior written consent of the other party, other than in connection
with a sale, merger or similar transaction in which the successor is bound by
all of the provisions of this Agreement.
14.4. Construction; Counterparts; Governing Law. The Article and Section
headings of this Agreement are for convenience of reference only and do not in
any way modify, interpret or construe the intentions of the parties. This
Agreement may be executed in two or more counterparts, and all such counterparts
shall consti tute one and the same instrument. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Missouri in the United Sates without reference to princi ples of conflict of
laws.
14.5. Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered
via facsimile with confirmation received if such notice is also enclosed in a
properly sealed envelope, and deposited (postage prepaid) in a post office or
collection facility regularly maintained by the relevant governmental postal
service and addressed as follows:
If to the Company
or the Parent: QA Training, Ltd.
Cecily Hill Castle
Cirencester, Glos. GL72EF
Attn: Timothy R. Buff
22
<PAGE>
with copies to: L. Brett Lockwood
Smith, Gambrell & Russell, L.L.P.
Suite 3100, Promenade II
1230 Peachtree Street N.E.
Atlanta, Georgia 30309-3592
Facsimile: (404) 815-3509
If to Buyer: Wave Technologies International, Inc.
10845 Olive Blvd., Suite 250
St. Louis, MO 63141
Facsimile: (314) 995-3943
Attn: Kenneth W. Kousky
with copies to: Mary Anne O'Connell
Husch & Eppenberger
One Kansas City Place
1200 Main, Suite 1700
P.O. Box 26006
Kansas City, MO 64196
Facsimile: (816) 421-0596
Any party may change its address for the purpose of notice by giving notice in
accordance with the provisions of this Section.
14.6. Expenses of the Parties. Except as otherwise provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement, including without
limitation, all fees and expenses of agents, representatives and counsel
employed by the parties hereto, shall be borne solely by the party who shall
have incurred the same.
14.7. Waiver of Jury Trial. THE PARTIES HERETO HEREBY EXPRESSLY WAIVE ALL
RIGHTS TO A TRIAL BY JURY WITH RESPECT TO MATTERS ARISING UNDER, OR RELATED TO,
THIS AGREEMENT.
14.8. Dispute Resolution. All parties will act in good faith to resolve
disputes prior to instituting litigation. Litigation will be commenced only in
the State of Missouri.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Buyer: WAVE TECHNOLOGIES INTERNATIONAL, INC.,
By:
-------------------------------------
Company: QA TRAINING, INC.
By:
-------------------------------------
Parent: QA TRAINING, LTD.
By:
-------------------------------------
24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
Employment Matters
------------------
<S> <C>
Name Salary at 1 January 1998
- ---- ------------------------
Joe Mattuch **
Tom Crawford **
Kathie Hellstein **
Melissa Minton **
Cindy DuChene **
David Simpson **
**
</TABLE>
V
Other items:
All staff are entitled to dental and health care with United Health Care of
Georgia, life insurance up to 50,000 per employee, long term disability
insurance paying ** of salary and free parking. David Simpson is a British
national working in the USA on an L1 visa, his wife and children are on L2
visas. There is a commitment to all staff to implement a 401k type pension plan
with an employer pension contribution of ** of salary.
The Company has written employment agreements with David Simpson and Joe
Mattuch.
<PAGE>
SCHEDULE 2
Contracts Included in Assets
----------------------------
<TABLE>
<CAPTION>
VENDOR/SUPPLIER Type Term Terminates Amount
<S> <C> <C> <C> <C>
*Ikon Capital Canon Copier 3 years 01/99 $ 203.00 month
Maintenance $ 64.00 month
*Pitney Bowes Postage Meter 51 mos 12/98 $ 108.52 quarterly
Blue Ridge Mtn Water Water Cooler n/a $ 12.00 month, plus water
AAA Parking Employee Parking Monthly n/a $ 250.00 month
Atlanta Coca Cola Coke Machine Loan n/a N/A - Purchase drinks from
Coca Cola
TELECO Maint. of phone system 1 year 08/98 $ 307.80 annual
Bell South Main - 8 lines with $ 696.00 month
optional services
ISDN line $ 105.00 month
Bell South Mobility DS Cell Phone 3 year $ 49.95 month, plus over
plan allowance
JM Cell Phone $ 72.94 month, plus over
plan allowance
Subscriptions See Attached List 1 year $1,437.00/year
</TABLE>
* Buyer will sub-lease these items from the Company if the lessor does not
consent to a direct assignment and assumption by Buyer.
<PAGE>
Schedule 2-A
Other Contracts
**
Final draft of contract agreed.
Services provided to ** under this contract include:
. course design
. course delivery
. training consulting
. instructional services
Instructional services are defined in Exhibit A of the contract. A new Exhibit A
will be executed for each new instructional service.
Statements of work for next phase are due to be drawn up with client at meeting
schedules for 20th January.
**
Proposal for February and April 1998 program verbally accepted. Summary below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Description Max no. trainees Duration in days Fees ($) per day Total Cost
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 week Program 12 35
- -----------------------------------------------------------------------------------------------------------------------
Lead Instructor NA 35 ** **
- -----------------------------------------------------------------------------------------------------------------------
Second Instructor NA 10 ** **
- -----------------------------------------------------------------------------------------------------------------------
Program Management NA 10 Included
- -----------------------------------------------------------------------------------------------------------------------
Course Development/Customization NA 20 ** **
- -----------------------------------------------------------------------------------------------------------------------
Course Development/Customization NA 10-15 Not Charged
- -----------------------------------------------------------------------------------------------------------------------
Cost of each Program **
- -----------------------------------------------------------------------------------------------------------------------
Total Cost **
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Subsequent (6) programs currently in discussion not yet committed.
<PAGE>
**
Verbally entitled to access courses and place orders as required.
Up to 8 runs of Software Development & GroupWare seminars @ **/day plus travel
and entertainment @ actual. QA to produce course manuals for up to 20 students
per run.
**
Current verbal commitment and work in progress, written work order due this week
from NETg for work for **.
**
Development of a customized Project Management curriculum is in progress.
Development work is by Phil Brown in the UK and Tom Crawford in the USA. A
review/pilot is being organized for the first week in February. Sue Bird is the
TPM and there are plans for Sue to meet with ** when Sue is in New York week
commencing 19th January.
Summary of business expected:
. 2 Project Management courses, PM1 and PM2
. 40 days of development/customization for both courses at **/day to QA
. 10 runs of the 2-day PM1 course at **/day to QA (rate needs confirmation)
. 3 runs of the 3-day PM2 course at **/day to QA (rate needs confirmation)
<TABLE>
<CAPTION>
VENDOR/SUPPLIER Type Term Terminates Amount
<S> <C> <C> <C> <C>
Employers Health Ins. Medical/Life 1 year 02/98 $1,523.00 month
Phoenix American Life Dental 1 year 02/98 $ 342.41 month
Standard Life Ins. Long Term Disability n/a $ 191.93 month
ITT Hartford Ins. Worker's Comp 1 year 07/98 $ 159.82 month
Commercial 1 year 07/98 $ 78.27 month
Umbrella 1 year 07/98 $ 45.00 month
Acordia Southeast Fiduciary Ins. 1 year 07/98 $ 626.00 annual
Sprint Long Distance and variable
US Foncards variable
Shipping
DHL - Fed Ex - UPS variable
</TABLE>
The Company has written employment agreements with David Simpson and Joe
Mattuch.
The Exempted Contracts as defined in the Agreement.
<PAGE>
SCHEDULE 4
Licensed Works
--------------
Code Title
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<PAGE>
** **
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* These courses are currently under development by Parent, and will be
delivered to the Buyer as is, but are subject to further development work
by Parent, at its option.
** Parent not required to provide Enhancements to this course, unless
otherwise prepared.
<PAGE>
Exhibit A
Form of Opinion
January __, 1998
Wave Technologies International, Inc.
10845 Olive Blvd., Suite 250
St. Louis, MO 63141
Attn: Kenneth W. Kousky
Re: Asset Purchase and License Agreement
Gentlemen:
We have acted as counsel to QA Training, Inc., a Georgia corporation (the
"Company") and to QA Training, Lt., a company incorporated in England (the
"Parent") in connection with that certain Asset Purchase and License Agreement
(the "Agreement") dated January __, 1998, by and among the Company, the Parent
and Wave Technologies International, Inc. (the "Buyer"). All capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the
Agreement.
Based on and subject to the foregoing, we are of the opinion that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia.
(ii) The Company has full corporate power and authority to
carry on its business as currently conducted and to own, lease, use and
operate its properties at the place currently located and in the manner
currently used and operated.
(iii) The Company is duly qualified to transact business, and is
in good standing in each jurisdiction in which failure to be so qualified
would have a material adverse effect on the business or properties of the
Company.
(iv) The Company has full power and authority to execute,
deliver and perform the Agreement.
(v) The Parent has full power and authority to execute,
deliver and perform the Agreement.
(vi) All actions on the part of the Company or the Parent
necessary to authorize the execution, delivery and performance of the
Agreement have been duly taken.
(vii) The Agreement has been duly executed and delivered by the
Company and the Parent and is valid and binding upon, and enforceable
against the Company and the Parent in accordance with its terms.
<PAGE>
Wave Technologies International, Inc.
January __, 1998
Page
(viii) There is no litigation, governmental or other proceeding
or investigation pending or, to our knowledge, threatened against the
Company or the Parent or their directors, officers, employees or agents
relating to the Assets, their business or the transactions contemplated by
the Agreement.
(ix) Neither the Company nor the Parent is required to submit
or file any notice, declaration, report or statement with any Governmental
Authority in connection with the execution, delivery or performance of, or
the consummation of the transactions contemplated by, the Agreement.
(x) No consent, approval, declaration or authorization of or
by, or registration with, any Governmental Authority is required to be
obtained or made by the Company in connection with the execution, delivery
or performance of, or the consummation of the transactions contemplated by,
the Agreement.
(xi) Neither the execution, delivery or performance by the
Company or the Parent, nor the consummation of the transactions
contemplated by the Agreement, does or shall (with the giving of notice or
passage or time or both) (i) conflict with or result in a breach or
violation of, or constitute a default under, or result in (or create in any
party the right to cause) the acceleration of any performance or any
increase in any payment required by or the termination, suspension,
modification or impairment of, or result in the loss, revocation,
impairment, suspension or forfeiture of any rights of the Company or Parent
under (A) any contract included in the Assets; (B) the Articles or
Certificate of Incorporation, Bylaws or other charter or constituent
documents of the Company or the Parent; (C) any Judgment to or by which the
Company, the Parent or any of the Assets may be bound or any applicable
Law; or (ii) result in the creation of any Lien upon the Assets.
(xii) There is no legal action, proceeding or investigation,
pending or, to our knowledge, threatened against the Company, the Parent,
the Business or the Assets, nor are there any Judgments outstanding against
the Company, or by which the Company, any of the Assets, or the Business is
bound, including without limitation, any such legal action, proceeding,
investigation, or judgment by which it is sought to effect: (i) any
modification, termination, suspension, or reformation of any contract
included in the Assets; (ii) any change in the character, location or use
of any of the Assets or the Business; (iii) any impairment of the
transactions contemplated by the Agreement; or (iv) an increase in the
liabilities or obligations of the Company.
(xiii) The Assets are subject to no Liens, restrictions,
encumbrances, mortgages, security interests or covenants other than the
Assumed Liabilities.
<PAGE>
Wave Technologies International, Inc.
January __, 1998
Page
(xiv) There are no liens, encumbrances or claims pending or
threatened against Parent that relate to the rights and Licenses granted
pursuant to the Agreement.
Sincerely,
Smith, Gambrell & Russell, L.L.P.
Note: As to issues of law governed by the laws of jurisdictions in which
your firm is not authorized to practice, you may rely on an opinion of counsel
authorized to practice in such jurisdiction or such counsel may provide such
opinions directly to Buyer, provided that in either instance the opinions and
counsel must be in a form acceptable to Buyer.
<PAGE>
EXHIBIT 10.20
** Indicates that a portion of the document is confidential and has been omitted
and filed separately with the Securities and Exchange Commission in connection
with a request for confidential treatment of such omitted material.
Wave Distribution Agreement
This Agreement effective as of January 22, 1998 ("Effective Date") is between
Wave Technologies International, Inc. ("WAVE") with an address at 10845 Olive
Boulevard, Suite 250, St. Louis, MO 63141, and QA Training, Ltd. ("QA") with an
address at Cecily Hill Castle, Cirencester, Glos. GL7 2EF.
1.0 DEFINITIONS
Capitalized terms in the Agreement have the following meanings:
1.1. Derivative Work is a work that is based on a Licensed Work and that would
be a copyright infringement if prepared without the authorization of the
copyright owners of the Licensed Work. Derivative Works are subject to the
ownership rights and licenses of a party or of others in the underlying
Licensed Work.
1.2. Licensed Work is any material described in or that conforms to the
description in the Attachment: Description of Licensed Works, or that is
delivered to QA as a Licensed Work, including associated documentation and
error corrections.
1.3. MCP Licensed Work is that Licensed Work further defined in the Attachment:
Description of Licensed Works.
1.4. MCSE Licensed Work is that Licensed Work further defined in the Attachment:
Description of Licensed Works.
1.5 A Unit is (a) one student enrollee in an MCSE course using all or any part
of the MCSE Licensed Work or any Derivative Work of the MCSE Licensed Work,
or (b) five student enrollees in an MCP course using all or any part of the
MCP Licensed Work, or of any Derivative Work of the MCP Licensed Work.
2.0 RESPONSIBILITIES OF WAVE
2.1. As soon as practicable after execution of this Agreement, WAVE will provide
to QA one complete set of each Licensed Work described in the Attachment:
Description of Licensed Works.
2.2. During the term of this Agreement, WAVE will:
a. provide to QA, at no charge, all error corrections for the Licensed
Works; and
<PAGE>
b. provide to QA, in electronic format, enhancements and updates for the
Licensed Works within 60 days after general availability of a new
release of Microsoft networking products covered by the Licensed
Works.
2.3 Updates and enhancements described in Section 2.2(b) shall be of at least
the quality of the Licensed Works.
2.4 WAVE will, during the term of this Agreement, use its best efforts to
correct all errors or defects identified by QA in the Licensed Works.
3.0 LICENSE
3.1 WAVE grants QA a non-exclusive, non-transferable license to use and copy
the Licensed Works and Derivative Works prepared by QA only in accordance
with the terms of this Agreement. QA may print paper copies of all or any
part of the information included on the CD-ROM or master copies of the
Licensed Works or permitted Derivative Works solely: for delivery of the QA
instructor-led portions of MCSE or MCP programs, or as student materials
for attendees at any such instructor-led training programs (one copy per
student and one copy per instructor), in the United Kingdom and Ireland
(other than, directly or indirectly, for Unisys or its employees or
affiliates). No other use, copying, license, resale or distribution of the
Licensed Works or Derivative Works is permitted. The parties will appoint
representatives to prepare a distribution agreement on WAVE's standard
terms extending these rights into other parts of the world (excluding North
America).
3.2 QA may prepare Derivative Works, including alternate packaging, of the
Licensed Works. WAVE will assist in the preparation of such Derivative
Works, provided that WAVE's related costs do not exceed **. Derivative
Works of the Licensed Works, other than those prepared by WAVE, or approved
by WAVE in advance in writing, are not authorized to carry any Microsoft
trademark under this Agreement.
3.3 WAVE grants QA a non-exclusive, non-transferable license to use and copy
the "Derivative Works" of the QA "Licensed Works" as such terms are defined
in that certain Asset Purchase and License Agreement among QA, WAVE and QA
Training, Inc. dated as of January , 1998, solely for delivery of
instructor-led training, or for attendees at any such instructor-led
training programs, solely in the United Kingdom and Ireland (other than,
directly or indirectly, for Unisys or its employees or affiliates), and not
for resale or other use outside of such classroom training.
3.4 The Licensed Works and Derivative Works are owned by WAVE and are protected
by United States copyright laws and international treaty provisions. The
parties will mark each copy of any Licensed Work or any Derivative Work
with all copyright,
Page 2 of 7
<PAGE>
trademarks and other proprietary notices as they appear in the versions
provided to QA by WAVE.
4.0 PAYMENT
4.1 For the rights and licenses granted herein, QA will pay WAVE:
a. a non-refundable license fee of $**, plus **. QA will pay Wave $** of
the license fee at the closing of this Agreement via wire transfer,
$** of the license fee on or before April 27, 1998, ** of the license
fee on or before March 31, 1998, and the remainder on or before
September 30, 1998; and
b. after QA accumulates ** Units, a royalty of ** for each student
enrolled in a QA course utilizing all or any part of the MCSE Licensed
Work or any Derivative Work of the MCSE Licensed Work, and ** for each
student enrolled in a QA course utilizing all or any part of the MCP
Licensed Work or any Derivative Work of the MCP Licensed Work.
4.2 If QA elects to have WAVE make copies of the Licensed Works for QA, QA will
pay WAVE a per copy fee not to exceed:
.** per copy of MCSE Licensed Work; and
.** per copy of MCP Licensed Work.
4.3 WAVE will invoice QA for any amounts due WAVE by QA. Except as set forth in
Section 4.1(a), all such amounts will be due within 30 days of the date of
WAVE's invoice.
4.4 None of the amounts specified above include applicable taxes (including
VAT), import duties, transportation charges or warehousing charges, which
will be added to the invoices to QA and paid by QA.
4.5 In the final invoice for the initial two-year term of this Agreement, WAVE
will credit QA with an amount equal to a percentage of all license fees and
royalties paid by QA in excess of the ** payment under Section 4.1 during
such two-year term, as follows:
.**% of amounts in excess of ** and less than **; plus
.**% of all amounts in excess of ** and less than **; plus
.**% of all amounts in excess of ** and less than **; plus
.**% of all amounts in excess of $**.
4.6 QA shall provide WAVE, in a format approved by WAVE, a monthly report of
the number of copies of each Licensed Work or Derivative Work made by QA
during the prior month and the number of students registering during the
prior month for any
Page 3 of 7
<PAGE>
instructor-led course in which any Licensed Work or Derivative Work is used
(by student name, course name, date of registration and date of course).
Such report shall be provided by the tenth (10th) day after the end of each
month.
4.7 QA shall maintain books and records in connection with its activity under
this Agreement for the term of this Agreement and for at least one year
from the date this Agreement terminates or expires.
4.8 WAVE shall have access to the books and records of QA during normal
business hours to audit, either directly or through a nationally or
internationally recognized accounting firm, the copies made by QA and to
verify the statements and reports sent to WAVE by QA under this Agreement.
4.9 In the event that the audit of the books and records of QA discloses an
error in any statement or report by QA to WAVE, then QA shall, within ten
(10) days of the date of written notification of such error, take
corrective action to remedy the error, and, in the event such error
constitutes a variance of five percent (5%) or more from any amount, shall
reimburse WAVE for all of its costs and expenses in connection with such
audit. Should QA fail to do so, within the time specified, then WAVE shall
have the right to terminate this Agreement, effective immediately.
5.0 INDEMNIFICATION AND LIABILITY
5.1 WAVE will defend and indemnify QA if a third party makes a claim against QA
based on infringement by the Licensed Works of patents, copyrights,
trademarks, trade secrets, and other intellectual property rights.
5.2 QA will defend and indemnify WAVE if a third party makes a claim against
WAVE based on failure by QA to perform QA's obligations under this
Agreement, or failure by QA to comply with government laws and regulations.
5.3 The party seeking indemnification will:
a. promptly provide the indemnifying party notice of any such claim; and
b. allow the indemnifying party to control, and cooperate with the
indemnifying party in the defense of, the claim and settlement
negotiations.
The indemnified party may participate in the proceedings at its option and
expense.
5.4 If an infringement claim appears likely or is made, WAVE may:
Page 4 of 7
<PAGE>
a. obtain the necessary rights for QA to continue to distribute, license,
otherwise use the Licensed Works on an uninterrupted basis and
exercise all rights granted in the Licensed Works; or
b. modify the Licensed Works to resolve the claim.
5.5 In addition to any remedies specified in this Agreement, each party may
pursue any other remedy it may have in law or in equity.
5.6 Regardless of the type of claim, neither party is liable to the other for
indirect, incidental, special, or consequential damages including, but not
limited to, lost profits or revenues, under any part of this Agreement,
even if informed that they may occur.
6.0 TERM AND TERMINATION
6.1 This Agreement begins on the Effective Date and continues thereafter for
two years.
6.2 WAVE may terminate this Agreement if QA has not cured a breach of Section
3.1 of this Agreement within 15 days after notice from WAVE, and WAVE may
terminate this Agreement immediately upon QA's second breach of Section 3.1
in any 12-month period.
6.3 Either party may terminate this Agreement for the other's material breach
by providing the breaching party with a written notice that describes the
breach. The termination will become effective forty-five (45) days after
receipt of the notice unless the breach is cured within that forty-five
(45) day period.
6.4 Either party may terminate this Agreement immediately in the event that the
other party shall become insolvent, or shall be dissolved or liquidated, or
any proceeding by or against it shall be commenced under the bankruptcy
laws of the jurisdiction in which such party is located.
6.5 Upon termination of this Agreement, all rights granted to QA by Wave in
this Agreement will terminate and revert to WAVE. No termination of this
Agreement shall relieve QA of its obligation to pay the license fee set
forth in Section 4.1. Promptly upon termination of this Agreement for any
reason, QA will return or destroy, as requested by WAVE, all copies of the
Licensed Works or Derivative Works in its possession. QA agrees to certify
compliance with such restrictions upon WAVE's request.
7.0 NOTICE
7.1 Any notice required or permitted to be made by either party to this
Agreement must be in writing. Notices are effective when received by the
appropriate coordinator as
Page 5 of 7
<PAGE>
demonstrated by reliable written confirmation (for example, certified mail
receipt or facsimile receipt confirmation sheet).
7.2 The persons responsible to receive all notices and administer this
Agreement are:
For For
QA: WAVE:
Name: Timothy R. Buff Name: Ms. Jan Fitzgerald
Title: Title: VP Corp. Administration
Address: Cecily Hill Castle Address: 10845 Olive Blvd.
Cirencester, Glos. GL7 2EF St. Louis, Missouri 63141
Phone: 128-565-5888 Phone: 314-692-1811
Fax: 128-565-1420 Fax: 314-995-3894
8.0 GENERAL
8.1 Independent Contractor. Each party is an independent contractor. Neither
party is, nor will claim to be, a legal representative, partner,
franchisee, agent or employee of the other. Each party is responsible for
the direction and compensation of its employees.
8.2 No Payments. QA hereby confirms that it has not received from WAVE, or any
employee or agent of WAVE, any payment, offer to pay or promise to pay any
money or anything of value in connection with this Agreement. QA further
confirms that no employee or agent of QA acting in connection with this
Agreement is an official of any government or governmental subdivision or
of any political party or is a candidate for political office.
8.3 Reliance. Neither party relies on any promises, inducements or
representations made by the other or expectations of more business
dealings, except as expressly provided in this Agreement. This Agreement
accurately states the parties' agreement.
8.4 Headings. The headings of this Agreement are for reference only. They will
not affect the meaning or interpretation of this Agreement.
8.5 Counterparts. This Agreement may be signed in one or more counterparts,
each of which will be considered an original, but all of which together
form one and the same instrument.
8.6 Amendment and Waivers. For a change to this Agreement to be valid, both
parties must sign it. No approval, consent or waiver will be enforceable
unless signed by the granting party. Failure to insist on strict
performance or to exercise a right when entitled does not prevent a party
from doing so later for that breach or a future one.
Page 6 of 7
<PAGE>
8.7 Actions. Neither party will bring a legal action relating to the subject
matter of this Agreement, against the other more than 2 years after the
cause of action arose.
8.8 Dispute Resolution. Both parties will act in good faith to resolve
disputes prior to instituting litigation.
8.9 Governing Law. This Agreement will be governed by the substantive law of
the United Kingdom.
This Agreement replaces all prior oral or written communications between the
parties relating to the subject matter. Once signed, any reproduction of this
Agreement made by reliable means (for example, photocopy or facsimile) is
considered an original, unless prohibited by local law.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
QA Training, Ltd. Wave Technologies International, Inc.
By: /s/ Chris Hill By: /s/ J. Michael Bowles
------------------------------ ------------------------------
Name: Chris Hill Name: J. Michael Bowles
---------------------------- ----------------------------
Title: Director Title: Chief Financial Officer
--------------------------- ---------------------------
Page 7 of 7
<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 January 31,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 686,107
<SECURITIES> 0
<RECEIVABLES> 8,897,430
<ALLOWANCES> 397,000
<INVENTORY> 1,119,234
<CURRENT-ASSETS> 11,393,827
<PP&E> 10,255,773
<DEPRECIATION> 6,514,792
<TOTAL-ASSETS> 19,243,260
<CURRENT-LIABILITIES> 9,665,071
<BONDS> 0
0
0
<COMMON> 2,066,231
<OTHER-SE> 7,139,370
<TOTAL-LIABILITY-AND-EQUITY> 19,243,260
<SALES> 13,145,526
<TOTAL-REVENUES> 26,800,558
<CGS> 2,128,824
<TOTAL-COSTS> 11,796,149
<OTHER-EXPENSES> 11,984,910
<LOSS-PROVISION> 23,462
<INTEREST-EXPENSE> 93,059
<INCOME-PRETAX> 802,648
<INCOME-TAX> 256,035
<INCOME-CONTINUING> 546,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,613
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
